Case No: TLQ/10/0099
Neutral Citation Number: [2010] EWHC 1886 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 23 July 2010 

Before :

THE HONOURABLE MR JUSTICE TUGENDHAT
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Between :

	JOAO ROSARIO	Claimant	
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	NADELL PATISSERIE LTD	Defendant	

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Mr Grant Armstrong (instructed by Harris Da Silva) for the Claimant
Mr Simon J Brown (instructed by Berrymans Lace Mower) for the Defendant

Hearing dates: 16 July 2010
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Judgment
Mr Justice Tugendhat : 
1.	The issue before the court is whether the parties to this claim for damages for personal injuries have settled the action or not, and if so on what terms and with what effect.  The issue depends in part upon the true construction of letters exchanged between solicitors for each party, and in part upon the meaning of CPR Part 36.
2.	In form the matter comes before the court by way of an Application Notice dated 29 June 2010 issued by the Defendant.  The order the Defendant asks the court to make is:
“1. That the Court applies the usual cost consequences of acceptance of a Part 36 offer under CPR 36.10(5); namely that:
(a) The Claimant will be entitled to the costs of the proceedings up to the date on which the relevant period of the Defendant’s Part 36 offer dated 12 November 2009 expired;
 (b)  The Claimant will be liable for the Defendant’s costs   for the period from the date of expiry of the relevant period to the date of acceptance. …”
3.	Implicit in that application is that the court will have accepted the Defendant’s contention that there was a Part 36 offer validly made on 12 November 2009 and that it was accepted by the Claimant.  However, in the course of argument, it became clear that both parties wished me to resolve the wider issue as to whether and if so what settlement agreement was reached. The Defendant also submits that even if the offer of 12 November 2009 were not a valid Part 36 offer, nevertheless, as a matter of contract, the same order as to costs ought to follow.
4.	The Claimant contends that there is indeed a settlement agreement but not on the terms of the offer dated 12 November 2009 by the Defendant (whether or not that was a valid Part 36 offer). The Claimant submits that the terms of the settlement are those set out in a draft consent order faxed to the Defendant’s solicitor on 30 April 2010.  That includes the provision that the Defendant do pay the Claimant’s costs of an incidental to the claim to be assessed if not agreed.  
5.	On the face of it therefore what is at stake in this issue between the parties is the Defendant’s costs from the period of the date of expiry of the offer made on 12 November 2009, which is said to be 7 December 2009.
6.	Little need be said about the nature of the issues in the action itself.  The Claimant was born in 1963.  He was employed as a baker by the Defendant from 1992 until 2009.  He suffers from a condition known as ‘Baker’s Asthma’.  Liability was admitted on 3 October 2007.  The Claim Form was issued on 30 September 2009 and served on 6 October 2009.  A default judgment was entered on 12 November 2009 with damages to be assessed.  
7.	On 4 December 2009 the Master gave directions including one in the usual form that:
“If the claim or part of the claim is settled the parties must immediately inform the court and consider whether or not it is then possible to file a draft consent order to give effect to the judgment”.
8.	The letter dated 12 November 2009 is written not by solicitors but by a Technical Claims Consultant for the underwriters of the Defendant.  It is addressed to the Claimant’s solicitors.  It is headed “Without Prejudice Part 36 Offer Save as to Costs”.  The first seven paragraphs discuss the different heads under which damages had been claimed by the Claimant. They set out the sum which the Defendant was prepared to offer to the Claimant in respect of each of those heads.  The letter then continues:
“Pursuant to Part 36 of the Civil Procedure Rules we hereby make a Global offer in the sum of £72,887.42 in full and final settlement of your client’s claim against our insured, this sum inclusive of interest.  
Please note that this offer is made gross of any recoverable benefits.  
This offer will remain open for a period of 21 days from receipt of this letter; thereafter the offer may only be accepted on the basis that any costs incurred henceforth by either party in relation to the above element of claim will be met by your client.
The above will be in addition to your appropriate costs, to be agreed or assessed….. ”
9.	Logically the first issue that arises is whether that was an offer made in accordance with Rule 36.2 or not.  Rule 36.1(2) provides:
“Nothing in this part prevents a party making an offer to settle in whatever way he chooses, but if the offer is not made in accordance with the rule 36.2, it will not have the consequences specified in rules 36.10…”
10.	It follows that if this offer was not made in accordance with 36.2, the specific relief claimed in the Application Notice could not be granted because that relief is expressly stated to relate to rule 36.10.  However, as I have indicated the issues are wider than that.  
