Hawley and Luminar Leisure Plc

Part 36 of the Civil Procedure Rules 1998 operates alongside ordinary contract law. An unaccepted Part 36 offer may be withdrawn, and an explicit withdrawal before acceptance ends its availability. An offer made shortly before an appeal hearing also carries an implied temporal limit: it cannot validly be accepted after the hearing has ended and judgment has been reserved. The Court left open whether a counter-offer rejects a Part 36 offer and whether such an offer lapses after a reasonable time. The rules permit offers in other forms, leaving the court to control whether Part 36 consequences follow. The application to accept the withdrawn offer was dismissed.

The claimant had sued the owners of a nightclub after being assaulted by a doorman supplied by a security company. The High Court held that the owners controlled the doorman’s activities, deemed them temporary employers, and held them liable. It also made findings concerning the security company’s insurance cover and a default judgment.

While appeals and a cross-appeal were pending, the insurers made a Part 36 offer proposing an equal division of liability. The owners made counter-offers, and the insurers expressly withdrew their offer during the appeal hearing. The owners purported to accept it after the hearing had concluded and sought a stay, a declaration of valid acceptance, and permission to accept under the Civil Procedure Rules 1998. The central issue was whether the offer remained open after the withdrawal, the hearing, or the parties’ counter-offers.

The Court of Appeal dismissed the application. The substantive appeals had already been heard by another division of the court, but the present application concerned the alleged acceptance of a Part 36 offer.

1. Part 36 is a procedural code which operates alongside ordinary contract law. In Utaniko Ltd v P & O Nedlloyd BV (No. 2) [2003] EWCA Civ 174; [2003] 1 Lloyd’s Rep 265, the reference to a trial in the appellate context was treated as meaning the hearing of the appeal. Scammell v Dicker [2001] 1 WLR 631 confirmed that an unaccepted Part 36 offer may be withdrawn under ordinary contract principles.

2. The insurers’ letter of 17 November was an explicit withdrawal. The offer was therefore no longer available for acceptance. If the owners were uncertain about the letter’s meaning, they could have sought clarification. If they wished to accept before the hearing ended, they could have sought a stay while applying for permission.

3. Even if the offer had remained open after the appeal hearing began, it carried an implied term that it could not be accepted after the hearing had ended and judgment had been reserved. By then the risks of the litigation might have changed materially. It would be contrary to the operation of Part 36 to permit acceptance at that stage, and the court retained power to refuse permission under CPR 36.12(2).

4. The court did not decide whether the owners’ counter-offer rejected the original offer under ordinary contract law, or whether the offer lapsed after a reasonable time or when the appeal opened. Those questions were left for a case in which they arose directly. Hyde v Wrench (1840) 3 Beav 334 at 337 and Norfolk County Council v Dencare Properties Ltd were considered in that context.

5. The argument that the offer was invalid because it omitted the warning required by CPR 36.5(7) was unattractive. CPR 36.1(2) permits offers in any chosen form and gives the court power to determine whether Part 36 consequences should follow. Mitchell v James [2002] EWCA Civ 997; 1 WLR 158 explained the intended treatment of costs terms.

The application was dismissed for the reasons in paragraphs 28 and 29.

1. Court of Appeal (Civil Division): A different division heard the first defendants’ appeal and the third defendants’ cross-appeal on 16 and 17 November 2005. The present division heard the Part 36 application on 16 December 2005 and dismissed it.
2. High Court of Justice, Queen’s Bench Division: Wilkie J tried preliminary issues on liability and delivered judgment in January 2005, holding the nightclub owners liable and making findings concerning insurance cover and a default judgment.