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Thewlis v Groupama Insurance Company Ltd

[2012] EWHC 3 (TCC)

Neutral Citation Number: [2012] EWHC 3 (TCC)

Case No: 1LS 70360

IN THE HIGH COURT OF JUSTICE

QUEENS BENCH DIVISION

LEEDS DISTRICT REGISTRY

TECHNOLOGY AND CONSTRUCTION COURT

The Court House

Oxford Row

Leeds LS1 3BG

Date: 05/01/2012

Before :

His Honour Judge Behrens sitting as a Judge of the High Court in Leeds

Between :

NORMAN LEE THEWLIS

Claimant

- and -

GROUPAMA INSURANCE COMPANY LIMIETD

Defendant

William Buck (instructed by Lawsons of Central Buildings, 13 The Bull Ring, Wakefield WF1 1HB) for the Claimant

Matthew Smith (instructed by Ford & Warren , Westgate Point, Westgate, Leeds LS1 2AX) for the Defendant

Hearing date: 20 December 2011

Judgment

Judge Behrens :

1

Introduction

1.

This is an application by the Defendant for a declaration that the proceedings have been stayed pursuant to Part 36.11 of the CPR on the grounds that the Defendant has accepted the Claimant’s offer made pursuant to Part 36 of the CPR.

2.

There is no dispute as to the facts relevant to the application. It is common ground between the parties that on 24th September 2008 (before the issue of proceedings) Lawsons on behalf of the Claimant made an offer to settle the proceedings and that the offer was rejected on 1st October 2008. Proceedings were subsequently issued on 25th May 2011 and have now reached the stage where the claim has been set down for trial in February 2012. On 17th October 2011 Ford & Warren on behalf of the Defendant purported to accept the offer in settlement of the whole claim.

3.

There is considerable recent jurisprudence on Part 36 which has spawned significant satellite litigation. During the course of the hearing I was referred to four decisions of the Court of Appeal (Footnote: 1), two decisions of the High Court (Footnote: 2) and one decision of the Romford County Court (Footnote: 3).

4.

There is no dispute between the parties that under ordinary common law principles the offer had terminated long before October 2011. There is equally no dispute that if the letter of 24th September 2008 was a valid Part 36 Offer it was validly accepted in the letter of 17th October 2011.

5.

The issue between the parties was whether the letter took effect as a valid Part 36 Offer. Mr Smith on behalf of the Defendant contends that it was and has referred me to the references to Part 36 in the letter and other parts of the letter which, he submits, make it clear that it should be interpreted as a Part 36 Offer. Mr Buck on behalf of the Claimant submits that it was not. It did not contain the formalities required by Part 36 and contained clauses inconsistent with Part 36.

2

The underlying dispute

6.

The underlying dispute is largely irrelevant to the present debate and thus may be summarised very shortly. The Claimant is the owner of residential property at Woodside Farm, Middlestown West Yorkshire. The property was insured by the Defendant. In 2007the Claimant made a claim under the policy of insurance in respect of subsidence damage. The Defendant disputed the claim. There are issues as to whether any damage (none being admitted) is covered by the terms of the policy and as to the extent and costs of any necessary remedial works.

3

The offer letter.

7.

As the letter is central to the current debate it is convenient to set it out substantially in full:

OFFER MADE PURSUANT TO PART 36 OF THE CPR

Dear Sirs

Re Our client: Mr Norman Lee Thewlis – Damage to Woodside Farm, Sandy Lane, Middlestown – Your Principal Insured – Groupama

We write further to the above and in one last attempt to settle this matter, we are instructed to put forward the following offer, this offer is made pursuant to Part 36 of the CPR and remains open for acceptance for a period of 21 days, from your receipt of this offer letter, thereafter it can only be accepted if we agree the liability for costs or the Court gives permission:-

1.

Your client to pay our client damages in the sum of £20,000 within 21 days of the date of the letter.

2.

Your client to pay our reasonable costs and our clients experts costs (Peter Wade Consultancy) such costs to be subject to detailed assessment if not agreed.

The above mentioned offer relates to the whole of our client’s claim against your client and takes into account any counterclaim they may have and is inclusive of interest.

