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A recent case, Bentley Design Consultants v Malcolm Sansom, has considered the interaction of the principle of construction of a contract and the procedural code contained in Part 36 of the CPR. The case concerned the proper construction of an offer to settle “the whole of this claim”. At both first instance and on appeal, it was held that the proper construction of the offer was to settle only part of the claim.
The principles applied in this case are important for determining what the acceptance of an offer may settle (and what may be left over). They may also create challenges for judges when determining whether a Part 36 offer has been beaten at the end of a trial. No longer can one simply look at just the terms of the offer made. Parties and judges will now have to consider the pleadings as they were at the time, as well as the factual matrix, to determine whether an offer to settle “the whole of the claim” is, in fact, an offer to settle only part of it.
In May 2011, Bentley entered into an agreement with Sansom to provide structural engineering services on two properties that Sansom owned, Plot 1 and Plot 2.
Sansom alleged that the advice received in respect of Plot 1 was negligent and issued proceedings claiming £35,025 in damages. In correspondence, Sansom made it clear that he was also taking advice in relation to a potential claim concerning Plot 2. If such advice indicated that Bentley had also acted negligently in providing its services in relation to that plot, then Sansom stated that he intended to issue a claim in respect of Plot 2 to be joined with Plot 1.
The proceedings in respect of Plot 1 were stayed while the parties explored settlement and the claim in respect of Plot 2 was investigated. After a stay of proceedings, Sansom made a Part 36 offer on 23 April 2015 (the offer). The offer stated that:
“Your client will pay to our client the sum of £25,025 in full and final settlement of the whole of this claim.”
The offer identified the claim by the claim number. The offer was not accepted at that time.
After a further stay of proceedings, the particulars of claim were amended on 8 June 2016 to add the claim in relation to Plot 2. In respect of Plot 2, Sansom claimed damages in the total sum of £131,491.
Bentley served a defence to the amended claim and then made its own Part 36 offer on 8 August 2016 in the sum of £40,000. That offer was rejected and Sansom filed his reply.
On 8 November 2016, Bentley wrote to Sansom to accept the offer “in full and final settlement of the whole of this claim.”
Bentley’s position was that it had accepted the offer to compromise the whole claim, which then comprised both the claim for Plot 1 and Plot 2. Sansom disputed this, arguing that the offer was only ever, and remained, in relation to the claim in respect of Plot 1.
The dispute over what had been accepted was listed to be heard as a preliminary issue.
At first instance, HHJ Cotter QC held that the effect of acceptance was only to compromise the claim in relation to Plot 1, such that the claim in respect of Plot 2 continued.
This decision was the subject matter of the appeal heard by Jefford J.
Jefford J dismissed Bentley’s appeal. Agreeing with HHJ Cotter QC, she held that the offer was to settle the claim for Plot 1 only and that the substance of this offer did not change over time.
Jefford J recognised that Part 36 creates a self-contained code for the making and acceptance of offers to settle and, although the background is that of contractual offer and acceptance, that code is not to be subject to the same rules.
She then went on to analyse the term “claim” holding:
“’Claim’ is not a defined term in Part 36 but it seems to me that the underlying premise of Part 36 is that there is a unitary claim in an action, rather than an agglomeration of distinct claims. In other words, the claim is that made in the action and is not ordinarily sub-divided into particular causes of action or heads of damages. These are ‘parts of the claim’.”
She explained that, if the cause of action is pleaded in contract and an additional cause of action in tort is added in respect of the same subject matter, it is still the same claim; if the claim is in respect of defects in a property and additional defects are alleged, it is still a claim in respect of defects in that property; likewise if an additional head of damage is added or the value of the claim is revised. Where a claim increases in value during the course of the litigation, whilst a claimant may have an interest in leaving the offer open for acceptance, if it does not want the offer to be accepted, it must be withdrawn or amended.
However, she explained that whether an offer needs amending or withdrawing begs the question of what the offer was for, which was a question of construction. That was the issue she had to decide. Jefford J found that, in this case, there was no unitary claim in respect of the property or the site or the project encompassing both plots. The offer, when made, was clearly only in respect of Plot 1 and the fact that the claim had been amended to include Plot 2 did not mean the offer subsequently also encompassed that claim.
The judge concluded:
“On the contrary, following the amendment, the offer to settle ‘the whole of this claim’ in respect of Plot 1 became an offer to settle what was now part of the whole of the claim in the proceedings. The offer did not change.”
On first blush, the outcome of the case is not altogether surprising. It would seem unfair for Bentley to accept an offer as compromising the claims for both Plots 1 and 2, when it was obvious that the offer was only intended to be in respect of Plot 1.
However, the result is surprising if one starts by asking, what would be the expected consequence of accepting an offer in respect of the “whole of this claim”? I respectfully suggest that most people would think that the acceptance would bring the case to an end. That would be so even if the case had been amended, because if the offeror did not want to compromise the claim on the terms offered, the offer would have been amended or withdrawn.
Indeed, prior to this case, most cases concerning the procedural code contained in Part 36 were offeree friendly. The courts have emphasised the importance of certainty and clarity outweighing considerations that one party had taken advantage of another to ensure that Part 36 remains a clear and workable code. Generally, the onus has been placed on offerors to withdraw or amend offers which they no longer wish to be accepted, otherwise they remained open for acceptance.
This case represents a bit of a sea change. Despite the offer being in respect of the whole of the claim and not being amended or withdrawn, Jefford J held that, in fact, the offer was only in respect of part of the claim. The consequence was that, accepting an offer to settle the whole of the claim only settled part of it; the rest remained live.
The judges, both at first instance and on appeal, focussed on the fact that everybody knew that, when the offer was made, it only concerned Plot 1. This is true and perhaps the simplicity of the case was its downfall. However, the only reason everyone knew the offer was in respect of Plot 1 was because that is what was pleaded at the time. Had the offer been made after the amendments to the particulars of claim had been made to add Plot 2, no one could have sensibly argued that the offer would not encompass both plots, even if there was no “unitary claim” as Jefford J found.
The effect of the judgment is that the construction of the phrase “the whole of this claim” changes depending on the time at which the offer is made. But is this right? Should the construction of these plain and simple words be so different depending on when the offer is made? Is this what was intended by the drafters of Part 36, when the procedural code requires an offeror to set out whether the offer is in respect of the whole of the claim or only part of it?
There are also some quite serious potential ramifications:
It may be that the simple facts of this case led to the straightforward conclusion reached by both judges, particularly when the parties were treating the claims in respect of each plot separately. However, the underlying principles may be more difficult to apply in a more complex case.
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