In claims concerning a child or a protected party, acceptance of a Part 36 offer is subject to the approval process under Part 21. Consequently, the accepted Part 36 offer is not deemed binding until the court approves the same. What would happen if the offeror wishes to withdraw the Part 36 offer during the period between acceptance and approval due to a material change in circumstances such as the death of a protected party?
Recently, the High Court was called upon to determine this very issue in Wormald.
The Facts
The Claimant sustained a serious brain injury at the age of 20 following a road traffic accident in 2009. In 2013, a personal injury claim was brought on his behalf with his mother acting as his litigation friend. Liability was contested and the matter was proceeding on a split trial basis however, in October 2014, the Defendant made a Part 36 offer in the sum of £2 million in respect of the whole claim. The liability trial subsequently took place in November 2014 and the Claimant succeeded subject to a 40% reduction for contributory negligence. The Defendant’s appeal was dismissed. Damages remained to be assessed and the Defendant’s offer remained open for acceptance.
Following the accident, the Claimant was wheelchair bound and has been admitted to hospital on a number of occasions. On 14 September 2020, the Claimant was admitted to hospital again where he suffered a cardiac episode. His mother and litigation friend reported this to his solicitors as she had been told that the Claimant was in a critical condition.
On 17 September 2020, following an urgent review of the case and the open offers, the Claimant’s Solicitor advised the Defendant that the Claimant had been hospitalised. On 18 September, following a consultation with Counsel and seeking instructions from the Claimant’s mother, the Defendant’s Part 36 offer of £2 million was accepted via email.
The Defendant’s Solicitor responded seeking an update on the Claimant’s condition and confirmation that he was still alive. The Claimant’s Solicitor advised that he remained in a critical condition. Unfortunately, the Claimant died later that day. The Defendant was not notified of this until 21 September 2020.
On 25 September 2020, the Defendant wrote to withdraw the Part 36 offer on the basis that it now substantially exceeded the true value of the claim and, in any event, had not yet been approved.
Naturally, a dispute arose as to whether the offer as capable of being withdrawn given that it had been accepted. The Defendant maintained that it was capable of being withdrawn owing to the fact that the acceptance required the court’s approval and approval should not be granted owing to the material change in circumstances. The Claimant applied for a declaration that the Part 36 offer had been validly accepted and also sought an order that the sum accepted be approved by the court pursuant to Part 21.
The Application Hearing
The matter came before Ms Clare Ambrose, sitting as a Deputy High Court Judge, on 24 March 2021 and, at [29], she held that the issues to be determined were as follows;
- Where a protected party accepts a Part 36 offer, is the other party subsequently able to withdraw that offer before approval of the settlement?
- When the court is asked to approve a settlement, on what grounds (if any) can a Part 36 offer be withdrawn?
- Should the court grant permission for withdrawal of the Defendant’s offer or approve the settlement in the amount offered?
In respect of the first issue, the Judge concluded as follows at [59];
- A compromise made on behalf of a protected party by acceptance of a Part 36 offer requires the approval of the court under CPR 21.10 (CPR 36.11 & 36.14).
- Where a protected party accepts a Part 36 offer, the offer and its acceptance are not binding to make a valid settlement until approved by the Court (CPR 21.10).
- The proceedings are not stayed until the court approves the settlement (CPR 36.14).
- Until the settlement is approved the other party may resile from its offer by giving notice of withdrawal (Drinkall). The withdrawal serves a purpose in giving notice that the settlement is challenged.
- However, the notice of withdrawal will not in itself be valid for the purposes of Part 36 (CPR 36.9), in particular in relation to costs consequences.
- Either party may apply for approval of the settlement (Practice Direction 21). A party resiling from the settlement may raise its position on that application. The court will decide whether the withdrawal is to be given effect or the settlement is to be approved.
- Further consequences were not explored but that party could probably issue an application to resolve any issue as to how the proceedings continue, including the effectiveness of its withdrawal from the settlement.
In respect of the second issue, the Judge provided guidance at [61-63] as to the grounds upon which a Part 36 offer could be withdrawn post acceptance. She concluded that in matters involving children and protected parties, the case law permitted either party to resile from a Part 36 settlement prior to approval under Part 21. Though she held that the Claimant had been correct in contending that the primary consideration had to be the protection of the protected party, she noted that the overriding objective was also relevant and that this required the parties to be on an equal footing. In this regard, the Judge held that the question for the court was whether, in all of the circumstances of the case, the approval of the settlement would be unjust and that the factors within CPR 36.17 would be relevant to the court’s assessment.
The third issue remains to be determined as the Judge elected to give the Claimant then opportunity to make the necessary application to adduce further evidence in relation to requests raised by the Defendant and to satisfy the evidentiary requirements of the approval process (the Claimant having failed to file the same when applying for the approval). Though the Judge suggested that it may be unfair to determine the third issue at this juncture in case of “an oversight or misunderstanding” [70], she gave an indication at [69] that she considered it unjust for the Defendant to be bound by the Claimant’s acceptance of the Part 36 offer.
Commentary
The dispute in this matter arose, in part, due to the lack of clarity in the rules as to the proper interaction between Parts 36 and 21 of the Civil Procedure Rules. Despite CPR 21.10 expressly requiring the court’s approval of any settlement reached on behalf of a protected party including the terms of any Part 36 offer, there is no express rule or provision dealing with the interaction between these two Parts of the CPR. Indeed, neither Part is expressly made subject to the other despite the requirements of CPR 21.10.
Patently, this is unsatisfactory and provides little assistance to litigants or the court as to how any conflict between Part 36 and Part 21 should be resolved. Whilst the ultimate discretion in determining such issues usually rests with the court, it is unusual for a lacuna such as this to exist between two such important parts of the Rules.
It remains to be seen what the outcome of this matter will be or, indeed, what it should be. There is considerable force to the arguments advanced by both parties in Wormald and, notwithstanding the Judge’s indications, until the Claimant produces the further documentary evidence required for approval and/or addresses the issues raised by the Defendant, it is difficult to speculate how this matter will conclude.
Once the issue is determined, a further article will follow.
Nonetheless, whatever the outcome of this matter, it seems that the Civil Procedure Rules Committee ought to consider this issue with a view to amending the relevant Rules to ensure clarity for any future issues arising out of this situation and the interaction between Part 36 and Part 21.
