Bentley Design Consultants Ltd v Sansom

This is an appeal from the decision of His Honour Judge Cotter QC made on 26 January 2017. I heard this appeal on 23 July 2018 and dismissed the appeal, giving brief reasons, with full written reasons to follow in due course. These are those reasons.

The appeal concerns what, on its face, is a short issue as to the proper construction of a Part 36 offer made in these proceedings on 23 April 2015.

I set out first the background to this issue and how it arose. I will generally refer to the Claimant/Respondent as Mr Sansom and the Defendant/Respondent as Bentley.

Mr Sansom is the owner of a site in Exmouth on which he undertook the construction of two properties, referred to as Plot 1 and Plot 2. On or about 6 May 2011, Mr Sansom engaged Bentley to provide structural engineering services.

By letter dated 19 December 2013, Foot Anstey (solicitors acting on behalf of Mr Sansom) wrote to Bentley setting out Mr Sansom’s claim. The letter made reference to the fact that Mr Sansom was constructing 2 new dwellings on the site and pleaded a contract for services formed by a request for a quotation dated 5 May 2011, an offer from Bentley dated 6 May 2011, and the acceptance of that offer (without specifying whether this contract related to Plot 1 or Plot 2 or both). The letter than made a claim in respect of Plot 1 which it was said had suffered cracking because of the lack of expansion joints, contending that the design of expansion joints was Bentley’s responsibility. The claim was said to be for damages being additional financing costs, the cost of repair, additional time managing the remedial works, and loss caused by delay in putting the property on the market. The total sum claimed was £35,025.14 (plus interest).

In February 2014, Mr Sansom commenced proceedings against Bentley. The Claim Form gave the brief details of claim as a “claim for damages for breach of contract and/or professional negligence”. The Particulars of Claim (dated 18 February 2014) were largely in the same terms as the December claim letter. The claim was, therefore, clearly in respect of Plot 1 only and the claim was for £35,025.14.

By an open letter dated 20 March 2014, Kennedys, Bentley’s solicitors, responded to the December claim letter. The letter said that Bentley was the structural engineer engaged by Mr Sansom to design the structural elements of two new properties on the site but also expressly stated that Bentley’s quote dated 6 May 2011 was in respect of Plot 1. At paragraph 2, Kennedys said:

“Our client accepts that movement joints were required in the present case and that the terms of their engagement included advising upon their use and positioning. To the extent that they failed to do so, breach of duty is admitted.”

However, they took issue with causation of loss and the damages claimed.

By a further letter of the same date (marked Without Prejudice Save as to Costs), Kennedys offered “£5,000, plus reasonable costs, in full and final settlement of this matter”.

Foot Anstey responded to that letter on 20 June 2014, apparently following further discussions and responding to queries. The letter was headed “Re. Plot 1, Seafield Avenue, Exmouth”. The letter said that, as discussed, Mr Sansom had a further claim to make against Bentley in relation to the second property on which he was taking advice. It continued “If matters cannot be resolved then a claim will be issued in relation to the second issue and this can then be joined to this claim and dealt with in the same proceedings.”

There was then a period during which the parties agreed stays of the proceedings and/or extended time for the service of the Defence. On 7 April 2015, following some recent communication, Kennedys wrote stating that they expected proper consideration to be given to the offer of £5,000. The letter expressly stated that it related to “the alleged issues arising at Plot 1 Seafield Avenue only (the Claim)”.

That was followed on 23 April 2015 by the letter that is central to the issue on this appeal (“the 23 April offer”). That letter was sent by Foot Anstey to Kennedys. It was stated to be “without prejudice save as to costs” but also to be an offer pursuant to CPR Part 36. It identified the claim by reference to the claim number A48YJ616. The offer was that “Your client will pay to our client the sum of £25,025 in full and final settlement of the whole of this claim”.

