Part 36 problems

In the view of many lawyers, part 36 is one of the most tricky and technical parts of the Civil Procedure Rules. In addition to complicate settlement negotiations, aspects of an individual road traffic accident claim may be parcelled out between insurers, solicitors and claims handling organisations, who may all be dealing with different aspects of the claim or insured or uninsured losses, making for a toxic brew.

In the case of Lee Hogg v Louise Newton (Claim No C51YJ790) an issue arose about whether or not a claim including a claim for £122,900.50 in credit hire charges incurred by the claimant in hiring a replacement vehicle from Accident Exchange had been compromised through the acceptance by the defendant of a part 36 offer.

The case concerned a road traffic accident which took place on 15th March 2012. The claimant instructed solicitors to act on his behalf. Those solicitors initially pursued a claim through the MOJ Portal, submitting a Claims Notification Form (CNF) on the claimant’s behalf. The CNF was dated 8th May 2012.

Section E of that document dealt with alternative vehicle provision. It identified that the claimant had been provided with an alternative vehicle by Accident Exchange. The claim did not continue through the MOJ Portal, dropping out of the Protocol.

On 12th February 2013 a part 36 offer was submitted by the claimant’s subsequently instructed solicitors. The letter read:

Please find enclosed copy medical report dated 4th December 2012 prepared by Mr Jonathan Page, together with our client’s schedule of special damages.

We make a Part 36 offer to you to settle the whole of our clients’ claim.

Our client will accept the sum of £1600 in full and final settlement of this claim.

It was not accepted at that stage. Years later on 7th March 2016, further solicitors issued proceedings, seeking amongst other things, £122,900.50 in credit hire charges.

On 15th July 2016 the defendant accepted the part 36 offer, by notice of acceptance sent to the second set of solicitors. The defendant’s contention was that the offer had not been withdrawn, the acceptance brought about a global settlement and there was nothing left to argue about.

The claimant’s contention was that in the context of the provision of the medical report and schedule, the only claim that had been settled was the claimant’s claim for general damages for personal injury, and the modest element of special damages identified on the schedule, being just over £75.

The case came before District Judge Read in the County Court at Middlesbrough on the defendant’s application for a declaration that the claim had been compromised and stayed, by the acceptance of the part 36 offer.

The defendant contended as follows. A part 36 offer remains capable of acceptance until it is withdrawn: Gibbon v Manchester City Council [2010] 1 WLR 2081 The starting point is to note that per C.v.D [2012] 1 WLR 1962 is that it is legitimate to borrow from the canons of contractual construction to construe a part 36 compromise to ascertain what the terms of that compromise were.

The law was said to have moved on from ICS Ltd.v.West Bromwich Building Society[1998] 1 WLR 896 in that Lord Hoffmann’s principles of contractual interpretation have been expanded, and explained in a series of further cases, before the House of Lords and Supreme Court. The most recent of these is Arnold.v.Britton [2015] AC 1619.

Lord Neuberger made a restatement of the applicable principles in paragraphs 14 to 22 of his judgment: those principles demonstrate a re-emphasis on the importance of the language used set against the background matrix of fact to determine what a contract means, and count against broad, sweeping constructions which do violence to the language used by the parties.

What is admissible, to aid the construction of a contract, is the “background matrix of fact”. In this respect, the defendant contended the CNF was significant: it established both that there was a potential claim for credit hire in this case, but also that the solicitors initially instructed, were well aware of the fact and indeed responsible for intimating that fact to the defendant in the CNF.

The medical report and the Schedule of Loss referred to in the first paragraph of the letter formed part of the matrix of fact. But it was contended those were simply documents which had not been provided before. They had no relevance to the construction of a “hidden offer” nor did the letter make further reference to them.

Moreover, the part 36 offer did not go on to say by reference to the documents “in respect of the issues of personal injury and the heads of claim identified in the schedule”: it was quite specific it related to the whole of the claim.

The fact that the offer is formulated by a solicitor’s firm, was also argued to be significant. Solicitors are or are meant to be, familiar with the terminology and working of part 36 and the settlement of claims. A solicitor would be familiar with the difference between a part 36 offer in relation to the whole of the claim, or a part 36 offer in respect of certain heads of claim, or the reservation of a right to intimate a further claim, if, in fact that was what was intended.

The defendant was not a party to the communications between the claimant, the claimant’s solicitors, the credit hire company or anyone else. The part 36 offer did represent an abandonment of any potential credit hire claim: however, there might have been any number of reasons why that might take place, known to the claimant but not the defendant, and the defendant was entitled to take at face value an offer that was clear.

District Judge Read accepted the defendant’s argument that the wording “the whole of the claim” meant that it was a global offer to settle and granted a declaration that the claim had been stayed by the defendant’s acceptance of the part 36 offer: accordingly the claim, including the very substantial credit hire claim was brought to an end.

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