Part 36 v Common Law Offer To Settle

In the judgment of DB Mortgages v Jacobs Solicitors [2016] EWHC 1614 (Ch), the judge Mr Andrew Hochhauser QC, held that a part 36 offer acts as a counter-offer that extinguishes an earlier offer to settle based on common law principles.[i]

The decision was in relation to an allegation of negligence made against Jacobs Solicitors by DB Mortgages. In August 2015, the defendant made an offer to settle the claim. The offer specifically stated that it was not a part 36 offer because the payment could not be made within 14 days as required by CPR 36.14 and there was no time for acceptance specified within the offer. Notwithstanding the fact that the defendant said that if the offer was not accepted, it would seek the part 36 consequences if the case went to trial, the judge held that the offer did not comply with part 36 and as such it was a common law offer.

The offer was re-stated in March 2016 and again in early May 2016. In the same month, the claimant issued a part 36 offer which was not accepted by the defendant. The claimant subsequently accepted the original offer made by the defendant in August 2015, five days before trial. However, the defendant argued that this offer had been extinguished by the claimant’s Part 36 offer. Or, alternatively, even if the August 2015 offer was capable of being accepted, the time for doing so had lapsed. Despite the fact that the offer failed to stipulate a time for acceptance as per the part 36 requirements, common law offers to settle must still be accepted within 21 days and as such this offer had expired.

This was accepted by Hochhauser QC on the grounds that the part 36 offer acted as a rejection of the defendant’s offer to settle. He stated:

‘In my judgment, because one is dealing with an initial common law offer, the impact on it of any counter-offer has to be addressed by reference to common law principles. A part 36 counter-offer is still a counter-offer’.

However, regarding the defendant’s second argument, the judge was not as agreeing. He said there was no basis for implying any time limit for acceptance of a common law offer, stating:

‘One cannot on one hand seek to take advantage of the fact that this is not a part 36 offer, for the purpose of invoking the common law rule of rejection by reason of making a counter-offer, and then, when it suits, pray in aid the part 36 regime to import a time period of 21 days. Further… there is no default position of 21 days in part 36… Unlike a common law offer, a part 36 offer may still be accepted after the date of expiry. If a party wishes to make a non-part 36 offer, it can do so without any time limit, and it will still be efficacious from a business perspective, because it can always be withdrawn at any time prior to acceptance’.

Representatives for the defendant have indicated that it may appeal this decision. However, in the meantime it is thought that the outcome of this judgment may affect settlement techniques and tactics going forward.