Part 36 liability offer cannot be relied on to salvage loss on part 36 monetary offer

The self-contained Part 36 code allows monetary offers in full and final settlement of damages as well as liability split offers on discrete issues. The High Court found on appeal that it was just and in keeping with Part 36 that the consequences of a claimant not beating a defendant’s Part 36 monetary offer in full and final settlement of a claim took precedence over the consequences of a claimant’s liability split offer on a discrete issue on which the claimant was successful.

The claimant failed in his appeal to the High Court in the case of Mundy v TUI UK Limited [2023] EWHC 385 (Ch) to rely on a Part 36 liability split offer, following the failure at trial to beat the defendant’s Part 36 offer in full and final settlement for damages.

Background

The claimant had brought a claim for damages after suffering food poisoning whilst on an all-inclusive holiday supplied by the defendant. The claimant had made two offers by way of Part 36: one to settle the claim for £20,000 and the other to split liability on a 90:10 basis. In response, the defendant had made a Part 36 offer in full and final settlement of the claim for £4,000. At trial, the judge awarded the claimant slightly over £3,800 for damages, an amount lower than the defendant’s Part 36 offer.

It was subsequently ordered that the claimant recover his costs up to the date of expiry of the defendant’s Part 36 offer, whilst the defendant would recover its costs thereafter. The judge had also ruled that the defendant would be entitled to offset its costs against both the claimant’s damages and his costs entitlement. The claimant appealed against the costs order on the basis that he had succeeded as to 100% on liability, having offered to previously settle for 90%. He also appealed the decision that the defendant was entitled to offset its costs against the claimant’s costs.

Decision

The High Court dismissed the appeal. The focus of the judgment was specifically on how CPR 36.17 applies, if at all, where one of the competing offers is a liability-only offer. CPR 36.17 comes into play where, upon judgment being entered, the claimant fails to obtain a judgment more advantageous than a defendant’s offer, or alternatively, when a defendant fails to beat a claimant’s Part 36 offer. Here, the claimant based his appeal on the argument that the judgment was in fact more advantageous to them, because of his 100% success on liability, having previously offered to accept 90%.

The claimant’s argument was dismissed on the basis that he was seeking to “save” the loss on a monetary offer by a win on a liability offer. The judge found that the liability offer was not a genuine attempt to settle what was effectively an “all or nothing” case, as there was no real prospect of finding contributory negligence. The judge also commented that it was not apparent how a 90% liability offer should be compared against the sum actually awarded after the conclusion of the quantum phase. Accordingly, the claimant’s liability offer did not carry Part 36 consequences, and it was not feasible to argue that loss on a monetary offer could be salvaged by a win on a liability offer.

The claimant’s appeal was dismissed, bar the argument that the trial judge had been wrong in law to allow the defendant to set off its costs against the costs to be paid to the claimant. This issue had already been resolved in the claimant’s favour in the matter of Ho v Adelekun [2021] UKSC 43.

Effect of the decision

This decision shows that when CPR Part 36.17 applies, the consequences of a Part 36 offer on a liability split on a discrete issue will not take precedence over the consequences of a Part 36 monetary offer in full and final settlement of the entire claim, or even the issue the Part 36 issue-based offer was made on.

If the issue-based Part 36 liability split offer was an attempt to resolve a genuine issue between the parties and provide certainty on that, for example where there was a real possibility of a contributory negligence finding, then the court can consider any injustice suffered by the offeror in the circumstances of the claim. However, overcoming a beaten full and final monetary Part 36 offer will be a high bar. Parties making Part 36 offers should target them at issues that are genuinely in dispute, and wherever possible, should quantify them in a manner that can readily be compared to the final judgment.

This article was prepared with the assistance of Rowena Hunt, solicitor apprentice in CMS Sheffield.