C v D (2011) – no time limit allowed

A time-limited offer cannot be a Part 36 offer. A Part 36 offer must be capable of acceptance unless and until it is withdrawn by service of a notice. When Part 36 is invoked, the timing aspect of the Part 36 offer should be construed so that it complies with the Part 36 regime, unless it is unreasonable to do so.  

The offer

The claimant’s offer stated:

“Offer to settle under CPR Part 36 …the offer will be open for 21 days from the date of this letter (the “relevant period"). …[It] is intended to have the consequences set out in Part 36 …".

The defendant purported to accept it almost a year after it was made and three and a half weeks before trial. Warren J held that the offer was no longer available for acceptance and the defendant appealed.  

Was the offer time-limited?

The Court of Appeal held, allowing the appeal, that the court was obliged to consider whether there was a reasonable construction of the offer letter which did not make it time limited, so that the offer could be regarded as a Part 36 offer as intended. In the context of Part 36, it is entirely feasible and reasonable to read the words “open for 21 days” as meaning that there will be no attempt to obtain the court’s permission to withdraw it within those 21 days. The offer was not time-limited.  

Relevance of the parties’ subsequent conduct

An offer should not be construed by reference to the parties’ subsequent conduct. The meaning of the emails between the parties relied upon by the judge depended on the proper construction of the offer. Warren J construed them in accordance with the premise that the offer was time-limited but they could also be read in accordance with the premise that the offer letter was warning of the imminence of a future withdrawal. As Rix LJ put it, “what is not permissible is to assume the answer to the problem of construction, then read the emails accordingly, and then read back that reading to support the assumption made in the first place”.

Was the offer withdrawn?

The claimant argued that the terms of the offer amounted to a withdrawal. The Court of Appeal disagreed, stating that an express time limit is not the equivalent of a withdrawal under Part 36. The claimant’s alternative case that the offer had been withdrawn by the subsequent emails was also rejected, as it had been below.

Comment

Many solicitors failed to appreciate that the new version of Part 36 introduced in April 2007 no longer said that a Part 36 offer had to be expressed to remain open for acceptance for 21 days from the date it was made. From that date, Part 36 offers remain available for acceptance until they are expressly withdrawn. As a result, many offers claiming to be Part 36 offers made in the last four years say that the offer will remain open for 21 days, as in C v D and Sutherland v Turnbull, or as a variant that the relevant acceptance period is 21 days from the date of receipt of the offer, as in Onay v Brown.

Warren J was clear that the claimant had intended to make a time-limited offer and this was borne out by the subsequent correspondence between the parties. Stanley Burnton LJ agreed. Tacitly acknowledging the failure to understand the new Part 36 regime, he said he was left with the “uncomfortable suspicion that when the offer letter was sent and received neither of the parties ... appreciated that a time-limited offer is not a Part 36 offer”.

This, however, was not the point. The offer had to be construed objectively without reference to the subsequent conduct of the parties or the subjective intention of the offeror. And because it purported to be a Part 36 offer in all other respects, it had to be interpreted as complying with Part 36 if reasonably possible. Rix LJ ingeniously found a construction of “the offer will be open for 21 days” which could work within the Part 36 regime. The fact that the normal effect of the phrase is that the offer will not be open for acceptance after 21 days was irrelevant given the clear express intention of the claimant to make an offer complying with Part 36.

This conclusion fits with the Court of Appeal decision in Onay v Brown, which was unfortunately not referred to in Warren J’s judgment, and should deter further satellite litigation about Part 36 offers. In other cases, such as Hertsmere Primary Care Trust v Estate of Balasubramanium, J Murphy & Sons Ltd v Johnston Precast Ltd and J P Morgan Chase Bank v Springwell Navigation Corp, the courts have discouraged parties from taking tactical points about technically flawed Part 36 offers. If you make an offer which purports to be a Part 36 offer, C v D shows that the court will bend over backwards to interpret it so that it complies with Part 36. The maker of a defective offer should not attempt to wriggle out of the costs consequences in Part 36 nor should the recipient of a defective offer try and rely on the defect before the court. Where an offer is stated to be a Part 36 offer, the court will do its utmost to treat it as one.

There is one crucial point on which some room for manoeuvre may remain. In Gibbon v Manchester City Council the Court of Appeal held that there is no room in Part 36 for the concept of implied withdrawal. If the offeror does not want the offer to remain on the table, he must serve the offeree with a notice in writing including an express reference to the date of the offer and its terms, together with words making it clear that it is withdrawn.

Rix LJ rejected the argument that an express time limit in a Part 36 offer could amount to a withdrawal. This suggests that including any future withdrawal mechanism in a Part 36 offer will not work and that a separate withdrawal notice must be served on the appropriate date. The Court of Appeal did not comment on Warren J’s view that the offeror can indicate before the end of the relevant period that he intends to withdraw the offer and can even serve a notice of withdrawal at the same time as the offer. It remains to be seen whether a valid notice of withdrawal could be served before it is due to take effect. In the meantime, the only safe method is to serve the notice of withdrawal after the relevant period (a minimum of 21 days) as defined by CPR 36.2(2)(c).

As a postscript, it is worth repeating a couple of points about the counter-intuitive Part 36 regime. Firstly, the fact that the other party has rejected the offer does not prevent them from accepting it at a later date. And secondly, as with any offer which does not comply with Part 36, the automatic costs consequences do not apply to a withdrawn Part 36 offer, but the offer should be taken into account by the court when exercising its discretion as to costs under CPR 44.3.