The common law defence of tender before claim is a defence that, before the claimant commenced court proceedings, the defendant had unconditionally offered the amount due to the claimant.
In order for the defendant to rely on this defence, he must comply with Civil Procedure Rule 37.2, which requires the defendant to make a payment into court of the amount he says was tendered, failing which the defendant cannot rely on the defence until the payment is made.
The defence does not, however, apply where the claim is for unliquidated damages (Greenwood v Sutcliffe [1892] 1 Ch. 1, 10). This was challenged by the defendants in the recent Court of Appeal decision of RSM Bentley Jennison v Ayton [2015] EWCA Civ 1120.
The claimant’s solicitors sent a pre-action protocol letter to the defendants’ solicitors demanding that the defendants ‘compensate [the claimant] for his loss of £100,025 plus interest and his legal costs’. The defendants’ solicitors replied by attaching a cheque for the sum of £103,576.56 which represented the amount claimed plus interest.
The claimant then issued proceedings in which it claimed an additional £37,000 and other damages. In the defence, it was argued that the defendants had returned the amount initially claimed by the claimant and had paid the amount into court pursuant to CPR 37.2.
The defendants’ subsequent strike out/summary judgment application was dismissed by the master, who accepted the claimant’s submission that the defence of tender before claim was not available in the case of a claim for unliquidated damages – and held that the position had not been altered by the CPR.
The defendants also lost a subsequent appeal before Judge Robert Owen QC. The matter eventually came before Lord Justice Underhill (pictured) in the Court of Appeal.
Common law position
Underhill LJ began by considering the common law position. He noted that in Davys v Richardson (1888) 21 QBD 202 the court was concerned with the circumstances in which, under Order XXII rule 5 of the then rules, a ‘payment into court… made with a defence setting up a tender of the sum paid’ could be taken out of court by the plaintiff. One of the issues was whether the payment into court made in that case fell within the terms of the rule. It was held that it did not because the claim in the action was one for unliquidated damages.
This position was reaffirmed by the Court of Appeal in John Laing Construction Ltd v Dastur [1987] 1 WLR 686. That case concerned a road traffic accident in which the claimants claimed the fixed amount of £137.85 (representing cost of repair and loss of use) plus costs in the sum of £28.80. The defendant’s insurers sent a cheque for £137.85. That was rejected by the claimants, who wanted their costs. They issued proceedings claiming ‘damage and loss’ quantified in the sum of £137.50, together with interest.
The defendant did not explicitly plead a defence of tender but paid into court the full £137.85 plus the claimed amount of interest; and the case proceeded on the basis that the defendant should be treated as having advanced a plea of tender. The county court judge rejected the defence on the basis that the original tender did not include interest.
Parker LJ, with whom Bingham LJ agreed, rejected that reasoning when he stated: ‘The plaintiffs, however, seek to uphold the judgment on the simple ground that the claim is one for unliquidated damages and that in such cases the defence of tender is not available at all.’
Parker LJ observed that the defendant accepted that, but that it was the defendant’s case that the position was altered by Order 1, rule 10 of the County Court Rules, which read: ‘A claim in an action for the cost of repairs executed to a vehicle or to any property in, on or abutting a highway in consequence of damage which it is alleged to have sustained in an accident due to the defendant’s negligence shall, unless the court otherwise orders, be treated as a liquidated demand for the purposes of these rules.’
The defendant argued that this meant that the defence of tender was available in respect of the claim of £137.85. Parker LJ rejected that argument. He held that even if the claim was solely for cost of repairs, the rule would not apply because the rule ends with the words ‘shall, unless the court otherwise orders, be treated as a liquidated demand for the purposes of these rules’.
The defence of tender is a common law substantive defence and the rules could not amend the substantive law. Furthermore, the rule itself gave the court a discretion to allow or disallow a substantive common law defence.
Has the common law position been altered by the CPR?
The defendant in Ayton relied upon the definition of the phrase ‘defence of tender before claim’ which appears in the glossary to the CPR (CPR 2.2(2)). The definition reads: ‘A defence that, before the claimant started proceedings, the defendant unconditionally offered to the claimant the amount due or, if no specified amount is claimed, an amount sufficient to satisfy the claim.’
However, although the phrase appears in the body of the rules only in Part 36 (Offers to settle – see rule 36.16(3)(a)), and Part 37 (Payments into court – see rules 37.2(2)) it does not appear in Part 16 (Statements of case). It was Underhill LJ’s opinion that the definition in the glossary appeared ‘to represent a deliberate attempt by those responsible for the drafting of the Civil Procedure Rules to expand the scope of the defence of tender before action so as to cover claims for unliquidated damages, though it seems a decidedly oblique way of doing so’.
His lordship went on to note that the introductory commentary to Part 16 in the White Book (paragraph 16.0.1) identifies one of the differences from the old rules of the Supreme Court as being that: ‘The defence of tender before action… is available in response to claims for damages as well as debts.’
Underhill LJ went on to explain that, in the law generally, the expression ‘defence of tender before action’ means a defence that the defendant has already tendered the liquidated sum claimed. It is true, Underhill LJ stated, that the rules refer to ‘defence of tender before claim’, but it is arguable that that purely verbal change is not enough to get round the purpose of rule 2.2(2).
Underhill LJ’s decision reaffirms the long-established principles concerning the defence of tender before action. It is a defence from the common law which is unaltered by the CPR. It is a defence which does not apply to a claim for unliquidated damages. Defendants would be wise to establish the type of damages claimed by the claimant before seeking to invoke the defence and before making payments into court.
Masood Ahmed, University of Leicester. Solicitor Farah Khan contributed to this article
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