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The Impact of Withdrawn Part 36 Offers When Resolving Disputes

by Justine Soutter

Invicta Law’s Justine Soutter examines the impact of Blackpool Borough Council v Volkerfitzpatrick Ltd [2020] EWHC 2128 (TCC) (3 August 2020) on withdrawn Part 36 offers for successful parties.

A ‘Part 36’ is an offer that can be made as part of the Civil Procedure Rules (CPR). It is designed to encourage the involved parties to settle their dispute without the need to go to trial and gives both parties the opportunity to inform the other side the conditions they would offer or accept to resolve a dispute.

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

HHJ Stephen Davies, sitting as a High Court judge, ruled that the claimant unreasonably rejected a defendant’s Part 36 offer which had been withdrawn prior to trial.

The effect of this was that the claimant paid most of the defendant’s costs from 21 days after service of the Part 36 offer.

The judge explained what weight should be given to the withdrawn Part 36 Offer. The primary issue was the reasonableness of the refusal, bearing in mind the facts and matters relevant to the merits of the claim as they ought reasonably to have appeared to the claimant at that time, not by reference to wider commercial factors.

The Case

In this case, the claimant was the winning party, having succeeded on six out of seven claims. However, it had had claimed £6.7 million and recovered £1.1 million.

The judge concluded that the claimant acted unreasonably in rejecting the Part 36 offer when it was available for acceptance, as the claimant then knew or was in a position to know that, in the light of testing results, its case had been significantly weakened and there was therefore a real risk that at trial it would not recover more than the offer.

The claimant had chosen to take a commercial risk, knowing that it could end up recovering less than the amount of the offer. The defendant was awarded its costs in relation to the claims that were the subject of the Part 36 offer from 21 days after service of the offer.

The automatic Part 36 costs consequences cannot apply to a withdrawn defendant’s Part 36 offer that a claimant fails to beat at trial (CPR 36.17(7)(a)). However, the offer may still be considered regarding costs under CPR 44.2(4)(c). The critical issue is whether the offeree acted reasonably in rejecting the offer while it was available (Thakkar v Patel [2017] EWCA Civ 117).

The Judgement

The judgment in Volkerfitzpatrick is a significant finding as the effect was that the claimant paid most of the defendant’s costs from 21 days after service of the Part 36 offer.

The judgment adds to the guidance in Thakkar, confirming how the court should consider the reasonableness of rejecting withdrawn Part 36 offers, something which was not directly addressed in Thakkar.

Invicta Law’s Dispute Resolution and Employment team can assist you with issues surrounding the Civil Procedure Rules during claims. Contact us on 03000 411100, email info@invicta.law or download the team leaflet for more information.

Contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute professional or legal advice. Invicta Law cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

 

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