11.	No point as to the compliance of the offer with Part 36 was made by the Claimant at any time between 12 November 2009 and a day or two before the hearing of this application.  However, it is not alleged by the Defendant that the Claimant or his advisors deliberately withheld from the Defendant their view that there was anything non-compliant about the offer.  On the contrary, the Defendants say that there is nothing non-compliant about the offer, and it had not occurred to the Claimant that there might be.  Nevertheless, the Defendant submits that it is now too late to take a point as to the compliance of the offer with rule 36.2.  The point having been raised late, I had some sympathy with Mr Brown for the Defendant when he said he had not fully developed his argument as to why the point was no longer open to the Claimant.  However, it seemed to me that his argument was best understood as a submission of estoppel by convention.  In the circumstances I shall consider the point later in this judgment.
12.	The critical letter in the case is one dated 30 April 2010 enclosing the draft Consent Order already referred to.  But before that was sent there was an exchange of correspondence to which I need refer briefly.  
13.	All the letters, including that dated 30 April 2010 were headed “Without Prejudice Save As To Costs”.   
14.	The first letter is dated 19 November 2009 from the Claimant to the Defendant.  It refers to the letter dated 12 November 2009, but does not refer to it as being a Part 36 offer.  It is a three page letter explaining the Claimant’s case on damages which, it was contended, totals £146,086.27.  The figure representing the biggest difference between the parties is a figure in respect of future earnings.  The letter sets out each of the elements of the offer as broken down in the letter dated 12 November 2009 and makes a counter offer which is for the same amount in respect of three of these items but higher in relation to two of them.  The counter offer is £130,983.98.  This figure is then rounded down and the Claimant’s solicitor states that the Claimant “is prepared to accept £130,000 plus his costs to be assessed if not to be agreed in full and final settlement of this matter”.  There is no suggestion that this is intended to be pursuant to Part 36.  
15.	Solicitors then take up the correspondence on behalf of the Defendant.  The next letter of significance is dated 19 February 2010 from those solicitors.  The Defendant’s solicitor set out reasons why they say the counter offer made on 19 November 2009 is unrealistic.  The letter goes on:
“In the circumstances, our client’s previous offer of £72,887.42 is in our view, a generous one…
We do not intend to withdraw the offer as it offers our client excellent costs protection at trial.  As the twenty one day period has now passed, your client may only accept it with the permission of the court or our agreement.  Under CPR Part 36 our client is likely to be able to recover their costs incurred after expiry of the 21 day period.  However, in order to reach an amicable end to this case, our client will agree to waive its right to seek recovery of those costs, if accepted by 4pm on Friday 5 March 2010.
If the offer is not accepted by then, our client will seek recovery of its costs from 7 December 2009.”
16.	The writer of the letter is mistaken in one respect.  It was formerly the law that after the expiry of the 21 day period for accepting an offer under Part 36, the other party could only accepted with the permission of the court or the offeror’s agreement.  That is no longer the case.  CPR 36.9(2) provides that 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.  The effect of the letter of 19 February 2010 is to make clear that the Defendant is not withdrawing the offer of 12 November 2009.  
17.	The deadline of 5 March 2010 passed without the offer being accepted by the Claimant.  Instead on 11 March 2010 the Claimant’s solicitors wrote another carefully reasoned letter explaining why the offer was not accepted.  The letter goes on:
“Accordingly in an effort to bring this matter to a conclusion we are instructed to make the following offer;
(1)	Your client pays our client £90,000 in full and final settlement of the claim.
(2)	Your client pays our client’s costs of an incidental to the claim to be assessed if not agreed”.
18.	On 12 March solicitors for the Defendant noted this further offer from the Claimant, but did not accept it. They confirmed that the Defendant would be seeking the Defendant’s costs from 7 December 2009, in the event that the Claimant failed to obtain a judgment more advantageous than that offer.