There can be no doubt that, at the time this offer was made, it was an offer to settle the claim in respect of Plot 1 only and Bentley does not dispute that. The only claim that had been made was that in respect of Plot 1: the claim in respect of Plot 2 was in contemplation but had not been made. The claim in the claim bearing the number referenced was only in respect of Plot 1. The offer was to settle “the whole of this claim” – if any further clarity were required, that wording made clear that it was an offer to settle the existing claim and not any potential claim. On this appeal, Bentley do not seek to argue differently but they argue that things changed.

The offer was not at this point accepted. On 13 May 2015, Kennedys took two further steps. Firstly, they wrote an open letter, expressly relating to Plot 2, with the subject line “The Property: Plot 2, Seafield Avenue”. That letter stated that they were in the process of appointing an expert and said that it may be appropriate for experts to speak. Secondly, Kennedys wrote a second letter “without prejudice save as to costs” with the subject line “The Property: Plot 1, Seafield Avenue”. That letter referred back to Foot Anstey’s letter of 23 April 2015 and continued:

“You will be aware that we have today sent an open letter in relation to Plot 2. While we appreciate that the matters in respect of the Property and Plot 2 stand alone, we note from previous correspondence that you and your client are of the view that there is merit in attempting to deal with the two matters together. We concur that this approach is most likely to enable the parties to achieve an acceptable settlement in a proportionate manner.

We are conscious that the proposed directions mean that our client’s Defence is due on 28 May 2015. However, in the light of our open letter, relating to Plot 2, our view is that it would be preferable for the parties to enter into a stay on the basis that we are obtaining expert evidence.

….”

I quote from this letter because it makes it plain that, although not entirely consistent with the headings of their letters, Kennedys were, at this time, treating the claim in respect of the Property (that is, Plot 1) as distinct from the claim in respect of Plot 2. However, they indicated their agreement that it would be sensible, as Foot Anstey had proposed in 2014, for the two matters to be dealt with together.

There was then a further period during which stays and/or extensions of time were agreed. On 30 April 2016, the court made an order by consent (in claim no. AY8YJ615) staying the proceedings until 29 May 2016. The order provided that, if “the claim” (which by definition was the claim in respect of Plot 1), had not been settled by that date, the claimant had permission to file Amended Particulars of Claim “incorporating the further claims it has against the Defendant”.

Amended Particulars of Claim were filed on 28 June 2016 which added the claim in respect of Plot 2. The Amended Particulars of Claim pleaded a single contract, alternatively two separate contracts. The claim in respect of Plot 1 was increased by an additional £5,000 claimed in respect of diminution in value of the house. The claim in respect of Plot 2 included a claim for the cost of remedial works at £95,223.64. It was averred that Mr Sansom had intended to occupy Plot 2 and, as a result of not being able to do so, had incurred £36,828 in additional mortgage payments on his alternative accommodation and other losses as a result of being unable to develop that property (the quantification of which was to be advised in due course). The claim in respect of Plot 2 was, therefore, for a substantially greater sum than had been claimed in respect of Plot 1.

Bentley’s Defence was filed on 27 July 2016. Bentley’s position remained that there were two separate contracts. Bentley admitted that it had breached both contracts but Bentley took issue with the monetary claims made.

On 8 August 2016, in a letter marked “without prejudice save as to costs – Part 36”, Kennedys offered to settle “the whole of your client’s claim (Claim no. A48YJ615) for the sum of £40,000”. That offer was rejected and on 5 September 2016, the claimant filed his Reply. Thereafter, directions were made in respect of the CCMC which was fixed for 16 November 2016.

On 8 November 2016, Kennedys then wrote to Foot Anstey in the following terms:

“Claim No. A48YJ615

We write to confirm our client’s acceptance of your client’s Part 36 offer dated 23 April 2015 of £25,025 in full and final settlement of the whole of this claim.

…………

We confirm that we have written to the court notifying them of our client’s acceptance of your client’s Part 36 Offer.”

In subsequent correspondence between solicitors, Kennedys confirmed that they intended to accept the offer as compromising both the claims in respect of Plot 1 and Plot 2. Foot Anstey, as might be anticipated, disputed that the offer related to anything other than the claim in respect of Plot 1 and thus the present issue arose.

