DJM Court of Appeal Success

Author: Laura Alliss

Date: 03 May 2019

 

DJM’s Court of Appeal Success – Clarification given on CPR Part 36

Calonne Construction Limited v Dawnus Southern Limited [2019] EWCA Civ 754

Acting for Dawnus Southern Limited (now in Administration) (“Dawnus”), Laura Alliss and Philip Graham of DJM solicitors have successfully defended an appeal brought by Calonne Construction Limited (“Calonne”) challenging the validity of a CPR Part 36 offer to settle, which had been made by Dawnus in the substantive proceedings.

The substantive proceedings[1] had been brought by Calonne, an SPV set up for the specific purpose of managing the construction of a property at 12 Calonne Road, Wimbledon (“the Property”), against Dawnus who carried out shell and core works at the Property. Allegations were raised by Calonne that Dawnus had negligently undertaken works which resulted in significant water ingress some six months after practical completion. Dawnus counterclaimed for the unpaid balance of its works.

At trial, HHJ McKenna found that Dawnus had not been negligent and gave judgement in favour of Dawnus. When it came to determining costs, Dawnus sought to rely on an offer which it had made under CPR Part 36 (“the Offer”) to accept a sum lower than that which was awarded to Dawnus at trial. Calonne argued that the Offer was not a valid Part 36 offer for two reasons;

  1. The Offer was made in respect of Calonne’s claim and Dawnus’ counterclaim, which at the date of the offer had not yet been issued/pleaded. Calonne argued that a valid Part 36 offer could not take into account a counterclaim which had not yet been issued, in circumstances where the main claim had already been issued; and
  2. The Offer imposed interest following the expiry of the relevant period. Calonne argued that in order to be a valid part 36 offer, only those terms as set out within CPR Part 36.5 can be included and that the inclusion of any additional terms, such as confidentiality clauses or interest after the expiry of the relevant period, took the offer outside of Part 36.

HHJ McKenna found that the Offer was a valid Part 36 Offer and therefore ordered costs to be paid on an indemnity basis and with an increased level of interest.

Calonne appealed the decision of HHJ McKenna and argued the two same points on 11th April 2019 before the Court of Appeal. In their Judgement, Hamblen LJ, Flaux LJ and Asplin LJ, when dismissing the appeal in its entirety, provided clarification on three practical matters relating to an offer made under CPR Part 36;

  1. A defendant’s proposed counterclaim is to be treated as if it were a claim for the purposes of CPR Part 36 and therefore an offer can be made in relation to a counterclaim, before it has been pleaded;
  2.  There is nothing within CPR Part 36 which precludes the inclusion of terms in addition to the requirements set out in CPR Part 36.5. Therefore, as long as the provisions of CPR Part 36.5 are complied with, the offeror can include any additional terms as they see fit; and
  3. When determining whether or not a Part 36 offer has been beaten at trial, the trial judge is to calculate the value of the offer as at the expiry of the relevant period.

When making its final order in the proceedings, the court exercised its discretion under CPR 37.3 to order payment out of funds held by the court in satisfaction of the outstanding judgement sum, so as to allow Dawnus to pursue the director of the impecunious Calonne for a non-party costs order in respect of all of the trial costs. Although Calonne had been ordered to pay into court (as a condition of the granting of permission to appeal) the costs which had been ordered to be paid with the substantive proceedings, the Court of Appeal ordered that pursuant to CPR 37.3 the sum could be released in part-payment of the outstanding judgement sum.

This Judgement provides useful guidance to those drafting Part 36 Offers and the Judgement can be found in full here 

[1] Calonne Construction Limited v Dawnus Southern Limited [2018] EWHC 1634 (TCC)

 

 Laura Alliss - Published 3rd May 2019

 

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