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A miss is as good as a mile – Part 36

In Hammersmatch Properties (Welwyn) Limited v Saint-Gobain Ceramics Limited (and another) [2013] EWHC 2227

In Hammersmatch Properties (Welwyn) Limited v Saint-Gobain Ceramics Limited (and another) [2013] EWHC 2227 (TCC) Ramsey J considered whether a near miss Part 36 offer should be of relevance on costs.

The case concerned terminal dilapidations. C had been awarded a total of £1,058,768 inclusive of interest at trial. D had made a Part 36 offer of £1,000,000 - which would have been only £3,637 shy of the sum ultimately awarded taking into account the lower interest due at the date of the offer.

The cost consequences in Part 36 are framed by reference to whether the claimant obtains a judgment “more advantageous than a defendant’s part 36 offer”. In Carver v BAA plc [2008] EWCA Civ 412 the C.A. effectively decided that where an offer was extremely close to the eventual judgement (in that case C only beat the offer by £53) the judgement could not properly be said to be “more advantageous” than the offer.

Concerns about uncertainty (how close?) and protraction of costs arguments led to the rules being changed in October 2011: r 36.14 (1A) now states that “more advantageous” means “better in money terms by any amount, however small….”

Attempts to circumvent r 36.14 (1A) are not infrequent, however.  In Hammersmatch the unsuccessful D sought to do so by placing reliance on the general costs provisions in r 44.2 (4) (c) which directs the court to have regard to “…any admissible offer to settle… which is not an offer to which costs consequences under Part 36 apply”.

Ramsey J rejected the argument: to give effect to a failed Part 36 offer in this fashion would plainly run contrary to the new r 36.14 (1A) and re-introduce Carver by the back door. An attempt to rely on r 44.2 (4) (a) - conduct of parties - was also rejected. The argument was that the Claimant should have made a counter-offer to the near miss Part 36 and failure to do so was a failure to negotiate. The oft cited eight “principles” of Jackson J (as he then was) in Multiplex Construction [2008] EWHC 2280 (TCC) – in particular principle 7 dealing with near misses and absence of negotiation - were prayed in aid.

Ramsey had no truck with that either: speculation as to what might have happened in relation to offers neither side actually made was to be avoided; there had, in any event, been a prior mediation so the allegation of failure to negotiate was unfounded; Multiplex had relied on Carver and (as regards near miss Part 36’s) had therefore been superseded. Although the decision can seem harsh on its facts (the C was originally claiming circa £7mil and the offer was extremely close) the clarity provided by this decision is to be welcomed.

Richard Hayes / 1st Dec 2013


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