A part 36 offer that was technically made the day after it was dated was compliant with the rules, a High Court judge has ruled.
But Mr Justice Pepperall said that, if he was wrong, neither the rule of de minimis nor estoppel could save the offer – parties should simply use form N242A if they wanted to avoid mistakes.
His decision on costs in Essex County Council v UBB Waste (Essex) Ltd (No. 3) [2020] EWHC 2387 (TCC) followed a finding in favour of the claimant in a significant dispute over a mechanical biological waste treatment plant in Basildon that saw him order an interim payment of account of costs of £8m.
The claimant sent a part 36 offer at 4.54pm on 7 March 2019 and so, given that it was sent after 4.30pm, it was deemed by rule 6.26 to have been served on the following day. The defendant argued that the only proper construction of the letter was that the 21 days ran from 7 March and, because the offer was not made until the following day, the offer therefore failed to specify a relevant period of not less than 21 days.
The claimant responded that the court should construe the offer such that the 21 days ran from the date of deemed service. Citing C v D [2011] EWCA Civ 646, it submitted that faced with two reasonable interpretations of the offer, the court should favour the construction that was compliant with part 36.
Having reviewed the case law, Pepperall J declined to construe the offer letter divorced from its proper context. He said that since there could be no doubt that the letter was intended to be a part 36 offer, a reasonable person having all the background knowledge available to the parties would know that:
- The letter was intended to be a part 36 offer;
- Rule 36.5(1)(c) requires part 36 offers to specify a ‘relevant period’ of not less than 21 days (being the period during which the defendant will be liable for the claimant’s costs upon acceptance under rule 36.13);
- The statement in the letter that the relevant period ran for “21 days of the date of this letter” was intended to be the statement of a relevant period in compliance with rule 36.5(1)(c);
- Rule 36.7(2) provides that part 36 offers are made when they are served; and
- Since this offer was sent by email at 4.54pm on 7 March 2019, it was not “made” for the purposes of part 36 until 8 March 2019.
The judge continued that, approached in this way, the statement on the relevant period could “feasibly and reasonably” be construed as meaning either that the 21 days ran from the date of the letter – in which case a mistake was made and the offer did not comply with rule 36.5(1)(c) – or that the 21 days ran from the date when the offer was made.
He concluded: “In accordance with the reasoning in C v D, I prefer the latter construction since it is consistent with the clear intention to make a part 36 offer and ensures that the offer is effective rather than ineffective. Accordingly, I reject UBB’s argument that the offer letter was not compliant with part 36.”
He went on nonetheless to consider the claimant’s fallback arguments that any non-compliance was de minimis and that the court should, in any event, treat the offer as a part 36 offer, and UBB was estopped from now relying upon any defect in the offer.
Rule 36.2(2) was clear, said Pepperall J, where the non-compliance was a failure to comply with one of the mandatory requirements set out in rule 36.5, rule 36.2(2) was clear and “there is no possibility of such an offer being treated as a part 36 offer”.
He added: “Like any other settlement offer, the non-compliant offer must be taken into account when exercising the general discretion as to costs under part 44: see rule 44.2(4)(c). In exercising the court’s discretion under part 44, the court cannot, however, treat an offer that is a ‘near miss’ as if it were a compliant part 36 offer.”
The offer letter concluded by saying that, should the defendant require any clarification as to the terms, or consider the offer to be in any way defective or non-compliant with part 36, it should say so within seven days of the letter, and any failure to do so would be relied on by the claimant to preclude the defendant from attempting to avoid the adverse costs consequences of part 36.
The defendant did not do so. When replying on 25 March to reject the offer, it had not identified the service point. The claimant contended the defendant was now estopped from taking the technical point under rule 36.5(1)(c).
Pepperall J said he was clear that estoppel “should play no part” in the part 36 regime, citing several reasons. These included that introducing the rules of estoppel would breach the core principle that part 36 is a self-contained procedural code, as well as creating “yet further uncertainty and complexity” into its operation. Further, rule 36.2(2) was “a complete answer to the estoppel argument”.
He continued: “I consider that, as a matter of policy, the responsibility for ensuring that an offer is compliant with part 36 should lie squarely upon the offeror and his lawyers. There are two very simple answers to the unrelenting stream of cases which, as Coulson LJ observed in King, litter the law reports in which parties seek to obtain the benefits of part 36 despite making non-compliant offers:
“(a) As has been repeatedly stressed by the Court of Appeal and as the rules clearly explain, there is no problem with a party making an offer outside part 36. Such offers will be taken into consideration under part 44 but will not gain the special advantages of part 36.
“(b) As the commentary in Civil Procedure (the White Book) makes clear at paragraph 36.5.2, much of the difficulty would be avoided if parties would only use form N242A to make their offers.”
Marcus Taverner QC, Piers Stansfield QC and Daniel Churcher (instructed by Slaughter and May) for the claimant. Roger Stewart QC and George McDonald (instructed by Norton Rose Fulbright) for the defendant.