Please take your client’s instructions on the above and revert to us in due course.

Yours faithfully

Lawsons

8.

It is perhaps worth noting that Part 36 was substantially amended with effect from 6th April 2007. Mr Smith invited me to infer and Mr Buck accepted that the author of the letter had in mind the provisions of Part 36 prior to the amendments.

4

Part 36

9.

CPR 36.1 provides under the broad heading scope of this part as follows:

“36.1

(1) This part contains rules about - a) offers to settle and b) the consequences where an offer to settle is made in accordance with this part.

“(2)

Nothing in this part 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.”

10.

36.2 provides as follows:

“(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 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, d) state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue and e) state whether it takes into account any counter claim.”

11.

36.3, under the heading “Offers – general provisions” provides

(2)

A Part 36 may be made at any time, including before the commencement of proceedings

(3)

A Part 36 offer which offers to pay or offers to accept a sum of money will be treated as inclusive of all interest until —

(a)

the date on which the period stated under rule 36.2(2)(c) expires; or

(b)

if rule 36.2(3) applies, a date 21 days after the date the offer was made.

. . .

(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.

12.

36.9, under the heading “Acceptance of a Part 36 offer”

(1)

A Part 36 offer is accepted by serving written notice of the acceptance on the offeror.

(2)

. . . 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.

13.

36.10, under the heading “Costs, consequences of acceptance of a Part 36 offer”, provides:

(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

(3)

costs under paragraphs 1 and 2 of this rule will be assessed on the standard basis if the amount of costs is not agreed.”

14.

Under the heading “the effects of acceptance of a Part 36 offer” 36.11 provides:

(1)

If a Part 36 offer is accepted the claim will be stayed

(2)

In the case of acceptance of a Part 36 offer which relates to the whole claim the stay will be upon the terms of the offer

5

The Authorities

15.

As already noted I was referred to seven authorities. In Gibbon Moore-Bick LJ made some general observations in paragraphs 4 – 6 of his judgment:

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.

16.

In paragraph 16 he rejected an argument that the rejection of an offer made it incapable of subsequent acceptance:

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.

17.

C v D concerned the construction of an offer contained in a letter headed “An offer to settle under CPR Part 36”. The relevant letter contained 2 (alternative) offers. It stated that the offers were to be open for 21 days from the date of the letter and that both offers were intended to have the consequences set out in Part 36 and were to settle all matters raised in the proceedings. The question arose as to whether the offer lapsed after 21 days.

18.

In paragraphs 25 – 27 of his judgment Rix LJ set out the provisions of Part 36 prior to the 2007 amendment. He explained in paragraph 27 that a pre April 2007 offer had to be expressed as “open for acceptance for 21 days” and also survived for acceptance after 21 days. In paragraph 44 he concluded that under the new scheme an offer cannot be time limited. As he pointed out in paragraph 45 it is either a Part 36 offer or a time limited offer. It cannot be both. He went on to hold that the offer had to be interpreted in the light of the guidance in Lord Hoffmann’s well known speech in ICS v West Bromwich Building Society [1998] 1 WLR 896. He went on to hold (for a variety of reasons) that “open for 21 days” simply meant that there would be no attempt to withdraw the offer within the 21 day period. Thus in paragraph 54 he said:

54.

In the context of Part 36, it seems to me to be entirely feasible and reasonable to read the words “open for 21 days” as meaning that it will not be withdrawn within those 21 days. Part 36 permits withdrawal within the 21 day relevant period, but only with the permission of the court. It seems to me that “open for 21 days” is an obvious way of saying that there will be no attempt to withdraw within those 21 days. It is also a warning that after the expiry of those 21 days, a withdrawal of the offer is on the cards. Such a construction would save the Part 36 offer as a Part 36 offer and would also give to both parties the clarity and certainty which both Part 36 itself, and the offer letter with its reference to “open for 21 days”, aspire to. It would leave the offeror entirely free to withdraw the offer immediately upon expiry of the stated period, or to let it roll on for as long as it wished. At the same time it would assure the offeree that it had 21 days to consider what it wanted to do, but was at risk if it had not accepted within that period. There might be an issue, had the offeror wished to withdraw within the relevant period, as to whether the court would permit it to do so where it had stated that it was open for 21 days: but that issue does not affect the current question.

