CIVIL PROCEDURE BACK TO BASICS 41: SEEKING CLARIFICATION OF A PART 36 OFFER: CPR 36.8

The decision in Calonne Construction Ltd v Dawnus Southern Ltd [2019] EWCA Civ 754 , looked at earlier in this blog highlighted one part of CPR Part 36 that often goes unnoticed.  It is important that a recipient of a Part 36 offer is familiar with CPR 36.8 given the very short time limits to make a request for clarification and for a response.

“There would be no need for the clarification provisions in rule 36.8 if the result of a failure to provide enough information were automatically to disqualify the offer from being a Part 36 offer at all”

THE JUDGMENT IN CALONNE CONSTRUCTION

The Court of Appeal upheld a finding that a Part 36 offer by a defendant, that included reference to a counterclaim that had not yet been pleaded, remained a valid Part 36 offer.

SEEKING CLARIFICATION

On the facts of the Calonne case there was no uncertainty about the figured in the counterclaim. However even if the counterclaim were uncertain this would make no difference to the issue of the validity of an offer.

  1. In this case, as Mr Stokell points out, there was no uncertainty about the nature and extent of the counterclaim because Iesis had produced a final review report which contained the figures upon which the counterclaim would be based and Calonne had included it in their own offer of 3 February 2017. Even if that were not the case, any uncertainty about the nature of a proposed counterclaim could be addressed by a request for clarification pursuant to CPR r 36.8 and ultimately, if necessary, could be addressed under the “unless unjust to do so” provision in CPR r 36.17(4).

CPR PART 36.8

This rule allows the “offeree” to seek clarification of the offer. If necessary by making an application to the court.

Note the very short timetable. Seven days to make the request for clarification. Seven days to respond.

“Clarification of a Part 36 offer

36.8 

(1) The offeree may, within 7 days of a Part 36 offer being made, request the offeror to clarify the offer.

(2) If the offeror does not give the clarification requested under paragraph (1) within 7 days of receiving the request, the offeree may, unless the trial has started, apply for an order that the offeror do so.

(Part 23 contains provisions about making an application to the court.)

(3) If the court makes an order under paragraph (2), it must specify the date when the Part 36 offer is to be treated as having been made.”

 

CASE LAW ON THE POINT

This issue was considered by Mr Justice Henderson in AB v CD & Ors [2011] EWHC 602 (Ch) where he was considering whether an offer made by a defendant was a valid Part 36 offer.

