Case No: (HC2009 )
Royal Courts of Justice
Strand, London, WC2A 2LL
Before :
MR JUSTICE WARREN
Between :
C | Claimant |
- and - | |
D & D2 | Defendants |
Michael Barnes QC (instructed by SJ Berwin LLP) for the Claimant
Jonathan Seitler QC (instructed by Rawlinson Butler LLP) for the Defendants
Hearing date: 11th November 2010
Judgment
Mr Justice Warren :
Introduction
This is an application by the Claimant under CPR r.3(1)(m) in effect seeking a declaration that an offer to settle the action made by the Claimant in a letter dated 10 December 2009 (“the Offer” and “the Offer Letter”) and expressed to be made for the purposes of CPR Part 36 is no longer open for acceptance and has not already been accepted.
In the action, the Claimant now seeks damages, having withdrawn a claim for specific performance, for breach of contract in relation to a sale of land. The trial of the action is listed to commence on 29 November 2010. On 5 November 2010, the Defendants purported to accept the Offer. The Claimant contends that the Offer was not capable of acceptance so that there is no binding settlement of the action which should therefore proceed later this month. The Defendants contend that they have validly accepted the Offer so that there is no need for a trial.
The Offer
The Offer Letter, from the Claimant’s then solicitors, to the Defendants’ solicitors, is headed “Offer to Settle under CPR Part 36” and throughout the Offer Letter there are many references to Part 36. The material parts fall under two headings – Settlement Agreement and Failure to Accept this Offer - which appear after a general statement of the Claimant’s position:
Settlement Agreement
“Notwithstanding that, C of course recognise that in reality D2’s position is market driven and they will accept a commercial solution.”
Our client will therefore make an offer based on either outcome. The impact however is not the same – if D2 buy the land, then that is very different for Claimant than of they are left with something they expected to sell by now. So the figures are not equivalent. Likewise, for your clients it is different – under one they pay more but have the development; on the other they pay less but have no development.
Our client’s proposal is this:
1. D2 purchase the property for £10,500,000, or
2. whilst there is no certainty as to the Fairveiw purchase of the Property, our client is willing to drop the action for specific performance and settle the claim at for [sic] £2,000.000.
Regardless of which settlement offer your client chooses, the offer will be open for 21 days from the date of this letter (the “Relevant Period”).Your clients can thus walk away from the dispute by the year end having achieved an attractive settlement. [I shall refer to this paragraph later in this judgment as the Offer Paragraph.]
Both offers are intended to have the consequences set out in Part 36 of the Civil Procedure Rules and are to settle all matters raised in the proceedings.
Failure to Accept this Offer
If your clients do not accept this offer and our clients obtain a judgment which is equal to or more advantageous than this offer, our clients will rely on CPR 36.14 to seek an order in the following terms:
(i) that your clients pay our client’s costs up to the expiry of the Relevant Period;
(ii) that your clients pay our client’s costs on the indemnity basis from the date at which the Relevant Period expired, with interest on those costs of up to 10% above base rate and interest on the whole or part of any sum awarded at up to 10% above base rate for some or all of the period starting from the same date.
Subsequent events
The Offer was not accepted within the 21 days mentioned in the offer letter. There is a short chain of seven emails which I should mention since, as part of his argument, Mr Barnes QC (appearing for the Claimant) relies on them in the context of the withdrawal or variation provisions in rule 36.3(6). I refer to the Claimant’s solicitors as CS and to the Defendants’ solicitors as DS
CS to DS 18 December 2009:
“You will be aware that our client’s Part 36 offer will remain open until 31 December. If your clients intend to revert after such time, we would expect a formal request detailing a specific date for extension of the deadline and the reason for this request. We would then revert to our client accordingly.”
Reply DS to CS later the same day:
“Thank you for your email we are aware when the period for acceptance expires however to provide a formal reply our client has to go through its internal reporting procedures……this process may not have completed until 8th January”
CS to DS 23 December 2009 after a chasing email:
“It was not clear from your email that a response was required, apologies. We had understood that your clients’ internal reporting procedures necessitate a longer period for consideration of the settlement offer, until 8 January 2010. If this is still the case, our client is prepared to wait until that date for a full response to its offer.”
DS to CS later the same day:
“Thank you for clarifying the position.”
