England and Wales Court of Appeal (Civil Division) Decisions

IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE, CHANCERY DIVISION
MR JUSTICE WARREN
HC09CO1220

		Royal Courts of Justice Strand, London, WC2A 2LL
		27/05/2011

Lord Justice Rix :

1. The critical issue raised by this appeal is what it means in a purported CPR Part 36 offer to say that the offer is "open for 21 days". On one view it means that the offer is not open after 21 days. On another view it means, in its context, that the offer will not be withdrawn for 21 days. That would reflect the terms of Part 36. Indeed, the judge, Warren J, held that Part 36 does not allow for a time limited offer, since a Part 36 offer can only lapse upon service of a written notice of withdrawal. However, the judge nevertheless held that the phrase "open for 21 days" meant that the offer lapsed without express withdrawal, with the consequence that what was made as a Part 36 offer failed to be one, albeit it survived as an offer under the common law.
2. In the present case, the offeree purported to accept the offer (well) outside the 21 days. The offeror submits that the offer had lapsed.
3. On this appeal, the offeree submits that the judge was wrong in his construction of the offer. The offeror submits that the judge was wrong to say that Part 36 could not admit a time limited offer.
4. The judge also found that, had the offer been a Part 36 offer, it had never been withdrawn. The offeror submits that the judge was wrong about that as well. The offeror says that the offer was withdrawn by reason of the terms in which was made, alternatively by subsequent emails.

The parties' dispute

5. The offeror, claimant in these proceedings, had sold development land to the offeree, the defendant, for a price of just under £12 million. A dispute arose as to whether a condition precedent of their contract had been fulfilled. The defendant said it had not, and declined to complete the transaction. The claimant originally sought specific performance of the sale, but has now given up the pursuit of that remedy and limited itself to a claim in damages. At the time of the offer, however, the claim for specific performance was still being maintained.
6. The claimant is in this court the respondent, and the defendant is the appellant. I will refer to the parties as claimant or respondent or offeror and defendant or appellant or offeree, as appears most appropriate. The parties have been anonymised as C v D because of the possibility that a trial might have to take place.

The offer

7. The offer was made in a letter dated 10 December 2009, written by the claimant's solicitors to the defendant's solicitors.
8. The letter was headed "Offer to Settle under CPR Part 36". It began by commenting on the dispute. It said that the claimant was in discussions to sell the land to a third party, which would quantify a loss. Or, if the land was not resold, the defendant would have to buy it at the original contract price. In addition, the claimant was also incurring holding costs and interest. Those costs would fall on the defendant in any event. The letter then proposed a "Settlement Agreement" as follows:

"Our client's proposal is this:

1. [The defendant guarantor] purchase the property for £10,500,000; or

2. whilst there is no certainty as to the [third party] purchase of the Property, our client is willing to drop the action for specific performance and settle the claim at for £2,000,000.

Regardless of which offer your client chooses, the offer will be open for 21 days from the date of this letter (the "Relevant Period"). Your clients can thus walk away from the dispute by the year end having achieved an attractive settlement. [The judge referred to this paragraph as the "Offer Paragraph", which is a convenient device.]

Both offers are intended to have the consequences set out in Part 36 of the Civil Procedure Rules and are to settle all matters raised in the proceedings.

Failure to Accept this Offer

If your clients do not accept this offer and our client obtains a judgment which is equal to or more advantageous than this offer, our clients will rely on CPR 36.14 to seek an order in the following terms:

(i) that your clients will pay our client's costs up to the expiry of the Relevant Period;

(ii) that your clients pay our client's costs on the indemnity basis from the date on which the Relevant Period expired, with interest on those costs of up to 10% above base rate and interest on the whole or part of any sum awarded at up to 10% above base rate for some or all of the period starting from the same date.

We await your response."

9. It is common ground that this offer was intended to be made pursuant to Part 36, as its language demonstrates. As will appear from the terms of Part 36 set out below, the concept of a "relevant period" and the consequences set out in CPR 36.14, are all part of the structure of Part 36.
10. It is also common ground that the issue of construction as to the meaning of "open for 21 days" has to be considered in the context of the offer, and of Part 36, as a whole.
11. It is therefore necessary to consider Part 36 in some detail.

CPR Part 36

12. Part 36 provides in relevant part as follows:

"1. Part 36 Offers to Settle

Scope of this Section

36.1 (1)…

(2) Nothing in this Section prevents a party making an offer to settle in whatever way he chooses, but if the offer is not made in accordance with rule 36.2, it will not have the consequences specified in rules 36.10, 36.11 and 36.14…

Form and content of a Part 36 offer

36.2 (1) An offer to settle which is made in accordance with this rule is called a Part 36 offer.

(2) A Part 36 offer must –

(a) be in writing;

(b) state on its face that it is intended to have the consequences of Section I of Part 36;

(c) specify a period of not less than 21 days within which the defendant will be liable for the claimant's costs in accordance with rule 36.10 if the offer is accepted;

(d) state whether it relates to the whole of the claim or to part of it or to an issue which arises in it and if so to which part or issue; and

(e) state whether it takes into account any counterclaim…

(3) Rule 36.2(2)(c) does not apply if the offer is made less than 21 days before the start of the trial…

Part 36 offers – general provisions

36.3 (1) In this part

(a) the party who makes the offer is the "offeror";

(b) the party to whom an offer is made is the "offeree"; and

(c) the "relevant period" means –

(i) in the case of an offer made not less than 21 days before trial, the period stated under rule 36.2(2)(c) or such longer period as the parties agree;…

(3) A Part 36 offer which offers to pay or offers to accept a sum of money will be treated as inclusive of all interest until –

(a) the date on which the period stated under rule 36.2(2)(c) expires;

(b) if rule 36.2(3) applies, a date 21 days after the date the offer was made…

(5) Before expiry of the relevant period, a Part 36 offer may be withdrawn or its terms changed to be less advantageous, only if the court gives permission.

(6) After expiry of the relevant period and provided that the offeree has not previously served notice of acceptance, the offeror may withdraw the offer or change its terms to be less advantageous to the offeree without the permission of the court.

(7) The offeror does so by serving written notice of the withdrawal or change of terms on the offeree…

Acceptance of a Part 36 offer

36.9 (1) A Part 36 offer is accepted by serving written notice of the acceptance on the offeror.

(2) Subject to rule 36.9(3), a Part 36 offer may be accepted at any time (whether or not the offeree has subsequently made a different offer) unless the offeror serves notice of withdrawal on the offeree…

(3) [This rule lists four cases where the court's permission is needed to accept a Part 36 offer. None of them applies in this case. The fourth of them (d) is where "the trial has started". So permission is not needed to accept an offer after the "relevant period" has expired.]

Costs consequences of acceptance of a Part 36 offer

36.10 (1) Subject to…paragraph 4(a), where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings up to the date on which notice of acceptance was served on the offeror…

(4) Where –

(a) a Part 36 offer that was made less than 21 days before the start of trial is accepted; or

(b) a Part 36 offer is accepted after expiry of the relevant period,

if the parties do not agree the liability for costs, the court will make an order as to costs.

(5) Where paragraph (4)(b) applies, unless the court orders otherwise –

(a) the claimant will be entitled to the costs of the proceedings up to the date on which the relevant period expired; and

(b) the offeree will be liable for the offeror's costs for the period from the date of expiry of the relevant period to the date of acceptance…

The effect of acceptance of a Part 36 offer

36.11 (1) If a Part 36 offer is accepted, the claim will be stayed…

Costs consequences following judgment

36.14 (1) This rule applies where upon judgment being entered –

(a) a claimant fails to obtain a judgment more advantageous than a defendant's Part 36 offer;

(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant's Part 36 offer.

