Hogg v Newton: The importance of insurers and solicitors complying with Part 36 of the Civil Procedure Rules.

Published 22 May 2018

On 18 May 2018, His Honour Judge Gargan handed down judgment, dismissing the Claimant's appeal from the County Court decision of District Judge Read, which had held that the litigation had been stayed following the Defendant's acceptance of a £950.00 Part 36 offer made by the Claimant for the whole of the claim, stated to be valued at approximately £125,000.00.

The Claimant has instructed Hillary Meredith Solicitors from the outset, who submitted a claim on 8 May 2012 via the MOJ Portal to the Defendant's insurers.  The Claims Notification Form confirmed that the Claimant was hiring a vehicle through Accident Exchange, as of 16 March 2012, as well as claiming for personal injury.

On 12 February 2013, the Claimant's solicitors made a Part 36 offer of "£1,600.00 in full and final settlement of this claim."  It was elsewhere within this letter expressed to be for "the whole of our client's claim".  By 26 March 2014, the personal injury element of the Claimant's claim had been settled at a net sum of £650.00, which therefore reduced the residual value of the Claimant's offer to £950.00.

Proceedings were issued almost two years later on 1 March 2016 through the Claimant's new solicitors, True Solicitors, including losses pleaded at over £125,000.00, with a hire claim of over £122,000.00.

On 15 July 2016, noting that the offer of 12 February 2013 was still effective and had not been withdrawn, DAC Beachcroft proceeded to accept the offer in full and final settlement of the whole of the claim in the net sum of £950.00.  After making the payment 6 days later, the Defendant subsequently applied for a declaration that the claim had been compromised.

Following District Judge Read's decision that the claim had been so compromised, the Defendant having accepted the Claimant's effective Part 36 offer, the Court was asked on appeal to reconsider that decision.

What issues were raised by the parties at first instance?

At first instance, the Claimant sought to argue that the Part 36 offer was for the personal injury claim only and could not relate to any other heads of claim, including credit hire.  Therefore, that effectively the part of the offer making reference to the "whole of the claim" should be construed together with the words "except credit hire".  It was further argued that the offer had lapsed upon resolution of the personal injury claim and was therefore not available for acceptance.

The Defendant argued that the phrase used in the offer letter relating to "the whole of our client's claim" must be taken to mean all claims arising out of the road traffic accident.  Citing decisions such as ICS Ltd v West Bromwich Building Society and Arnold v Britton, it was emphasised that it was important to give effect to the ordinary meaning of the words.  Therefore, by applying this principle, all special damage losses including credit hire formed part of the offer which had been made.

What was the decision made on appeal?

On appeal, the Claimant raised a fresh issue that the offer made by Hillary Meredith had not in actual fact been a Part 36 offer at all, having purportedly failed to comply with the requirements of the CPR rules.  The Claimant further reiterated the arguments which had led District Judge Read to find in favour of the Defendant at first instance.

Ground 1 – Was the offer a Part 36 offer?

The Defendant took issue with the raising of this ground, given that the Claimant had not raised it at first instance but had argued the case as if the offer was a valid Part 36 offer.  The Defendant submitted that this was contrary to the doctrine of approbation/reprobation due to the Claimant effectively carrying out an about turn in their stance.  The Court allowed the Claimant to argue the point.

Claimant argument on this ground

Thereafter, in arguing that the offer made by the Claimant was not a Part 36 offer, the Claimant sought to rely upon the fact that:

• The text within the offer did not include the phrase it is intended to have the consequences of section 1 of Part 36 as required by sub-rule (b) within CPR 36.2(2);
• Having stated the Defendant had "21 days to respond to this offer", it had not made it clear that the offer could be accepted after that date.  It was argued that this was a matter of form, not construction and therefore the Part 36 offer ought to be deemed defective.

Defendant argument on this ground

The Defendant argued that it was not necessary for an offer to recite the words set out in the rule as a magic formula.  Whilst form was important, an offer would not be rendered ineffective by every minor departure from the wording within the rules. 

It was assued that the case could be distinguished from earlier decisions holding that particular offers were defective since there was a sufficient attempt to comply with the requirements of sub rules (b) and (c) as noted above.

Court finding on ground 1 of the appeal

His Honour Judge Gargan dismissed the appeal, finding that the reference in the letter to the Claimant "seeking the full sanctions available under part 36" was sufficient and that a reasonable man (or insurer) would have read the relevant passage as being part of a valid Part 36 offer. 

In similar terms, the Court found that it was sufficient that the 21 day period had been referred to within the offer and that it was unnecessary for the offer to set out the exact text within sub-rule (c) in full.

This led to ground 1 failing.

Ground 2 – Does settlement of part of the claim revoke a Part 36 offer?

In finding that the offer remained available for acceptance, His Honour Judge Gargan found that:

• The offer had not been withdrawn in writing as required by CPR r 36.9(2).
• The case could be distinguished from the decision in Super Group in that the credit hire claim was still extant, forming part of a single overall claim which had not been wholly resolved.  In the Super Group case, the claim had been withdrawn before an acceptance attempt was made and therefore the claim was no longer extant.
• The conclusion that the offer remained open was more consistent with the overriding objective.

Ground 3 – Construing the whole claim

His Honour Judge Gargan agreed with the decision made by District Judge Read, finding that in the absence of some special factor, the natural meaning must be given to "the whole of our client's claim", such that it could not be found that the offer excluded the claim for credit hire. 

What is the significance of this decision for the credit hire and motor market?

The case highlights the importance of insurers and solicitors complying with the strict requirements of Part 36 of the Civil Procedure Rules when making or, for that matter, accepting offers. 

Although the decision was ultimately made in the Defendant's favour in this case, it was clear that ground 1 in particular was a strongly argued point and this was only the case due to the fact that the Claimant's solicitors had failed to use the exact wording set out in Part 36. 

Whilst the Court was of the opinion that it was not mandatory to do so on the particular facts of this case, the risks of satellite litigation and the consequences of a defective Part 36 offer can be significant for either party.

The matter was handled throughout by Gary Orritt, Solicitor, in the DAC Beachcroft Credit Hire Team.