CS to DS 8 January 2010:
“Our client agreed to wait until today for a full response from your client to its settlement offer. We note that no response has been forthcoming and ask that you confirm by the end of the day when such response will be available.”
DS to CS on the same date:
“I have not been able to get into the office but will respond early next week.”
CS to DS on 11 January 2010:
“In relation to your clients’ response on settlement, we request a response in the shortest possible order.”
Part 36
So far as material, Part 36 is in the following terms:
“1 PART 36 OFFERS TO SETTLE”
Scope of this Part
36.1
(1) ….
(2) Nothing in this Section prevents a party making an offer to settle in whatever way he chooses, but if the offer is not made in accordance with rule 36.2, it will not have the consequences specified in rules 36.10, 36.11 and 36.14.
(Rule 44.3 requires the court to consider an offer to settle that does not have the costs consequences set out in this Section in deciding what order to make about costs)
Form and content of a Part 36 offer
36.2
(1) An offer to settle which is made in accordance with this rule is called a Part 36 offer.
(2) A Part 36 offer must –
(a) be in writing;
(b) state on its face that it is intended to have the consequences of Section I of Part 36;
(c) specify a period of not less than 21 days within which the defendant will be liable for the claimant's costs in accordance with rule 36.10 if the offer is accepted……
……….
Part 36 offers – general provisions
36.3
(1) In this Part –
(a) the party who makes an offer is the ‘offeror’;
(b) the party to whom an offer is made is the ‘offeree’; and
(c) ‘the relevant period’ means –
(i) in the case of an offer made not less than 21 days before trial, the period stated under rule 36.2(2)(c) or such longer period as the parties agree;
(ii) …….
(2) A Part 36 offer –
(a) may be made at any time, including before the commencement of proceedings; and
(b) may be made in appeal proceedings.
…………..
(5) Before expiry of the relevant period, a Part 36 offer may be withdrawn or its terms changed to be less advantageous to the offeree, only if the court gives permission.
(6) After expiry of the relevant period and provided that the offeree has not previously served notice of acceptance, the offeror may withdraw the offer or change its terms to be less advantageous to the offeree without the permission of the court.
(7) The offeror does so by serving written notice of the withdrawal or change of terms on the offeree.
(Rule 36.14(6) deals with the costs consequences following judgment of an offer that is withdrawn)
………
Acceptance of a Part 36 offer
36.9
(1) A Part 36 offer is accepted by serving written notice of the acceptance on the offeror.
(2) Subject to rule 36.9(3), a Part 36 offer may be accepted at any time (whether or not the offeree has subsequently made a different offer) unless the offeror serves notice of withdrawal on the offeree.
(Rule 21.10 deals with compromise etc. by or on behalf of a child or protected party.)
…………….
Costs consequences of acceptance of a Part 36 offer
36.10
(1) Subject to paragraph (2) and paragraph (4)(a), where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings up to the date on which notice of acceptance was served on the offeror.
……….
(4) Where –
(a) a Part 36 offer that was made less than 21 days before the start of trial is accepted; or
(b) a Part 36 offer is accepted after expiry of the relevant period,
if the parties do not agree the liability for costs, the court will make an order as to costs.
(5) Where paragraph (4)(b) applies, unless the court orders otherwise –
(a) the claimant will be entitled to the costs of the proceedings up to the date on which the relevant period expired; and
(b) the offeree will be liable for the offeror’s costs for the period from the date of expiry of the relevant period to the date of acceptance.
……….
Costs consequences following judgment
36.14
(1) This rule applies where upon judgment being entered –
(a) a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or
(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer.
(2) Subject to paragraph (6), where rule 36.14(1)(a) applies, the court will, unless it considers it unjust to do so, order that the defendant is entitled to –
(a) his costs from the date on which the relevant period expired; and
(b) interest on those costs.
(3) Subject to paragraph (6), where rule 36.14(1)(b) applies, the court will, unless it considers it unjust to do so, order that the claimant is entitled to –
(a) interest on the whole or part of any sum of money (excluding interest) awarded at a rate not exceeding 10% above base rate(GL) for some or all of the period starting with the date on which the relevant period expired;
(b) his costs on the indemnity basis from the date on which the relevant period expired; and
(c) interest on those costs at a rate not exceeding 10% above base rate(GL).
(4) In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3) above, the court will take into account all the circumstances of the case…..
