In Robert Colicci & Others v. Nora Grinberg & Another,[1] the High Court of England and Wales confirmed that a Part 36 offer containing a term that the court would not have been able to order (in this case, a payment to the defendant in exchange for the transfer of shares) was a valid Part 36 offer.
Background
The case concerned shareholding in a company established by Ernesto Colicci and his former wife, Josephine Colicci. In a deed dated 1 June 2016, Ernesto and Josephine had covenanted that any shares still held in the company when they died would pass to their children, and that they would each make wills to that effect. Ernesto did not comply with that promise and instead made a will leaving his shares in the company to his second wife, Nora Grinberg.
When Ernesto died, Josephine and her two children brought a claim against Grinberg seeking a declaration of the children’s beneficial ownership and a transfer of the shares to them. Grinberg resisted the claim. However, it was common ground between the parties that – even if Grinberg was successful – the claimants nevertheless had a right to acquire the shares for full value in accordance with the terms of a shareholders’ agreement.
During the course of the litigation, the claimants made an offer to settle the claim, by which they offered to pay Grinberg £150,000 in exchange for Grinberg transferring the shares to the children. The offer was stated to be a Part 36 offer and contained the following provision regarding costs: ‘If this offer is accepted within 21 days (the relevant period), our clients will be entitled to be paid their costs of the proceedings (including recoverable pre-action costs) up to the date on which you serve written notice of acceptance of this offer in accordance with CPR 36.13(1), such costs to be assessed on the standard basis if not agreed’. These are the normal cost consequences of a defendant accepting a claimant’s Part 36 offer within the relevant time period.
The claimants were successful and claimed costs, including the additional amounts provided for in CPR 36.17(4).
Grinberg contested the additional sum on the grounds that she had no claim to a payment of money and accordingly argued:
- The defendant had no claim to a payment of money – unless she was successful and the court awarded her costs.
- The payment offered must therefore have been an offer in respect of her costs.
- A claimant’s offer that includes terms as to the payment of the defendant’s costs is inconsistent with Part 36.
- Where an offer contains terms that are inconsistent with the provisions of Part 36, that offer is not an effective Part 36 offer.
The High Court’s decision
The High Court started with the fact that Part 36 offers must be interpreted according to ordinary objective principles – i.e., as they would be interpreted by a reasonable person in the position of the offeree with knowledge of the relevant background. The court further reasoned that an offer of settlement which is expressed to be made under Part 36 would normally be interpreted by a reasonable person consistently with Part 36.
The court stated that the relevant background in this case is that the children claimed to be the beneficial owners of the shares, seeking a declaration and an order for transfer of the shares. That claim was resisted by the defendant, but the parties agreed that if the defendant succeeded, the claimants nevertheless had a right to acquire the shares for full value. The point of the litigation was to decide whether the claimants had to pay for the shares or not, and so, the offer was, in the court’s view, an offer to compromise that issue.
The court held that the fact that the claimants’ offer contained a term that the court could not have ordered after trial (i.e., payment by the claimants to Grinberg in exchange for the transfer of the shares) was irrelevant. An offer containing such a term can take effect under Part 36.
In that context, the court considered that no reasonable person would have found themselves even pondering whether the offer was an offer to pay the defendant’s costs.
Accordingly, the court concluded that the offer was a valid Part 36 offer.
Takeaway
Part 36 is an extremely useful tactical tool – as the possibility of being subject to a significantly enhanced costs award can be effectively leveraged to achieve a settlement with even the most recalcitrant of parties.
Judgments relating to Part 36 are usually concerned with emphasising the importance of offering parties strictly complying with the provision of the part in order to secure its benefit. This case is a useful reminder that, while strict compliance is vital, offering parties may nevertheless be creative with the terms of the offer made.
[1] [2023] EWHC 2075 (Ch).
Contributors
Alex Radcliffe