Costs News

15 October 2015
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Defendant manages to overturn its own part 36 offer

A defendant which had a part 36 offer accepted has successfully argued on appeal that it did not actually meet the requirements of the rule.

The underlying dispute in Hertel & v Saunders & Anor [2015] EWHC 2848 (Ch) was around the existence or otherwise of a partnership or joint venture between the parties. The defendants were appealing Deputy Master Lloyd’s costs order, which had been made on the basis of what was clearly meant to be a part 36 offer, and was headed as such.

Before the deputy master, both parties accepted that the offer letter was a part 36 offer, but on appeal the defendants submitted that it did not conform with the pre-1 April 2013 rule.

Mr Justice Morgan observed: “It can be seen that the defendants' case on this appeal is a new case and different from the case they ran before the deputy master where they accepted that the letter was a part 36 offer. The claimants do not contend that this new case is not open to the defendants. The letter in question was headed ‘Part 36 offer’ but the claimants do not argue that the defendants are estopped from contending otherwise. Accordingly, I must deal with the new case on its merits.”

The main issue was compliance with rule 36.2(2)(d) – that the offer had to state whether it related to the whole or part of the claim, or to an issue that arose in it, and if so which part or issue.

Morgan J recounted: “The offer letter stated that it related to the claimants' proposed claim by amendment for an account based on an agreement. It is clear that the letter referred to the claim which was the subject of the amendment (or the proposed amendment) in paragraph 20A of the amended (or draft amended) particulars of claim. That claim was plainly not ‘the whole of the claim’ within rule 36.2(2)(d). The question then is whether that claim was part of the claim or an issue which arose in the claim.

“It seems to be accepted by the defendants that if, on or before 17 February 2015, the particulars of claim had been effectively amended to include paragraph 20A, then that claim was part of the claim within rule 36.2(2)(d). Accordingly, the question becomes: had the particulars of claim been effectively amended before 17 February 2015 to include the claim in paragraph 20A.”

The answer to this turned on whether a letter from the defendants on 30 July 2014 amounted to written consent to the amendment.

The judge ruled: “I consider that the overall sense of the letter was that the defendants were not giving a consent at that point but instead expressed the intention that there would only be a permission to amend when the court granted it on a future occasion, at which time the defendants would raise ‘no issue’, i.e. not oppose the grant of permission.

“This reading of the letter is strengthened by the consideration that the letter did not say anything about the costs of and occasioned by the amendment. It is well known by solicitors that it is standard practice when the court gives permission to amend for it to direct that the costs of and occasioned by the amendment be paid by the amending party in any event.”


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