The matter came before His Honour Judge Cotter QC on 26 January 2017 for the hearing of what was described as a preliminary issue: “Did the defendant’s letter dated 8^th November 2016 have the effect of settling or compromising any or all of the claimant’s claims and, if so, on what terms.” In a careful and thoroughly reasoned judgment, the learned judge held that the answer to that question was this:

“The effect of the defendant’s letter dated 8^th November 2016 was to compromise only the claimant’s claim for damages and breach of duty in relation to Plot 1 as set out in paras. 10 and 16 to 18 of the amended particulars of claim dated 28^th June 2016. The claimant’s claim so identified is stayed on terms that the defendant is to pay the claimant the sum of £25,025 within 14 days of 8^th November 2016. The claimant’s claim for damages for breach of duty in relation to Plot 2 as set out in the remainder of the amended particulars of claim has not been compromised and is not stayed.”

It is against that decision that Bentley now appeals.

To put Bentley’s case in context, it is necessary to set out the material terms of Part 36.

At the heart of the Bentley’s argument is the following proposition – that an offer to settle the whole of the claim made in an action is what is says, that is, an offer to settle the whole of the claim in the action. As a basic proposition that much, I accept, is clear from Part 36.2(3)(a) and Part 36.5(1)(d).

Bentley then submits that, if the nature and extent of the claim varies in the course of proceedings, the offer remains an offer to settle the whole of the claim (whatever it may now be). If that is not what a claimant intends, it is incumbent on him to make that clear either by withdrawing or varying an offer (which he is entitled to do under Part 36.9(4)) and, if he does not do so, the offer continues to be open for acceptance in respect of “the whole of the claim”. That, Ms Piercy submits, is how the 23 April offer is to be construed bearing in mind the context in which it is made, that is, the context of a Part 36 offer. Further, she submits that that approach is necessary to achieve clarity and certainty in the operation of Part 36: if that were not the position, the court would be faced with the task of construing every Part 36 offer, and determining its effect, by reference to the claims made and the quantification of those claims at the time the offer was made in order to ascertain what the offer was offering to settle.

Two matters are, rightly in my view, common ground between the parties. The first is that this is a matter of construction of the 23 April offer. The second is that Part 36 creates a self-contained code for the making and acceptance of offers to settle and, although the background is that of contractual offer and acceptance, that code is not to be subject to the same rules.

For those propositions, the parties relied on a number of authorities. I summarise these and the issues that arose in them below.

In Gibbon v Manchester City Council [2010] EWCA Civ 726, in summary, the defendant council had admitted liability for injuries suffered by the claimant when she tripped and fell in a playground. The claimant made a Part 36 offer to accept £2,500. The defendant made two lower Part 36 offers and then a Part 36 offer in the sum of £2,500, which the claimant rejected. The council then purported to accept the claimant’s original Part 36 offer. The issue which arose was whether the council’s rejection of the original offer and/or the making of lower offers meant that that offer was no longer open for acceptance, as would be the normal contractual position. The Court of Appeal rejected that argument because Part 36 created a self-contained code in which an offer remained open unless withdrawn; there was no room for a concept of implied withdrawal and there might be a number of offers open for acceptance at any one time.

Moore-Bick LJ identified the central question as “whether Part 36 embodies a self-contained code or is subject to the general law of offer and acceptance in so far as it fails expressly to provide otherwise.” He concluded that:

“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. …

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.

….

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 [counsel’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. ….”

The facts of C v D [2011] EWCA Civ 646, [2012] 1 WLR 1962 are helpfully set out in the headnote to the report in the Weekly Law Reports as follows;

“The claimant made offers to settle the proceedings by a letter which stated that “the offer will be open for 21 days from the date of this letter” and that the offers “ are intended to have the consequences set out in” CPR Pt 36. The defendant purported to accept one of the offers after the expiry of the 21-day period. The judge granted the claimant a declaration that the offer had not been open for acceptance when the defendant had purported to accept it, holding that an offer which the offeror stated had to be accepted within a specified time was not capable of being a Part 36 offer and that the claimant’s offer letter was to be construed as containing such a time-limited offer.”