(6) Paragraphs (2) and (3) of this rule do not apply to a Part 36 offer –
(a) that has been withdrawn;
(b) that has been changed so that its terms are less advantageous to the offeree, and the offeree has beaten the less advantageous offer;
(c) made less than 21 days before trial, unless the court has abridged the relevant period.
(Rule 44.3 requires the court to consider an offer to settle that does not have the costs consequences set out in this Section in deciding what order to make about costs)
The proper approach to Part 36 has been dealt with by the Court of Appeal in the conjoined cases of Gibbon v Manchester City Council and LG Blower Specialist Bricklayers Ltd v Reeves [2010] 1 WLR 2081. Moore-Bick LJ in the leading judgment included the following in his general observations:
“4 It can be seen from Part 36 as a whole, as well as from the extracts cited above, that it contains a carefully structured and highly prescriptive set of rules dealing with formal offers to settle proceedings which have specific consequences in relation to costs in those cases where the offer is not accepted and the offeree fails to do better after a trial. In cases where there has been no Part 36 offer or a Part 36 offer has been bettered the judge has a broad discretion in dealing with costs within the framework provided by Part 44 . Rule 44.3(4) provides that when exercising its discretion as to costs the court will have regard to the general rule that the unsuccessful party should pay the costs of the successful party, but will also have regard to the conduct of the parties and any payment into court or admissible offer to settle made by one or other party which falls outside the terms of Part 36 . In seeking to settle the proceedings, therefore, parties are not bound to make use of the mechanism provided by Part 36 , but if they wish to take advantage of the particular consequences for costs and other matters that flow from making a Part 36 offer, in relation to which the court's discretion is much more confined, they must follow its requirements.
5 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. In some respects those consequences reflect broadly the approach the court might be expected to take in relation to costs; in others they do not; for example, rule 36.14(3) allows the court to award a claimant who has obtained a judgment at least as advantageous as his offer interest on the sum for which he has obtained judgment at an enhanced rate of up to 10% over base rate, costs on the indemnity basis and interest on those costs at an enhanced rate as well.
6 Basic concepts of offer and acceptance clearly underpin Part 36, but that is inevitable given that it contains a voluntary procedure under which either party may take the initiative to bring about a consensual resolution of the dispute. Such concepts are part of the landscape in which everyone conducts their daily life. It does not follow, however, that Part 36 should be understood as incorporating all the rules of law governing the formation of contracts, some of which are quite technical in nature. Indeed, it is not desirable that it should do so. Certainty is as much to be commended in procedural as in substantive law, especially, perhaps, in a procedural code which must be understood and followed by ordinary citizens who wish to conduct their own litigation. In my view, Part 36 was drafted with these considerations in mind and is to be read and understood according to its terms without importing other rules derived from the general law, save where that was clearly intended.”
Later on in the judgment, Moore-Bick LJ considered an argument in relation to the Part 35 Offer dated 18 November 2008 made by the claimant in the first claim (Mrs Gibbon). That offer had been made in response to a previous offer from the Council which previous offer was then increased. Mrs Gibbon rejected the Council’s increased offer but did not withdraw her own offer. The Council then increased its offer to match Mrs Gibbon’s 18 November offer, but she rejected it again without withdrawing the 18 November offer. On the Council’s solicitors subsequently accepting the 18 November offer, Mrs Gibbon’s solicitors purported to withdraw it. Under a conventional contact analysis, the Council’s increased offer would no doubt have been a refusal of Mrs Gibbon’s offer of 18 November 2008 which would thereby have lapsed and no longer have been capable of acceptance. That point was argued on her behalf, an alternative submission being that the letter rejecting the Council’s offer made it quite clear that she was unwilling to accept the amount offered in settlement of her claim and thus amounted to an implied withdrawal of her Part 36 offer sufficient to satisfy the requirements of rule 36.3(7). As to that, Moore-Bick LJ said this:
“16 In my view, attractive though these arguments are, they cannot be reconciled with the clear language of Part 36, or indeed with the scheme which it embodies. Rule 36.9(2) is quite clear: a Part 36 offer may be accepted at any time unless the offeror has withdrawn the offer by serving notice of withdrawal on the offeree. Moreover, it may be accepted whether or not the offeree has subsequently made a different offer, a provision which is contrary to the general position at common law. The rules state clearly how a Part 36 offer may be made, how it may be varied and how it may be withdrawn. They do not provide for it to lapse or become incapable of acceptance on being rejected by the offeree. That would be the case at common law, but it 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 the 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 the 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 render it incapable of acceptance. In Samplav Rushmoor Borough Council[2008] EWHC 2616 (TCC) Coulson J held, largely for these reasons, that the rejection of a Part 36 offer does not render it incapable of late acceptance. In my view he was right to do so. ”