(2) Subject to paragraph (6), where rule 36.14(1)(a) applies, the court will, unless it considers it unjust to do so, order that the defendant is entitled to –

(a) his costs from the date on which the relevant period expired; and

(b) interest on those costs.

(3) Subject to paragraph (6), where rule 36.14(1)(b) applies, the court will, unless it considers it unjust to do so, order that the claimant is entitled to –

(a) interest on the whole or part of any sum of money (excluding interest) awarded at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;

(b) his costs on the indemnity basis from the date on which the relevant period expired; and

(c) interest on those costs at a rate not exceeding 10% above base rates.

(4) In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3) above, the court will take into account all the circumstances of the case…

(6) Paragraphs (2) and (3) of this rule do not apply to a Part 36 offer –

(a) that has been withdrawn;

(b) that has been changed so that its terms are less advantageous to the offeree, and the offeree has beaten the less advantageous offer;

(c) made less than 21 days before trial, unless the court has abridged the relevant period.

13. It will have been observed:

(1) that the "relevant period" of at least 21 days before trial is critical to the operation of a Part 36 offer, and that the specification of such a 21 day period in which the acceptance of the offer will entail liability for the claimant's costs up to the date of acceptance of the offer is critical to the making of a Part 36 offer more than 21 days before trial (rule 36.2(2)(c), rule 36.3(1)(c), rule 36.10(1));

(2) that Part 36 is prescriptive of the effect of a Part 36 offer as to costs and interest (rule 36.3(3), rule 36.10.1, rule 36.14(2));

(3) that a Part 36 offer cannot be withdrawn within the relevant period without the permission of the court (rules 36.3(5) and (6));

(4) that a Part 36 offer can be withdrawn only by service of a written notice of withdrawal on the offeree (rule 36.3(7));

(5) that an unwithdrawn Part 36 offer can therefore be accepted at any time, and that common law rules as to the lapsing of a Part 36 offer do not apply (rule 36.9(2));

(6) that Part 36 prescribes the costs consequences of a judgment which betters or fails to better the Part 36 offer, subject only to the court's discretion to order otherwise if the prescribed consequences would be unjust, and subject also to a discretion as to the amount of the enhanced rate of interest to be awarded to a claimant on both any judgment sum and on costs (rule 36.14);

(7) that it is an essential feature of the rule 36.14 consequences (where the litigation has proceeded to judgment) that they only apply where the offer has not been withdrawn (rule 36.14(6)(a));

(8) that an offer may be made outside Part 36, in which case it will not have the prescribed consequences (rule 36.1(2)).

Jurisprudence on Part 36

14. Several of these matters have been commented or ruled upon in decisions of the court.
15. The most important decision in this respect is that of this court in Gibbon v. Manchester City Council [2010] EWCA Civ 726, [2010] 1 WLR 2081. The issue there was whether a Part 36 offer had been superseded by another revised offer, or by a rejection. At common law, an original offer would have been superseded in such circumstances, but that was not the way that Part 36 operated. Moore-Bick LJ began with some general observations:

"[4] It can be seen from Part 36 as a whole, as well as from the extracts cited above, that it contains a carefully structured and highly prescriptive set of rules dealing with formal offers to settle proceedings which have specific consequences in relation to costs in those cases where the offer is not accepted and the offeree fails to do better after a trial…parties are not bound to make use of the mechanism provided by Part 36, but if they wish to take advantage of the particular consequences for costs and other matters that flow from making a Part 36 offer, in relation to which the court's discretion is much more confined, they must follow its requirements…

[6] Basic concepts of offer and acceptance clearly underpin Part 36, but that is inevitable given that it contains a voluntary procedure under which either party may take the initiative to bring about a consensual resolution of the dispute. Such concepts are part of the landscape in which everyone conducts their daily life. It does not follow, however, that Part 36 should be understood as incorporating all the rules of law governing the formation of contracts, some of which are quite technical in nature. Indeed, it is not desirable that it should do so. Certainty is as much to be commended in procedural as in substantive law, especially, perhaps, in a procedural code which must be understood and followed by ordinary citizens who wish to conduct their own litigation. In my view, Part 36 was drafted with these considerations in mind and is to be read and understood according to its terms without importing other rules derived from the general law, save where that was clearly intended…"

16. Moore-Bick LJ then continued by addressing the specific issue in the case. He said:

"[16] In my view, attractive though these arguments are, they cannot be reconciled with the clear language of Part 36, or indeed with the scheme which it embodies. Rule 36.9(2) is quite clear: a Part 36 offer may be accepted at any time unless the offeror has withdrawn the offer by serving notice of withdrawal on the offeree. Moreover, it may be accepted whether or not the offeree has subsequently made a different offer, a provision which is contrary to the general position at common law. The rules state clearly how a Part 36 offer may be made, how it may be varied and how it may be withdrawn. They do not provide for it to lapse or become incapable of acceptance on being rejected by the offeree. That would be the case at common law, but it is inconsistent with the concepts underlying Part 36, which proceeds on the footing that the offer is on the table and available for acceptance until the offeror himself chooses to withdraw it. There are good reasons for that. An offer which appears unattractive when made, and which is therefore rejected, may become more attractive as the proceedings progress and the parties reassess the strength of their prospective cases. A defendant who chooses to leave his offer on the table may tempt the claimant into accepting it, with the benefit to himself of the consequences for costs of an offer made at an early stage. Part 36 allows a defendant (or for that matter a claimant) to decide whether to leave his offer open for acceptance or to withdraw it and make another offer later. To import into Part 36 the common law rule that an offer lapses on rejection by the offeree would undermine this important element of the scheme. It could give rise to disputes about whether the offer had been rejected in any given case, so as to render it incapable of acceptance. In Sampla v Rushmoor Borough Council [2008] EWHC 2616 (TCC) Coulson J held, largely for these reasons, that the rejection of a Part 36 offer does not render it incapable of late acceptance. In my view he was right to do so.

[17] Nor do I think that the letter of 18 February 2009 [in which the claimant had rejected a counter-offer] can be read as containing an implied withdrawal of the Part 36 offer. Rule 36.3(7) provides that an offer is withdrawn by serving written notice on the offeree. In my view that leaves no room for the concept of implied withdrawal; it requires express notice in writing in terms which brings home to the offeree that the offer has been withdrawn. If justification for that requirement is sought, it can be found once again in the need for clarity and certainty in the operation of the Part 36 procedure…

[18] In some cases the demands of clarity and certainty in the operation of Part 36 may appear to produce injustice and I see the force of Dr Friston's submission that Mrs Gibbon's solicitors had made it clear that she was not willing to accept £2,500 to settle her claim. Her difficulty, however, is that a Part 36 offer had been made on her behalf and had not been withdrawn. It remained on the table and was therefore open for acceptance. We are not concerned with whether she has any ground for complaint against the council [the offeree] for accepting her offer despite the fact that she had made her intentions clear, since no suggestion has ever been made that she has a legitimate complaint about that."