19.

He expressed his conclusion in paragraph 68:

68.

…Ultimately, it is important for the security of the Part 36 scheme, in countless cases, that it should be clearly understood that if a claimant wishes to make a time limited offer, in the sense that the offer is to lapse of its own accord at the end of a stipulated period, then such an offer cannot be made as a Part 36 offer; that an offer presented as a Part 36 offer and otherwise complying with its form will not readily be interpreted in a way which would prevent it from being a Part 36 offer; and that if an offeror wishes to bring his Part 36 offer to an end, so that it cannot be accepted, then he must serve a formal notice of withdrawal. It seems to me that, although the precise point raised in this appeal is new, all the jurisprudence on Part 36 cited above contributes to these conclusions.

20.

This point was emphasised in paragraph 84 in the judgment of Stanley Burnton LJ where he said:

84.

Any ambiguity in an offer purporting to be a Part 36 offer should be construed so far as reasonably possible as complying with Part 36. Once it is accepted that a time-limited offer does not comply with Part 36, one must approach the interpretation of the offer in this case on the basis that the party making the offer, and the party receiving it, appreciated that fact

21.

This passage was expressly cited by Rix LJ in paragraph 66 of the very recent decision in Epsom College.

22.

Huntley was an action for personal injuries. In such a case there is an added requirement under 36.5(4)(d) that the offer must state that any damages which take the form of periodical payments will be (I paraphrase) adequately funded. An otherwise compliant Part 36 offer failed to comply with 36.5(4)(d). Underhill J held (see paragraph 5) that this was a formal defect and that the offer was thus not a Part 36 offer. He went on to exercise his discretion under CPR 44.3.4(c) to provide for the same costs consequences as if the offer had been Part 36 compliant.

23.

Carillon also concerned construction of an offer to split liability on a 70:30 basis. The offer was expressed to have been made under Part 36 of the CPR and that it was intended to have the consequences of Part 36. It contained no time limits but invited the offeree to respond within the next 7 days. Akenhead J held that the offer did not comply with Part 36 because it did not comply with the prescriptive requirements of rule 36.2. At paragraph 15 he said:

The first exercise in this case therefore is to determine whether or not, on a proper reading of the letter of 5 February 2010, it was a Part 36 offer which complied with the provisions of Part 36. I have formed the view that it did not comply for the simple reason that it did not, as prescriptively required by Part 36, “ specify a period of not less than 21 days within which [RWC would] be liable in accordance with rule 36.10 if the offer is accepted". Although Paragraph 4.5 of the letter said that the offer was "made under Part 36…and the offer is intended to have the consequences of Part 36…”, this does not, in my judgement, begin to comply with the prescriptive requirements of Rule 36.2. A Court should be cautious about seeking to introduce purely contractual interpretation and construction principles into the exercise of determining whether an offer is compliant with Part 36. It should however be clear that it is compliant. The failure to spell out a 21 day period is an important one because it provides not only a timetable within which the offeree needs to accept the offer but also points the offeree to the cost consequences of accepting it. This is perhaps even more important when, as here, the offeree was not yet a party to the proceedings (albeit that an incipient Pre-Action Protocol process was underway) and the offeree was nowhere near as well informed about the underlying litigation as Phi was.

24.

Shah was another case which turned on the construction of an offer. In that case the offer was open for acceptance for 21 days after receipt of the letter. Judge Platt followed C v D and held that that did not prevent it from being a Part 36 Offer. However the letter also offered predictive costs until 21 days after the receipt of the letter. Judge Platt held (paragraph 23) that this was a reference to the fixed costs regime recoverable in Road Traffic Accidents. He held (paragraph 26) that this was materially less favourable to the Claimant than the costs to which he would have been entitled under Part 36 rule 10. He thus held that this was not a Part 36 offer.

6

Discussion and Conclusion

25.

Mr Buck makes two substantive points about the letter of 24th September 2008. First it fails to comply with Part 36(2)(b) in that it does not say on its face that it is intended to have the consequences of Part 36. Second he submits that it is inconsistent with Part 36 because after 21 days it can only be accepted “if we agree the liability for costs or the court gives permission”.

