COSTS AFTER VARIATION OF A PART 36 OFFER TO BE LESS ADVANTAGEOUS TO THE RECIPIENT: BURRETT -v- MENCAP CONSIDERED
The decision of District Judge Ackroyd in Burreett -v- Mencap Ltd (14th May 2014) was reported on Lawtel earlier this week and is available on Bailli. It contains an important lesson to both defendants and claimants as to costs when a Part 36 offer is varied downwards. However it could actually turn out to be less advantageous to defendants than it first appears. In particular it raises the question whether claimants, who make higher offers after making an initial Part 36 offer should always do this by way of variation of the initial offer.
Thanks to James Manning of Plexus Law a transcript of the arguments are available here. 685251_Burrett v Mencap Ltd_Proceedings_14 05 14 (1)
THE FACTS: INITIAL OFFER OF £15,000 REDUCED TO £2,500.
The facts (or at least the figures involved) are not wholly clear from the transcript (the judge was giving a judgment for the parties and not general distribution). However the facts can be gained from the useful discussion of the judgment in Litigation Futures.
- The defendant made an offer of £15,000 to the claimant to settle a personal injury claim.
- After reviewing video evidence that offer was reduced to £2,500.
- This reduced offer was done by variation of the defendant’s original offer rather than making a new offer.
(The precise wording was:
“We hereby change the terms of our client’s Part 36 offer dated 19th of July pursuant to CPR 36.3.6.”)
- The claimant subsequently accepted this reduced offer of £2,500.
THE RULES: PART 36.3 .(5),(6) & (7)
“5) Before expiry of the relevant period, a Part 36 offer may be withdrawn or its terms changed to be less advantageous to the offeree, only if the court gives permission.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.”
WHAT ARE THE COSTS IMPLICATIONS FOR AN ACCEPTANCE OF AN OFFER VARIED UNDER 36.3(6)?
This was the issue in the Burrett case. The claimant accepted the reduced offer within 21 days of the variation. Was she entitled to her costs up to acceptance or did the costs penalties of Part 36 run from the date of the original (higher) offer?
THE JUDGE’S FINDINGS: THE COSTS CONSEQUENCES OF PART 36 RAN FROM THE DATE OF THE FIRST OFFER
The judge was quite clear that the costs consequences of Part 36 ran from the date of the first offer. CPR 36.7 is silent on any extension or renewal or replacement of the time for acceptance. There was nothing in the rules, and no authority, that indicated any implied entitlement to additional time from the date of the time of any reduced offer. The costs consequences of Part 36 ran from 21 days after the date of the first offer and not the second.
PRACTICAL IMPLICATIONS FOR DEFENDANTS
This can be put bluntly.
- A defendant who wants to reduce an earlier offer would be unwise, and most probably negligent, to withdraw the first offer and make a second lower offer.
- The reduced offer should always be stated to be by way of variation under CPR 36.3.6 (the defendant’s solicitors in Burrett have kindly provided a precedent for the wording of the variation which is set out above.
PRACTICAL IMPLICATIONS FOR CLAIMANTS
This adds to the information that has to be given to a claimant when a Part 36 offer is made. In addition to warning of the costs consequences claimants have to be warned that those costs implications may still apply if the defendant makes a reduced offer at a later date which the claimant elects to reject.
AND THIS CAN WORK THE OTHER WAY ROUND AS WELL: IT COULD BE A HEADACHE FOR DEFENDANTS
Since both parties can make Part 36 offers similar principles could apply if a claimant made an offer and subsequently varied it to be less advantageous to the defendant. That is increased the sum offered. It may well be that any further Part 36 offer a claimant makes should be expressed to be a variation of the original offer. This higher offer would be “less advantageous to the offeree”. The defendant would then be faced with indemnity costs, increased interest etc from the date of the original (lower) offer. In any event it may well be prudent to express increased offers from claimants as variations to the original (lower) offer rather than as fresh offers.
This must be nonsense. How long is it going to be before it is sorted out?
Either when the rules get changed or someone takes it to appeal. Until then we all have to be mindful of the situation and only (reported) decision so far.
A lot of commentators saying that this is nonsense, but I am not sure I agree. The Claimant had received an offer of £15,000. She could have accepted the offer as originally made within the 21 day period, but elected not to. If she had, she would have been better off and costs would have been lower – you could say she should have accepted that offer. Why then should she get her costs until 21 days after expiry of the variation? I have some sympathy with her solicitors who may lose out depending on the retainer, but that is a matter between solicitor and client.
I doubt that this situation could really provide that much of a ‘headache’ to defendants. It is extremely difficult to secure an indemnity costs order pre-judgment even when an offer is accepted well out of time (and presumably on the odd occasion that circumstances alter the value of the claim up).
Surely the fact that a transcript has been prepared means tah this decision is under appeal. It may be a reported decision, but it is a decision of a DJ in a County Court.