A recent Court of Appeal case sheds welcome light on time-limited settlement offers

In C v D [2011] EWCA Civ 646, D appealed against a decision that a time-limited offer to settle did not constitute a Civil Procedure Rules Part 36 offer. C had put forward the proposed settlement almost a year before trial. Described as a Part 36 offer, it was “open for 21 days” from the date of the letter. Nearly a year later, just weeks before trial, D attempted to accept C’s proposal. The judge decided that a time-limited offer was not permitted under Part 36, as a Part 36 settlement proposal could only lapse upon service of a written notice of withdrawal. He ruled that the words “open for 21 days” meant that C’s offer lapsed without express withdrawal and consequently was time-limited. C’s settlement proposal was therefore not a Part 36 offer and not open for acceptance when D tried to accept it.

Appeal ruling

D successfully appealed against the decision. It was agreed that a Part 36 offer could not be time-limited. However, the Court of Appeal decided that, in the context of Part 36, it was entirely feasible and reasonable to read the words “open for 21 days” as meaning that the offer would not be withdrawn within that period of time, even though (under the CPR) such a withdrawal could in fact be effected with the court’s permission. “Open for 21 days” was simply a way of saying that there would be no attempt to withdraw the settlement proposal within that time.

However, it was also a warning that, once those 21 days had expired, a withdrawal of the offer was on the cards. This construction did two things: it allowed the settlement proposal to count as a Part 36 offer, and it also gave the clarity and certainty that both Part 36 and the offer letter aimed to achieve. It left the offeror free to withdraw the offer immediately the 21 days had expired, or to leave it open for as long as it wished. At the same time, it assured the offeree that it had 21 days to consider its position, while making it clear that the offeree risked the proposed settlement being withdrawn if was not accepted within that period of time.

Lessons from the decision

This decision provides some useful lessons for both Part 36 offerors and offerees. In particular, it emphasises the importance of formally withdrawing a Part 36 offer if the offeror no longer wants it to be available for acceptance. If it is not withdrawn, an offer can be accepted at any time, so it may be worth carrying out a review of cases where Part 36 offers have been made – even if that was long ago – but have not been formally taken off the table. It may be, for instance, that new evidence has subsequently come to light which now makes the original offer less attractive for the offeror (in which case, it can be withdrawn) or, alternatively, more attractive to the offeree (in which case, its acceptance can be reconsidered). A Part 36 offer should therefore never be regarded as a fire-and-forget weapon.

The lessons learned from Gibbon v Manchester City Council [2010] EWCA Civ 726 should also be borne in mind – namely, that a subsequent Part 36 offer does not cause an earlier offer to lapse. If an offer has not been withdrawn, it is still capable of acceptance, even if a further offer has been made. It is also wise to remember that, providing it has not been formally revoked, a Part 36 offer can still be accepted even if it has been rejected previously. Withdrawal of an offer should be carried out by serving a written notice in clear, unambiguous terms.

Conclusions from C v D

What conclusions can be drawn from the Court of Appeal’s decision in C v D? It demonstrates the developing nature of Part 36 offers ,as well as the appellate court’s ability to apply common sense where before there has been confusion. While courts will not readily interpret a time-limited offer as not obeying Part 36 rules, the decision also emphasises the need for clarity and the risks of non-compliance with CPR requirements when making a Part 36 offer. Of course, if an offeror wants to make a time-limited settlement proposal that simply lapses at the end of the specified acceptance period rather than being formally withdrawn, it is free to do so. However, such an offer will not provide it with the protection of Part 36.