Perhaps unsurprisingly, the appeal was allowed. Since the letter was expressly intended to be a Part 36 offer, the Court of Appeal construed the words with a view to making the offer effective rather than ineffective, and as meaning that the claimant would not withdraw the offer within a 21 day period.

In addressing the second issue (“as a matter of construction, what does “open for 21 days” mean in context?”), Rix LJ said at [45]:

“…. there is a necessary inconsistency between an offer being both time-limited and a Part 36 offer. An offer may be one or the other, it cannot be both. That is the objective context in which the offer in this case was made by the claimant’s solicitors to the defendant’s solicitors. Both the writer and the reader of that offer must be taken, objectively, to know the legal context. Of course, mistakes occur and must be allowed for. However, the question is how a reasonable solicitor would have understood the offer in that context, including the known context of the dispute as it stood at that time: Investors Compensation Scheme Ltd. v West Bromwich Building Society [1998] 1 WLR 896.”

Rix LJ then set out the various arguments as to the meaning of the words used. He recognised the force in the argument that the normal meaning of the words would be that acceptance after 21 days would be too late but continued (at [48]):

“…. However, that is not going further than saying that, outside the context of Part 36, that is the normal meaning of that expression. The question is whether that is the meaning which it sustains within the context of a Part 36 offer, where ex hypothesi such an offer cannot be made.”

At [55] et seq, he then applied the principle that words should be understood in such a way that “the matter is effective not ineffective” and preferred the appellant’s construction for that reason.

Rimer LJ, agreeing with Rix LJ, also considered that the issue was one of construction in which it was “not of utility to consider the meaning of the offer paragraph in isolation from the context in which the offer was made.” The critical question, he said, was how the reasonable man would read the offer (at [75]):

“…. The relevance, however, of the claimant’s expressed intention to make its offer a Part 36 offer is that, if there are any ambiguities in it raising a question as to whether the offer does or does not comply with the requirements of Part 36, the reasonable man will interpret it in a way that is so compliant. That is because, objectively assessed, that is what the offeror can be taken to have intended. ….”

In Mahmooz v Elmi [2010] EWHC 1933 (QB), the claimant, a taxi driver, was involved in a car accident. He suffered soft tissue injuries, his vehicle was damaged and required repair, he was off work for approximately two weeks, and he hired a replacement vehicle. By letter dated 1 October 2007 to the defendant’s insurers, and before proceedings had been commenced, his solicitors provided medical evidence, a schedule of special damages and various documents and made a Part 36 offer “to settle for £2100.” Insurers responded agreeing the figure of £2,100 for general damages. The claimant’s solicitors responded also referring to this as a figure for general damages. The parties then litigated over the remaining claims. However, at the start of the trial, the defendant sought to accept the 1 October 2007 letter, in so far as not already accepted, on the basis that it was an offer to settle the whole of the claim which remained open for acceptance. The judge at first instance found that that compromised the whole of the claim and that decision was upheld on appeal. The offer was, on its face, an offer to settle the whole of the claim. The subsequent correspondence did not change its meaning and could only amount to a counter offer and acceptance. The original offer had not been withdrawn.

In Clark v Meerson [2018] EWHC 142 (Ch), the liquidator of a company sought declaratory relief as against a director that he was in breach of fiduciary or statutory duties, in causing or permitting the company to make payments totalling £136,329.65. A pre-action offer was made, as a Part 36 offer, to settle “the whole of the claim” for £44,500 which was accepted. The issue then arose as to whether that compromised the claims that had been intimated as against Mr Meerson or, as he argued, all the liquidator’s claims or potential claims. It is apparent from the judgment of Mr Deputy Registrar Mullen that that issue was argued by reference to authorities relating to contractual construction. Applying those principles, he found that the offer was limited to the claims that had been intimated against Mr Meerson:

