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 [2017] 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 CASE
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 CONSEQUENCES
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 [2016]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.
RELATED POSTS ON PART 36
- Costs should not normally be reduced when a claimant beats their own Part 36 offer: Court of Appeal decision.
- Part 36: the costs consequences of late acceptance
- Part 36 offer did not encompass payment on account
- Fixed costs and Part 36: the judgment in the Court of Appeal.
- Lord Chancellor gets a bonus: the powerful results of a claimant’s Part 36 offer.
- Not a racing certainty: but indemnity costs follow claimant’s Part 36 offer.
- Part 36: when the normal costs penalties may not apply
- Is this a claimant’s or defendant’s offer? Another important decision on Part 36
- Clarification of a Part 36 offer has a major effect on costs.
- Costs where a claimant accepts a Part 36 offer late: two cases where the claimant came to grief
- Another case where there was an invalid Part 36 offer
- Is this a Part 36 offer I see before me? That’s an important question
- How relevant are Part 36 offers to issue based orders?
- Knowing the risks and advantages for the claimant in the new Part 36.
- The costs consequences of Part 36 offers: do they always apply? The cases in detail.
- Costs consequences of Part 36 offers: some interesting examples
- Costs, conduct, Part 36 and the “Winning Party”.
- Interest and costs when a claimant beats their own Part 36 offer.
- Costs of £7 million: Part 36 bites hard on claimants who cleared a first hurdle but fell at the second.
- Claimant beats own Part 36 offer and receives an additional £75,000 in damages.
- The dangers of a Part 36 offer: Claimant pays three times more in costs than he receives in damages.
- Another example of a successful defendant not recovering all of its costs (and of the advantages of a Part 36 offer).
- Percentage costs orders after a claimant beats their own Part 36 offer: a High Court decision.
- Very important decision on Part 36 offers, assessment of costs and additional amounts when offers not beaten.
- Increased interest and costs after claimant beats its own Part 36 offer.
- Part 36 offer does not override the need to serve the claim form.
I really enjoy these articles but why have you stopped publishing the whole article on your email, so that I now have to visit the website itself to read it? It’s no biggie, but it just seems a retrograde step.