17. It may be said that this decision demonstrates that the need for clarity and certainty in the operation of Part 36 outweighs the pressure exerted on the court by thoughts that the offeree has somehow taken advantage of the error of the offeror in not formally withdrawing an offer which the offeree had reason to know was no longer acceptable to the offeror. An essential feature of the Part 36 procedure is that a Part 36 offer remains on the table until it is formally withdrawn by a notice of withdrawal. It is because the offer remains on the table (until formally withdrawn) that the Part 36 consequences of a Part 36 offer, whether under rule 36.10 following acceptance prior to judgment, or under rule 36.14 following judgment, can be prescribed in the form which Part 36 sets out. If a Part 36 offer has been withdrawn before judgment, then the consequences of rule 36.14(2) and (3) do not flow.
18. Sampla v. Rushmoor Borough Council, which Moore-Bick LJ in Gibbon had cited and approved, raised the issue whether a Part 36 offer could be accepted (a) after it had been rejected, (b) after the trial had started. As to question (a), Coulson J ruled that it could be. He said:

"[29] First…CPR Part 36 is entirely silent as to offers that are rejected…

[30] Secondly, CPR [36.9(2)] makes plain that an offer can be accepted "at any time". Those are wide words which are not qualified in any way. If an offer could not be accepted because it had been initially rejected, then I would have expected Part 36 to say so in clear terms…

[31] Thirdly, in express confirmation of those first two points, are the words in brackets in CPR 36.9(2), to the effect that an offeree can accept an offer at any time, even if his original response had been to make a counter-offer. That is the direct opposite of the position in contract, where a counter-offer 'kills' an offer just as completely as an express rejection."

19. However, question (b) arose because rule 36.9(2) was subject to rule 36.9(3)(d), which required the court's permission for the acceptance of an offer after trial had begun. That rule gave the court the discretion to refuse permission where there had been a significant change of circumstances since the offer had been made; and Coulson J refused permission for that reason.
20. It may be observed that a significant change of circumstances is not a general ground on which the court's permission is required to accept a Part 36 offer.
21. In Rolf v. De Guerin [2011] EWCA Civ 78 the present issues did not arise. However, a Part 36 offer was there expressed to be "open" for a period of 21 days. After the 21 days had expired, the claimant offeror chased for a response. I commented (at [21]):

"It was thus clear that the part 36 offer, and the offer of mediation etc, were still on the table. There is in fact no practical limit on the time within which a Part 36 offer may be accepted: see CPR 36.9(2). There was no reply to that letter either."

Ultimately the matter went for trial. Both the trial judge and this court treated the offer as a Part 36 offer. The judge used it against the offeror, because she had failed at trial to obtain as much as her offer. The judge proceeded as if she had failed at trial to obtain as much as a defendant's Part 36 offer (there was none) and because she had claimed so much more than her Part 36 offer. I said (at [34]):

"However, there is nothing about the procedure which states that an offeror is to be prejudiced as to costs because he has expressed his willingness to accept less than his open position. That would make the procedure a most dangerous one to use. The judge's ruling that the incidence of costs should change at the expiry of the relevant period of three weeks confirms the illogicality of his decision. The three weeks is given to protect the offeree, who has that period to make up his mind: the judge used it, however, (to its limited extent) to protect the offeror, Mrs Rolf."

Elias and Tomlinson LJJ agreed.

22. Although the present issues were not before the court in that case, nevertheless it appears that no one regarded the offer as lapsing at the end of the 21 days, or as not capable of being a Part 36 offer at all.
23. In Onay v. Brown [2009] EWCA Civ 775, [2010] 1 Costs LR 29 the defendant made a Part 36 offer in inter alia the following terms:

"This offer is made pursuant to Part 36 of the Civil Procedure Rules and is intended to have the consequences of that rule.

The relevant acceptance period is 21 days from the date of receipt of this letter, namely to 26 September 2008."

Within that period the claimant accepted the offer. The offer and the acceptance said nothing about costs, and there was a dispute about how costs should be dealt with. It was submitted on the part of the claimant that the defendant's offer did not amount to a Part 36 offer because the wording of rule 36.2(2)(c) was not expressly set out. This court rejected that submission. Goldring LJ said:

"the reference to the relevant (my emphasis) acceptance period of 21 days plainly pointed to CPR 36.2" (at para 27)."

24. No one suggested that the stipulation of an "acceptance period" prevented the offer from being a Part 36 offer. Again, the precise point before us was not the point before the court. But in a concurring judgment Carnwath LJ said this, which resonates in the context of our case:

"32. I also agree. The moral of this story is that someone who writes a letter headed "Part 36 offer", and which is stated as "intended to have the consequence of that rule", should make sure that he knows what those consequences are. I agree with my Lord that those consequences in a case such as this are clearly set out in 36.2(2) and 36.10(1). If the party writing the letter does not want those consequences to apply, he should put his offer in some other way, as is expressly permitted by rule 36.2.

33…it seems to me important, in the interests of certainty, that, when the Part 36 jurisdiction is expressly invoked, the court should generally take that at face value, and as far as possible give effect to the consequences as envisaged by the rules."

The 2007 amendment to Part 36

25. This litigation has been conducted under the amended Part 36, which came into force on 6 April 2007. Prior to the amendments, the old Part 36 provided (inter alia) as follows:

"Form and content of a Part 36 offer

36.5…(6) A Part 36 offer made not less than 21 days before the start of the trial must –

(a) be expressed to remain open for acceptance for 21 days from the date it is made; and

(b) provide that after 21 days the offeree may only accept it if –

(i) the parties agree the liability for costs; or

(ii) the court gives permission…

(8) If a Part 36 offer is withdrawn it will not have the consequences set out in this Part…

Time for acceptance of a claimant's Part 36 offer

36.12 (1) A defendant may accept a Part 36 offer made not less than 21 days before the start of the trial without needing the court's permission if he gives the claimant written notice of acceptance not later than 21 days after the offer was made."

If, however, the offer was accepted after 21 days and the parties agreed liability for costs, then the offer could again be accepted without the permission of the court (rule 36.12(2)(b)(i)). That was consistent with rule 36.5(6)(b)(i).

26. There was no defined concept of the "relevant period". There were no provisions relating to the withdrawal of an offer other than rule 36.5(8), which recognised the possibility of withdrawal, but stipulated that the effect of a withdrawal would be that for Part 36 purposes it would be as though it had never been made.
27. The provisions cited above demonstrate that under the unamended rules a Part 36 offer both had to be expressed as "open for acceptance for 21 days" and also survived for acceptance after 21 days. After 21 days the offer could be accepted without the permission of the court if the parties agreed the incidence of costs, but otherwise needed the permission of the court and the court would then, if it gave permission, settle the incidence of costs (rule 36.12(3)). The old rules therefore indicated that the expression "open for acceptance for 21 days" was not inconsistent with the offer remaining open for acceptance after 21 days, and that was emphasised by the required language of rule 36.5(6)(b). Thus the old rules proceeded on the basis that "open for acceptance for 21 days" did not in that context mean "not open for acceptance after 21 days". Consistently with that, it seems that an offer could be withdrawn after the 21 days for acceptance, but not, I would suggest, before, and that it could be accepted even after the 21 days, but any acceptance after 21 days lay either with the parties, where they could agree the incidence of costs, or with the court. These old rules were in any event inconsistent with the construction of the words "open for acceptance for 21 days" as meaning that the offer automatically lapsed at the end of the 21 day period.
28. A Consultation Paper (CP 02/06) was published by the Department for Constitutional Affairs to assist in the amendment of the old Part 36. The "Policy Objectives" of the proposals contained this passage at para 6:

"to make it easier and more attractive to use Part 36 by removing unnecessary burdens/processes, in particular by:…

– allowing parties to accept offers after the initial time limit has expired without requiring the court's permission and, to balance that, allowing unaccepted offers and payments to be withdrawn after the time for acceptance has expired."

29. Section 2 of the proposals (at paras 27ff) was concerned with "Acceptance and rejection of offers". The Paper pondered the considerations as follows:

"28. At present it is not entirely clear whether the court may exercise its general discretion to extend the prescribed time for acceptance of a Part 36 offer (so that the offeree will still enjoy automatic costs consequences).

