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19 July 2017

Claimant fails in bid to accept Part 36 offer during trial

B P Collins’ recent success for their waste management client in Houghton v PB Donoghue [2017] EWHC 1738 (Ch), included a victory on technical and procedural question of law: in what circumstances can a claimant accept a Part 36 offer, after a trial has started?

Mr Houghton claimed £3m for unpaid royalties and commission allegedly due under various oral contracts. In the middle of an 8-day trial in the Chancery Division and after having been cross-examined for two days, Mr Houghton sought to accept the P B Donoghue’s Part 36 offer made six months before trial. 

A Part 36 offer can only be accepted “during the progress of the trial” with the permission of the court. On behalf of P B Donoghue and with the assistance of Simon Mills (barrister, Five Paper Buildings) we argued that it would be unjust to allow the offer to be accepted against their will. Neither the relevant rule nor the notes in the White Book state what principles should be applied by the court in deciding whether to grant permission, and the White Book refers to no authority. 

We argued before Morgan J. that there had been a significant change of circumstance that would make it unjust to grant the permission sought on the grounds that:

  1. Mr Houghton’s perception of the likely outcome of the trial had obviously changed for the worse as a result of his evidence, as indicated by his desire to accept just £330,000 in respect of a multi-million pound claim.
  2. That change in perception was shared by P B Donoghue, as evidenced by the fact they opposed the application and wanted the trial to proceed.
  3. The non-attendance of three of Mr Houghton’s witnesses was a material change in circumstance.
  4. As the evidence was almost complete, the application had been made far too late for the court’s normal wish to encourage settlements to have been negated.

Morgan J. agreed and dismissed the application, saying:

“I think that the philosophy exists that where a claimant decides to take his chances with the trial and then repents of his earlier decision to turn down the offer of settlement because the trial, he thinks, is going less well or more badly than predicted, that the court will often take the view that it is not right to give permission to impose a settlement on the reluctant defendant.

“Taking that approach does not mean that permission will never be given. In the course of argument, examples were given of when permission would be appropriate, but those examples do not apply to this case.

“Having endeavoured to assess the points in play, my overall conclusion is that the just result here is to refuse permission to the claimant to accept the part 36 offer.”

The judgment is the only authority on this point in relation to the new version of CPR r.36.11(3)(d). 

Fortunately for the Defendants they did not come to rue their decision. The trial of the main claim continued and Murray Rosen QC dismissed all the claims, describing some of them as “so fantastic as to verge on the delusional.”

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