Dilapidations claim: cost of failing to accept a Part 36 offer

The defendant will be counting the cost of not accepting a Part 36 Offer following the decision in Coldunell Ltd v Hotel Management International Ltd [2022] EWHC 3084 (TCC), which followed judgment for the claimant for dilapidations of £597,111 in May 2022. A Part 36 offer by the claimant of 2 July 2019 offered to accept the sum of £495,000. It was expressed to take account of any counterclaims – including a costs order of June 2016 in earlier lease renewal proceedings – and was inclusive of interest until the period for acceptance had expired after which 8% per annum was claimed. It also claimed the benefit of CPR 36.17 in the event that it was not accepted and the claimant obtained a judgment equal to or more advantageous than the offer, namely, that the defendant pay: (i) the claimant’s costs; to expiry of the period for acceptance of the offer on the standard basis; and from expiry of that period onwards on an indemnity basis; (ii) interest on the costs at 10% above base rate; and (iii) an additional amount of 10% of the first £500,000 and 5% on any sum above that to a maximum of £75,000. The court dismissed the defendant’s challenge that the offer was outside the scope of Part 36 because it took account of the claimant’s liability for costs under the June 2016 order. Both parties recognised that the liability for those costs needed to be set off against the defendant’s liability to the claimant in these proceedings. As long as an offer meets the requirements of Part 36 it can be made in any way a party chooses. The liability under the 2016 costs order was ascertainable by reference to the defendant’s cost budget in those proceedings and so did not impact the question of whether the claimant had achieved a judgment at least as advantageous as the offer. The offer was clearly expressed to settle the claim, including any actual or proposed counterclaims, and its terms were perfectly clear and understood by the defendant who did not seek any clarification in respect of it. CPR Part 36.7 provides that a Part 36 offer is made when it is served and anything less than formal service under CPR Part 6 is unlikely to suffice. The offer was served by e-mail but the defendant’s solicitors had not consented to service by such method under CPR PD6A. However, the failure did not invalidate the offer unless the court so ordered (London Trocadero (2015) LLP v Picturehouse Cinemas Ltd [2021] 4 WLR 143). The court validated the service of the offer under CPR Part 3 because it was e-mailed to the solicitor with the conduct of the case on behalf of the defendant throughout the proceedings, who expressly rejected it, and the defendant had suffered no prejudice as a result of receiving the offer by e-mail. The defendant ought to have accepted the offer and the court considered it just to make the orders sought by the claimant under CPR 36.17. It awarded interest on the judgment sum and costs at 5% and an additional sum of £32,914. Louise Clark is a property law consultant and mediator