19.	After further letters, the Claimant’s solicitors sent the letter of 30 April 2010.  It is a two page letter and contains a further explanation of the Claimant’s position.  In particular his hours of work had increased and with that his salary, so by this time the Claimant’s claim for loss of earnings had been reduced.  Other matters are mentioned.  The letter then goes on with this critical paragraph:
“5. Notwithstanding the above we have obtained our client’s further instructions on your offer.  In view of his recent increase in hours and salary which brings his claim for future loss of earnings back (by and large) to the position it was when our client’s claim was issued our client has instructed us to accept your client’s offer of £72,887.42 (subject to deductions for the interim payment of £10,000 and for the benefits he has received to date).
We have now received the documents from the DWP and enclose herewith a copy of the most recent breakdown of benefits dated 14 April 2010.  Please note that our client disputes the calculation of these benefits and we are in the process of looking into this issue and anticipate being able to confirm the final figure on the benefits received by our client within the next 14 days.  In the meantime we enclose herewith our proposed Consent Order for your approval.
We reserve the right to refer this correspondence to the court on the question of costs in due course”. (emphasis added)
20.	The draft Consent Order provides for the trial window to be vacated (para 1); for the Defendant to pay the Claimant £72,887.42 in full and final settlement of the claim within 14 days of this order (para 2) and, lastly and significantly, the following:
“The Defendant do pay the Claimant’s costs of an incidental to the claim to be assessed if not agreed”.
21.	The fax had been sent on a Friday and the response of the Defendant’s solicitors was on an email dated the following Wednesday 5 May 2010.  The email reads:
“Thank you for your recent fax, and your client’s agreement to accept my client’s previous Part 36 offer of £72,887.42 gross of CRU.  Could you please send me an electronic copy of the Consent Order. 
I have requested cheques from the contributing insurers.  It will come in three separate sums as there are three separate insurers… I am also arranging to discharge the remaining CRU balance and I thank you for the recent certificate.
I have written to the court today to confirm settlement and I enclose my letter”.
22.	The enclosed letter is an attachment which bears the same date, and is addressed to the listing officer of this court informing him 
“that settlement has now been agreed in the sum of £72,887.42 gross of CRU.  The matter had been listed for an assessment of damages but this can now be removed…. A consent order will follow shortly”.
23.	The reference to the certificate and the CRU balance is significant to the issue to whether the offer of 12 November 2009 was in accordance with Part 36 or not. I shall return to that point.
24.	On 10 May 2010 the Defendant’s solicitor sent an email informing the Claimant’s solicitor that he had put the first of the three damages cheques in the DX that day.  He noted that he had still not received an electronic copy of the Consent Order and asked for it by email.  The Consent Order was duly emailed by the Claimant’s solicitor and the two cheques were sent as promised.
25.	On 13 May 2010 the issue which I have to decide was first raised.  The solicitor for the Defendant sent an email with an amended draft consent order as an attachment.  It was signed by his firm.  He had made two amendments.  The first is not controversial. It adjusts the £72,887.42 referred to in the Claimant’s draft order to take account of £10,000 interim payment and £3,718.13 of offsetable benefit.  Nothing turns on these purely formal alterations.  What matters is the new provision as to costs as follows:
“3. The Defendant shall pay the Claimant’s costs up to 7 December 2009 on the standard basis, costs to be assessed if not agreed
4 the Claimant shall pay the Defendant’s costs from 7 December 2009, on the standard basis, costs to be assessed if not agreed”.
THE PROVISIONS OF THE CPR.
26.	The provisions of Part 36 relevant to this dispute (apart from the issue of whether the offer was in accordance with rule 36.2) are the following:
“36.10… (4) where …
 (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;
(b) The offeree will be liable for the offeror’ costs for the period from the date of expiry of the relevant period to the date of acceptance.   
36.9 (1) a Part 36 offer is accepted by serving written notice on the acceptance on the offer or….
Practice Direction 36 A – offers to settle
3.1 where a Part 36 offer is accepted in accordance with rule 36.9(1) the notice of acceptance must be served on the offeror and filed with the court where the case is proceeding”.
27.	No copy of the letter dated 30 April 2010 was filed by the Claimant with the court.  
28.	The submission for the Defendant is that in the letter dated 30 April 2010 the words were “your offer” and “your client’s offer of £72,887.42” are a reference to the Part 36 offer made on 12 November 2009.  This submission is based on the (correct) understanding that that offer remained open for acceptance in accordance with the rule as it now is, notwithstanding that the 21 days for acceptance had expired.  This must be what the Claimant’s solicitors were referring to, it is said, because there was no other offer to which the letter could refer.  As both parties would have understood, the offer of 19 February 2010 in the same amount had expired on 5 March 2010.  Alternatively, if it could refer to that offer then the only difference would be that the 21 days would expire in March and the period in respect of which the Claimant would be ordered to pay the Defendant’s costs would be correspondingly shorter.  
