Part 36 offer to settle "the whole of the claim" did not include claims set out in draft amended pleadings

In a recent Court of Appeal decision, a defendant's Part 36 offer to settle "the whole of the claim" (which the claimant had accepted) was construed as relating only to the pleaded claims and not the additional claims set out in the claimant's draft amended particulars of claim. However, the claimant could not bring new proceedings raising those additional claims: to do so would be an abuse of process under the so-called Henderson abuse principle, as the additional claims could and should have been raised, if at all, in the earlier action: Warburton v The Chief Constable of Avon and Somerset Constabulary [2023] EWCA Civ 209.

The decision highlights a potential trap for the unwary, as a party might assume that claims put forward in a draft amended pleading will be encompassed in a settlement resulting from the acceptance of a Part 36 offer to settle the whole of the claim. The current decision suggests that this will not be the case, applying the reasoning in Hertel v Saunders [2018] EWCA Civ 1831 (considered here) in which the Court of Appeal held that an offer relating to a proposed claim by amendment was not a valid Part 36 offer.

It is not clear, however, whether the court in the present case was referred to the subsequent decision in Calonne Construction Ltd v Dawnus Southern Ltd [2019] EWCA Civ 754 (considered here), which distinguished Hertel in finding that an offer to settle both the claim and an unpleaded counterclaim was a valid Part 36 offer - or whether that decision would have affected the court's conclusion on the construction of the Part 36 offer in this case. In light of the uncertainties, parties making or accepting Part 36 offers should ensure it is clear whether any claims which have been referred to but not yet pleaded are covered by the offer.

The decision is also of interest in applying the Henderson abuse principle to prevent a party bringing a claim that it had "raised" in earlier proceedings, in the sense of including it in draft amended particulars, but had not formally pleaded in that action. The Court of Appeal rejected the argument that the Henderson abuse principle excludes claims that were "raised but not brought" in this sense. The decision also shows that, where the earlier proceedings were settled, the court will consider the pre-settlement correspondence in considering whether there is an abuse, despite such correspondence being generally inadmissible under the "without prejudice" rule.

Background

The claimant brought defamation proceedings against the defendant police force in 2018, alleging that information it had supplied to another police force (to which the claimant had applied for a job) regarding certain allegations against the claimant was defamatory. The particulars of claim asserted that the defendant's actions were also in breach of data protection legislation, but it did not put forward a claim under that legislation. The claimant subsequently filed and served draft amended particulars of claim which included a data protection claim.

In June 2019, the defendant put forward a Part 36 offer to settle "the whole of the claim" for £10,000 "to reflect the distress your client felt in respect of breaches of the Data Protection Act 1998". It refuted the defamation claim in its entirety. In July 2019, the defendant increased the offer to £20,000, and the claimant accepted it.

In August 2020, the claimant issued new proceedings advancing essentially the same data protection claims as had been set out in the revised draft amended particulars of claim. The defendant applied to strike out the proceedings and for summary judgment in its favour.

The district judge refused the application, but the High Court allowed the defendant's appeal. It held that the new proceedings were an abuse of process. The claimant had been compensated already for the data protection claim, which was integral to the defamation claim, and the issue would not have arisen if he had brought all of his claims to court in the first instance.

The claimant appealed.

Decision

The Court of Appeal (Phillips LJ, with whom Moylan and Males LJJ agreed) dismissed the appeal.

Phillips LJ noted that the starting point is the statement of principle of Wigram V-C in Henderson v Henderson (1843) 3 Hare 100, namely that where a matter is the subject of litigation:

“the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of a matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. ...”

As explained by the House of Lords in Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1, the principle serves the public interest of ensuring that there is finality in litigation and a party is not twice vexed in the same matter. Accordingly: "The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all." The principle applies whether the earlier proceedings resulted in a court judgment or were settled between the parties.

Phillips LJ noted that, under CPR 36.5(1)(d) a Part 36 offer must “state whether it related to the whole of the claim or to part of it or to an issue that arises in it…”. He referred to Hertel in which, as noted above, the Court of Appeal held that an offer to settle a proposed claim by amendment was not a valid Part 36 offer, on the basis that the words "claim", "part of claim" and "issue" must refer to matters pleaded in the action, not merely intimated but not pleaded. He said that the corollary of that reasoning, accepted by both parties, was that a Part 36 offer to settle “the whole of the claim” must be construed as relating only to the pleaded claims, and not those set out in a draft amended pleading. Accordingly, it was common ground that the settlement in this case, resulting from acceptance of the Part 36 offer, encompassed only the defamation claim and not also the data protection claim.

The claimant argued that the data protection claim fell outside the Henderson abuse principle, as the claim was "raised" in the earlier proceedings, by being referred to in those proceedings and/or expressly set out in the draft amended particulars, even though it was not formally pleaded. He contended that, as a matter of principle, it was not abusive to pursue claims which had fairly been flagged so that the other party was aware of them.

The Court of Appeal rejected that argument. The Henderson abuse principle applied to matters which were not formally brought before the court. It was clear that by using the word "raised", the House of Lords in Gore Wood did not intend to exclude from the principle matters which had been mentioned, if they had not been brought formally before the court. It commented:

"Excluding a 'raised but not brought' claim from the scope of the Henderson principle altogether would create an unnecessary and unprincipled exception which would enable parties to bring second claims with impunity, no matter how obviously abusive and contrary to the clear public interest they might be."

The Court of Appeal also rejected the claimant's argument that, in considering the question of whether the new action was an abuse of process, the judge should not have considered the "without prejudice" correspondence leading up to the settlement of the original proceedings. It noted that communications between the parties leading up to the settlement, particularly as to the possibility of a second claim, had often been regarded as important in determining whether the second action was an abuse. The judge was, in the Court of Appeal's view, not only entitled but obliged to consider the pre-settlement correspondence, including in particular the fact that both parties had been negotiating on the basis that they would settle all claims including the data protection claim.