29. Rule 3.1 probably allows it, but that rule refers to extending or shortening time limits for compliance with any rule, whereas Part 36 does not itself directly require acceptance (or explicit rejection) of an offer. The Department considers that it should be made clear, one way or the other, whether the court can amend the 21-day period for accepting offers.

30. Assuming the court's probable power to extend is to be confirmed…

31…there may be circumstances in which the offeror may know that the offeree is likely to require longer than 21 days to assess the claim. To avoid unnecessary applications, and possible censure by the court, the offeror may prefer to express the offer as remaining open for more than 21 days. The Department proposes therefore that the offeror should be permitted to state a longer period of acceptance than 21 days…

32. It is proposed to remove the requirement to obtain the court's permission to accept a Part 36 offer after the expiry of the time limit. This is because a permission requirement implies a possibility of refusal and it is unclear why the court should ever do this. Parties should be encouraged and assisted to settle cases, not hindered. (If the parties cannot agree costs, the court will have to agree those costs in any event)…

34. It is proposed that:

• the formal requirement for permission to accept an offer out of time should be removed;

• an offer (if not withdrawn) should be acceptable at any time. If accepted out of time, it should not have the automatic costs consequences of Part 36 (see rules 36.13 & 14). If costs were not agreed, they would fall to be assessed by the court. The normal rule might be that costs incurred after the time for acceptance would not be allowed…

30. Section 3 of the Paper is headed "Withdrawal of offers". The following is relevant to record:

"36. As the rules stand, there is a lack of clarity and consistency in respect of the withdrawal of offers and payments…

38. A Part 36 offer…may be withdrawn at any time^[1] but rule 36.5(8) provides that such offers that are withdrawn will not have the consequences set out in Part 36. However the Western Power^[2] judgment must throw doubt on this…

41. It is proposed as a means to achieve such clarity to place litigants on an equal footing (removing the distinction in relation to offers and payments). The approach favoured by the Department is that all offers (and payments in support of offers) may be withdrawn:

• any time after the expiry of the period during which they are expressed to be open for acceptance, unless the offer has been accepted

• before the expiry of the period during which they are expressed to be open for acceptance only with the permission of the court

42. The Department considers that allowing a party who makes an offer to withdraw it (after the expiry of the period during which it is expressed to be open for acceptance) is a natural corollary of the offeree being able to accept it without permission after expiry of the same period (see paragraphs 32-34 above)…

46. However, we do not propose an absolute bar on withdrawal during that period, merely that there should be a requirement to apply to the court for permission.

47. The alternatives to what is proposed would be either an unfettered right to withdraw an offer at any time (by service of a notice), or a requirement for permission to withdraw at any time, and/or a complete ban on withdrawing during the period for acceptance (which might be expressed as more than 21 days or might have been extended by the court)."

31. Ms Sue Carr QC, counsel for the appellant, sought to draw some assistance from this Paper in the light of the amendments to Part 36, but I am not sure that much assistance is to be obtained. The Paper's discussion appears to be somewhat discursive, since it is not focused on any particular wording. There is also some lack of precision about the terms deployed. Thus a period (of 21 days) for acceptance is both spoken of as a "time limit" but also as a period which can be transcended for the purpose of acceptance (see para 41): and even after the end of that period, it may be that the offer can only be withdrawn with the permission of the court, even if the preferred proposal is that no permission should be required at that time. However, it is at any rate reasonably plain that it is not contemplated that language such as "open for acceptance" for 21 or any other number of days means that the offer automatically lapses (or is withdrawn) at the end of that period, and this may be important at several points of the arguments deployed before us. There would of course be no need for withdrawal of an offer after the time for acceptance had expired if such language engendered an automatic lapse of the offer. That point would be more powerful, however, if the old Part 36's language (and the Paper's language) of "open for acceptance" had survived into the amended Part 36, which it has not.

The issues

32. Three issues were argued by Ms Carr on behalf of the appellant, and by Mr Michael Barnes QC on behalf of the respondent:

(1) Can a Part 36 offer be made in terms which limit the acceptance of the offer to a stipulated period, such that the offer lapses at the end of that period? Such an offer was referred to as a time limited offer. The judge said that such an offer could not be made as a Part 36 offer, although it could be made as an offer outside Part 36. Within Part 36, however, an offer must be withdrawn, otherwise it remains on the table. The appellant seeks to maintain that answer on appeal.

(2) What is the true construction of the respondent's offer being "open for 21 days" in the context of what was clearly intended to be a Part 36 offer? The judge said it was a time limited offer, and that therefore it was not a Part 36 offer. The appellant submits that that was wrong. The respondent seeks to maintain that answer on appeal.

(3) If withdrawal of a Part 36 offer is necessary, was the respondent's offer withdrawn: either by the time limited terms of the offer itself, or by the emails which followed it? The judge did not formally decide that issue, but briefly expressed his view that, had a withdrawal been necessary, there was none. The appellant submitted that that opinion was correct, the respondent submitted that it was wrong.

33. Ms Carr argued those three issues in that order. She did so because she submitted that it was important to come to the issue of construction with an understanding of the way in which Part 36 worked. That was the context in which offeror and offeree would reasonably understand an offer expressed to be a Part 36 offer. Mr Barnes, however, was anxious to argue issue (2) first, for, although he recognised the context, he wanted to give to the disputed words "open for 21 days" the full benefit of what he submitted was their natural meaning.
34. I will approach the issues in the order in which the judge did, as stated above.

Issue (1): Can a Part 36 offer be a time limited offer?

35. The judge concluded that it could not, for essentially three reasons. First, rule 36.9(2) indicates that a Part 36 offer comes to an end by withdrawal rather than in accordance with its own terms, since otherwise the offer can be accepted "at any time". Secondly, the rule 36.14(3) sanction does not apply where the Part 36 offer is withdrawn (see rule 36.14(6)(a)): ie the policy of Part 36 is that, for the benefits and sanctions to work, the offer must be kept open. Thirdly, however, there is no express loss of sanction where the offer lapses, as distinct from being withdrawn: but it would be unfair if a claimant could maintain the benefit of a Part 36 offer which lapsed, where he could not maintain its benefit where it was withdrawn.
36. Ms Carr relies on those reasons, but adds two others, or at any rate builds on the judge's reasons. First, she submits that rule 36.9(2) goes beyond recognising the importance of withdrawal. Combined with rules 36.3(5), (6) and (7), it indicates that only the service of a written notice of withdrawal can bring a Part 36 offer, together with its potential consequences, to an end. Moreover, that is the effect of what Moore-Bick LJ said in Gibbon, which is that Part 36 is a self-contained code to which the principles of the common law have to make way where inconsistent with it. Just as rejection of the offer, or the making of a counter-offer, do not bring a Part 36 offer to an end, so a Part 36 offer cannot lapse under its own terms. It can be brought to an end only by withdrawal: see especially Gibbon at [16], where Moore-Bick LJ said –

"The rules state clearly how a Part 36 offer may be made, how it may be varied and how it may be withdrawn. They do not provide for it to lapse or become incapable of acceptance on being rejected by the offeree. That would be the case at common law, but it is inconsistent with the concepts underlying Part 36, which proceeds on the footing that the offer is on the table and available for acceptance until the offeror himself chooses to withdraw it."