29.	It is further submitted that the draft Consent Order sent with the letter is irrelevant, or at least neutral, as to the true construction of the letter.  At most it was a proposal as to an agreement on liability for costs pursuant to 36.10(4) which, if not agreed, would then be the subject of resolution by the court by order made under 36.10(5).  While the heading of such an acceptance of an offer with the words “without prejudice save as to costs” might be inappropriate, and while the last two lines of the letter might likewise be inappropriate (in reserving the right to refer the correspondence to the court on the question of costs), neither of those parts of the letter are relevant to, or detract from, the true construction of the letter as a written notice of the acceptance of the offer made in accordance with 36.9(1).  The fact that it is not stated to be pursuant to Part 36, and the fact that para 3.1 of the Practice Direction was not complied with are likewise immaterial. 
30.	For the Claimant it is submitted that the letter of 30 April 2010 has nothing to do with Part 36, but is an offer made by the Claimant (alternatively, a counter offer) made in a way chosen by the Claimant as is permitted by Rule 36.1(2).  The designation of the letter as being “Without Prejudice Save As To Costs” and the reservation of the right to refer to it on the question of costs, were both appropriate to an offer, but neither are appropriate to an acceptance of an offer.  Further, it is said that the proposed Consent Order is an integral part of the offer and not some proposal in accordance with 36.10(4).  The counter offer makes no reference to Part 36 at all.  The “offer” referred to is the Defendant’s offer in respect of the amount, and no more than the amount.  It is not the whole of the terms of the letter of 12 November, or for that matter 12 February. 
31.	It is submitted that the subsequent correspondence objectively viewed demonstrates that that was, at least until 13 May, the common understanding of the parties and the basis upon which the two cheques were sent and accepted.  It is true that the Defendant’s solicitors’ email of 5 May refers to “my client’s previous Part 36 offer of £72,887.42 gross of CRU”, but it is said that the focus in that expression is on the sum of money and not on the whole of the terms of the letter dated 12 November.  It is noted that no query is raised as to the provision as to costs set out in the draft Consent Order: there is simply a request for it to be sent in electronic form.  Further the letter to the court, which was also sent to the Claimant, makes no reference to any outstanding issue as to costs, but simply says “a consent order will follow shortly”.
32.	The witness statement for the Claimant made by his solicitor states that the cheques were given to the Claimant and “it is understood that he has paid them into the bank”.  It is not suggested that he has changed his position by expending the money in a way that he would not have spent money had he not received the cheques.  The solicitor for the Claimant further notes that by 36.11(6) unless the parties agree otherwise in writing where a Part 36 offer to pay a single sum of money is accepted, that sum must be paid to the offeree within 14 days of the date of acceptance, failing which, by sub-rule (7), the offeree may enter judgment for the unpaid sum.  The Defendant’s form of Consent Order made no provision for payment within 14 days and the third and outstanding cheque has not been paid within 14. 
33.	There are three alternative findings open to me :
(1)	That the Defendant is right, and the letter of 30 April 2010 is written notice of acceptance of a Part 36 offer made by letter dated 12 November 2009. On this alternative I should make one of the orders sought in the Application Notice.  
(2)	The Claimant is right, with the result that the letter of 30 April 2010 is an offer made in a way otherwise than is provided by Part 36. On this alternative the position as to costs is as set out in the Claimant’s draft Consent Order.
(3)	There has been no concluded settlement of the case nor acceptance of any Part 36 offer.
(4)	If the offer of 12 November 2009 is not made in accordance with Part 36.2, then it is a contractual offer and has been accepted. On this alternative the costs are payable in accordance with the offer and there is no place for the court to order otherwise under Part 36.10 (5).
