PHI Group Ltd v Robert West Consulting Ltd [2012] EWCA Civ 588

The Court of Appeal held that a defective Part 36 offer was not implicitly withdrawn by two later offers.  The offer remained open and when it was not beaten by the offeree at trial the court, exercising its discretion, awarded the offeror its costs on a standard basis.

This case is a useful reminder to parties involved in construction disputes and general litigation of the requirements of making offers to settle and the perils of ignoring even ‘defective’ offers.

Facts

The main contractor, Carillon JM Ltd, was engaged to carry out the design and construction of a train servicing depot. Carillon engaged PHI Group Limited as a specialist to design and build for the soil nailing work. Robert West Consulting was the consulting engineer and lead consultant for the overall works. In 2009 Carillon issued a claim against PHI for damages for negligence. PHI then brought a contribution claim against RWC. The main action between Carillon and PHI was settled shortly before trial but the contribution proceedings (as well as Carillon's 2010 claim against RWC for the balance of its negligence claim) remained live.

PHI made three offers to settle the contribution proceedings against RWC.  The first was made in February 2010 and PHI contended that it was a Part 36 offer to which the usual cost consequences should apply. This offer was not accepted. In November 2010, PHI made two further offers, neither of which were accepted by RWC.

Akenhead J held that both PHI and RWC had been negligent on the basis of a 60/40 split in liability. As the apportionment of liability set out in PHI's February 2010 offer was more favourable to RWC than the eventual outcome at trial, PHI argued that it should have all its costs of the contribution proceedings.

On the issue of costs, Akenhead J held that PHI's February 2010 offer to settle the contribution proceedings was not a Part 36 offer and had been withdrawn by the November 2010 offers.

Decision

The Court of Appeal upheld Akenhead J's decision that PHI's February 2010 offer was not within the scope of Part 36 as it did not specify a period of not less than 21 days but overturned the decision that the February 2010 offer had been withdrawn. PHI's offer was not withdrawn but remained open for acceptance until trial. Although PHI's February 2010 offer was not a Part 36 offer, the Court of Appeal used its discretion to award PHI its costs of the contribution proceedings on a standard basis.

This case is a timely reminder of the following:

  • parties should ensure that Part 36 offers strictly comply with the requirements of the Civil Procedure Rules;
  • there must be compelling circumstances for the court to find that an offer of settlement has been implicitly withdrawn; Part 36 offers can only be withdrawn expressly in writing;
  • there is no reason why different successive offers cannot be made by a party but only one may be accepted;
  • an offer, not made under Part 36, can be relevant to the exercise of the court’s discretion under the general rules as to costs.