17 Nor do I think that the letter of 18 February 2009 can be read as containing an implied withdrawal of the Part 26 offer. Rule 36.3(7) provides that an offer is withdrawn by serving written notice on the offeree. In my view that leaves no room for the concept of implied withdrawal; it requires express notice in writing in terms which bring home to the offeree that the offer has been withdrawn. If justification for that requirement is sought, it can be found once again in the need for clarity and certainty in the operation of the Part 36 procedure. Although the rule does not prescribe any particular form of notice, in order to avoid uncertainty it should include an express reference to the date of the offer and its terms, together with some words making it clear that it is withdrawn. There may, of course, be cases in which the terms of the notice are less clear than might be wished so that there is room for argument about whether the notice fulfils the requirements of the rule. However, that is a different question. The letter of 18 February 2009 did not refer to the Part 36 offer and did not contain any language that might be construed as a notice of withdrawal. In my view it was quite incapable of constituting a notice of withdrawal of the kind required by rule 36.3(7).
18 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. We are not concerned with whether she has any ground of complaint against the council for accepting her offer despite the fact that she had made her intentions clear, since no suggestion has ever been made that she has a legitimate complaint about that. In those circumstances I am of the view that the judge below was right and that this appeal must be dismissed.”
The issues: construction of the Offer Letter and the meaning of Part 36
The principal issue is one of construction of the Offer Letter construed against the background of Part 36. One therefore needs to have an understanding of the operation of Part 36. The ordinary meaning of the words of the Offer Paragraph viewed in isolation is no doubt a guide to its meaning in the context of the Offer Letter as a whole against the background of Part 36. but that ordinary meaning is not necessarily determinative of the issue.
As the judgment of Moore-Bick LJ shows, general contractual rules are not incorporated wholesale into Part 36: some common law rules are simply inconsistent with the provisions of Part 36 and must give way to those provisions. That is not, however, a warrant for giving the words of an offer a meaning which they cannot properly bear in order to squeeze that offer into Part 36 even if that is to be done to give effect to an expressed intention that Part 36 is to apply. If the words used cannot fit with Part 36, then the result is simply that Part 36 does not apply whatever may have been intended.
The issue in the present case is whether the Offer Paragraph creates a time-limited offer. By a time-limited offer, I mean one which the offeror has stated must be accepted within a specified time and so that, if not accepted within the stated period, it comes to an end. In the present case, the Offer Paragraph states that “the offer will be open for 21 days” from the date of the Offer Letter. It is clear, I think, that viewed apart from Part 36, the Offer Paragraph would be a time-limited offer. What else, it might be asked, could those words mean?
The Offer Paragraph does not, of course, stand in isolation. As I have said, it has to be construed as part of the Offer Letter as a whole and against the background of Part 36. It is only against that background that the inclusion of a definition of the period for which the offer is to remain open as “the Relevant Period” makes any sense. In the Offer Letter itself, that definition is subsequently used to explain the costs consequences of not accepting the offer, an explanation which only makes sense by reference to rule 36.14. It is clear to me that “the Relevant Period” is a reference to “the relevant period” mentioned in rule 36.2(2)(c) and rule 36.10.
Rule 36.2(2)(c) makes it a requirement of a Part 36 offer that a “relevant period” is specified. I do not think that it is necessary for the offer to use words such as “the period of so many days is hereby specified as the relevant period” for the purposes of rule 36.2(2)(c), but it must be possible to identify with clarity and certainty the relevant period for that purposes. In the case of the Offer Letter, the specification of the relevant period can be found, if it is to be found at all, only in the Offer Paragraph. There is nowhere else in the Offer Letter where the specification of a relevant period is to be found and the definition of “the Relevant Period” makes the position clear. So one can see that at least one of the purposes of the Offer Paragraph is to ensure compliance with rule 36.2(2)(c).
Part 36 and time-limited offers
At this point, I identify an issue which is of importance in construing the Offer Paragraph. It is whether a time-limited offer is capable of constituting a Part 36 Offer. This issue is important because Mr Barnes QC (who appears for the Claimant) submits that a time-limited offer is capable of being Part 36 Offer whereas Mr Seitler QC (who appears for the Defendants) submits that it is not.
