Part 36 Offers: Still Governed By Common Law Principles of Offer and Acceptance?

Published: 16/12/2016

The High Court has recently held in DB Bank UK Ltd v Jacobs Solicitors [2016] EWHC 1614 (Ch) that where a settlement offer outside of the Part 36 regime has been made, that offer is considered rejected as soon as a later Part 36 offer is made.

The facts

In October 2013 the Claimant brought a professional negligence claim against the Defendant solicitors. In August 2015, the defendant sent a letter to the claimant which stated at the top, ‘Without Prejudice Save as to Costs’ ('WPSAC'), offering to settle the claim ('the August 2015 offer'). In their letter, the defendant specifically expressed that this offer was not a Part 36 offer as the defendant’s insurer had been declared in default and any payment would take longer than the 21 day provision detailed in CPR Part 36.

There continued thereafter a series of without prejudice communications. On multiple occasions over 2015 and into early 2016, the defendant reiterated to the claimant that the August 2015 offer was still open for acceptance. This culminated in the claimant first making a Part 36 offer in May 2016, followed by a letter in June 2016 accepting the August 2015 offer. The defendant later argued that the Part 36 offer had amounted to a rejection of the August 2015 offer.

Decision

Andrew Hochhauser QC, sitting as High Court Judge, held that the August 2015 offer was an offer capable of acceptance, but the real question was whether it had been implicitly rejected as a result of the claimant’s Part 36 counter-offer.  He found that it had.

In arriving at its decision, the Court considered the difference between an offer at common law, and a Part 36 offer. It found that the main difference between the two was that offers at common law are ruled by the basic concepts of offer and acceptance whereby an offer can be rejected if a counter-offer is put forward. By contrast, a Part 36 offer is not governed by the ordinary common law rules on offer and acceptance and remains open until formally withdrawn by the party making the Part 36 offer.  Indeed, Moore-Bick LJ in Gibbon v Manchester City Council, with which Mr Hochhauser QC agreed, said: “Part 36 is drafted as a self-contained code. It prescribes in some detail the manner in which an offer may be made and the consequences that flow from accepting or failing to accept it. …It does not follow, however, that Part 36 should be understood as incorporating all the rules of law governing the formation of contracts…”

As a result, Mr Hochhauser QC held that, because the August 2015 offer was made outside of the Part 36 regime, the impact on it of any counter-offer, whether that fell within Part 36 or not, had to be addressed by reference to common law principles, and as such the Part 36 offer implicitly rejected the August 2015 offer: “A Part 36 counter offer is still a counter-offer.”

Comment

The dispute before Mr Hochhauser QC was made more challenging due to the lack of any precedent. While the dicta from Gibbon was able to provide helpful guidance as to the makeup of a Part 36 offer, it did not deal specifically with the issue of competing WPSAC and Part 36 offers, and whether a Part 36 offer does or does not implicitly reject the WPSAC offer.  Although the matter has been appealed, nevertheless the decision should be welcomed as having provided greater clarity in an otherwise untouched issue of law.  A further update will be provided following the appeal.

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