Timothy Sailsbury considers the recent Chancery Division case of
The High Court has confirmed that whilst Part 36 Offers have their own rules and unique manner of operation, they are not beyond the rules of common law offers. In the case of DB UK Bank Ltd v Jacobs Solicitors  EWHC 1614 (Ch), Andrew Hochhauser QC held that one side’s common law offer was not capable of acceptance after the other side made a Part 36 offer. The fundamental rule that a counter offer acts as a rejection of the original offer applies.
In this case, the bank made a claim for professional negligence against a firm of solicitors. The solicitors, in a letter marked without prejudice save as to costs, proposed terms of settlement. The parties sought to record their agreement in a Tomlin order. During the negotiations to settle the terms of the Tomlin order, further without prejudice correspondence was exchanged. The defendants reiterated their earlier offer of settlement. The claimant later sent a Part 36 offer. The claimant then sought to accept the previous without prejudice offer. The High Court was required to determine whether there was an issue to be determined at trial or whether the claim had been compromised.
The claimant contended that the without prejudice offer remained open and capable of acceptance, that this had been accepted, and, therefore, there was no triable issue. The defendant’s position was that the without prejudice offer was subject to the common law rules of offer and acceptance, pursuant to which any counter-offer renders the previous offer rejected. The defendant’s interpretation was therefore that the Part 36 offer operated as such a counter-offer and that by making the Part 36 offer the claimant had rejected the defendant’s without prejudice offer.
Mr Hochhauser QC explained that he preferred the defendant’s argument and held at paragraph 27 of his judgment that “a part 36 counter-offer is still a counter-offer.” He continued that because “one is dealing with an initial common law offer, the impact on it of any counter-offer has to be addressed by reference to common law principles.” The Part 36 counter-offer meant the without prejudice offer was no longer capable of acceptance.
Whilst we understand that the matter has been appealed, we welcome the clear statement of principle in this case. It makes plain that the procedural rules do not take priority over the common law. The rules governing offer and acceptance are clear and predate the CPR so it is correct that the established rules continue to apply.
A copy of the judgment can be found here.
A copy of this article can be downloaded here.
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