Part 36 Offers: Say It Like You Mean It!

In Mundy v TUI UK Ltd [2023] EWHC 385 (Ch) (judgment available here), Collins Rice J heard an appeal which considered the implications of the Claimant’s Part 36 offer to split “liability” at 90%/10%.

The Facts in Mundy

The matter arose out of a claim for damages for ‘holiday sickness’ when the Claimant went on an all-inclusive package holiday supplied by the Defendant. He claimed that he had suffered food poisoning through contaminated food provided by the hotel and sought damages between £25,000 and £35,000. The Court ultimately gave judgment for the Claimant but awarded him just £3,805.60 in damages.

There were two offers of relevance:

1. in 2018 the Claimant had made a Part 36 offer to settle the issue of ‘liability’ at 90/10 in his favour; and
2. in 2019 the Defendant had made a Part 36 offer to settle the whole of the claim in the sum of £4,000.

Neither offer was accepted and following judgment each party claimed to have beaten their offers.

The Claimant asserted that as the Defendant had been found to be 100% liable for his illness, the judgment was ‘at least as advantageous’ as his Part 36 offer. Further, as his offer was made first in time, when adding the 10% ‘additional amount’ as provided for by CPR 36.17(4)(d), the total amount awarded exceeded the Defendant’s offer in any event.

The Decision in Mundy

The Court noted that although the practice of making 90/10 liability offers to secure costs advantages had become widespread, there did not appear to be any existing authority on precisely how such offers fit into CPR 36.17.

Reviewing the construction of the Claimant’s offer and upholding the decision at first instance, Collins Rice J determined the issues in favour of the Defendant:

1. In the context of this claim, there were no genuine questions of issues-based liability, and it was in reality an ‘all or nothing’ case.
2. At first instance the trial judge had found the pleading of contributory negligence to be a “hopeless idea” and one that “no competent legal adviser could have regarded the contributory negligence plea as having the slightest chance of success”.
3. The 90/10 offer on ‘liability’ was unparticularised but it was clear that causation would have remained live as part of the quantum assessment.
4. Having regard to the circumstances of the case as per CPR 36.17(5), the Claimant’s offer was not a ‘genuine attempt to settle the claim’ and even if it had been beaten, the Court would have deemed it unjust for the claimed consequences to follow.

It was felt that accepting the Claimant’s submission would result in the unhappy outcome where he would secure the benefits of beating his own liability offer despite failing to beat the Defendant’s global monetary offer.

Collins Rice J stated at [32] that this would “cut across the binary structure of CPR 36.17(1)” and would have resulted in both parties being entitled to costs following their Part 36 offers “in circumstances where it is far from obvious that is within the contemplation of the rule at all”.

Stating at [38] that CPR 36.17 was a “provision entirely simple in structure”, Collins Rice J felt that the plain reading of the rules had a logic which required a comparison simply between what the Defendant had offered and what the Claimant ultimately recovered ‘in money terms’.  On that analysis, the Judge stated at [42] that she was:

“unpersuaded this rejected 90/10 liability offer can be fitted into the terms of CPR 36.17(1)(b) consistently with the wording, integrity and practicality of the CPR 36.17 mechanism. Trying to do so strains the language of the provision, undermines its careful balance, and introduces a degree of complexity and uncertainty which I am not persuaded is within its contemplation. It is a provision that relies on its clarity, simplicity and predictability for the incentivising effects which puts it at the heart of the Part 36 code”.

It appears that the Judge was not impressed with what might be seen to be mere gamesmanship and while the Claimant’s offer may have appeared to be “all carrot and no stick”, in reality it did not incentivise acceptance but was “an attempt to use CPR 36.17 against itself, contrary to both its letter and its spirit”: [44]. 

Comparing Mundy with the Decision in JMX

The conclusion in Mundy however, might be contrasted with the outcome in JMX v Norfolk and Norwich Hospitals [2018] EWHC 185 (QB) where, in relation to a clinical negligence claim, a trial of the preliminary issue of breach of duty was tried with an ‘all or nothing’ outcome. The Claimant succeeded in full and the issue was whether their Part 36 offer to accept 90% of damages to be assessed was a genuine attempt to settle proceedings. Foskett LJ accepted in that case that the Claimant had made a significant concession by offering to accept 90% of damages as the value of the claim was “likely to run into several million pounds”, therefore a 10% concession was of significant value to both sides. Accordingly, the Claimant succeeded in recovering Part 36 consequences.

Comment

It is clearly possible and indeed encouraged, for parties to seek to make meaningful offers to narrow the issues or compromise particular heads of loss. CPR 36.4(d) provides for the making of offers relating to a “part of” the claim or “to an issue which arises in it”. It might therefore appear surprising that in Mundy, despite the Defendant raising and pleading the issue of contributory negligence in pleadings signed with a statement of truth, and despite that issue remaining live at trial, the Court disregarded it as so fanciful so as not, in reality, amounting to an issue in the case at all. One might suppose that running an inherently implausible argument would, generally, put the party at risk of an unfavourable costs order.

Issue-based Offers

The Court of Appeal gave consideration to ‘liability’ Part 36 offers in Seabrook v Adam [2021] EWCA Civ 382 (this judgment is discussed in the author’s blog entitled “Part 36 Offers: Liability Encapsulates Causation”, which can be read here). In Seabrook, the Court considered that offers of ‘90% of damages to be assessed’ were deemed not to have been beaten by the Claimant when causation was successfully challenged. It was suggested in that case that where the issue to be settled is ‘liability’, a party should make clear whether the offer is an invitation to admit breach of duty only, or an invitation to make a wider concession and if so, what damage the Defendant is being invited to accept was caused.

It appears therefore that in Mundy, the Claimant may have better assisted himself by making a clear and unambiguous offer directly relating to an issue in the claim. If he had done so, the Court may have been prepared to consider whether he should be entitled to recover the costs of that particular issue, or take the offer into account when considering whether it was unjust to award the Defendant its costs benefits under CPR 36.17(3).