“In my judgment the expression “the whole of the claim” in the offer is ambiguous. There was no “claim” before the court. Had there been such a claim, the use of the technical word “claim” would have encapsulated all those issues in respect of which the Liquidator sought relief. I do not consider that the words “the whole of the claim” can be interpreted to mean all potential claims of whatever sort so as to avoid the need to construe the Offer against the context in which it was made. The use of the definite article suggests the Liquidator was offering to settle the whole of a particular claim, not any claim at all. The Offer itself introduces the settlement proposal by reference to previous correspondence and it seems to me that one must consider that correspondence to establish what disputes “the whole of the claim” can properly be understood to encompass.” [paragraph 11]

I have set out in summary the facts of these cases and the particular issues that arose because it is important both to have regard to the factual scenario in which the more general statements of principle in respect of Part 36 were made and to appreciate the extent to which what may be argued to be general statements of principle are in truth examples of the application of principle to the facts of the particular case.

The first point of principle that emerges, and which was not controversial, is that the meaning of an offer under Part 36 remains a question of construction. The second point is that the engagement of Part 36 was capable of giving a result which was different from that which would have been reached on what I have called normal contractual principles but did so to ensure the effectiveness of the Part 36 offers made. In particular, in C v D, the natural meaning of the words as to the period for which the offer remained open were displaced by the context of Part 36 but that was because what was expressly intended to be a Part 36 offer would otherwise have been ineffective.

In the present case, no question of the effectiveness of the offer arose. It was common ground that the 23 April offer was an effective Part 36 offer in respect of “the whole of this claim”. The issue of construction was what that expression meant so long as the offer remained open for acceptance and Bentley’s case was that it meant the claim in respect of Plot 1 when it was made and the claim in respect of Plot 1 and Plot 2 following the amendment of the Particulars of Claim.

Where an offer in respect of the whole of the claim is made, for example, at an early stage of proceedings, whether by the claimant or the defendant, the scope or value of the claim then increases, and the offer is not withdrawn or varied, the fact that the offer is made in the context of Part 36 readily leads to the conclusion that the offer relates to the whole of the claim made at any time the offer remains open for acceptance. “Claim” is not a defined term in Part 36 but it seems to me that the underlying premise of Part 36 is that there is a unitary claim in an action, rather than an agglomeration of distinct claims. In other words, the claim is that made in the action and is not ordinarily sub-divided into particular causes of action or heads of damages. These are “parts of the claim”. If the cause of action is pleaded in contract and an additional cause of action in tort is added in respect of the same subject matter, it is still the same claim; if the claim is in respect of defects in a property and additional defects are alleged, it is still a claim in respect of defects in that property; likewise if an additional head of damage is added or the value of the claim is revised. Such an approach seems to me to be wholly consistent with the Court of Appeal’s emphasis on rendering Part 36 offers both effective and certain. In the context of a claim that increases in value, a defendant would have an obvious interest in leaving his offer in place against the possibility that the claimant might, even with the increased claim made, fail to beat the original offer. The claimant may have an interest in leaving his offer open because it will be all the more likely that he will better the offer.

If a party does not intend that result, it must withdraw or vary the offer. But, as His Honour Judge Cotter QC succinctly put it in his judgment below, the need, if any, for the claimant to withdraw or amend an existing offer simply begs the question of what the offer was. That is the question of construction. It does not follow from accepting the proposition that a Part 36 offer is to be construed against the background of Part 36 that an offer, the terms of which are clear, should be differently construed simply because it is or purports to be a Part 36 offer.

So far as I can see, none of the authorities cited to me deals expressly with the examples I have given at paragraph 41 above or the present situation.

Both parties placed some reliance on the decision of Cox J in the Mahmood case. On the one hand, Mr Coulson submitted on behalf of Mr Sansom that it supported his proposition that the meaning of an offer did not change over time, whilst Ms Piercy relied on the fact that the context of Part 36 led to an outcome that was almost certainly unintended by either party. The decision, as so often, is one on its own facts. So far as the argument as to the meaning of the offer was concerned, the judge below and on appeal construed the words used as an offer to settle the whole of the claim and the argument that the meaning was different depended on what the parties had appeared to think the offer meant after it was made. That is not what happened in this case and the decision does not assist me in construing the April offer. The argument that the offer had not been withdrawn drew on the same arguments as in the Gibbon case. The offer was made in respect of a claim where proceedings had not yet been commenced so that any claim was a potential claim (in the sense of one made in proceedings) and to that extent it might support Bentley’s argument that an offer can relate to a claim not yet made. But in the present case, there was a claim made (in proceedings) to which the offer related.

