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Mon, 2 Aug 2010

CPR Part 36 Code or Contract?

In the recent conjoined appeals of Gibbon v Manchester City Council and LG Blower Specialist Bricklayer Ltd v Reeves [2010] EWCA Civ 726 the court of appeal confirmed that whilst basic concepts of offer and acceptance in the general law of contract underpinned Part 36 of the Civil Procedure Rules it was not to be understood as incorporating all of the rules applicable to the formation of contracts. Part 36 was a self-contained code.

In the first case, Gibbon made a Part 36 offer of £2,500 to the local authority. The local authority initially made lower offers before offering the full £2,500. Gibbon rejected this but had not withdrawn the previous Part 36 offer, which local authority then formally accepted.

Gibbon appealed against the decision of the lower court to award the local authority its costs from the date of the Part 36 offer arguing that firstly, the lower offers made by the local authority rendered the Part 36 offer incapable of acceptance and secondly, Gibbon’s rejection amounted to an implied withdrawal of the offer.

In dismissing the appeal, the court of appeal held that the arguments advanced by Gibbon could not be reconciled with the clear language of Part 36. Although in contract law, an offer had the effect of superceding and therefore withdrawing previous offers, the same could not be said for Part 36 because the language was clear: a Part 36 may be accepted at any time unless it has been withdrawn. Furthermore, since Rule 36.3(7) provides that an offer is withdrawn by serving a written notice there was no room for the concept of implied withdrawal.

In the second case, Reeves made a series of Part 36 offers to LG in May, August, and November 2007 before making a final offer in February 2008. At trial, LG obtained judgment and when addressing the issue of costs an issue arose as to whether LG had obtained a judgment more advantageous than the Reeves previous Part 36 offer. The judge at first instance held that the offer in February 2008 had superceded all previous offers and so this provided the bench mark to decide whether the judgement was more advantageous. However, for the reasons set out in Gibbon, the court of appeal rejected this ruling because the claimant’s offers in May and August 2007 had not been withdrawn.

In practical terms, when making a CPR Part 36 offer, it is advisable to carefully consider what must be included in an offer so that it falls within Part 36. A decision should then be taken, subject to the minimum time limits under Part 36, on whether to formally withdraw the offer or leave it open for acceptance.

If an offer is left open for acceptance it is strongly recommended that this is carefully noted on the case file because there may come a point in the life of the case when the offer suddenly becomes very attractive and is accepted before the offeror has chance to withdraw it.

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