Make No Mistake About It: Part 36 Is Compatible With The Doctrine Of Mistake

• Published date: 24 January 2022
• Subject Matter: Litigation, Mediation & Arbitration, Personal Injury
• Law Firm: Gatehouse Chambers
• Author: Ms Charlotte Wilk

The recent decision in O'Grady v B15 Group Limited [2022] EWHC 67 (QB) clarifies that the common law doctrine of mistake is applicable to offers made under CPR Part 36. Surprisingly, this issue had not been addressed directly by the courts or the Rules Committee. In O'Grady, Master Thornett held that nothing about Part 36 being a self-contained code, or existing authority excluded the applicability of mistake where obvious errors had been made.

The legal conundrum

The primary issue in O'Grady is the question as to whether the common law principle of unilateral mistake is consistent with CPR Part 36. The doctrine of unilateral mistake arises where one party is mistaken and the other party knows (or ought to have known) of the mistake. If the mistake is fundamental to the contract, the contract can be voided.

Hartog v Colin & Shields [1939] 3 All ER 566 is an example of the principle and is part of the 'snapping up' line of case law. In Hartog the defendants mistakenly offered Argentine hare skins at price per pound, rather than per piece; it was held that as previous negotiations between the parties (as was customary) were based on price per piece, the mistaken offer did not represent the defendants' true intentions and was therefore void.

In O'Grady, the offeror sought to rely upon this common law doctrine and argued that it can be imported into CPR Part 36; if a party inadvertently makes a Part 36 offer for an incorrect sum, and that offer is snapped up by the offeree, the offeror should be entitled to renege pursuant to CPR 36.10.

The self-contained nature of the Part 36 costs regime was expressly enshrined in CPR 36.1(1), which codified Flynn v Scougall [2004] EWCA Civ 873; [2004] 1 W.L.R. 3069 whereby it was stated that Part 36 payments, and therefore offers, were not contractual, but procedural.

Gibbon v Manchester City Council [2010] EWCA Civ 726 involved combined appeals concerning the interpretation of CPR Part 36, and specifically, the question of whether Part 36 embodies a self-contained code or whether it engages the usual principles of offer and acceptance. It was established that whilst basic concepts of offer and acceptance underpin Part 36, this is inevitable because contracts form part of the landscape of everyday life; however, Part 36 is 'to be read and understood according to its terms without importing other rules from general law, save where that was clearly identified'.

Similarly, Mr Peter Prescott QC's judgment in Orton v Collins...