Part 36 offer for defendant to accept 95%: was this a genuine attempt to settle?
Jockey Club Racecourse Ltd v Willmott Dixon Construction Ltd
Technology and Construction Court
4 February 2016
The issue of whether a Part 36 offer is a “genuine attempt to settle the claim” is not new. The Civil Procedure Rules Committee recognised its importance by including it in the 2015 amendments to Part 36 as a factor for determining whether it is unjust to award additional Part 36 benefits when an offer is beaten. Andrew Cousins reviews the judgment in Jockey Club Racecourse Ltd v Willmott Dixon Construction Ltd (2016) in which the High Court had to consider whether an offer for the defendant to accept 95% liability was a genuine one, even though a percentage split was not an available outcome at trial.
The claimant had engaged the defendant to design and construct a new grandstand at Epsom racecourse. The roof system was damaged by high winds on two occasions and the claimant brought proceedings against the defendant for the costs and consequential losses associated with the repairs. On 30 January 2015, the claimant made a Part 36 offer to settle liability on the basis that the defendant would pay 95% of the damages to be assessed. The defendant did not respond to the Part 36 offer. After the 21 day period for acceptance had expired, the claimant served amended Particulars of Claim setting out for the first time the total cost of the replacement of the roof and an estimate of its consequential losses, which amounted to over £5 million. A split trial was ordered.
Before the split trial took place, the defendant conceded liability and the preliminary liability issues were settled, by consent, in the claimant’s favour. The claimant contended that it was entitled to the benefits conferred by Part 36 on the basis it had bettered its Part 36 offer. The issues were:
1. whether the claimant’s offer fell within the meaning of Part 36 and was a genuine attempt to settle liability and reflected an available outcome of the litigation; and
2. if so, whether it was unjust to make an order reflecting some or all of the incentives under Part 36.
Mr Justice Edwards-Stuart finding for the claimant, held:
There was never an issue as to whether contributory negligence would attach in this case and it was accepted that a decision that the defendant would pay 95% of the claimant’s damages was not one that would have been open to the court.
There were three issues to be determined:
(a) Was the claimant’s “Part 36 offer” an offer within the meaning of Part 36 at all?
(b) If so, was it a genuine attempt to settle liability?
(c) If the answer to (a) and (b) is yes, whether it would be unjust to make an order reflecting some or all of the incentives in Part 36.
Whilst a 5% reduction was not generous it was also not “all take and no give”. The defendant was being offered a real reduction if it accepted the offer. It was immaterial that the offer did not reflect an award that the court was ever going to make in the litigation as cases are frequently settled on the basis of an assessment of risk that combines both the risk of failure and the uncertainty of the true value of the claim.
Considering the authorities, the offer was a genuine offer of settlement. Had defendant accepted the offer, the reduction in damages would not have been insubstantial. Whilst the amended Particulars of Claim alerted the defendant to the fact that it was facing a much larger claim than first thought, that did not alter the liability position.
The claimant therefore succeeded and was awarded its costs of dealing with liability on the indemnity basis from May 2015 (when the court considered the defendant ought reasonably to have been able to make an informed decision on liability). Any decision as to whether it would be appropriate to award the claimant any other Part 36 enhancements was deferred until after the quantum issues had been resolved.
For further information please contact Andrew Cousins Senior Solicitor Advocate, Insurance on 0161 603 5093
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