    1. I now turn to the prior question whether the defendants’ offer was indeed a valid Part 36 offer. The claimant submits that it was not, because of the defendants’ failure to supply the necessary financial data to enable the claimant to make an informed assessment of the value of the £x monetary compensation on offer. Counsel for the claimant submits that, if the policy of Part 36 is not to be defeated, a defendant which wishes to make a monetary offer to a claimant in the present type of case must supply the claimant with the same sort of financial information about the allegedly infringing business as the court would order by way of Island v Tring disclosure so as to enable the claimant to elect between an inquiry as to damages and an account of profits. It is only with the benefit of such information that the claimant can make an informed decision whether or not to accept the offer. In the present case, the claimant through its solicitors made reasonable requests for the necessary information, and said that it would be willing to receive it on a confidential basis and without prejudice save as to costs: see the letters of 5 July and 11 August 2010 quoted above. However, the requests were refused, and no good reason was given for the refusal. In particular, the assertion in the defendants’ solicitors’ letter of 29 July 2010 that “[The claimant] is certainly able to assess the defendants’ offer” misses the point and is unsupported by any evidence.
    2. In support of these submissions counsel for the claimant relies on the duty of the parties to help the court to further the overriding objective, and to co-operate in the conduct of the proceedings: see CPR 1.3 and 1.4(2)(a). He also relies on the provisions of Part 36 itself, including in particular rule 36.8 (dealing with clarification of a Part 36 offer) and rule 36.14(4)(d) (in considering whether it is unjust to grant a successful Part 36 offeror or offeree the favourable orders referred to in paragraphs (2) or (3), the court will take into account all the circumstances of the case, including “(d) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated”).
    3. In addition, counsel for the claimant cited the decision of the Court of Appeal in a personal injuries case, Ford v G. K. R. Construction Ltd [1999] EWCA Civ 3030[2000] 1 WLR 1397. This was a pre-CPR case where liability was admitted for injury sustained by the claimant in a road traffic accident, and after a hearing to assess damages she failed by a substantial margin to beat the payment into court made by the defendants. The trial judge nevertheless ordered the defendants to pay the claimant’s costs of the action. The appeal to the Court of Appeal was concerned only with the order for costs. For present purposes nothing turns on the detailed facts, and the interest of the case lies in certain observations made by Judge LJ (as he then was), who gave the leading judgment, and by Lord Woolf MR.
    4. Judge LJ said this at 1400H:
“Civil litigation is now developing into a system designed to enable the parties involved to know where they stand in reality at the earliest possible stage, and at the lowest practicable cost, so that they may make informed decisions about their prospects and the sensible conduct of their cases. Among other factors the judge exercising his discretion about costs should consider is whether one side or the other has, or has not, conducted litigation with those principles in mind.”
    1. Lord Woolf MR agreed, and added this at 1403 C-G:
“The principle to which Judge LJ referred as to the parties conducting their litigation making full and proper disclosure is even more important now that [the CPR] have come into force. Under the CPR it is possible for the parties to make offers to settle before litigation commences. As to the disclosure required in relation to that procedure, protocols in specific areas of litigation make express provision. Even where there is no express provision contained in a relevant protocol which applies to the particular litigation, the approach reflected in the protocols should be adopted by parties generally in the conduct of their litigation.
If the process of making Part 36 offers before the commencement of litigation is to work in the way which the CPR intend, the parties must be provided with the information which they require in order to assess whether to make an offer or whether to accept that offer. Where offers are not accepted, the CPR make provision as to what are to be the cost consequences … Both those rules deal with the usual consequences of not accepting an offer which, when judged in the light of the litigation, should have been accepted.
I also draw attention to the fact that the rules refer to the power of the court to make other orders and make it clear that the normal consequence does not apply when it is unjust that it should do so. If a party has not enabled another party to properly assess whether or not to make an offer, or whether or not to accept an offer which is made, because of non-disclosure to the other party of material matters, or if a party comes to a decision which is different from that which would have been reached if there had been proper disclosure, that is a material matter for a court to take into account in considering what orders it should make. This is of particular significance so far as defendants are concerned because of the power of the court to order addition interest in situations where an offer by a claimant is not accepted by a defendant. We have to move away from the situation where litigation is conducted in a manner which means that another party cannot take those precautions to protect his or her position which the rules intend them to have.”
  1. Relying on these principles, counsel for the claimant submits that the defendants’ offer as a whole cannot be regarded as a valid Part 36 offer, or alternatively that the monetary offer of £x should be disregarded. He accepts that no existing authority has yet gone this far, but points out that the principles of civil procedure are apt to develop in an incremental fashion, and some advances which are now taken for granted (such as Island v Tring disclosure, or orders for the interim payment of costs) were once unprecedented.
  2. These submissions were persuasively advanced by counsel for the claimant, but I am unable to accept them. I readily agree that it is good practice, and in accordance with the spirit of the CPR in general and Part 36 in particular, for a party who makes a Part 36 offer to provide the offeree with enough information to make an informed decision whether or not to accept it. Nothing that I say in this judgment is intended to detract in any way from that salutary principle. But the provisions of Part 36 itself seem to me to show that the result of a failure to comply with this obligation is not to invalidate the offer, provided of course that the other requirements of a valid Part 36 offer are satisfied. There would be no need for the clarification provisions in rule 36.8 if the result of a failure to provide enough information were automatically to disqualify the offer from being a Part 36 offer at all; and the provisions of rule 36.14(4)(d) show that a refusal to give information for the purposes of enabling the offer to be evaluated comes into play at the later stage of deciding whether or not it would be unjust to grant the successful party the favourable consequential orders which normally follow from equalling or beating the offer (as the case may be).
  3. Furthermore, it would in my view be productive of much uncertainty if the validity, as opposed to the costs and interest consequences, of a Part 36 offer were to depend on something as difficult to ascertain as the adequacy of the information supplied by the offeror to the offeree. In many cases it may well be reasonable for the offeror to supply no, or only limited, information when the offer is made, and to leave it to the offeree to come back with a request for further information. Any such request should then be dealt with in a spirit of co-operation, and (if it is not) the offeree is free to apply to the court for an order under rule 36.8. Alternatively, the offeree can decide whether or not to accept the offer as it stands, and if he decides to refuse it, but later fails to match or improve on it, he can argue that the usual adverse consequences should not follow, or should at least be mitigated, in reliance on rule 36.14(4)(d). This is in my judgment a coherent and workable scheme, which respects the “demands of clarity and certainty in the operation of Part 36” to which Moore-Bick LJ referred in Gibbon v Manchester City Council at [18].
  4. To return to the present case, it is in my judgment far from self-evident that the claimant lacked sufficient information to make an informed decision whether or not to accept the defendants’ amended offer. The claimant and the defendants were in the same line of business, and the claimant may have had enough information from its own experience and business models to make an educated decision, particularly as the alleged infringing use had lasted for barely seven months and had ceased (or at least substantially ceased) with the re-branding of the defendants’ business. The claimant had the option of applying to the court for an order under rule 36.8, but for whatever reason chose not to do so. The truth may be that the claimant never had any serious intention of examining the merits of the offer, given its apparent belief (referred to in the its solicitors’ letter of 11 August 2010) that the defendants “made a profit of the order of £y million from the business operating under the [defendants’ business name] sign solely in the eight month period up to August 2009″. I am of course in no position to make findings of fact on these points at this stage, but the mere fact that such questions may arise is enough to show how dangerous it would be to rule that the defendants’ failure to provide information automatically invalidated their Part 36 offer.
  5. For these reasons I conclude that the defendants’ amended offer was a valid Part 36 offer, with the result that the costs since 20 August 2010 cannot be dealt with at this stage and must be reserved until the conclusion of the trial on quantum.