37. Secondly, Ms Carr submits that the 2006 Consultation Paper, particularly at its para 6, explains the purpose of the new proposals in a way which accords with withdrawal being crucial to the termination of the offer.
38. In response, Mr Barnes accepts the force of these points as far as they go, but submits first, that there is no express exclusion in Part 36 of a time limited offer, secondly that there is nothing in Part 36 which necessarily albeit implicitly excludes, by reason of inconsistency, a time limited offer, and thirdly, that Part 36 as a matter of principle does not dictate to the offeror what may be contained in the offer as part of its subject-matter and that a time limit is to be regarded as part of the offer's subject-matter over which the offeror retains complete autonomy.
39. As for the matters which the judge and Ms Carr relied on as indicating Part 36's inconsistency with a time limited offer: the words "at any time" in rule 36.9(2) were simply to be explained as pointing up the distinction with the old rule 36.5 under which an acceptance after the time for acceptance required the permission of the court; any possible unfairness that might flow from imposing the rule 36.14 consequences in the wake of the lapse of a time-limited offer could be avoided by the discretion of the court contained in the words "unless it considers it unjust to do so" within rules 36.14(2) and (3); and, although an offer cannot be time-limited at less than 21 days, the requirement of a withdrawal in the absence of a time limit does not exclude the imposition of a time limit, for the functions of each are different.
40. In my judgment, the reasons advanced by the judge and Ms Carr have more weight than those advanced on the other side. It is true that Part 36 does not contain an express exclusion of a time limited offer. However, the essence of the matter is that a Part 36 offer, to have effect in terms of costs consequences after trial, has to be an offer which has not been withdrawn, but has remained on the table. The initial offer has to specify a period of at least 21 days during which the defendant remains liable for the claimant's costs until acceptance (rule 36.2(2)(c) and rule 36.10(1)). The offer cannot be withdrawn within that period without the permission of the court (rule 36.3(5)). After that period has expired, the offeror can withdraw the offer only by serving notice of withdrawal on the offeree (rules 36.3(6) and (7)). In the absence of withdrawal, the offeree can accept the offer at any time (rule 36.9(2)). The language of that rule's "unless the offeror serves notice of withdrawal on the offeree" states a pre-condition which has to be fulfilled in order to prevent the offeree having the right to accept "at any time". That critical rule is made subject to a few limited exceptions (rule 36.9(3)), one of which is where the trial has commenced, but the expression of those exceptions only serves to emphasise that, in the ordinary way, unless the offer has been withdrawn before the expiry of the relevant period with the permission of the court, or the offer has been withdrawn after the expiry of that period by the service of a written notice of withdrawal, there is no room for an offer which is neither withdrawn before or after the expiry of the relevant period, but lapses as a matter of its own terms. It is in any event fanciful to think that there is a point of time which lies between before and after the expiry of the relevant period. Although the present issue was not in play in Gibbon, the logic of this court's decision there underwrites the conclusion which I, together with the judge below, would favour: and I agree that para 16 of Moore-Bick LJ's judgment there comes very close to expressing the rule applicable in our case.
41. I therefore do not accept Mr Barnes' submission that the availability of the costs advantages of rule 36.14 to the offeror of a time-limited but not withdrawn offer is to be avoided, not by a rule, as occurs in the case where the offer has been withdrawn (rule 36.14(6)(a)), but by the exercise of the court's discretion to avoid injustice. That would make no sense at all. If such a discretion was to operate in the case of a time limited offer, it ought to operate in the case of an offer which was withdrawn. The discretion in rules 36.14(2) and (3) is given for other reasons, to avoid injustice occurring by reason of a formula. Nor do I accept his submission that a time limit is a matter of the subject matter of the offer over which an offeror within Part 36 has autonomy: it is rather the subject matter of Part 36 itself, for the reasons stated above. Therefore it is only outside Part 36 that a claimant has full autonomy over the means by which his offer may lapse in the absence of either the supervision of the court or the service of a notice of withdrawal.
42. It would no doubt have been better if Part 36 had expressly stated that a time limited offer could not be accommodated within its scheme. Against the backdrop of the old Part 36, the Consultation Paper, and the somewhat different terms in which the amended Part 36 was ultimately formulated from those which were being proposed and discussed in that Paper, it is even possible that there was some uncertainty or lack of clarity on this point. After all, the old Part 36 had accommodated the appearance of a time limit in its formulation but had nevertheless imposed its own regime on that appearance. Be that as it may, in my judgment the new Part 36 regime cannot accommodate a time limited offer. The essence of a Part 36 offer is that it lies on the table until formally withdrawn. Only an offer which has not been withdrawn down to the commencement of trial is capable of having the scheme's costs consequences set out in rule 36.14. A Part 36 offer can be accepted at any time unless withdrawn. Therefore the scheme seeks to encourage offers which are not time limited. The scheme nevertheless permits flexibility in permitting offers to be amended and withdrawn. The process however is strictly regulated in the interests of clarity and certainty.
43. The difference between a time limited offer and an offer which is formally withdrawn immediately after the end of the relevant period may not be a great one as a matter of substance or form. That, however, depends entirely on the service of such a timely withdrawal. There is a substantial difference between a time limited offer and an offer which can be accepted at any time until it is formally withdrawn. The matter is illustrated by the facts of this case, as the emails cited below will demonstrate. At the end of a time limited period, there is typically an exchange of correspondence (or even telephone calls) dealing with the possibility that the time limit is being extended. Strictly speaking a time limited offer will lapse at the end of the time limit. If there is a suggestion of an extension of the time limit on the next day, has the time limit been extended, or waived, or is this a new offer, and in any event when does the final limit occur? The scheme's rules are designed to lay such uncertainties, which would occur in nearly every case of a time limited offer, to rest. If a Part 36 offer is to lapse, it must be formally withdrawn. That is what Gibbon said in dealing with another way in which at common law an offer might lapse, and in my judgment the same logic holds good for a time limited offer.
44. Therefore, the claimant's offer must be construed in the context of a Part 36 scheme which does not permit an offer within the scheme to be time limited.

Issue 2: as a matter of construction, what does "open for 21 days" mean in context?

45. It follows from my answer to the first issue that there is a necessary inconsistency between an offer being both time limited and a Part 36 offer. An offer may be one or the other, it cannot be both. That is the objective context in which the offer in this case was made by the claimant's solicitors to the defendant's solicitors. Both the writer and the reader of that offer must be taken, objectively, to know the legal context. Of course, mistakes occur and must be allowed for. However, the question is how a reasonable solicitor would have understood the offer in that context, including the known context of the dispute as it stood at that time: ICS v. West Bromwich Building Society [1998] 1 WLR 896 (HL).
46. It is common ground that the offer was intended to be made and understood as a Part 36 offer. It is disputed, however, what the meaning of "open for 21 days" means in that context. The claimant submits that it means that the offer lapses at the end of 21 days (in this case on 31 December 2009), ie that the offer is not open for acceptance after 21 days. The defendant submits that it means that the offer is open for 21 days as an expression of the relevant period but that after those 21 days it may be withdrawn.
47. It is accepted by Mr Barnes on behalf of the respondent that both meanings are feasible. That is a change from the submission that he made in his written skeleton argument. There he repeatedly submitted that no other meaning could be realistically given to the words other than that they amounted to a time limit which prevented the offer being accepted outside the stated period. He there submitted that the words "are not capable of having any other meaning"; and that the interpretation advanced by the appellant "is untenable". In my judgment, the concession made by Mr Barnes during the oral argument was correct. The issue therefore is which of two possible meanings is the objectively correct one.
48. Mr Barnes also submitted that, if his meaning was not the only tenable meaning, it was at any rate a traditional and well understood way of expressing a time limit which prevented acceptance of an offer after the stated period had expired. If that is so, it is giving a negative meaning to a positive statement. It is not to my mind blindingly obvious that an offer which is stated to be open for a certain period cannot be accepted after that period has expired. It may be a way of stating that the offer will not be withdrawn for that period, although whether such a statement could be relied on by the offeree was a matter of conflicting submissions by Mr Barnes. However, Mr Barnes may be correct, and for the sake of argument I will assume that he is. I see force in what Lord Justice Rimer has said at para 72 below. However, that is not going further than saying that, outside the context of Part 36, that is the normal meaning of that expression. The question is whether that is the meaning which it sustains within the context of a Part 36 offer, where ex hypothesi such an offer cannot be made.
49. There is a general principle of construction that a document which falls to be construed should be read as a whole and its separate parts should be so construed, if that is possible, as to bring rational sense and consistency to that whole. Ms Carr relied on that principle and cited cases such as Pagnan SpA v. Tradax Ocean Transportation SA [1986] 2 Lloyd's Rep 646 (Steyn J), [1987] 2 Lloyd's Rep 349 (CA) in support of it. The principle is not in doubt. One question there was as to the meaning of a term "Sellers to provide for export certificate…" Was it an absolute obligation or only one of reasonable endeavours? That question had to be answered against the background of a prohibition of export clause which led to the cancellation of the contract where any executive or legislative act prevented fulfilment. In that situation, and if the certificate clause did impose an absolute obligation, which clause prevailed? The appeal arbitrators found in favour of the sellers, however Steyn J and this court found in favour of the buyers. Steyn J said that he found the arguments finely balanced. Was there a genuine inconsistency? If so, one clause might have to make way for the other. However, Steyn J cited The Brabant [1967] 1 QB 588, and said at 89:

