Approach with caution

Suppose you act for a claimant who has suffered a road traffic accident and wants to recover general damages for pain, suffering and loss of amenity, repair costs and credit hire. You make two part 36 offers, one £3,000 for PSLA and one £2,000 for repair costs. The defendant makes one £7,000 global.

The credit hire is claimed at £6,000. The defendant accepts your two part 36 offers but does not withdraw his part 36 offer. Can you accept the defendant's part 36 offer and say that the overall claim has been settled for £12,000, even though after the claims for general damages and repair costs have been agreed the most the claim is worth is £11,000?

Part 36.9(2) provides that a part 36 offer may be accepted at any time (whether or not the offeree has made a different offer) unless the offeror serves notice of withdrawal on the offeree.

On the face of it, therefore, the defendant's offer, not having been withdrawn, is open for acceptance even though the offeree (the claimant) had subsequently made a number of different offers. Further, part 36.11(3) deals with what happens with the rest of the claim when a part 36 offer that relates to part only is accepted. It provides that the claim will be stayed as to that part (where there has been acceptance) upon the terms of the offer.

Thus, by accepting the claimant's part 36 offers in relation to general damages and repair costs, the claim was stayed in respect of those heads of claim, but the claim continued in respect of what remains, namely the credit hire.

In Gibbon v Manchester City Council [2010] EWCA Civ 726, there were two appeals but the more interesting one for our purposes is that of Mrs Gibbon, who suffered a tripping accident. She made a part 36 offer of £2,500 plus CRU and costs. That was met with two lower part 36 offers by the defendant, which were rejected, and a final part 36 offer by the defendant of £2,500, which the claimant rejected.

On the table

The defendant then formally accepted the first offer that the claimant had made. The claimant, however, contended that the offer was no longer capable of acceptance.

The claimant submitted that the rejection of the claimant's part 36 offer made it incapable of acceptance; alternatively that the claimant's rejection of the defendant's part 36 offer in the same sum made it quite clear that she was unwilling to accept that amount in settlement of the claim and it was, therefore, an implied withdrawal of her offer.

The Court of Appeal disagreed. Moore-Bick LJ put it this way: '[Common law] is inconsistent with the concepts underlying part 36, which proceeds on the footing that the offer is on the table and available for acceptance until the offeror himself chooses to withdraw it. There are good reasons for that. An offer which appears unattractive when made, and which is therefore rejected, may become more attractive as the proceedings progress and the parties reassess the strength of their respective cases. A defendant who chooses to leave his offer on the table may tempt the claimant into accepting it, with a benefit to himself of the consequences for costs of an offer made at an early stage.

'Part 36 allows a defendant (or for that matter a claimant) to decide whether to leave his offer open for acceptance or to withdraw it and make another offer later. To import into part 36 a common law rule that an offer lapses on rejection by the offeree would undermine this important element of the scheme. It could give rise to disputes about whether the offer had been rejected in any given case so as to render it incapable of acceptance.'

He continued, with specific reference to Gibbon, to say: 'In some cases, the demands of clarity and certainty in the operation of part 36 may appear to produce injustice and I see the force of Dr Friston's submission that Mrs Gibbon's solicitors had made it clear that she was not willing to accept £2,500 to settle her claim. Her difficulty, however, is that a part 36 offer had been made on her behalf and had not been withdrawn. It remained on the table and was, therefore, open for acceptance.'

No limit

Gibbon was followed in C v D [2011] EWCA Civ 646. There, the offeror had made an offer stating it to be a part 36 offer but saying that the offer was 'open for 21 days'. Long after the expiry of the 21 days, the offeree gave notice of acceptance.

The Court of Appeal held that, because the offer had been stated to be a part 36 offer, it had to be construed with the part 36 regime in mind and, therefore, unless withdrawn, the offer remained open for acceptance after the 21-day limit. The Court of Appeal also held that the offer had not been impliedly withdrawn.

Commenting on Gibbon, Rix LJ said: 'It may be said that this decision demonstrates that the need for clarity and certainty in the operation of part 36 outweighs the pressure exerted on the court, by thoughts that the offeree has somehow taken advantage of the error of the offeror in not formally withdrawing an offer which the offeree had reason to know was no longer acceptable to the offeror.

'An essential feature of the part 36 procedure is that a part 36 offer remains on the table until it is formally withdrawn by a notice of withdrawal. It is because the offer remains on the table (until formally withdrawn) that the part 36 consequences of a part 36 offer, whether under rule 36.10... or under rule 36.14... can be prescribed in the form which part 36 sets out. If a part 36 offer has been withdrawn before judgment, then the consequences of rule 36.14(2) and (3) do not flow.'

C v D was distinguished in Norma Lee Thewlis v Groupama [2012] EWHC 3 (TCC), where an offer 'made pursuant to part 36 of the CPR and remains open for acceptance for a period of 21 days' was held not to be a part 36 offer and therefore not open for acceptance after the 21 days. The (slender) distinction was based on slight differences in wording.

An extreme example of the consequences of the strict way of looking at part 36 is the case of Mahmood v Elmi [2010] EWHC 1933 (QB). In that case, the claimant, who had been in a road traffic accident, made an early part 36 offer of £2,100. The claimant was also incurring hire and storage charges and those subsequently amounted to £17,895.

The defendant's solicitors wrote, accepting liability, and agreeing the figure of £2,100 for general damages, and subsequently the claimant's solicitors accepted that sum for general damages.

The matter got to trial some while later and, on the morning of the trial, the defendant gave written notice of acceptance of the part 36 offer of October 2007. The judge hearing the claim ruled that that brought the claim to an end, and, notwithstanding the fact that there was an outstanding claim of nearly £18,000 for hire charges, the claim had been validly compromised at £2,100. The claimant appealed and, on appeal, Cox J dismissed the appeal.

Regime change

The judge pointed to the fact that the current part 36 regime made a considerable change from the original part 36 regime. Before the current regime, an offeror did not have to withdraw an offer that he subsequently came to consider was too low or too high because, after the 21-day period, the offeree needed the court's permission to accept an offer and if by then circumstances had changed permission was unlikely to be granted.

This was in contrast to the entirely new part 36. Cox J said: 'Drawing on an example advanced by Mr Vaughan during oral argument, Mr McNair referred to a defendant who offers the sum of £1m to settle the whole of the claimant's claim, which the claimant rejects. Subsequently, the defendant offers £100,000 in respect of the general damages element alone, which the claimant accepts.

This acceptance cannot have the effect of withdrawing the earlier offer. If that offer were not withdrawn, the claimant could subsequently accept it in settlement of the whole of his claim, notwithstanding his earlier acceptance of a sum offered for general damages. If the offer were not withdrawn, he could accept the earlier offer even if his claim for special damages and future losses did not exceed, say, £600,000.'

She also said: 'Ultimately, if the parties before the court choose to use the machinery prescribed by the CPR in order to settle their disputes, then they must be taken to submit to the consequences.'

The offer made at the beginning was, therefore, open for acceptance.

It seems then that the answer to my question is, yes, you can accept the outstanding global offer. This example illustrates how important it is that offers that are no longer relevant (being superseded by events in the case or the settlement of parts of the case as it progresses) are formally withdrawn. If that does not happen, they might pop up and bite you.