Case Alert - [2018] EWHC 242 (Ch)

Judge rules that an offer was not a valid Part 36 offer

The defendants in this case made a Part 36 offer intended to cover both the claim and counterclaim and which provided that "your client is to be liable to pay our client's costs of the claim and the counterclaim on the standard basis….up to the end of the Relevant Period or, if later, the date of service of notice of acceptance of this offer". The claimant argued that this was not a valid Part 36 offer for two reasons:

(1) Although the offer was expressed to be a claimant's Part 36 offer, it was really a defendant's Part 36 offer and as it was not for a sum of money (as required by CPRr35.5) and so it was not a valid Part 36 offer. That argument was rejected by the judge. It was clear from CPR r20 that a counterclaim is to be treated as a claim for the purposes of the CPR (with certain exceptions, of which Part 36 is not one). The offer was therefore a valid Part 36 claimant's offer, which expressly stated that it took account of the counterclaim. The judge also confirmed that an offer can be treated as a claimant's offer even where a counterclaim has not yet been advanced, but the offer refers to the defendant's intention to bring a counterclaim.

(2) The offer contained a term as to costs which was inconsistent with the effect of Part 36. That argument was accepted by the judge. The wording here meant that if the offer were accepted within the Relevant Period, the party treated as the defendant would pay the claimants' costs up to the end of the Relevant Period, whereas by rule 36.13 the defendant should pay the claimants' costs only up to the date of acceptance within the Relevant Period. The judge refused to construe the term "or, if later" as meaning "or, if sooner": "the offer in the terms in which it was made makes grammatical sense, and is not in itself absurd".

COMMENT: This decision confirms that an appropriately-worded offer from a counterclaiming defendant will be treated as a claimant's offer (by contrast, the offer in Van Oord v Allseas had a number of defects which prevented it being treated as a claimant's offer, for example the offer was not expressly stated to be a claimant's offer, and it offered to pay the other side's costs). It is also a reminder of the necessity of ensuring that the costs consequences of accepting an offer are identical to those provided for in Part 36. Although the difference between the terms of the offer and CPR r36.13 here was fairly minor (and the claimant was to be paid its costs up to the date of acceptance, as provided for by CPR r36.13), it was enough to render the offer invalid under Part 36, notwithstanding that it was clearly intended to be a Part 36 offer and also expressly stated that "if your client accepts the offer within…the Relevant Period your client will be liable for our client's costs, in accordance with CPR r36.13".