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Acceptance of Part 36 offers – what happens if the offer made was a mistake?

Cases discussing Part 36 offers usually concern whether they were accepted after expiry of the relevant period, their withdrawal and the costs associated with their acceptance or rejection. But what happens if a party makes a Part 36 offer which they allege is a mistake, and that offer is accepted by the other side?

Recently, I appeared before DDJ Smith in Atiba-Davies v William Hill Organisation Limited, at Clerkenwell and Shoreditch County Court, where this issue was explored.

Facts

Mrs Atiba-Davies was working as a Customer Experience Manager at William Hill. She injured herself at work when attempting to put marketing material in the window of the Defendant’s premises. Liability was later admitted by the Defendant, thus the matter proceeded solely in respect of quantum. The claim form had initially stated that the value of the claim was limited to £3,000. However, this was later amended to £5,000.

Five months after the admission of liability had been made, a paralegal at the Defendant’s solicitors’ firm left a voicemail message for the Claimant’s solicitor, to have a without prejudice discussion about quantum. A telephone conversation took place several days later, in which the paralegal said he had instructions to make a Part 36 offer of £15,000. Following the conversation, a covering letter enclosing the form N242A was sent to the Claimant’s solicitors that same day. The form N242A similarly made an offer of £15,000.

3 days later, the Claimant accepted the Part 36 offer and acceptance was communicated to the Defendant’s solicitors. Several hours later, the Defendant’s solicitors’ firm sent a letter to the Claimant’s solicitors stating the following:

“Unfortunately, this offer was made by mistake and therefore is not capable of acceptance. It is my contention that you must have been aware of the mistake, given the sum offered, £15,000, was far in excess of the statement of value of your client’s claim form. I also contend that as the statement of value on the claim form was amended on 5 September 2018, that this is further evidence that you ought reasonably to have been aware of the true value of the claim…

The Defendant’s solicitors’ firm then sent the Claimant a Part 36 offer for £5,000, which they averred they had meant to have offered.

The Claimant’s solicitors denied that they were aware that this was a mistake. They referred to recordings of the telephone conversation, in which the paralegal had plainly stated that he had instructions to make a Part 36 offer for £15,000. Further, the Claimant had ongoing symptoms that had not yet resolved and was awaiting further medical appointments.

The Defendant proceeded to make an application to withdraw/change the terms of the Part 36 offer on the basis that the offer was a mistake under CPR 36.10.

The matter came before DDJ Smith. He first looked at CPR 36.10, which states:

(2) Where this rule applies –

b) if the offeree serves notice of acceptance of the original offer before the expiry of the relevant period, that acceptance has effect unless the offeror applies to the court or permission to withdraw the offer or to change its terms –

i) within 7 days of the offeree’s notice of acceptance;

ii) if earlier, before the first day of trial.

3) On an application under paragraph (2)(b), the court may give permission for the original offer to be withdrawn or its terms changed if satisfied that there has been a change of circumstances since the making of the original offer and that it is in the interests of justice to give permission.

An application had been made by the Defendant within 7 days of the notice of acceptance. The Judge therefore considered that what he had to determine was whether a mistake could be considered to be a change of circumstances.

He considered that a mistake could in fact be a change of circumstances. However, the Judge drew upon OT Africa Line v Vickers PLC [1996] CLC 722 (QB), in which the following was outlined:

“The test, in relation to whether a person ought to have realised that a mistake had been made, was not what the actual intentions of each party were but what each party was entitled to conclude from the attitude of the other.

There was nothing to indicate that the plaintiffs or their solicitors ought reasonably to have known that a mistake had been made. The offer made sense in the circumstances as the meeting had left the plaintiffs with the legitimate expectation that the defendants would reconsider and possibly increase their offer to cover costs”.

In this case, DDJ Smith was satisfied that there was nothing to indicate to the Claimant’s solicitors that a mistake had been made, nor that they ought reasonably to have known that a mistake had been made. The Judge stated that he had to put himself in the position of the Claimant’s solicitor who received this offer. The Claimant had recently had a MRI scan, which indicated more damage than was at first suspected. She had further medical appointments that were forthcoming at the time the offer was made, as well as ongoing symptoms. The Judge considered that it could reasonably have been concluded by the Claimant’s solicitor that the Defendant wanted to get rid of the matter by making a respectable offer. The Judge therefore dismissed the application and awarded the Claimant their costs.

This case is a cautionary tale for those making Part 36 offers. Following OT Africa Line, unless the mistake is effectively an obvious one, which does not make sense in the circumstances, such offers are likely to stand.

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