Part 36 Offer & The Consequences of Rejection

Rawbank SA v Travelex Banknotes Ltd [2020] EWHC 1619 (Ch) 

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Accepting or Rejecting a Part 36 Offer 

 

In brief, the consequences of accepting or rejecting a Part 36 Offer include:

  • The costs benefits of a Part 36 Offer are that, if accepted within the relevant period, costs will be awarded to be assessed on the standard basis up until the date of acceptance.
  • Should the Claimant obtain a judgment in its favour following Trial, which is equivalent to the Part 36 Offer or higher, interest on those costs is awarded at up to 10% above the base rate and costs will be awarded on an indemnity basis from the date of expiry.
  • Should the Claimant obtain a judgment which is less than a Defendant’s Part 36 Offer; the Claimant will be required to pay the Defendant’s costs from the end of the relevant period.
  • These automatic Part 36 costs consequences do not follow from any different offers, and acceptance of an offer under CPR 36.13 (in standard costs matters) provides for a deemed costs order upon which detailed assessment can be commenced.

 

Rawbank SA v Travelex Banknotes Ltd [2020] EWHC 1619 (Ch) 

Rawbank SA v Travelex Banknotes Ltd was a case whereby the Claimant issued proceedings for money owed. During the proceedings, the Claimant made an offer to settle the debt owed, which resulted in only 0.03% of the value of the claim being conceded. The Judge held that the offer made by the Claimant was an effective offer and some of the consequences which followed the making of a Part 36 Offer applied.

A letter submitted by the Claimant had made the Part 36 Offer to settle the entire case, requiring the Defendant to pay £48,290,000 in full and final settlement with payment to be made within 14 days of accepting the offer. The offer did not include costs but did include interest until the 21 day period ended, as per the required terms of a valid CPR Part 36 Offer. Also outlined in the offer were the consequences of failure to accept the offer if the Claimant was successful in obtaining a judgment which was equal to or exceeded the offer made. These consequences included:

(a) Payment of indemnity costs;
(b) Interest;
(c) An additional 10% damages up to £500,000 and 5% of damages in excess of this amount.

These requests were a reflection of CPR Rule 36.17 (4).

 

The Judgment

The hearing took place on 7 May 2020 before Judge Birss.

When consideration was given to whether it would be just to make an order reflecting the terms as per CPR 36.17(4), the Court was required to take into account all of the circumstances of the case, including whether the Part 36 Offer was a genuine attempt to settle the claim.

The Court was mandated to apply the consequences of failure to beat the Part 36 Offer unless it was unjust to do so.

The Defendant argued that the offer made was not a genuine attempt to settle the claim. For that reason, the Defendant argued it would be unjust to make such an order. In their argument, the Defendant referred to the case of AB v CD [2011] EWHC 602 (Ch) referring to the judgment made by Henderson J at paragraph 22 where he stated that the offer must contain a genuine element of concession for it to be considered as an offer. The Defendant further referred to the case of Huck v Robinson [2002] EWCA Civ 398, whereby it was held an offer made at 95% of the sum claimed was a genuine offer to settle.

The Defendant went on to say that a discount of only 0.3% was offered in the Part 36 Offer against the amount claimed for in the claim form, arguing this was not a substantial discount to amount to a genuine attempt to settle the claim. The Defendant stated this offer was simply a tactic to benefit from the enhanced payment of Part 36.17(4).

Birss J did not accept this argument stating that the question was not the proportion of the discount offered but whether the offer could demonstrate a genuine attempt to settle the claim. Birss J held that in this case, the chances of success were near-certain, and thus a discount of 0.3% could be deemed as a genuine attempt to settle.

However, the Defendant submitted that they were unable to pay the amount, and this was considered by Birss J when assessing if making the Order was justified.

Birss J held that the Part 36 Offer could only be accepted if the Defendant was capable of paying the sum set out in the offer. Due to the Defendant’s insolvency, the offer could not be accepted as it could not be paid. While this point alone would mean that it would be unjust to make an order in line with CPR 36.17(4), Birss J took into consideration the circumstances of the case when deciding that the Part 36 Offer was effective and therefore a genuine attempt to settle the claim. It was found to be just to order the Defendant to pay the legal costs of the proceedings on the indemnity basis, and the interest in the sum owed at the rate of 8%, as per part of the consequence set out in the Claimant’s Part 36 Offer.

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