Sleaford Building Services Ltd v Isoplus Piping Systems Ltd  , Part 36 and genuine attempts to settle proceedings
In Sleaford Building Services Ltd v Isoplus Pipings Systems Ltd, the Court considered the validity of a Part 36 offer made and whether the offer was a genuine attempt to settle the claim.
The claim related to the enforcement of an adjudicators decision. In January 2023, Isoplus wrote to Sleaford demanding payment in accordance with the adjudicator’s decision, in the sum of £323,502.32. Sleaford responded indicating their intention to issue Part 8 proceedings for declaratory relief, including that the adjudicator’s decision should not be enforced. The final deadline for payment was accepted by Isoplus to be 14 February 2023.
On 23 February 2023, Isoplus disputed the contentions made by Sleaford and indicated that unless a satisfactory response was received, it would commence enforcement proceedings. On the same day, a Part 36 offer was made by Isoplus in the sum of £323,502.32, inclusive of interest. No response was received to the Part 36 offer and on 27 February 2023 , Sleaford issued Part 8 proceedings. Part 7 proceedings were issued by Isoplus on 15 March 2023.
Litigation continued until the hearing in April 2023, where the Court dismissed the Part 8 claim brought by Sleaford and gave judgement in the Part 7 claim enforcing the adjudicator’s decision. The Court awarded Isoplus £326,586.60 in damages. When accounting for accrued interest, Isoplus had beaten their Part 36 offer by £350 by proposing to forgo interest for 10 days.
Consideration was given to the extent to which Isoplus is entitled to rely on the Part 36 offer and the associated benefits of beating the Part 36 offer, and what order should be made regarding the Part 7 proceedings.
The validity of the offer
Firstly, Mr Nissen KC considered whether the Part 36 was valid and was one that Isoplus is able to rely. Sleaford argued that in the circumstances of the matter, the case was not “decided” within the meaning of CPR 36.3€ as there was an agreement during proceedings to accept the sums payable and as payment had been made since judgement was made, so the judgement cannot be said to be as advantageous to Isoplus as that contained in the offer made.
Sleaford’s submissions were rejected as Mr Nissen KC considered that the Court’s order that Isoplus was entitled to be paid was a decision, albeit not one that was opposed and as the Order following the hearing in April 2023 provides for judgement in respect of the sum awarded by the adjudicator despite the payment made by Sleaford in the meantime and the payment made by Isoplus was insufficient to cover the full amount for which Sleaford was liable.
Mr Nissen KC found that the Part 36 was a valid offer upon which Isoplus is entitled to rely.
Enforcement of Part 36 benefits
Upon clarifying that the Part 36 was valid, consideration was given to the benefits Isoplus would be entitled to receive under CPR 36.17(4). The relevant law states that the Court must order that Isoplus is entitled to the relevant Part 36 benefits unless it considers it unjust to do so.
Sleaford submitted that it would be unjust for the Court to do so. Firstly, Sleaford submitted that Isoplus made an alternative offer within their Part 36 offer letter which was accepted by Sleaford. Secondly, the Part 7 proceedings were unnecessary and should never have been issued as they were duplicative and Sleaford was only given one working day to respond to the offer. Thirdly, the purpose of the Part 36 regime is to encourage parties to make and accept sensible offers and it does not apply in circumstances where an alternative offer was made concurrently with the Part 36 offer. Finally, Sleaford suggested that the Part 36 offer was not a genuine attempt at settlement and was purely tactical.
Mr Nissen KC was not convinced by the first three reasons presented by Sleaford however, he was satisfied that it would be unjust to make the orders as set out in CPR 36.17(4) as, objectively viewed, the offer was not a genuine attempt to settle the proceedings. Had the offer been accepted, Isoplus would have received the whole of the sum awarded by the adjudicator and the only concession offered by Isoplus was to forgo interest of a period of 10 days. Mr Nissen KC accepted that in some instances, offering to forgo interest may be a valid concession however, he did not consider that to be the case here. Balance was also given to the fact that had the £350 concession be considered a genuine offer, Isoplus would have been entitled to an additional payment of £32,250.23 in addition to enhanced interest. The application by Isoplus was rejected.
This matter shows that Claimants should be cautious when making Part 36 offers for a high value when they consider the other side has no actionable defence. While consideration will be given by the Court to the entire circumstances, including the balance of the uplift against the concession made, the Court have shown they are prepared to deny any successful Claimant an entitlement to Part 36 benefits if they fail to make a reasonable concession.
It is important to discourage Claimants from simply making an offer close to the full value of the claim where it is unlikely that quantum is to be considered an issue and ensuring either an early settlement or an uplift of costs awarded and placing Defendants under considerable pressure early into proceedings. While this remains in the tactical arsenal of a claimant in such a matter, this case has given a Defendant in such a claim a shield against such tactics, albeit a rather small one.