The relevance of the issue is this. If Mr Barnes is correct, then he can assert that there is no inconsistency between, on the one hand, construing the Offer Paragraph as a time-limited offer capable of acceptance only during the Relevant Period and, on the other hand, the clearly expressed intention that the Offer is a Part 36 offer. On this approach, the Offer Paragraph serves a dual purpose: first, it lays down the period within which the Offer must be accepted; and secondly, it specifies the relevant period for the purposes of rule 36.2(2)(c).
In contrast, if Mr Seitler is correct, there would, according to him, be an inconsistency between construing the Offer Paragraph as a time-limited offer and that clearly expressed intention. If the Offer Letter, properly construed, creates a time-limited offer, it is not in fact a Part 36 Offer at all in spite of the clearly expressed intention that it should be. In contrast, if the Offer Letter creates an offer which is not a time-limited, the Offer would have remained open for acceptance even after the end of the Relevant Period (albeit with different costs consequences under Part 36 from an acceptance during that period).
Mr Seitler has two powerful arguments for saying that a time-limited offer cannot be a Part 36 offer. The first argument relies on rule 36.9(2). That rule appears to envisage that any Part 36 offer is capable of being accepted at any time unless and until it is withdrawn. A time-limited offer ceases to be an offer once the period for acceptance has expired. It cannot subsequently be either accepted or withdrawn. It cannot therefore be a Part 36 offer.
It could be said that support for that argument is to be found in the paragraph 16 of the judgment of Moore-Bick LJ in Gibbon. As he pointed out, a Part 36 offer once made remains open for acceptance unless withdrawn whatever the common law rules might otherwise provide when an offer is rejected. Similarly, once a Part 36 offer is made, it continues to be open for acceptance, whatever the terms of the offer might otherwise provide.
There is, however, an element of circularity in reliance upon that part of the judgment since there is an important difference between the sort of case described by Moore-Bick LJ and the case of a time-limited offer. In the former case, it is possible to identify an offer and to say that it is, without doubt, a Part 36 offer. Once it has been identified as such, the provisions of Part 36 apply to it and, if the results which flow are different from the results which would flow from the application of general common law rules, Part 36 prevails.
But in the case of a time-limited offer, the prior question is whether it is capable of being a Part 36 offer in the first place. It would not be right to cherry pick terms on which the offer is made and to identify only some of those terms as comprising the Part 36 offer. Accordingly, it would not be right to ignore the terms relating to the mode and time of acceptance, treating the other terms of the offer as the Part 36 offer, and then to apply rule 36.9(2) to those terms alone.
Nonetheless, I consider that rule 36.9(2) provides a strong indicator of the sort of offer with which Part 36 is concerned. The indicator is that it is an offer which is at least capable of being withdrawn and is not one which comes to an end according to its own terms.
The second argument really goes to support the first argument and relies on the structure of Part 36 in general and on rule 36.14 in particular. Under that rule, there is a severe costs sanction placed on a defendant who does not accept a Part 36 offer where there is judgment against the defendant which is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer. That sanction is to be found in rule 36.14(3). But the sanction does not apply where the Part 36 offer has been withdrawn or where the terms are changed so as to be less advantageous to the offeree and the offeree has beaten the less advantageous offer. The policy of Part 36 can thus be identified, under this argument, as being to encourage a defendant to accept a reasonable Part 36 offer from the claimant but so that, if the offer is not kept open, by being withdrawn or changed detrimentally, the sanction ceases to apply. The successful offeror can take the benefit of the provisions only, as the quid pro quo, if he has left it open to the offeree to accept the offer is kept open.
It would not be consistent with that policy for there to be a time-limited offer making the defendant subject to the risk of the rule 39.14(3) sanction whilst not obliging the claimant to leave his offer open. Mr Seitler accepts that the offeror is not to be compelled to keep an offer open. An offeror is entitled to withdraw the offer at the end of the relevant period; he can indicate in advance that that is what he will do and can even serve a notice of withdrawal at the same time of the offer. But that is unobjectionable and in accordance with the policy of Part 36 because it removes the sanction under rule 36.14(3) by virtue of rule 36.14(6).