In Clark v Meerson, the offer was similarly a pre-action offer and it was necessary to determine as a matter of construction to what “claim” the offer related. The context of the offer - as a Part 36 offer - did not render an offer to settle “the whole of the claim” an offer to settle any potential claim that might be made in future. The issue was simply one of construction of the meaning of the offer and beyond that does not provide any authority for any particular proposition as to the meaning of an offer.

In this case, as a matter of construction, what the offer was was very clear and that was an offer to settle the claim in respect of Plot 1. His Honour Judge Cotter QC put it this way:

“The phrase the whole of this claim used at that time was in my view the only sensible combination of words that could be used to refer to the entirety of the claim in respect of Plot 1 because no claim had been advanced in relation to Plot 2. It meant the whole of the claim in relation to Plot 1 and nothing more. Neither party knew whether any further claims would be made or the nature and extent of them.”

I agree. There simply was no unitary claim in respect of the property or the site or the project, or however it might have been expressed, encompassing both plots. As persuasive as Ms Piercy arguments were, I cannot see that the effect of Part 36 is that an offer that was made to accept a sum in settlement of “the whole of this claim” (which was, and is recognised by Bentley to have been, a reference to the extant claim in respect of Plot 1) became, on amendment of the Particulars of Claim, an offer to settle the claim subsequently made in respect of Plot 2 under a separate contract for works to a separate property. Nor do I consider that Part 36 requires me to construe the offer in that way or that any of the authorities cited to me drive such a conclusion.

On the contrary, following the amendment, the offer to settle “the whole of this claim” in respect of Plot 1 became an offer to settle what was now part of the whole of the claim in the proceedings. The offer did not change.

The objective context of the offer (as Rix LJ put it in C v D) was that this was an offer to settle the claim in respect of Plot 1 and that did not change when the Plot 2 claim was added into the extant proceedings. I do not consider that the fact that the offer was a Part 36 offer in respect of what was at the time “the whole of this claim” leads to the conclusion that the solicitors making and receiving the offer would objectively have construed it as an offer in respect of a distinct claim to be made in the future. My view is supported and reinforced by the facts that the parties had always regarded the Plot 2 claim as a distinct claim and the joinder of the Plot 2 claim into the existing action was a matter of practicality to the parties. Had that consensual approach not been taken, Mr Sansom would have issued fresh proceedings in respect of Plot 2 and might then have applied to have the two matters joined and tried together. That puts this case into a very different picture from the one in which a further cause of action in respect of the same subject matter is added to the claim or a fresh allegation or further head of damage is added in relation to an already pleaded claim.

In support of her argument, Ms Piercy identified a number of instance in which the position might be less obvious than the examples I have given or this particular case. It does not, however, seem to me that the identification of potential difficulties in other scenarios is a reason to construe a clear offer as meaning something that it plainly did not. To do so does not promote certainty but confusion.

One further matter was canvassed in skeleton arguments although only touched upon in oral submissions. That was the argument that the “relation back” of the claim in respect of Plot 2 had the effect that the reference to the “claim” in the 23 April offer was to the whole of the claim as made after amendment. The argument turns on s. 35(1)(b) of the Limitation Act 1980:

“(1)

For the purposes of this Act, any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced –

(a)

in the case of a new claim made in or by way of third party proceedings, on the date on which those proceedings were commenced; and

in the case of any other new claim, on the same date as the original action.”

As Mr Coulson submitted, the “relation back” that is provided for in s.35(1)(b) is for the purposes of the Limitation Act and not for all procedural purposes and he is, in my judgment, right to say that this provision does not take matters any further in this case.

For all these reasons, the appeal is dismissed.