MACHISMO OR MADNESS? THE DANGERS OF MAKING A “TIME LIMITED” OFFER OR WITHDRAWING A PART 36 OFFER
There may be tactical advantages to making a “time limited” offer, or withdrawing a Part 36 offer after 21 days. However this can backfire badly. We have already looked at the decision in Thakkar -v- Singh  EWCA 117 in the context of failing to mediate. However that case also illustrates the dangers of making an offer “time limited” or withdrawing it after 21 days.
The action concerned a claim for dilapidations by landlords of commercial premises and a counter-claim for damages for flooding by the tenants. The claimant landlords claimed £210,000 plus interest. The defendants counterclaimed £41,875 for the rent paid when the premises could not be occupied by reason of the flooding. The matter proceeded to trial. The judge:
- Awarded £44,933.52 to the claimants on the claim.
- Awarded £16,750 to the defendants on the counterclaim.
There was a balance due to the claimants of £28,183.52. With interest the final balance was £32,083.13.
THE DEFENDANTS’ OFFER
The defendants had made an offer of £30,000. Taking into account interest the offer would have beaten the sum that the claimants recovered at court. However the offer was stated to be open for three weeks. It was not a valid Part 36 offer.
The defendants were ordered to pay 75% of the costs, their failure to mediate being a large factor in that determination. On appeal the defendants argued that their offer, although not a Part 36 offer, should have been taken into account under CPR Rule 44.2. This argument was rejected by the Court of Appeal. The judge’s order on costs was upheld.
THE SUMS INVOLVED
The total costs of both sides in the litigation were about £300,000. The defendants will be paying their own costs and 75% of the claimants’s costs.
IF THE OFFER HAD BEEN A VALID PART 36 OFFER
All the recent case law on this subject indicates that the courts are increasingly unwilling to go behind the basic principles of Part 36, see Webb -v-Liverpool Women’s NHS Foundation Trust EWCA Civ 365. The basic principles that the party who does not beat a Part 36 offer pays the costs thereafter is, on the whole, being strenuously upheld. It is unlikely that the defendants’ reluctance to mediate would be a major factor and the normal Part 36 consequences would have applied.
SO WHY MAKE A TIME LIMITED OFFER?
They may well have been good tactical reasons for the defendants’ decision in the Thakkar case (it is all to easy to be wise after the event). However if a defendant is willing to pay £30,000 on the 1st May it would seem unusual that they were not willing to pay £30,000 on the 22nd May. The case is a good illustration of the serious consequences of failing to make sure that an offer falls within Part 36.