PART 36: LIABILITY ONLY OFFERS AND THE COURT OF APPEAL: WE DON’T HAVE CLARITY AND CERTAINTY WE DO HAVE CONFUSION AND AMBIGUITY

Those with long memories will recall the confusion  and uncertainty that the Court of Appeal caused in Carver v BAA Plc [2008] EWCA Civ 412 when the concept of a “near miss” was introduced in relation to Part 36. A change in the rules was required to rectify the problems that was caused by that particular case.  Similar chaos and confusion is likely to have been caused by some of the observations in Smithstone v Tranmoor Primary School [2026] EWCA Civ 13. In particular there is now considerable uncertain as to precisely when a liability only offer will be effective under Part 36 when the matter proceeds to trial on all issues.  Here we look at the issues of concern as the position is far from straightforward.

There will be a detailed consideration of this issue in relation to liability only offers in the webinar on the 26th February.  In addition to reviewing recent cases on Part 36 and their practical relevance, the webinar will consider:

• The current state, and relevant case law, in relation to “liability only” offers.

• Is a refusal to mediate relevant when considering Part 36 consequences.

Booking details for the webinar are available here. 

Details of how to obtain the CLB member’s discount code are here.

THE RULES

CPR 36.2.(3).

(3) A Part 36 offer may be made in respect of the whole, or part of, or any issue that arises in—

(a) a claim, counterclaim or other additional claim; or

(b) an appeal or cross-appeal from a decision made at a trial.

THE OBSERVATIONS IN SMITHSTONE

We have looked at the case several times already. The claimant had made an offer of 10% contributory negligence. The matter proceeded to trial on both liability and damages. It settled at the door of the court for £3,500. The Court of Appeal rejected the claimant’s argument that the offer should lead to Part 36 benefits. The court had not adjudicated on the issue and it was not possible to state whether or not the offer had been beaten.

THE OBSERVATIONS AS TO LIABILITY ONLY OFFERS

If the judgment had ended there then certainty would reign.  However the Court of Appeal threw a spanner in the words by referring, in passing to a decision that the Circuit Judge had found to be binding on them, that is Mundy -v- Tui  UK Ltd [2023] EWHC 385 (CH)

It is unfortunate that neither of these authorities, in particular Huck v Robson, appears to have been cited to Collins-Rice J in Mundy v Tui: indeed, save on the separate question of set-off which is not relevant to the present case, no authorities are referred to at all. Moreover, as Hill J observed in Chapman v Mid and South Essex NHS Foundation Trust (re costs) [2023] EWCA 1871 (KB); [2023] Costs LR 1145, the factual context of Mundy is important. As noted above, the claimant had made two separate Part 36 offers, one based on a 90:10 liability split and one to accept £20,000 in settlement of the claim; the Defendant had made a Part 36 offer of £4,000 in full and final settlement; and the Claimant was ultimately awarded damages of £3,805.60. In those circumstances it is perhaps unsurprising that the judge was unwilling to find that the Claimant, who had been seeking damages of more than five times the amount which he recovered, was entitled to a favourable order for costs pursuant to CPR 36.17. But insofar as Collins-Rice J may have suggested (obiter) that a 90:10 liability offer is ineffective as a matter of principle to engage CPR 36.17, I disagree. Whether litigation is complex and of high value, or straightforward and of relatively modest value, the courts should, and the Civil Procedure Rules do, encourage settlement of specific issues where the case as a whole cannot be settled. In a case where liability is to be tried before quantum the benefits of a liability-only offer in saving costs and court time are obvious. But even in a fast track case where all contested issues will be resolved by a district judge or deputy district judge in the course of a single hearing, liability-only or quantum-only offers are still to be encouraged. The policy considerations identified in Huck v Robson and Broadhurst v Tan remain to this day. The 90:10 offer was in my view to be treated as a genuine offer to compromise, just as the 95:5 offer was treated in Huck v Robson.

35. Accordingly, while Judge Baddeley understandably regarded Mundy v Tui as binding on him, I would overrule it on the issue of principle. That is not, however, enough to get the Claimant home, since the next issue is whether on the facts of this case the outcome was at least as advantageous to the Claimant as the proposals contained in his offer.

