‘Drop hands’ offer held to be inconsistent with Part 36

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Posted on: August 11th, 2020 by Elena Kostova

In the addendum to the judgment in Akinola v Oyadare and Anor [2020] EWHC 2038 (Ch) Deputy Master Henderson dealt with issues as to disposal and costs.

The main hearing dealt with preliminary issues in respect of a claim for beneficial interest in properties or proceeds based on a common intention constructive or resulting trust or upon an agreement with the administrator of the estate regarding beneficial interest. The Claimant was found to have no interest in the estate or its assets.

The Defendants argued that failure to accept a Part 36 offer made in the conduct of the matter justified an indemnity costs order. The offer was made a couple of weeks before the Order listing the hearing of the preliminary issues.

The letter accompanying identified the offer as a Part 36 and Form N252A was enclosed. Amongst other things, the form was headed “offer to settle”; confirmed the proceedings it related to and that it excluded counterclaim.  The same further referred to costs consequences of acceptance in accordance with rule 36.13. The 21 day period for acceptance expired on 4th September 2019 and the Defendants argued that indemnity costs should be awarded from that point.

The wording of the offer included:

‘The Defendants make the following Part 36 offer to the Claimant in the terms that the Claimant is invited to withdraw the Claim issued on 27 December 2018 on a ‘drop hand’ basis and also in accordance with Part 36 CPR 1998.’

Following consideration of each of the requirements for a Part 36 offer under CPR 36.5 Deputy Master Henderson noted compliance with all the provisions but in his judgment ‘the offer is outside Part 36 for a more fundamental reason’. The Deputy Master noted the usual meaning of ‘drop hands’ is that the claim or claims should be discontinued with each side bearing its own costs. He considered the same would be inconsistent with Part 36 whilst also noting there is no procedure for “withdrawing” a claim.

Whilst bearing in mind the references to Part 36 and rule 36.13 the Deputy Master also considered whether it was possible for the Claimant to agree to discontinue the claim or have it dismissed or stayed but still have the claim stayed under CPR 36.14. Deputy Master Henderson went on to say:

‘In my judgment it is not possible to construe “withdrawal” of the claim in the context of the 14th August 2019 offer as including a stay.’

Consideration was also given to the practical difficulty of automatic stay of proceedings which would mean the proceedings continue to exist and “withdrawal” whereby proceedings would cease to exist.

The offer was held to not be a Part 36 offer and the same was taken into account when considering indemnity rather than standard basis costs. In Deputy Master Henderson’s judgment the failure to accept the offer was not so unreasonable as to justify an order for indemnity costs.

It seems to me sensible that a party cannot seek the consequences of failing to accept a Part 36 offer when the offer is compliant with the required format but is inconsistent with the rest of the rules. From the judgment it is not clear what the offeror contemplated would happen in the event the offer was accepted. The decision stresses the importance of consideration to be given not only to the format of an offer but also the consequences of acceptance procedurally and in relation to the issue of costs.

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