34.	The parties agree that the issues are to be determined by applying an objective test to arrive at the meaning of the correspondence. While the provisions of Part 36 are not part of the law of contract, they are made against the background of that law. The need to apply an objective test is one of the rules which apply in both contexts.   Under the objective test, a party may be bound if his words or conduct are such as to induce a reasonable person to believe that he intends to be bound, even though he in fact has no such intention.  The Editors of Chitty on Contracts 30th  edn Volume 1 para 2- 003 give the example of a solicitor who had been instructed by his client to settle a claim for US $155,000 but by mistake offered to settle it for the higher sum of £150,000.  Mr Armstrong cited Investors Compensation Scheme v West Bromwich BS [1998] 1 WLR 896 at 912-913.
35.	In my judgment, in the context of the correspondence that had taken place up to that point between the parties, the letter of 30 April 2010 cannot reasonably be understood as an acceptance of the whole of the terms set out in the letter of 12 November 2009.  The word “offer” can be used to refer to the whole of what is technically referred to as an offer for the purposes of the law of contract or for Part 36. But it can also be used to refer to a part or item constituting one of a number of parts or items of an offer which is capable of acceptance under Part 36 or the law of contract.  The designation of the letter “Without Prejudice Save As For Costs”, and the final paragraph, cannot be ignored as unnecessary or inappropriate and otiose words.  Nor can the proposed consent order reasonably be interpreted as an offer or invitation by the Claimant to the Defendant to accept a liability for  costs other than the one that would apply in the absence of agreements between the parties pursuant to 36.10 (4).  Finally, although on their own they would have counted for little, the fact that the practice direction was not respected by the Claimant’s solicitor (in that no copy of the letter was filed with the court), and that no reference was made to the time for payment under 36.11(6), suggest the same conclusion. There is a complete absence of any words or conduct on the part of the Claimant indicative of an action pursuant to Part 36.9(1). Combined with the use of words which would be unnecessary or inappropriate in a notice pursuant to 36.9, this leads me to the conclusion that this letter is not such a notice of acceptance.
36.	It follows that it is a counter offer. The next question therefore is whether it was accepted.  The terms of the email of 5 May 2010, together with the subsequent letter to the court and the sending of the cheques, are all words and conduct which would convey to a reasonable person having all the background knowledge available to the Claimant’s solicitor, that the Defendant’s solicitor considered the matter to have been finally disposed of in accordance with the terms of the letter dated 30 April 2010.  There is no query as to the terms of the provision for costs as in the draft Consent Order, still less any counter proposal until 13 May. In the meantime a letter was sent to the court and two cheques were sent to the Claimant.
37.	The Defendant’s case that there is no acceptance essentially depends on the use of the words “previous Part 36” in the first line of the email of 5 May 2010.  But this use of language is imprecise.  The words could have been “thank you for … your client’s acceptance of my client’s Part 36 offer”. But the words “your client’s agreement to accept my client’s previous Part 36 offer of “£72,887.42 gross …” by themselves are consistent with a reference to agreement to the figure, as opposed to the agreement to the whole of the terms of the Part 36 offer.
38.	The terms of the email of 13 May 2010 also do not fit easily with the Defendant’s submission that the draft consent order from the Claimant was a proposal to agree in accordance with 36.10(4). What the Defendant’s solicitor wrote was 
“no provision was made for CPR 36.10(5)(b)… unless the court orders otherwise, your client is liable for my client’s costs from that date.  I am not aware that you have applied to the court for an order to the contrary”.  
39.	That is not an accurate reflection of the position.  As submitted by Mr Brown for the Defendant, the Claimant’s draft order did make provision for an agreement as to the liability for costs in accordance with 36.10(4).  It was not incumbent upon the Claimant to apply to the court under 36.10(5) without first seeking agreement in accordance with 36.10(4).  
40.	Accordingly in my judgment there was a settlement as contended for by the Claimant in the terms of their Consent Order.
41.	In the circumstances I do not have to decide whether the letter of 12 November 2009 was made in accordance with rule 36.2.  The argument for the Claimant includes that Rule 36.2(4) requires that in appropriate cases a Part 36 offer must contain such information as is required by rule 36.15 (deduction of benefits).  Rule 36.15(5) to (7) requires the offeror to have applied for a certificate and to state information derived from it either in the offer itself or not more than 7 days after receipt of the certificate.  It is said the information has not been provided. Since the hearing the parties have submitted further documentation and argument on this point. But it is not necessary for me to say more about these.
CONCLUSION
42.	Accordingly for the reasons stated above the application will be dismissed and judgment will be entered for the Claimants in the form of the Order agreed between the parties and in so far as it relates to costs.