Phi group ltd –v- robert west consulting ltd  ewca civ 588
The main contractor sued their contractor PHI for damages. PHI notified RWC of their intention to pursue them for a contribution, under the terms of an indemnity; Part 20 proceedings were then issued late on the proceedings, which were to be tried separately from the main action.
The main action between the main contractor and PHI settled in the sum of £3.8m.
The main contractor had also commenced separate proceedings against RWC. In those proceedings RWC pursued contribution proceedings against PHI.
In February 2010, PHI made a liability offer of 70:30, with RWC accepting 30%. The offer was purported to have been made under Part 36 CPR. PHI however only give RWC seven days to respond to the offer ‘in light of pressing timescales’.
A second letter was sent on the 4th November 2010, in advance of mediation which was to take place between the main contractor and RWC. PHI did not attend but, prior to the mediation between the main contractor and RWC, made an offer to RWC in any event.
It was made on condition that mediation between the main contractor and RWC was successful; if successful then PHI would discontinue the Part 20 proceedings against RWC, with no order as to costs. RWC in turn, would discontinue their proceedings against PHI, with no order as to costs. The offer was expressed to be open until the 16th November 2010, at which time it shall be deemed withdrawn.
It was also stated that the letter would be referred to upon the issue of costs to be considered by the Trial Judge.
The conditions of that offer were not met because mediation was not successful.
A third letter was sent on the 29th November 2010 by PHI to RWC offering to discontinue the contribution proceedings against RWC, with RWC discontinuing their proceedings against PHI, on condition that each party to bear their own costs of the proceedings.
The offer was to remain open for 21 days but as it specifically prescribed costs consequences it was made clear that it was not a Part 36 offer.
The Trial was heard in March 2011 whereby PHI were found to be 60% and RWC 40 % responsible respectively.
That part of his Judgement on costs which was to be appealed, ordered PHI to pay 30% of RWC’s contribution proceedings against it and no order as to costs on PHI’s contribution proceedings.
The Judge found that later offers had effectively withdrawn the earlier offers made. He refused to consider and take into account the first offer made.
PHI appealed seeking an order that RWC should pay PHI’s costs of both sets of contribution proceedings and that RWC should bear their own costs of both.
The Court of Appeal found that the offer purportedly made under the terms of Part 36 was not a Part 36 offer because it had not specified a period of acceptance for less than 21 days. The Judge at first instant was correct to find that it was not a Part 36 offer.
The Court did however find that the Judge at first instant had incorrectly exercised his discretion on costs. He had wrongly found that the offer had been withdrawn because subsequent offers were made, which were inconsistent.
The only inconsistency was that only one offer could be accepted. There was no inherent reason why a party could make alternate offers to settle litigation, either being capable of acceptance, but not both.
A subsequent offer made did not imply that an earlier offer made had then been withdrawn.
The Court of Appeal allowed the appeal and ordered that RWC should pay the costs of PHI within their contribution proceedings and bear their own costs of their contribution proceedings.
The decision highlights the following:
i) Parties should ensure that Part 36 offers strictly comply with the requirement of the rule. In the event of non compliance the Court will consider the offer when exercising its general discretion regarding costs under CPR 44.3; and
ii) There must be compelling circumstances for a Court to find that an offer of settlement has been implicitly withdrawn; Part 36 offers can only be withdrawn expressly in writing.