Demite Limited v Hanmer Webb-Peploe & Ors

A Part 36 offer made less than 21 days before trial cannot be unilaterally withdrawn once the offeree has applied for permission to accept it. The application places acceptance under the court’s control, and withdrawal would undermine the procedural scheme and the overriding objective. When deciding whether to permit acceptance, the court may focus on the offer, its surrounding circumstances and the parties’ conduct. It need not assess the substantive merits of the litigation. The discretion as to costs is not constrained by provisions of Part 36 that do not apply to the situation. An appeal against a discretionary costs order faces a high threshold.

This was a renewed application for permission to appeal from a decision of the Vice Chancellor, Sir Andrew Morritt, at a pre-trial review on 19 October 2000. The claimant alleged conspiracy, breach of duty and breach of confidence, while the defendants pursued a counterclaim.

Less than 21 days before trial, the claimant made an offer under Part 36 to accept £114,000 from £132,000 held in a joint solicitors’ account, in settlement of its claim and the defendants’ counterclaim. The defendants applied for permission to accept it. The claimant sought to withdraw the offer only at the hearing. The Vice Chancellor held that unilateral withdrawal was unavailable after the application and granted permission, ordering the claimant to pay the costs of its claim. The central issues were withdrawal, permission to accept, and costs.

Application dismissed.

1. A proposed fourth ground was not contained in the appellant’s notice and had not been raised below. The court refused to permit it to be argued, since no sufficient interests of justice justified raising the new point at that stage.

2. Under Part 36 of the Civil Procedure Rules, the court had discretion both to permit acceptance of the offer and to determine costs. Rule 36.5.8 contemplated withdrawal but did not define the circumstances. An offer made less than 21 days before trial could not be unilaterally withdrawn once the offeree had applied for permission to accept. The offeree had done everything within its power to accept, and only the court’s formal decision remained. Withdrawal at that stage would make the application ineffective and permit tactical replacement offers, contrary to the practical operation of the rules and the overriding objective.

3. In deciding whether to grant permission, the court was principally concerned with the procedural circumstances. It could examine the offer, the surrounding circumstances and the parties’ conduct without determining the substantive merits of the claims. The Vice Chancellor therefore made no error of principle and caused no basic unfairness by granting permission.

4. The discretion as to costs was not constrained by other provisions of Part 36 which did not apply to the particular situation. The money in the joint account was not properly characterised as a payment into court. It had been placed in the joint hands of the solicitors as security for the counterclaim, while the claimant retained control over it. The claimant ultimately paid £18,000 from money which had originally belonged to it.

5. The test on appeal against a discretionary costs decision was a high one: see AEI Ltd v Phonographic Performance Ltd [1990] 1 WLR 1507 at 1523. There was no real prospect of satisfying that test, so the renewed application was dismissed.

• Court of Appeal (Civil Division): Nourse LJ refused permission on the documents. On renewal, Lord Justice Keene dismissed the application.
• Chancery Division: At a pre-trial review, the Vice Chancellor held that the claimant could not unilaterally withdraw the late Part 36 offer after the defendants had applied for permission to accept it. Permission was granted and the claimant was ordered to pay the costs of its claim, with no order as to the counterclaim costs.