7 December 2015Print This Post

Defendant with counterclaim not entitled to benefits of claimant’s part 36 offer, High Court rules

RCJ

Coulson J: CPR “expressly differentiates” between two kinds of offer

A part 36 offer made by a defendant with a counterclaim is not “automatically to be regarded as a claimant’s offer”, the High Court has ruled.

Mr Justice Coulson said the matter was a “question of construction” for the court and the answer “must always depend on” the terms of the offer.

Ruling in the Technology and Construction Court on a dispute over a gas pipeline on the Shetland Islands, Coulson J said it “plainly matters” what type of offer has been made, because the CPR “expressly differentiates” between the consequences of rejecting a claimant’s part 36 offer and a defendant’s offer.

A successful claimant was entitled to a “raft of enhancements” under CPR 36.17(4), including interest on the sum awarded at up to 10% above the base rate, indemnity costs and interest at an increased rate, and an uplift on the sum awarded of up to £75,000.

In contrast, a defendant who beat its part 36 offer had a more “limited entitlement” under CPR 36.17(3), to costs and interest.

Coulson J distinguished the offer letter in the case with the one at issue in the leading Court of Appeal authority of AF v BG, which described itself as a claimant’s offer and “spelt out” the claimant’s enhancements if it was rejected.

Delivering judgment in Van Oord UK v Allseas UK [2015] EWHC 3385 (TCC), Coulson J said: “As a matter of construction, I am entirely satisfied that the offer letter in this case was not a claimant’s part 36 offer.

“Unlike the offer letter in AF v BG, it did not say expressly that it was a claimant’s offer. Unlike the offer letter in AF v BG, it did not offer to accept an amount of money in settlement of claim and counterclaim: instead, it offered to pay an amount to the claimant, OSR.

“Unlike the letter in AF v BG, it offered to pay the other side’s costs. And unlike the letter in AF v BG¸ it did not spell out the enhanced consequences of non-acceptance (indemnity costs and penal interest up to 10%) that are set out in r.36.17(4).

“Instead, the letter in this case has all the hallmarks of a defendant’s part 36 offer. It offered to pay a sum in settlement of the litigation (taking into account the counterclaim). That offer accepted that OSR could retain the sums already paid.

“It offered to pay OSR’s costs up to the date of acceptance, for a maximum period of 21 days after the date of the offer.”

Coulson J ruled that the letter should be treated, as a matter of construction, as a defendant’s part 36 offer.

However, he decided to award indemnity costs to AUK on the grounds that OSR had made a “hopeless claim, which it should have known was hopeless from the outset”.

Coulson J went on: “The unforeseen ground conditions claim failed at every possible hurdle, and was, in any event, fatally tainted by the fact that, as OSR accepted, the same claim based on an alleged contractual term had had to be abandoned.

“In similar vein, the claims based on an absence of temporary crossings had all the hallmarks of an unreal argument, seized upon by claims consultants months or years after the event, which had been raised at the time, but had then petered out in the contemporaneous correspondence because it was so unimportant.

“In addition, I was critical of OSR’s witnesses in the main judgment because of the disjunct between what they were alleging now, and the contemporaneous documentation, which almost always said something different. I also noted that significant elements of the claim were not addressed at all, let alone supported as a matter of fact, in the OSR evidence.

“In all those circumstances, I have concluded that this was a widely-drawn but hopeless claim which should not have been pursued.”

Noting that there were no costs management orders in the case, because the claim was for over £10m, Coulson J said he hoped that, even in cases of this size, the parties would use the costs management regime to avoid disputes and uncertainties.

He ordered an interim payment of £1.3m to be made by OSR on account of AUK’s costs.

By Nick Hilborne

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