Mr Barnes seeks to ameliorate that unfairness inherent in the proposition that a time-limited offer is capable of being a Part 36 offer by pointing out that the sanction is not absolute. The court has a discretion under rule 36.14(3) to disapply the sanction is it considers its application would be unjust. That is a partial answer but it is not a complete answer. There is a real difference in the position of a claimant who needs to rely on the court deciding that it would be unjust to apply rule 36.14(3) in the case of a time-limited offer and a claimant who can rely on rule 36.14(6) as a matter of right if the Part 36 offer is withdrawn.
Mr Barnes is in any case compelled to accept that a time-limited offer has to remain open for at least 21 days in order to comply with rule 36.2(2)(c). But, so he says, that does not mean that the offer has to be kept open for more than 21 days. Part of his argument is that it is permissible to include conditions in a Part 36 offer which are not directly connected with the subject matter of the dispute – for instance a condition that the defendant release a charge over the property of a third party. There is no reason, he says, why the offeror should not impose a condition about the time for acceptance of the offer. In other words, the condition about the time for acceptance is a term of the Part 36 offer.
But this is a curious analysis, to my mind, of rule 36.2. As a matter of the language of rule 36.2, and of rule 36.2(2)(c) in particular, the offer is surely that which is open for acceptance and becomes a term of the contract which comes into being as a result of the acceptance. It is the offer which, if accepted within 21 days, has the costs consequences set out in rule 36.10. It seems odd, in the context of rule 36.2 to regard, for instance, a letter accepting an offer as being an acceptance of a term of the offer. Rather, in the context of rule 36.2, it is more naturally to be seen as the implantation of a process which results in acceptance of the offer rather than acceptance of the term itself.
By way of analogy, suppose that the offer contains a provision that says it may only be accepted by a hand-delivered letter and not by post or any other means. The offer, if it otherwise falls within Part 36, is not precluded by such a condition from being a Part 36 offer. If the offeree purports to accept the offer by sending a letter in the post, that will not be effective to accept the offer (unless for some reason the general law applies on the facts of the case to treat acceptance by post as effective). But if the offer is accepted by hand-delivery of a letter, the offer which has been accepted encompasses the terms of which acceptance had to be effected by hand-delivery; it does not in addition accept, for the purposes of Part 36.2, an offer which comprises as one of its terms, the condition for hand-delivery.
In my judgment, a time-limited offer, as I have described it, is not capable of being a Part 36 offer. I consider that the structure of Part 36 in general and the provisions of rule 36.2(2) and rule 36.14(6) in particular, establish that an offer must be capable of acceptance unless and until withdrawn by service of a notice within rule 36.9(2), although an offer may also be changed; but if its terms are less advantageous, the costs sanctions under rule 36.14(6) do not apply.
Construction of the Offer Letter
I come now to Mr Seitler’s arguments on construction in the light of that decision. He explains the Offer Paragraph in this way. The Offer gives the Defendant a choice of two settlement proposals (not on their face time limited). The Defendants can choose either of the two settlement proposals. But, regardless of the choice, for 21 days the offer will be open, in the sense of being available, on the basis set out in Part 36, in particular rule 36.10. In other words, there is a qualification in the offer: it can be accepted with the consequence set out in rule 36.10(1) but only if accepted within 21 days. The offer is nonetheless intended to be a Part 36 offer and since that requires it to remain open even after the 21 day period has expired (unless withdrawn by notice), the Offer Paragraph should be read in that sense.
Mr Seitler would say that support for this conclusion is to be derived from the use of the definition “the Relevant Period”. Given that that phrase is clearly, in my view, a reference to “the relevant period” mentioned in rule 36.2(2)(c), and given that reading the Offer Paragraph as requiring acceptance of the offer within 21 days would prevent Part 36 applying at all, Mr Seitler’s construction gives effect to the clear intention that Part 36 is intended to apply whilst giving a construction to the Offer Paragraph which, whilst departing from the ordinary meaning of the words used, does not do unjustifiable damage to those words or distort their meaning to an inadmissible extent.
Mr Seitler also relies on the paragraphs in the Offer Letter under the heading “Failure to Accept this Offer”. Its reference to rule 36.14 shows quite clearly that Part 36 was intended to apply and that the consequences set out would only be capable of applying if the Offer is not a time-limited offer.