"This question must be approached on the basis that the court's duty is to reconcile seemingly inconsistent provisions if that result can conscientiously and fairly be achieved."

50. In this court, Bingham LJ cited Steyn J's statement of principle (at 349), cited the jurisprudence on inconsistent or repugnant clauses, and continued:

"It would in my judgment be quite wrong to approach this question of construction with any predisposition to find inconsistency between the special condition and cl. 19. They are all part of the same contract…One should, therefore, approach the documents in a cool and objective spirit to see whether there is an inconsistency or not" (at 349/350).

He affirmed Steyn J's analysis, albeit saying that he did so with more confidence than Steyn J had expressed in his answer.

51. The general principle is stated in Lewison, The Interpretation of Contracts, 4^th ed, 2004, at para 9.13, in this way:

"The court is reluctant to hold that parts of a contract are inconsistent with each other, and will give effect to any reasonable construction which harmonises such clauses."

52. In the present case it is at this stage of the argument a given that a time limited offer and a Part 36 offer are inconsistent. Therefore, if the claimant's offer was time limited, it could not take effect as a Part 36 offer. In such circumstances, the court is obliged to consider whether there is a reasonable construction of the offer letter which does not involve it in being time limited. It is not suggested that the offer can be regarded as other than intended to operate as a Part 36 offer. It states: "Offer to Settle under CPR Part 36" and "Both offers are intended to have the consequences set out in Part 36 of the Civil Procedure Rules".
53. In my judgment, there is an entirely feasible and reasonable construction of the offer letter which avoids it being construed as a time limited offer, and that is the meaning for which the appellant contends.
54. In the context of Part 36, it seems to me to be entirely feasible and reasonable to read the words "open for 21 days" as meaning that it will not be withdrawn within those 21 days. Part 36 permits withdrawal within the 21 day relevant period, but only with the permission of the court. It seems to me that "open for 21 days" is an obvious way of saying that there will be no attempt to withdraw within those 21 days. It is also a warning that after the expiry of those 21 days, a withdrawal of the offer is on the cards. Such a construction would save the Part 36 offer as a Part 36 offer and would also give to both parties the clarity and certainty which both Part 36 itself, and the offer letter with its reference to "open for 21 days", aspire to. It would leave the offeror entirely free to withdraw the offer immediately upon expiry of the stated period, or to let it roll on for as long as it wished. At the same time it would assure the offeree that it had 21 days to consider what it wanted to do, but was at risk if it had not accepted within that period. There might be an issue, had the offeror wished to withdraw within the relevant period, as to whether the court would permit it to do so where it had stated that it was open for 21 days: but that issue does not affect the current question.
55. Another principle or maxim of construction which is applicable in the present circumstances is that words should be understood in such a way that the matter is effective rather than ineffective (verba ita sunt intelligenda ut res magis valeat quam pereat). If the words "open for 21 days" are given the meaning for which the respondent contends, then the offer, intended to take effect as a Part 36 offer, fails as such. If, however, the words are given the meaning for which the appellant contends, then the intention of making a Part 36 offer is fulfilled. There are numerous instances of the application of this maxim. This is how Chitty on Contracts, 30^th ed, 2008, Vol 1, at para 12-081 refers to this rule:

"If the words used in an agreement are susceptible of two meanings, one of which would validate the instrument or the particular clause in the instrument, and the other render it void, ineffective or meaningless, the former sense is to be adopted. This rule is often expressed in the phrase ut res magis valeat cum [sc. quam] pereat. Thus, if by a particular construction the agreement would be rendered ineffectual and the apparent object of the contract would be frustrated, but another construction, though by itself less appropriate looking to the words only, would produce a different effect, the latter interpretation is to be applied, if that is how the agreement would be understood by a reasonable man with a knowledge of the commercial purpose and background of the transaction. So, where the words of a guarantee were capable of expressing either a past or a concurrent consideration, the court adopted the latter construction, because the former would render the instrument void. If one construction makes the contract lawful and the other unlawful, the former is to be preferred…"

56. It seems to me that this construction is also supported by the offer's language which purports to define the 21 days for which the offer will be open as the "relevant period". This is not exactly the way in which Part 36 defines the relevant period, but the clear intention to assimilate the 21 days for which the offer will be open with Part 36's relevant period is another indication that a construction for "open for 21 days" must be found which is consistent with Part 36 and its concept of the relevant period. A point may perhaps have been taken that the offer did not comply with rule 36.2(2)(c). But no such point was taken, and the judge was satisfied that that rule had been complied with. No objection with his judgment in that regard has been taken for the purposes of this appeal. He said (at his [12]):

"In the case of the Offer Letter, the specification of the relevant period can be found, if it is found at all, only in the Offer Paragraph. There is nowhere else in the Offer Letter where the specification of a relevant period is to be found and the definition of "the Relevant period" makes the position clear. So one can see that at least one of the purposes of the Offer Paragraph is to ensure compliance with rule 36.2(2)(c)."

If so, then that is a powerful pointer to the self-same words having to be interpreted in a way consistent with Part 36 as a whole and with the doctrine of the relevant period, something which on the respondent's construction becomes wholly irrelevant. Yet the same 21 days are involved.

