Part 36 – Beware of Withdrawn Offers!

Blackpool Borough Council v Volkerfitzpatrick Ltd [2020] EWHC 2128 (TCC)

Facts of the Case

The Claimant made a claim for a sum in the region of £6.7 million in relation to construction of a tram depot. The Defendants made a Part 36 offer and then later withdrew it. At Trial, although the Claimant was successful on 6 of 7 points, they ultimately failed to beat the Defendant’s withdrawn Part 36 offer and the Court therefore considered the impact of the withdrawn offer.

 

Factors considered

The Court firstly considered the following points of Part 36;

  • Part 36.9 permits the Party making the Part 36 offer to withdraw it if not accepted.

 

  • When a Part 36 offer is made by the Defendant, and it is withdrawn, the automatic cost consequences under CPR 36.17(1)(a) and (3) cannot apply.

 

  • However, CPR 44.2 (4)(c) can be considered as a relevant circumstance

 

The Court also considered the principles set out in Thakkar v Patel [2017] EWCA Civ 117, regarding the reasonableness of rejecting, or failing to accept a Part 36 offer which is thereafter withdrawn. The principle being that the Court should put its self in the Claimant’s position at the time and not utilise hindsight.

 

Judgment and Application

Upon consideration of the Claimant’s claim, the Court determined that the Claimant was unreasonable in not accepting the offer proposed by the Defendant given the that the Claimant was in a position to undertake their own assessment as a result of the investigations undertaken and the results of the Socotec test. The Court was of the opinion that the test results severely weakened the claim and the Claimant took “a commercial risk in the knowledge that it could end up recovering less than the amount of the offer.” (para 76)

As a result of the Courts finding, it was held that “…the starting point is that the claimant ought to pay the defendant’s costs of all issues save for the tram doors and the wave form cladding panels from 21 days after service of the Part 36 offer, which I assume would be from 6 September 2019 onwards.(para 77)

 

Opinion

It seems remarkably unfair that a withdrawn Part 36 offer should still have the same consequences as an offer open to acceptance. It is my view that should an offer be withdrawn, it should not be considered when determining costs as it is no longer in play – if a party want the benefits of Part 36 they should have the courage of their convictions and the offer should remain open.

 

The Full Judgment can be read here.

 

If you have any questions regarding this summary case law please contact Karl Robson here