Mr Barnes, of course, says that this is simply not an admissible construction. The words “the offer will be open for 21 days” are clear and unambiguous and must be given effect to even if, contrary to his primary submissions, a time-limited offer cannot be a Part 36 offer. Mr Seitler’s construction strains the language beyond breaking point.
There is also this point to bear in mind. As is shown by the discussion above, the issue whether a time-limited offer is capable of being a Part 36 offer is not straightforward and does not admit only a single obvious answer. The drafting of the Offer Letter is entirely consistent with the view (and if I am right, the mistaken view) that a time-limited offer can be a Part 36 Offer. If the Offer Letter shows clearly that it is drafted on the basis of the mistaken view, then it becomes difficult, if not impossible, to sustain an argument which depends on stretching the language used to make it fit with the apparent intention that the Offer should be a Part 36 offer.
To put this another way, it is one thing to construe a document against the provisions of a relevant statutory instrument (such as the CPR) and to interpret the document in a way which fits with the scheme of the statutory instrument in a case where the document gives no indication of a particular understanding of the statutory instrument; but where the document does indicate a particular understanding of the statutory instrument which later turns out to be incorrect, it would not be right in principle to interpret the document in a way which fits with the scheme of the statutory instrument when to do so would be inconsistent with the understanding on which the document was in fact drafted.
In the context of the present case, it would be wrong to construe the Offer Paragraph by reference to the meaning which I have held Part 36 to have if it can be shown, from an examination of the Offer Letter, that it was not the meaning which the draftsman understood Part 36 to have. [I say “from an examination of the Offer Letter” because I have no other evidence about what he actually understood it to mean even if such evidence were admissible, as to which I say nothing.]
The case would not then be one of two inconsistent intentions expressed in the same document, namely an intention to have a time-limited offer and an intention to comply with Part 36. Rather, it would be a case of a single intention to have a time-limited offer and the expression of the consequences, being consequences which were understood, mistakenly, to follow from the time-limited offer.
As to that, the only sections of the Offer Letter which might be said to display such a misunderstanding are the sections which I have set out at paragraph 3 above. It must be acknowledged that the drafting of the Offer Letter is not anything like as clear as it might have been even if the draftsman considered that a time-limited offer could be a Part 36 offer. But having said that, it is very difficult indeed to see how any draftsman could have produced the two sections of the letter containing the Offer and setting out the costs consequences if he had appreciated that a time-limited offer could not, or even might not, be capable of being a Part 36 offer.
In my judgment, the Offer Letter does display that understanding on the part of the draftsman, a mistaken understanding if I am right in what I have said about the meaning of Part 36. By failing to distinguish between the time for acceptance of an offer and the time which needs to be specified for the purposes of rule 36.2.(2)(c), he has shown that he perceived no need to do so: the restriction of the acceptance period for the offer to 21 days would automatically carry with it the result that the “relevant period” would also be 21 days, the minimum period which could be specified.
Further, his reference to the consequences of a failure to accept the offer is also most sensibly seen as a reference to a failure to do so within 21 days. He did not envisage the possibility of an acceptance after that period; on that basis, rule 36.14 would indeed apply thereafter with the consequence set out under the heading “Failure to Accept this Offer”.
It follows from this conclusion that the Offer was not a Part 36 Offer at all. Since it was not a Part 36 Offer, it was a perfectly valid time-limited offer. Whatever the effect of the e-mails mentioned in paragraph 4 above, it is clear that there was no subsisting offer open for acceptance in November 2010 and nothing, therefore, which it was possible for the Defendants then to accept.
These conclusions make it unnecessary to consider the effect of those emails in the context of a Part 36 offer. In particular, assuming that Mr Seitler’s construction of the Offer Paragraph were correct, it is not necessary to decide whether those emails amounted to a withdrawal of the Offer for the purposes of rule 36.9(2). However, I express very briefly the tentative view that they would not do so. The principal reason for reaching that view is that one only gets this far in the argument if the only purpose of the 21 day time-limit in the Offer Paragraph is to specify a relevant period within rule 36.2(2)(c). A lengthening of that period cannot, on that footing, be seen as a withdrawal of the Offer. It is at most a change in the terms of the Offer which has no consequence in terms of the Offer remaining open for acceptance but only has repercussions for costs if the action does not settle and the Claimants beat their Offer.
Conclusion
The Offer was not open for acceptance on 5 November 2010 and has not, therefore, in fact been accepted. I am willing to make a declaration along the lines sought.