57. The solution to this issue is also to my mind demonstrated by the position which would occur if the offer said nothing about how long the offer was open for. Mr Barnes acknowledged that in the absence of any statement as to the time for which an offer is open, at common law the offer would lapse within a reasonable time. On that basis every offer, if not expressly, then implicitly, is time limited. That would make Part 36 impossible. That supports the view that when the Part 36 regime is invoked, the construction of the timing aspect of the Part 36 offer has to be construed with its regime well in mind. A Part 36 offer which says nothing as to the length of time for which it is open does not close within a reasonable time: it closes only with withdrawal.
58. As it was, the judge favoured the claimant's construction. That construction was said by the claimant to be the only "admissible construction". The defendant's construction was said to be "simply not an admissible construction" (at [31] in the judgment below). That, however, is to beg the question, and does not represent the respondent's present position. The judge appears also to have been influenced by the thought that the offer "shows clearly that it is drafted on the basis of the mistaken view" that a time-limited offer can be a Part 36 offer (see his discussion at [32]-[37]). However, the judge does not explain why he takes the view that the offer was drafted on that mistaken basis, for which purpose he limited himself quite properly to the terms of the offer itself. That, however, as it seems to me, is to beg the question, which is what the offer means as between the two possible meanings (even if the judge appears to have regarded only one as feasible). Or else it is to make an assumption about what the offeror subjectively intended to say, which is both to beg the question and to do so on an illegitimate basis, since what has to be sought is the objective and not the subjective intent.
59. The court explored in the course of argument whether the terms of the offer itself showed that an answer was needed urgently, and whether this was additional context which supported the respondent's construction of a time limited offer. After all, the respondent was saying in its letter that it was in negotiations for the sale of the property, in which case, if the property was sold to a third party, one of the two alternative offers, which involved the appellant buying the land at a discounted price, would have fallen away, with the attendant risk that if that offer was subsequently accepted, the claimant would have been unable to comply. That was not a point high-lighted by the respondent below or on this appeal. The answer to it, however, is that it is neutral between the two constructions. On any view, the offer letter is telling the offeree that it ought to make up its mind quickly, because the offer may be promptly withdrawn. The error, however, subject to issue (3), was in not withdrawing the offer.
60. For similar reasons, the respondent's attempt to draw support for its construction from the subsequent emails fails. I shall set out those emails below, under issue (3), where they properly belong. A document cannot be construed by reference to the parties' subsequent conduct. In any event, as will appear below, the meaning of the emails themselves depends on the proper construction of the offer. If the offer letter is a time limited offer, the emails can be construed in accordance with that premise. If, however, the offer letter is a warning of the imminence of a future withdrawal, then the emails can be read in accordance with that premise. What is not permissible is to assume the answer to the problem of construction, then read the emails accordingly, and then read back that reading to support the assumption made in the first place.
61. For these reasons, I would respectfully disagree with the judge's construction of the offer. I prefer the construction of the appellant.

Issue (3): Do the terms of the offer itself, or the subsequent emails, amount to a withdrawal of the offer?

62. Mr Barnes submitted that the terms of the offer itself amounted to a withdrawal. That submission, however, depended on his construction being adopted. And if it had been, the offer would not have been within Part 36, and withdrawal would not have been necessary. In the circumstances, it is unnecessary to say more than that I do not believe that an express time limit is the equivalent of a Part 36 withdrawal.
63. Mr Barnes also submitted that the offer, if within Part 36 and to be construed as the appellant would construe it, was nevertheless withdrawn by subsequent emails.
64. Those emails were as follows:

(i) Claimant's solicitors to defendant's solicitors, 18 December 2009:

"You will be aware that our client's Part 36 offer will remain open until 31 December. If your clients intend to revert after such time, we would expect a formal request detailing a specific date for extension of the deadline and the reason for this request. We would then revert to our client accordingly."

(ii) Defendant's solicitors to claimant's solicitors, 18 December 2009:

"Thank you for your email we are aware when the period for acceptance expires however to provide a formal reply our client has to go through its internal reporting procedures…this process may not have completed until 8^th January"

(iii) Claimant's solicitors to defendant's solicitors, 23 December 2009:

"It was not clear from your email that a response was required, apologies. We had understood your clients' internal reporting procedures necessitate a longer period for consideration of the settlement offer, until 8 January 2010. If this is still the case, our client is prepared to wait until that date for a full response to its offer."

(iv) Defendant's solicitors to claimant's solicitors, 23 December 2009:

"Thank you for clarifying the position."

(v) Claimant's solicitors to defendant's solicitors, 8 January 2010:

"Our client agreed to wait until today for a full response from your client to its settlement offer. We note that no response has been forthcoming and ask that you confirm by the end of the day when such response will be available."

(vi) Defendant's solicitors to claimant's solicitors, Friday 8 January 2010:

"I have not been able to get into the office but will respond early next week."

(vii) Claimant's solicitors to defendant's solicitors, Monday 11 January 2010:

"In relation to your clients' response on settlement, we request a response in the shortest possible order."

65. In my judgment none of these emails amounts to a withdrawal of the offer. On the contrary, they are all concerned with an extension of the 21 day period. The last email is again extending the period, for some uncertain but short period. On the hypothesis of the respondent's construction, they may be read as dealing with a deadline after which acceptance would be ineffective. On the hypothesis of the appellant's construction, they may be read as dealing with the deadline after which the offer may be withdrawn. In any event, they do not amount to a withdrawal (and see, in this respect, Moore-Bick LJ in Gibbon at [17]). The judge was of the same view (at his [40]).
66. There was no suggestion on the part of the claimant that the terms of these emails gave it some additional right against the defendant to say that the offer had lapsed.

Conclusion

67. For these reasons, I would allow the appeal. The defendant's acceptance of the alternative offer, to pay £2 million, on 5 November 2010, only three and half weeks before trial, was effective, for the claimant had made a Part 36 offer which it had never withdrawn.
68. It is said that such an acceptance was opportunistic, for disclosure and the exchange of witness statements had led the claimant to think that its case had improved. However, whether that view is correct or not would have been revealed, if at all, at trial and has not been debated in these interlocutory proceedings. It is said that the offer had become less advantageous to the claimant, because it has continued to suffer additional holding costs of the property in the form of security and insurance costs. That may be, but such variables will always arise, as Moore-Bick LJ explained in Gibbon at [16]. It is suggested that the defendant's case with regard to the offer lacks merits, but a similar suggestion failed to deflect the result in Gibbon. Ultimately, it is important for the security of the Part 36 scheme, in countless cases, that it should be clearly understood that if a claimant wishes to make a time limited offer, in the sense that the offer is to lapse of its own accord at the end of a stipulated period, then such an offer cannot be made as a Part 36 offer; that an offer presented as a Part 36 offer and otherwise complying with its form will not readily be interpreted in a way which would prevent it from being a Part 36 offer; and that if an offeror wishes to bring his Part 36 offer to an end, so that it cannot be accepted, then he must serve a formal notice of withdrawal. It seems to me that, although the precise point raised in this appeal is new, all the jurisprudence on Part 36 cited above contributes to these conclusions.

Lord Justice Rimer :