WHAT THIS HAS LED TO

There has already been a glut of posts and articles stating that liability only offers are back and can be effective. There are, however, profound dangers in this approach.

• It ignores the desirability of a party making an overall offer, thinking that a simple offer on liability will be effective.
• It ignored previous Court of Appeal authority to the contrary.
• It fails to understand the nature of the decision in Mundy -v- TUI.

WHAT WAS DECIDED IN MUNDY

Munday was a personal injury holiday sickness claim.   The claimant made two Part 36 offers. One to accept 90% liability, the offer for £20,000. The defendant made an offer of £4,000.   At trial damages of £3,700 was awarded.  There was no finding of contributory negligence.

THE CLAIMANT ARGUED THAT THEY HAD WON

The claimant argued that he had won because he had beaten his own offer on liability, despite having not beaten the defendant’s offer on damages.  It is unsurprising that the judge was not convinced.

I can see that he found the submissions advanced on Mr Mundy’s behalf to be strongly counter-intuitive, if not to a degree baffling, but I am unpersuaded that he went wrong in his core analysis.
If some of his explanatory reflections reflected rather than resolved that degree of bafflement, I am unpersuaded that his reasoning, taken as a whole, lacked explanatory
power, and I have in any event expanded upon it in this judgment. In these circumstances, I would dismiss the appeal on grounds 1-3.”

THE DIFFICULTY WITH THE COURT OF APPEAL’S APPROACH IN SMITHSTONE

The judgment in Smithstone states that the approach in Mundy was wrong, without giving any particulars as to why it was wrong or stating what the judge should have done in these circumstances.

THE COURT OF APPEAL IGNORED ITS OWN DECISION IN SEABROOK -v- ADAM

Whilst in Smithstone the Court observes that certain authorities should have been referred to the judge, it fails itself to consider its  own earlier decision in Seabrook v Adam [2021] EWCA Civ 382. This was a personal injury case where the claimant offered to accept 90% of his damages.  The matter proceeded to trial on all issues. The claimant argued that the defendant would have been 10% better off if it had accepted his offer and he should have the Part 36 benefits.  The Court of Appeal held that the offer did not attract Part 36 benefits. In that action causation was still in dispute and if the defendant had accepted 90% of liability it would have accepted the claimant’s case as to causation.

“In order to avoid the kind of dispute which has arisen here, especially in a low value claim, it is important to make express reference in the Part 36 offer to whether the offer relates to the whole claim or part of it and/or the precise issue to which it relates, in accordance with CPR 36.5(1)(d). In particular, if the issue to be settled is “liability”, it would be sensible to make clear whether the defendant is being invited only to admit a breach of duty, or if the admission is intended to go further, what damage the defendant is being invited to accept was caused by the breach of duty.”

One issue, raised by the defendant in argument in the Seabrook case, was that CPR 36.14 (1) provides that when a Part 36 offer is accepted the claim will be stayed. CPR 36.14(2) provides that where an offer relates to part of the claim is accepted then the claim is stayed as to that part upon the terms of the offer.  The extent of the stay may not be clear if an offer is made in relation to liability and there are issues in relation to causation and damages.

THE SITUATION IS SIMPLER WHEN THERE IS A SPLIT TRIAL

The situation is simpler when there is a split trial.  However even here there can be problems with liability only offers. In Elbanna v Clark (Re Consequential Matters) [2024] EWHC 1471 (KB) Mr Justice Sweeting found that a claimant’s Part 36 offer to accept 75% of liability was too ambiguous to be effective when issues of causation were also to be determined at a trial of a preliminary issue.

SO WHERE ARE WE NOW?

The truth is that we do not know.  The Court of Appeal has disavowed the case on Mundy without any analysis of what they say the judge should have done faced with a situation where a claimant was arguing they had “won” despite not beating a defendant’s Part 36 offer.  It at all possible a claimant should make an offer that includes liability and damages.  The issues relating to liability only offers when there is no order for a split trial (and even when there is a split trial) remain problematic.