The impact of withdrawn Part 36 offers when resolving disputes
Justine Soutter considers the effect of a recent case, involving a borough council, on withdrawn Part 36 offers for successful parties.
A ‘Part 36’ is an offer that can be made as part of the Civil Procedure Rules (CPR). It is designed to encourage the involved parties to settle their dispute without the need to go to trial and gives both parties the opportunity to inform the other side the conditions they would offer or accept to resolve a dispute.
In Blackpool Borough Council v Volkerfitzpatrick Ltd [2020] EWHC 2128 (TCC), HHJ Stephen Davies, sitting as a High Court judge, ruled that the claimant unreasonably rejected a defendant’s Part 36 offer which had been withdrawn prior to trial.
The effect of this was that the claimant paid most of the defendant’s costs from 21 days after service of the Part 36 offer.
The judge explained what weight should be given to the withdrawn Part 36 Offer. The primary issue was the reasonableness of the refusal, bearing in mind the facts and matters relevant to the merits of the claim as they ought reasonably to have appeared to the claimant at that time, not by reference to wider commercial factors.
The Case
In this case, the claimant was the winning party, having succeeded on six out of seven claims. However, it had claimed £6.7 million and recovered £1.1 million.
The judge concluded that the claimant acted unreasonably in rejecting the Part 36 offer when it was available for acceptance, as the claimant then knew or was in a position to know that, in the light of testing results, its case had been significantly weakened and there was, therefore, a real risk that at trial it would not recover more than the offer.
The claimant had chosen to take a commercial risk, knowing that it could end up recovering less than the amount of the offer. The defendant was awarded its costs in relation to the claims that were the subject of the Part 36 offer from 21 days after service of the offer.
The automatic Part 36 costs consequences cannot apply to a withdrawn defendant’s Part 36 offer that a claimant fails to beat at trial (CPR 36.17(7)(a)). However, the offer may still be considered regarding costs under CPR 44.2(4)(c). The critical issue is whether the offeree acted reasonably in rejecting the offer while it was available (Thakkar v Patel [2017] EWCA Civ 117).
The Judgement
The judgment in Volkerfitzpatrick is a significant finding as the effect was that the claimant paid most of the defendant’s costs from 21 days after service of the Part 36 offer.
The judgment adds to the guidance in Thakkar, confirming how the court should consider the reasonableness of rejecting withdrawn Part 36 offers, something which was not directly addressed in Thakkar.
Justine Soutter is Head of Dispute Resolution and Employment at Invicta Law. She can be contacted This email address is being protected from spambots. You need JavaScript enabled to view it. or by telephone at 03000 419709.
