Burrett v Mencap Limited (2014)
The Defendants in Burrett v Mencap (2014) reduced a Part 36 offer, made months earlier which the claimant then sought to accept. The court was asked to determine the parties’ costs liabilities. Was the Claimant entitled to the costs up to the date of the later, reduced offer, or was the Defendant still entitled to cost protection from the date of the previous offer?
The Defendant made a Part 36 offer on 19 July 2013 which the Claimant chose not to accept. It was not subsequently withdrawn by the Defendant and, as a result remained “on the table”.
On 17 January 2014, the Defendant wrote to the Claimant and stated:
We hereby change the terms of our client’s Part 36 offer dated 19 July pursuant to CPR r.36.3 (6).”
The effect of the variation of the offer was to put forward a reduced figure in full and final settlement of the claim.
CPR r.36.3 provides that
After expiry of the relevant period and provided that the offeree has not previously served notice of acceptance, the offeror may withdraw the offer or change its terms to be less advantageous to the offeree without the permission of the court”
The Claimant subsequently accepted the varied offer, although not within 21 days of the variation. However, her solicitors argued that the variation amounted to a fresh Part 36 offer and applied for an order that the Claimant was entitled to recover her costs on the standard basis up to 2 February 2014.
Although it is not apparent from the Judgment, the factual background to these events is that the Defendant’s initial Part 36 offer was £15,000. In the intervening period, the Defendant obtained surveillance evidence which, in its view, reduced the likely value of the claim. The variation of the Part 36 offer reduced the proposed settlement figure to £2,500.
The question which arose was whether, in the event of a party accepting a varied Part 36 offer, the costs protection afforded by the original offer is maintained, or alternatively whether the variation triggers a further 21 day period within which the Claimant can accept the offer and recover costs on the standard basis.
Held by District Judge Ackroyd, sitting in Northampton County Court that:
CPR r.36.7 is silent on the existence of any extension or replacement period for consideration of a varied Part 36 offer.
Consequently, the terms of the original offer stood and the time for acceptance given in the original offer was that one that applied.
The Claimant’s application was dismissed.
It is unusual for a first instance decision to garner the attention which this case has generated. However, it is of great interest (especially to Defendants).
Defendants not infrequently have to grapple with the dilemma which arises when a Part 36 offer subsequently appears to represent an overvaluation of a claimant’s case. This most commonly occurs where significant surveillance evidence comes to light after the offer has been made, but can also arise where there are material developments in the expert evidence.
In those circumstances, Burrett confirms that a defendant can simply vary or change the terms of a Part 36 offer, so they are less advantageous to the claimant, whilst still benefitting from its cost protection. Perhaps surprisingly, the decision also confirms that in these circumstances, the claimant has no “breathing space” to consider the variation. It is also worth bearing in mind that it is also open to a claimant to increase a Part 36 offer and do so without starting a new acceptance period.
It remains to be seen whether this issue will be raised in an appellate/higher court, but for now the decision serves as a useful reminder that this tactical approach is available.
Where an offer is reduced, it should be noted that although cost protection continues to flow from the original Part 36 offer, a claimant would only need to beat the terms of the varied (reduced) figure in order to secure costs on the standard basis of the whole action.
For further details please contact Tony McLoughlin, Director, on 0151 907 3042.
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.