We often talk about the need for clients to carefully consider any offers that have been made in litigation, but the recent decision of Equitix Eeef Biomass 2 Ltd v Fox & Ors  EWHC 2781 (TCC) (19 October 2021) emphasises that a delay in making the decision to accept a Part 36 offer (when you are a defendant) can be a costly one. This was a case where a Part 36 offer was made on 25 January 2021. The offer was not accepted by the defendants and it was beaten at trial.
The defendants in the Equitix case argued that they were only able to make an informed assessment of the Part 36 after a second report was served on 22 March 2021 (approximately 8 weeks after the Part 36 offer had been served) and therefore the enhanced rate of interest on damages (which was a consequent on the Part 36 offer having been beaten) should run only from the March date. The court disagreed with the defendants’ argument. The court held that an enhanced rate of interest of 5.1% ran from 16 February (being the 22nd day after the Part 36 offer) to the date of payment. The court emphasised that ‘parties frequently face the pressure of a Part 36 offer without all pieces of the jigsaw in place.’
The case acts as a reminder that parties should, wherever possible, promptly respond to any Part 36 offers and make a decision based on the evidence available at the time the offer is made. A delay of 8 weeks on the face of it doesn’t sound like a lot, but where, as in this case, judgment had been given for £11million then the enhanced rate of interest payable can represent a substantial amount.
Our expert dispute resolution team at Burges Salmon are well versed in the area of Part 36 offers and will advise on the consequences of not accepting any offers which have been made.
Parties frequently face the pressure of a Part 36 offer without all pieces of the jigsaw in place. Much of the purpose of Part 36 would be lost if it were otherwise; the costs which the regime was intended to prevent being incurred, would have to be incurred before the normal consequences of the offer could flow. A well judged Part 36 offer is often based on inspired and educated guesswork, which the other party must also display when deciding whether to accept it. - Mr Justice Kerr