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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Demite Ltd v Hanmer Webb-Peploe & Ors [2001] EWCA Civ 106 (25 January 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/106.html Cite as: [2001] EWCA Civ 106

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(The Vice Chancellor)

		Royal Courts of Justice Strand London WC2 Thursday, 25th January 2001

Thursday, 25th January 2001

1. LORD JUSTICE KEENE: This is a renewed application for permission to appeal against the decision of the Vice Chancellor, Sir Andrew Morritt, on 19th October 2000, permission having been refused on the documents by Nourse LJ. The applicant is the claimant in the proceedings.

2. The decision in question was made on a pre-trial review of a claim and counterclaim. In broad terms, the claimant alleged conspiracy, breach of duty and breach of confidence against the first three defendants and sought damages, declarations and accounts against various of the defendants. The counterclaim sought damages amounting to £131,000 in all. On 17th December 1999 the claimant paid a sum, which became in due course £132,000, into a joint account in the name of its solicitors and those of the defendants' solicitors. The trial was then fixed for 6th November 2000. On 16th October 2000 the claimant's solicitors made a Part 36 offer to the defendant's solicitors. The crucial part of the letter states:

"Our client will accept, in settlement of its claim, and taking into account your clients' counterclaim, "£114,000 of the £132,000 (together with the proportionate interest accrued) held in the joint names of Farrer & Co and Pritchard Joyce & Hinds.

Our client's offer to accept the above is in settlement of all its claims (save, of course, its claim for costs) and all your clients' Counterclaim in these proceedings."

2. This offer was being made less than 21 days before the start of trial. The letter rightly stated, as required by the Civil Procedure Rules rule 36/5/7, that the defendants might only accept the offer if (a) the parties agreed liability for costs, or (b) the court gave permission. Some clarification was then sought and obtained by the defendant's solicitors as to what was being proposed on costs. That was not agreed, but on 17th October, by fax, the defendants' solicitors stated that their clients had decided to ask the court for permission to accept the offer. On 18th October an application notice was duly issued seeking such permission.
3. At the hearing the Vice Chancellor recorded that it was common ground that, under the rules, the court had a discretion, first, whether or not to give permission to accept and, secondly, if permission was given, what order for costs should be made. However, the claimant at the hearing applied to withdraw the offer. I note that it is accepted by Mr Lord, who has appeared this morning on behalf of the applicant, that no attempt to withdraw the offer had been made before the hearing.
4. The Vice Chancellor held that it was not open to an offeror in the case of an offer made less than 21 days before trial to withdraw his offer unilaterally, at least not once the application for permission had been made by the offeree. He went on to grant permission to the offeree to accept the offer. He then ordered the claimant to pay the costs of their claim, but with no order as to the costs of the counterclaim.
5. In the appellant's notice a number of grounds are advanced. Mr Lord has helpfully condensed those into what he says are four grounds of appeal, but in fact one of his four, as he accepts, is not advanced in the appellant's notice, nor was it a matter which was raised before the Vice Chancellor below. In those circumstances, I have not given him leave to amend his appellant's notice; and I do not regard that ground as one which it is open to him to argue today. I can see nothing in the interests of justice that makes it appropriate that that particular new point should now be raised for the first time.
6. In effect, that leaves three grounds of appeal, one of which is a matter of law and two of which go to the exercise of discretion by the Vice Chancellor. I deal with the matter of law first.
7. It is said that the Vice Chancellor was wrong to hold that the Part 36 offer could not be withdrawn. It is argued by Mr Lord that there are clear indications in the Civil Procedure Rules that a Part 36 offer can be withdrawn. For that he refers me to rule 36.5.8, which does indeed imply that such an offer may be withdrawn, though without indicating the circumstances in which that may be done. It is contended that the situation is simply a matter of contract law and that, consequently, an offer can be withdrawn at any time prior to its acceptance. Acceptance, for this purpose, in the submissions advanced by Mr Lord, means something which occurs where permission has been given by the court to accept or after agreement on costs has been arrived at. Only clear words, in the applicant's submission, could override the normal contract position as I have outlined it. There are clear words in rule 36.5.6 dealing with a different situation, that is to say where an offer has been made not less than 21 days before the start of trial. No such clear words exist in the situation with which we are dealing.
8. I accept that rule 36.5.8 does contemplate that a Part 36 offer may be withdrawn, but it does not specify in what circumstances. It is right that, if the offer is made not less than 21 days before trial, it must remain open for acceptance for 21 days. However, if the offeree does not accept that within that time period and thereafter does not apply for permission to accept, I would agree that the offer could be withdrawn. In the case of an offer made less than 21 days before trial, it is arguable that the offeror could withdraw the offer if there is no agreement on costs and no acceptance by the offeree, or if the offeree makes no application to the court for permission to accept. But I agree with the Vice Chancellor and with Lord Justice Nourse, who emphasised this point, that once the offeree has applied for permission to accept the offer, the offeror cannot then unilaterally withdraw the offer. The offer has, in effect, been accepted by the offeree subject to external control. He has done everything which is within his power to accept. All that is then awaited is the formal decision of the court whether or not to grant permission.
9. Any other interpretation would, it seems to me, place the offeree in an impossible position. He, having indicated acceptance by seeking the court's permission, would then find that the offeror could withdraw the offer which has been made and make a fresh lower offer with the possibility indeed of a series of tactical offers following. It would also mean, as Mr Lord accepts, that the offer could be withdrawn at the last minute, even indeed during the hearing itself, without the consent of the court, up to the point where the judge prepares to make his decision on the application for permission. Effectively, the ability to act in such a way would render the offeree's application to the court of no effect. To my mind that does not make sense. Moreover, it would lead to quite impractical consequences if such an offer could be withdrawn at any time before the judge gives permission when an application has been issued to seek the court's permission. This may not be provided for expressly in the wording of Part 36, but it seems to me to be clearly implied and indeed requisite for the practical application of those rules in accordance with the overriding objective. I see no prospect of success therefore on this ground.
10. The other two grounds concern the exercise of the Vice Chancellor's discretion, first, as to whether the offeree should be given permission to accept the offer and, secondly, as to costs. In respect of both of those, of course, there is a heavy burden on any applicant seeking permission to appeal against an exercise of discretion. Mr Lord contends that this was an instance where the Vice Chancellor should not have given permission. He was not in a position to assess the merits of the case, as he himself had accepted, and in those circumstances, bearing in mind that the court then had to go on to deal with costs, it was not proper for him to have granted permission.
11. I bear in mind that this was a situation where a Part 36 offer had been made and, on the conclusions which I have already reached, was open to be accepted. The offer, as the Vice Chancellor emphasised, had been made on the advice of experienced and indeed well-known solicitors. It was not a case of an offer having been put forward under some illusion or mistake, or of a litigant in person acting without an understanding of the consequences. The application for permission to accept was made by the offeree without any delay. As I have emphasised, there had been no attempt by the claimant to withdraw the offer before the hearing. The Vice Chancellor noted that the claimant opposed permission, and I quote his words, "not because of any mistake in the terms of the offer but because it was concerned that it might not accurately have foreseen the costs consequences".
12. All those points appear to be sound and valid ones. As to the point particularly pressed by Mr Lord this morning, it does not seem to me that the Vice Chancellor needed to be in a position to deal with the totality of the merits of the case, so far as the substance of the claims was concerned. In a situation where offers of this kind have been made and are being accepted, the court is principally concerned with the procedural situation. He was entitled to look at the offer and the circumstances surrounding it and to the conduct of both parties, which is what he did. I can see no error in principle in the Vice Chancellor's approach, nor any basic unfairness which results therefrom.
13. As to costs, where clearly, of course, the Vice Chancellor had a discretion, it is first said on behalf of the applicant that the judge should have looked at the rest of Part 36 so as to achieve some guidance in this matter. I am prepared to accept that in broad terms; but I do not accept that the exercise of the discretion is somehow constrained by those other provisions of Part 36 which have no application to the situation with which the court is faced. The Vice Chancellor here was, as Mr Lord says, influenced by the fact, as he saw it, that the payment of £114,000 which the claimant sought under the terms of the offer was money simply coming out of the money which it, the claimant, had paid into the joint account. Beyond that it was offering to pay £18,000 of that money to the defendants of what had been its own money. That is a categorisation which is challenged by Mr Lord. He points out that at one stage in the correspondence it was described as having been akin to a payment into court. I accept that that phrase was used, although I am bound to say that I am not sure that it was apt.
14. The circumstances in which the money was paid into the joint account are described in the Vice Chancellor's judgment at the foot of page 3. He says:

"This enabled the provisional liquidation..." in which the claimant company was at that time, "...to be brought to an end on 23rd September 1999."

15. In effect, as is accepted on behalf of the applicant, the company had to show that its creditors, amongst whom were the defendants, were adequately provided for. That money was paid into the joint account for that purpose. The claimant apparently believed that it would extinguish the liability and get the money back by succeeding on its claim; and it largely did so, says Mr Lord. Consequently, it is contended that the money in question is to be treated as if it was a payment in and was really out of the hands of the claimant, and so could not be seen to be money still, as it were, owned by the claimant. Thus here we have a situation where the bulk of it came back to the claimant under the terms of the offer which were accepted.
16. As I have already indicated, I regard the description of the mechanism by which this money was paid into the joint account as a payment in as being an inaccurate one. It was not something which could be accepted by the other side. Rather, this payment was made into the joint account so as to provide security for the counterclaim which was being made against the claimant company by the defendants. It is right that in the end the claimant got the bulk of that money which it had paid into the joint account back, but it ended up paying £18,000 out of that particular sum under the terms of the offer which was accepted with the court's permission.
17. Looked at on that basis, it seems to me that there was merit in the way in which the Vice Chancellor approached this. This was not money which the claimant company had relinquished total control over. It was money which it had put into the joint hands of both sides' solicitors, so that it was secure, pending the outcome of the case and, as a result of that, a certain sum of money, £18,000 in all, went from it to the other side.
18. The test on appeal against costs is a high one: see AEI Ltd v Phonographic Performance Ltd [1990] 1 WLR 1507 at 1523. Bearing in mind the way in which the facts of this payment ought properly to be seen, and the fact that at the end of the day the defendants obtained £18,000 out of money which had originally been money belonging to the claimant company, I cannot see that there is any real prospect of the test as set down in the AEI case being met in these circumstances. It follows that on that aspect as well this application will be dismissed.
Order: Application dismissed.