Maximum Value From A Part 36 Offer

• Published date: 20 October 2020
• Subject Matter: Corporate/Commercial Law, Insolvency/Bankruptcy/Re-structuring, M&A/Private Equity, Financial Restructuring, Corporate and Company Law, Insolvency/Bankruptcy, Contracts and Commercial Law
• Law Firm: Hill Dickinson
• Author: Mr John Quicler

In the recent High Court decision in Rawbank S.A. -v- Travelex Banknotes Ltd [2020] EWHC 1619 (Ch) the advantages of making a Part 36 offer even in circumstances where a defence has no prospect of success were considered.

Background

The High Court was recently asked to look at whether the claimant's Part 36 offer, which only offered a very small discount of 0.3% in relation to the principal sum and accruing interest, constituted a genuine offer to settle and to consider whether the defendant should be subject to the usual interest and cost consequences by failing to beat such an offer.

The claimant, the largest bank in the Democratic Republic of Congo, had entered into a contract with the defendant for the supply of banknotes. The claimant placed an order for $40 million in banknotes in March 2020 and transferred the purchase price of $40,048,000. The defendant upon receipt of the order confirmed the banknotes would be delivered on 23 March 2020, but concerns arose almost immediately following the international travel restrictions imposed by the COVID-19 pandemic. The defendant, despite not delivering the initial order, also indicated on 19 March 2020 that it could include a further $20 million banknotes and shipment for all ordered banknotes would arrive on 21 March 2020. Following this representation, the claimant paid the further purchase price for the additional $20 million banknotes.

By early April 2020, the defendant had still not delivered the requested banknotes and the claimant was facing the real possibility of a run on the bank. The parties entered into discussions to resolve matters, but the defendant confirmed that it could not deliver the banknotes nor provide a refund in the near future. The defendant advised that it was in serious financial difficulty and required a restructure, due to be completed by the end of May 2020.

Proceedings and Part 36 offer

The claimant, in response to the defendant's failure to deliver the requested banknotes, issued proceedings on 4 May 2020, claiming breach of contract and/or misrepresentation in the sum of $60,072,000 ('48,311,860) inclusive of interest to this date.

On the same day, the claimant made a Part 36 offer on terms such that the defendant would pay the sum of '48,290,000 in full and final settlement of the claim, exclusive of legal costs.

The claimant, following the issuing of its claim, issued an application for summary judgment and the matter came before the High Court. Following receipt of the...