Before we delve into the recent case of Essex County Council v UBB Waste (Essex) Ltd (No. 3)  EWHC 2387 (TCC)….
What is a Part 36 offer?
Parties to a court proceeding will usually try their best to mitigate adverse costs consequences by making a well-thought settlement offer which complies with the Part 36 of the Civil Procedure Rules (“Part 36”). Such offers are commonly made on a ‘without prejudice, save as to costs basis’. Hence, such negotiations are usually privy to parties and the court will only be informed of such Part 36 offers when the matter of costs is being considered. Part 36 offers can be made by either party. Usually if parties agree to settle through a Part 36 offer, the claim is resolved save as to the matter on costs. However, if the offer is rejected, parties proceed to court and there may be adverse cost consequences that might arise from this.
Is your offer a valid Part 36 offer and does principal of estoppel play a role?
In the recent case of Essex v UBB, the high court held that an intended Part 36 offer is viewed as a valid offer. The judge went on to clarified that the principal of estoppel does not apply in the construction of a Part 36 offer. The judge also took into consideration the conduct of the Defendant throughout the proceeding when dealing with the issues in respect of costs and other matters which will not be covered in today’s article. We strongly recommend that you read the full judgment.
Essex County Council (the “Claimant”) was successful at trial and was awarded damages approximately £9 million against UBB Waste (Essex) Limited (the “Defendant”). Following such success, the court proceeded to cost hearing and went on to consider the Part 36 offer made by the Claimant via email on the 7th March 2019. The offer was sent at 4:54pm and therefore, under the Civil Procedural Rule (“CPR”), it was deemed to have been served on the following day. Although, the offer stated that it was valid “within 21 days of the date of this letter”, the Defendant argued that the Claimant’s offer was invalid because it did not comply with the Part 36 rule. The reason was because it had been deemed served on the 8th March 2019 (the following day) as it was served passed 4:30pm. Therefore, the Claimant had failed to meet the requisite of 21-day relevant period for the Part 36 offer to be a valid one.
The Claimant argued that the Defendant was estopped from doing so (i.e. prevented from arguing that the Part 36 was invalid) as they have explicitly written to the Defendant requesting the Defendant to notify them in any event of the Part 36 offer was not compliant with Part 36 offer on its receipt.
- Was it a valid Part 36 offer?
Pepperall J gave considerable guidance on construing Part 36 offers. He even revisited a formal case law Dutton v Minards  EWCA Civ 984 that states the basic principal of “validate if possible”. The judge also went on to apply the reasoning in C v D by stating ‘’any ambiguity in an offer purporting to be a Part 36 offer should be construed so far as reasonable possible as complying with Part 36”. This simply means where there is a clear intention to make a Part 36 offer, it should be construed that the Part 36 offer will be a valid one. The judge considered that any non-compliance be considered de minimis (i.e. trifle error).
- Principal of Estoppel
Principal of estoppel does not apply in the construction of Part 36. It is the responsibility of the offeror and his lawyer to ensure that the Part 36 offer was complaint with the law. Thus, preventing any reliance on the principal of estoppel.
This decision serves as a reminder that judges these days are departing from the “technical challenge” nature within the litigation environment. It highly encourages parties to consider settling out of court and would likely to uphold an intended Part 36 offer. We strongly encourage parties to use the designated form N242A to make Part 36 offers. This is to avoid the above scenario having an opponent arguing that the Part 36 offer was invalid.
As you can see from the case above, a valid Part 36 offer provides for a massive difference in costs consequence at the end of the cost hearing. The Claimant was awarded the following: indemnity costs; interest at the maximum 10% over base rate on both damages and costs; and an additional amount of £75,000.
Furthermore, please also bear in mind that the principal of estoppel clearly does not apply within the ambit of the construction of a Part 36 offer no matter how well it was worded. For instance, in this case, the Claimant could not rely on principal of estoppel even though the particular offer had included the following:
‘Should the Defendant require any clarification as to the terms of this Offer, or should the Defendant consider this Offer to be in any way defective or noncompliant with Part 36 of the CPR, please notify us by return and in any event within seven days of the date of this letter. Any failure to do so will be relied on by the Claimant to preclude the Defendant from attempting to avoid the adverse costs consequences of Part 36.’
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