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.


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 claimant's application, the defendant filed its own application for a stay of the proceedings and/or alternatively a stay of the judgment to enable it to arrange a restructuring deal or an M&A deal to avoid potential insolvency. The defendant's solicitors had also written to the claimant's solicitors agreeing that judgment be entered in the sum of £48,448,059, meaning the claimant had 'beaten' its Part 36 offer by some £158,059 (equivalent of 0.3% of the claim).

The High Court approved the claimant's application for summary judgment, but the defendant contended at the hearing that the claimant's Part 36 offer was not a genuine attempt to settle and it would be unjust to make any interest or costs consequences in accordance with CPR Part 36. The defendant referred Mr Justice Zacaroli to case law, as authority for the proposition that a Part 36 offer must contain some genuine element of concession to be effective, and a settlement, which was all take and no give could not be a settlement at all.

Mr Justice Zacaroli held that the critical question was not a mathematical one in relation to the proportion of the discount, but whether it was possible to infer from the size of the discount that there was no genuine attempt to settle. Mr Justice Zacaroli noted that there was no quantum dispute, no valid defence had been raised and that with no prospect of failure on the part of the claimant, the discount presented involved the claimant giving up something that it had a near certainty of obtaining. Mr Justice Zacaroli accepted that the discount was a very small amount in comparison to the principal sum. But in circumstances where the claimant had a near-certain chance of success, then an offer to settle, on the basis that the claimant forego an amount equal to interest or costs, is still capable of being characterised as a genuine offer of settlement.

Mr Justice Zacaroli appreciated that circumstances beyond the defendant's control had prevented it from paying the Part 36 sum and it had not 'fought on' in the hope of beating the offer, which would have made it unjust to apply some of the CPR 36.17(4) orders. However, it was not unjust to allow the claimant the full benefit of the Part 36 offer and to require the defendant to pay both the claimant's legal costs on an indemnity basis and interest on the principal sum at the rate of 8% per annum from the end of the relevant period to the date of judgment, as the defendant could have agreed to judgment being entered earlier.


The case highlights once more thecfantastic tactical advantage of using Part 36 offers even in circumstanceswhere the defendant's defence has no real prospects of success and payment is not forthcoming. In circumstances, where the claimant has a near-certain chance of success, offers to settle on the basis that there is a waiver of an amount equal to interest or costs is capable of being characterised as a genuine offer of settlement under CPR Part 36, and the costs consequences should apply.

The court did not impose the full rigour of Part 36 in terms of making a 'bonus' payment under CPR 36.17(4)(d) as it appreciated that the defendant had a genuine inability to pay namely by reason of its insolvency and requirement to restructure its business. Parties making summary judgment applications should bear in mind the considerable upsides of a Part 36 offer being effective, including the increased recoverability of costs and interest and should consider making such offers more readily, particularly where the prospects of success on the summary judgment application are high. The case is also a warning for defendants who continue with indefensible claims, the courts can and will penalise such conduct in appropriate circumstances, increasing a parties' liability; although the judge in the present case did give some credit to the defendant, saying: 'This is not a case where [the defendant] fought on in the hope of beating the Part 36 offer.'

For further information on Part 36 offers, please contact John Quicler.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.