69. I have had the advantage of reading in draft the judgment of Rix LJ and gratefully adopt his comprehensive explanation of the issues that have given rise to this appeal. I agree with Rix LJ that the appeal should be allowed. In deference to Warren J's carefully considered different view, I add my own reasons for so concluding, although I am conscious that they are based on ground already covered by Rix LJ.
70. Rix LJ, in paragraph [32], has identified the three issues argued before us. As to the first, namely whether it is possible for a Part 36 offer to be a time limited one, I agree with the judge and Rix LJ that it is not. Rix LJ has fully explained why the making of a time limited offer is inconsistent with the scheme of Part 36 and there is nothing on that topic that I can usefully add. It follows that if, upon its true construction, the claimant's offer was a time limited one, destined by its own terms to lapse at the expiry of 21 days from 10 December 2009, then (i) it was not a Part 36 offer at all and the provisions of Part 36 had no application to it; and (ii) the defendant's purported acceptance of it well outside the 21-day period was ineffective.
71. The crucial issue is the second one that Rix LJ has identified in paragraph [32]. In short, was the offer a time limited one? The answer to that turns on its true interpretation in the context in which it was made, that context being a purported Part 36 offer. In advancing his submissions on that question, and whilst rightly recognising that context is all, Mr Barnes asked that we should, at least in the first instance, simply consider the ordinary meaning of the key words of the offer paragraph divorced from their context. The judge, whilst of course also recognising that the context was crucial, engaged in such an exercise at paragraphs [8] and [10] of his judgment. In his view it was obvious that, viewed in isolation, an offer declaring itself to be 'open for 21 days' would be a time limited one. As he put it, 'What else, it might be asked, could those words mean?'
72. There is, I consider, compelling force in that. If, following oral discussions between X and Y about a possible sale by X to Y of his house, X writes to Y formally offering to sell it to him for £300,000 and stating that 'this offer will be open for 21 days from the date of this letter', I consider that the objective interpretation of X's words, as Y ought reasonably to understand them, would be that acceptance within the 21-day period would secure the purchase, whereas a purported acceptance after that period would be too late. In the absence of any relevant context requiring a different meaning to be attached to that particular collection of English words (there being none in my example), that is the natural meaning of the offer and that is how Y would understand it.
73. What, however, Y might not also understand – unless he is a lawyer – is that he will not necessarily be able to bask in the certainty of actually having up to 21 days within which to accept the offer. That is because it would be open to X to withdraw it at any time before acceptance. X's offer therefore commits him to nothing unless and until it is validly accepted; and, until then, it likewise confers no legally enforceable rights on Y. It would be different if, for consideration moving to X from Y, X agrees to keep the offer open for 21 days. The arrangement would then be in the nature of an option and Y would be ensured the full 21 days in which to decide whether or not to exercise it. If he decides not to, the option will lapse. There is no question of any option having been granted in this case.
74. Having devoted two paragraphs to a consideration of the key words of the offer paragraph read in isolation, I suspect that Lord Hoffmann would regard them as an irrelevant distraction. He has perhaps done more than any other judge in recent years to focus judicial attention on the point that often the true sense of the words that people use can only be assessed by paying careful regard to the particular context in which they have used them. Thus in Charter Reinsurance Co Ltd v. Fagan [1997] AC 313, at 392A, he observed that '[i]t is artificial to start with an acontextual preconception about the meaning of the words used and then see whether that meaning is somehow displaced.' This is because, as he shortly afterwards explained in Mannai Investment Co Ltd v. Eagle Star Life Assurance Co. Ltd [1997] AC 749 and Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 WLR 896 (and quoting from ICS, at 913):

'The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax….'

75. In the present case, therefore, it is not of utility to consider the meaning of the offer paragraph in isolation from the context in which the offer was made. Whatever else may be in dispute, there is no dispute that the offer was intended to comply with Part 36. It was expressly stated to be an 'Offer to Settle under CPR Part 36' that was 'intended to have the consequences set out in Part 36….' Of course, that does not mean that it did in fact comply with Part 36 and therefore must, come what may, somehow be shoehorned into the confines of its four corners: a stated bid to attain a particular goal does not also mean that the goal has been attained. The answer to the critical question still turns on how the reasonable man would read the offer. The relevance, however, of the claimant's expressed intention to make its offer a Part 36 offer is that, if there are any ambiguities in it raising a question as to whether the offer does or does not comply with the requirements of Part 36, the reasonable man will interpret it in a way that is so compliant. That is because, objectively assessed, that is what the offeror can be taken to have intended. That is also in line with the principle of construction to which Rix LJ referred in paragraph [55].
76. How, therefore, should the offer paragraph be construed? It must, I consider, be read and interpreted against both the requirements prescribed by Part 36 for the making of a valid Part 36 offer and also the effect and consequences of such an offer that Part 36 describes. So reading the offer paragraph, its description of the 21-day period as the 'relevant period' is, I consider, important and is obviously a reference to the 'relevant period' as defined in Part 36.3(1)(c). What does Part 36 tell us about the 'relevant period'? One thing it tells us is in Part 36.3(5), which provides that '[b]efore expiry of the relevant period, a Part 36 offer may be withdrawn or its terms changed to be less advantageous, only if the court gives permission.' Part 36.3(6) then provides that after the expiry of the 'relevant period' an unaccepted offer can be withdrawn, or the offeror can change its terms, without the court's permission.
77. Those are provisions of a Part 36 offer of which the reasonable offeree will be aware and which will be relevant to his interpretation of the critical words in the offer paragraph. He may perhaps read those words as, on one view, meaning that the offer is a time limited one that will automatically expire after 21 days. But that interpretation sits oddly with Part 36.3(6) which provides for an absolute right to withdraw the offer after 21 days. Why should the offer be read as such a time limited one when the scheme of the provisions under which it is made expressly permits such a withdrawal and so provides the offeror with the almost exact commercial equivalent of an offer that is so time limited? The reasonable man would, I consider, accordingly regard that interpretation of the critical words as unlikely, if not impossible; and that their more likely explanation is that they were simply intended to express a qualification of the provisions of Part 36.5(5) by way of a communication to the offeree that, during the 21 days during which the offer 'will be open', the offeror will not seek the court's permission to withdraw it.
78. That appears to me to be a feasible and reasonable interpretation of the critical words, and one that is congruent with the scheme of Part 36.3(5) and (6). Mr Barnes recognised it as a possible interpretation, although it was not one that he supported. In my view, it is an interpretation which, in the context of an offer expressed to be made under Part 36, fits comfortably with its terms. I regard it as the correct interpretation. It enables the offer to be read as the offeror expressly intended, namely as a Part 36 offer which would be governed by the provisions of Part 36.
79. Once that conclusion has been arrived at, the force of the point that the offer was a time limited one is, in my view, extinguished. If the sense of the offer paragraph can rationally be explained as serving the purpose just described, it is difficult also to ascribe to it the dual intention of conveying that, if unaccepted within the 21-day period, the offer will lapse. Nor is there any sensible or practical need to do so. The reasonable offeree will know that, once the 21-day period has expired, the offeror can withdraw the offer at any time and without the need for the court's permission. The offeror will, or ought to, know likewise.
80. For these reasons, which essentially reflect part of Rix LJ's much fuller reasons, I agree with Rix LJ that, objectively interpreted, the offer was not time limited but was an offer that complied, as it claimed to do, with Part 36.
81. The third issue to which Rix LJ referred in paragraph [32] was as to whether, if so, the offer was withdrawn by the claimant before its purported acceptance. For the reasons given by Rix LJ, to which I cannot usefully add, I agree with him that it was not.
82. I too would allow the appeal.

Lord Justice Stanley Burnton

83. The first question to be considered by Warren J was whether CPR Part 36 permits a time-limited offer. It is regrettable that neither the CPR nor the Practice Directions 36A and 36B expressly address this issue. I agree with the conclusions of Warren J and Rix and Rimer LJJ on it, but I am left with the uncomfortable suspicion that when the offer letter was sent and received neither of the parties to these proceedings appreciated that a time-limited offer is not a Part 36 offer. However, their subjective assumptions on this issue are irrelevant to the construction of the offer.
84. Any ambiguity in an offer purporting to be a Part 36 offer should be construed so far as reasonably possible as complying with Part 36. Once it is accepted that a time-limited offer does not comply with Part 36, one must approach the interpretation of the offer in this case on the basis that the party making the offer, and the party receiving it, appreciated that fact.
85. I agree that the normal effect of the phrase "the offer will be open for 21 days" is that the offer is not open for acceptance after 21 days. However, Mr Barnes QC accepted that the use of that phrase is consistent with a warning that the offer will be withdrawn after 21 days. Given the clear express intention of the respondent to make an offer complying with Part 36, it should be so construed.
86. There are other indications in the offer that it was intended to be available only for prompt acceptance. However, these indications are accommodated by the respondent's ability to withdraw the offer.
87. It follows that, despite Warren J's carefully reasoned contrary conclusion, and my suspicion that he may well have correctly identified the subjective intention of the respondent, I agree that this appeal should be allowed.

Note 1   sed quaere    [Back]

Note 2   Stokes Pension Fund Trustees v. Western Power Distribution (South West) Plc [2005] EWCA 854, [2005] 1 WLR 3595    [Back]