Can a defendant be a claimant under Part 36?

The simple answer is yes, where it is making a compliant Part 36 offer on its counterclaim to settle the whole of its counterclaim and the claimant's claim.

In AF v BG, the defendant made a part 36 offer to the claimant offering to settle its proposed counterclaim and the claimant's claim against it. The defendant stated in the offer that it was to be taken to have the consequences of a claimant's Part 36 offer. That meant the defendant would be entitled to its costs if the offer was accepted within the 21-day period and to the more penal costs and interest consequences if the defendant obtained a judgment at least as advantageous as the offer at trial. The claimant contended that the defendant's offer was not a claimant's Part 36 offer.

The Court of Appeal held that on a proper construction of Part 36 and Part 20, the defendant's offer to settle its counterclaim did constitute a "claimant's" Part 36 offer and could, in principle, carry with it the penal costs consequences provided by 36.14(3). The counterclaim was to be treated as if it were a claim and the defendant, as the party bringing the counterclaim, was to be treated for the purposes of the offer as the claimant. In relation to its position in defending the proposed counterclaim, the claimant was treated as the defendant. The court found that "only in this way can the rule apply in an even-handed way, as it plainly should, and so as not to have any arbitrary results according to which party brought proceedings first".

An offer made under Part 36 must make it clear whether it is in relation to the whole of the claim and whether it takes into account any counterclaim. The offer in this case made it clear that it was put forward on a net basis and that acceptance of it would constitute full and final satisfaction both of the proposed counterclaim and of all claims asserted by the claimant. It followed that where 36.10 (1) speaks of the costs of the proceedings being recoverable where a "claimant's" offer is accepted within the relevant period, it meant, in the present case, the costs of both the counterclaim and of the claim.

Things to consider

Whether the court will award a defendant enhanced interest and costs as envisaged in 36.14(3) in circumstances such as this will depend on the extent they deem the counterclaim to be genuine and not merely tactical. But, where both parties genuinely have substantive claims and their status as either claimant or defendant has genuinely depended on who issued proceedings first, this decision will prove useful.

Unfair relationship applies to live agreements only

This was the finding in, Soulsby and Soulsby v FirstPlus Financial Group Plc (1) and Limited (2). FirstPlus advanced money to the claimants under three successive credit agreements. The claimants took out payment protection insurance (PPI) in relation to each loan. To consolidate the claimants' debts, the first loan was subsequently consolidated into the second loan, and the second loan into the third loan. Each of the consolidated loans included a sum of credit relating to the funding of the premium for each of the PPI policies. The claimants subsequently alleged mis-selling of the PPI as against the second defendant broker and the defendant.

The issue for the court was whether the claim to re-open the credit agreements due to an unfair relationship under s140A of the Consumer Credit Act 1974 (CCA) should be struck out in relation to the first two credit agreements. The claimants alleged that the first and second credit agreements were related to the third credit agreement as they had been consolidated into it and so were caught by these provisions. FirstPlus argued that the first and second agreements were completed agreements with no sums payable under them and so were excluded from attack under s140A.

The court agreed with FirstPlus. The first and second agreements were related agreements made before April 2007 and had ceased to have any operation before April 2008. They were therefore protected from attack as related agreements under s140B CCA. They might be challengeable as extortionate credit bargains if that was pleaded however. The allegation of unfair relationship in those two agreements should therefore be struck out.

Things to consider

This case simply confirms that for an agreement to be reviewed under the unfair relationship test, it has to be live. Where there have been previous agreements that have been consolidated, look closely at the timings and when the earlier agreements ceased to have any operation.

Payment starts time running

Where primary limitation has expired, an acknowledgment of a claim or payment in respect of it can start time running again. Where the claim relates to an action to recover mortgage loans, this can add another 12 years to the time within which a claim can be brought.

This was the position in Bradford & Bingley v Ashcroft. The lender repossessed and sold the defendant's property in July 1992, pursuant to its legal charge. A debt of £48,340 remained outstanding. The lender sought proposals for repayment in October 1995 and in October 2000, the defendant commenced payment of £10 per month towards the debt. Following non-payment proceedings were commenced for the balance in August 2008. The defendant claimed the proceedings were statute barred.

The court held that where an underlying limitation period has expired, by s29(5) Limitation Act 1980 (s29(5)), time starts to run again from the date, if any, on which the debtor "acknowledges the claim or makes any payment in respect of it". An effective acknowledgment needs to be in writing and signed by the debtor. The issue here was whether there had been an effective acknowledgment.

In correspondence over several years the defendant had notified the lender of his concerns as to the amount of the shortfall and as to the undervaluation of the property on resale. He had, however, commenced monthly payments in late 2000 for a period of time. The defendant alleged that the payment was only in respect of as much of the debt as was unaffected by the sale at the alleged undervalue. That being the case, there could be no acknowledgement in law since what had to be acknowledged was the actual debt claimed, not just part of it.

The Court of Appeal did not accept this. Payment, albeit part payment, came within s 29(5), and was a freestanding mechanism for the computation of time. The purpose of s29(5) was not to fix any particular sum but to enlarge the time for bringing proceedings in which that issue could be litigated if the defendant raised it. The defendant had not pleaded a sale at an undervalue and the payments made were therefore in relation to the whole debt owed to the lender. The payments had been made within the 12 years before the issue of the proceedings which were not therefore time barred pursuant to s20 Limitation Act 1980.

Things to consider

There is authority to confirm that the court can take into account intrinsic evidence in determining whether payment made is referable to the whole of the sum due or just part of it. In this case there was no pleaded defence or counterclaim based on the sale at an undervalue. The payments made could therefore only be referable to the whole debt.

No good reason for non-appearance

Failure by a party to attend at the trial of an action will generally lead to an order striking out its claim or defence. The court will only set aside such an order if certain conditions are met.

Those conditions were reiterated in King's Hill (No1) Ltd v Opiah, in which case the claimant was the assignee of a debt owed by the defendant upon two credit cards. Judgment was entered against the defendant who had failed to attend a hearing. The defendant applied to set the judgment aside on the basis he had misremembered the time of the court hearing and that the claimant had not notified him of the assignment of the debt or complied with certain Consumer Credit Act provisions. The excuse given by the defendant for misremembering the court hearing time was that he had lost the letters sent by the court giving that information during the process of separating from his wife.

The court dismissed his appeal holding that it was settled law that where a party failed to attend a hearing it could apply for an order under the Civil Procedure Rules Part 39.3 that a judgment made at the hearing be set aside only if the application was made promptly, if the party had good reason for not attending and there were reasonable prospects of success at trial. Here, two letters had been sent to the defendant telling him the time of the hearing and the court held there was no good reason for him not attending.

Things to consider

This is a robust judgment and one that should be borne in mind where there is a failure to attend at trial. The party applying for relief must jump over all three hurdles to succeed.