26.

Mr Smith seeks to avoid this argument in a number of ways. He says that when the letter is read as a whole it refers to Part 36 in two places – one in bold type. It was plainly intended to be a Part 36 offer. The court should follow the guidance given by Stanley Burnton LJ and resolve any ambiguity, so far as possible as complying with Part 36. In those circumstances one should ignore the last few words of the first paragraph of the offer. It is plain that the author of the letter had in mind the old provisions of Part 36. In those circumstances a reasonable solicitor receiving the letter was entitled to interpret the letter as if it was made under the new regime. Whilst he accepted that that there was no express statement that the letter was intended to have the consequences of Part 36 when the letter is read as a whole it is plain that was the effect. He referred me to the heading, the other reference to Part 36, the requirement to pay the reasonable costs and the statements that the sum claimed was inclusive of interest and that it relates to the whole of the claim. All of these are features of Part 36 and thus show that the letter was intended to have the consequences set out in Part 36.

27.

Whilst I see the force of Mr Smith’s submissions I cannot accept them. In my view rule 36.2 means what it says. As Mr Buck pointed out it uses the word “must”. Furthermore both Underhill J and Akenhead J have treated failures to comply with rule 36.2 as fatal and I see no reason not to follow their approach. Mr Smith attempted to distinguish both of these decisions. He pointed out that the failure in Huntley related to a different provision. To my mind that is a distinction without a difference. To my mind what is important is that Underhill J regarded the defect as technical yet he still held that the offer was not a Part 36 offer. It was for that reason he had to exercise his discretion under CPR 44.3.4(c).

28.

Mr Smith submitted that Carillon could not stand with the decision in C v D which is not referred to in the judgment. With respect I cannot agree. C v D is concerned with the interpretation of the offer. Carillon is concerned with whether the failure to comply with rule 36.2 means that the offer is not a Part 36 offer. To my mind there is considerable force in the observations in paragraph 15 of Akenhead J’s judgment. It is also by no means clear that the Claimant did intend the letter to have the consequences of the new Part 36. The final sentence of the first paragraph is inconsistent with Part 36. Furthermore whilst the letter refers to some of the consequences of Part 36 it does not refer to them all. It is not without significance that in paragraph 68 of his judgment in C v D Moore-Bick LJ was careful to point out that an offer presented as a Part 36 offer must “otherwise comply with its form”. In my view the letter of 24th September 2008 does not comply with rule 36.2 and is not therefore an offer within Part 36.

29.

In the light of my view on rule 36.2 it is unnecessary for me to express a view on the construction of the letter. However as it has been fully argued it is right I should express my view. I do not overlook the guidance given by Stanley Burnton LJ in paragraph 84 of C v D but to my mind this case is distinguishable from that case. That case was concerned with the construction of the phrase that the offer was open for 21 days in the light of references to Part 36. The offer in that case did not contain the clause “thereafter it can only be accepted if we agree the liability for costs or the Court gives permission” which appears in the letter of 24th September 2008. If any effect is to be given to that clause the offer does not remain open after 21 days for the Defendant to accept. It is therefore inconsistent with a Part 36 offer. Mr Smith argues (as he must) that the Court should reject the clause as surplusage on the ground that the author has misunderstood the effect of Part 36 and the court should simply treat it as a Part 36 offer. I do not accept that submission. In my view a reasonable solicitor reading that clause would understand that the offer did not remain open for acceptance after 21 days unless one of the conditions specified in the clause were satisfied. Whilst a party accepting a Part 36 offer is liable to pay costs those costs are on the standard basis. Under this clause it is possible that the Claimant may wish to argue that costs should be payable on an indemnity basis. There is no reason why a Claimant should not attempt so to provide. However he cannot do so in a Part 36 offer.

30.

In my view therefore as a matter of construction this offer was not open for acceptance after 21 days. It was not accordingly a Part 36 offer.

31.

It follows that I would dismiss this application with costs.

Thewlis v Groupama Insurance Company Ltd

[2012] EWHC 3 (TCC)

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