PART 36 of the CPR – Offers are changing

Part 36 of the Civil Procedure Rules encourages parties to settle their disputes. It does this by imposing sanctions if one party turns down an offer to settle but then doesn’t get a better result at trial. The rules are complex, so Andrew Mitchell takes a closer look at the latest changes to Part 36. 

Why change it (AGAIN)?

1. Concerns followed Thewlis v Gruopama (2012) EWHC 3 (TCC)
2. Gaps (such a split trials, counterclaims and the like)
3. The ability to alter or withdraw
4. Time-limiting offers
5. Avoiding satellite litigation
6. Having a codified “one-stop” set of free-standing rules
7. The rise of litigants in person.

Thewlis

An offer was made by the claimant in September 2008 (before issue), which was rejected in October 2008. The defendant purported to accept the offer in October 2011. The issue was whether the initial offer was a valid Part 36 offer. The alleged failures in the offer were:

1. The letter did not state on its face it was intended to have the consequences of part 36
2. It was inconsistent with Part 36 because it could only be accepted after 21 days “if we agree the liability for costs or the court gives permission”
3. The claimant responded that the whole should be considered, and Part 36 was referred to in bold in 2 places and ought to resolve ambiguity so far as possible, as complying
4. The rules required the offer to be recorded as Part 36 (36.2)
5. The offer was therefore not in Part 36 format.

The significance of the Part 36 regime

1. 36.1(1) “this part contains a self-contained procedural code about offers to settle made pursuant to the procedure set out in this part…” Part 36 is therefore intended to be a statutory procedure for settlement, complete in its own right and by itself (White Book 2015 at 36.2.2).

Key changes

1. Form of offer – CPR 36.5 replaces 36.2. This alters (1)(b) from “a part 36 offer must state on its face that it is intended to have the costs consequences…” to “a part 36 offer must make it clear…” . This does away with the uncertainty created in Thewlis.

2. Offer in counterclaims, additional claims and appeals 36.2(3) – A Part 36 offer may be made in respect of the whole, or part, of any issue that arises in a claim, counterclaim or additional claim, or an appeal or cross appeal from a decision made at a trial. The intention is to provide clarity that Part 36 can be used for counterclaims, additional claims, appeals or cross appeals.

Withdrawing or changing part 36 offers

36.9(1) – The offer can only be withdrawn or the terms changed if the offeree has not previously served notice of acceptance.

36.9(2) – The offeror withdraws the offer or changes its terms by serving a written notice of the withdrawal or change of terms on the offeree. The costs consequences at 36.17(2)

36.9(4) – Subject to (1) after the expiry of the relevant period, the offeror may withdraw the offer or change the terms without permission of the court, or the offer may be automatically withdrawn in accordance with its terms

36.9(5) – If the offeror changes the terms to make it more advantageous to the offeree, the improved offer is treated as not withdrawing the original offer but a new offer on improved terms, and the period is then 21 days or such time as specified as longer

36.10 – Where the offeror serves notice before the expiry of the relevant period of withdrawal of the offer or change in terms to less advantageous terms to the offeree. Where the the offeree has not served notice of acceptance by the expiry of the relevant period, the offeror’s notice has effect on the expiry of that period 36.10(2)(a). If the offeree serves notice of acceptance of the original offer before the expiry of the relevant period, that acceptance has effect unless the offeror applies to the court for permission to withdraw the offer or change the terms within 7 days of the offeree’s notice of acceptance or, if earlier, before the first day of the trial (36.2(b)). On application under 2(b) the court may give permission to withdraw or vary if satisfied there has been a change in circumstances since the original offer and that it is in the interests of justice to give permission.

Split trials & offers

36.12 – split trials – If there has been a split trial but the case is not decided, any part 36 relating to only parts of the claim or issues that have already been decided can no longer be accepted. Any other offer (unless the parties agree) cannot be accepted earlier than 7 clear days after the judgment is handed down in such trial. This is supposed to deal with a practical problem stemming from the old rules which envisaged a straightforward case;

36.16(3)(d) adds that the restriction on disclosure to the judge to the end of the case does not apply where although the case has not been decided, any part of issue has been and the offer relates only to parts or issues that have been decided (ie split trials and offers relating to parts).

Costs consequences following judgment

36.17 (5) (e)– Costs consequences following judgment have added that the consideration as to whether it would be unjust to make orders for up to 10% (up to £75,000) should be – “whether the offer was a genuine attempt to settle the proceedings”. This it is supposed, is to give discretion on “cynical” offers that are not “genuine”. There is currently no guidance in the White Book. In Huck v Robson (2002) 3 ALL ER 263 under old CPR 36 rules – an offer was made at 95% in favour of the claimant. The defendant offered 50:50. At trial, the defendant was held solely liable. Indemnity costs were then requested on the basis of the Part 36 at 95%. The judge held that the offer was derisory and nonsensical, as it was inevitable that it would be rejected and no court would have – or could have – ordered such a split.

On appeal, the court held that the offer would be taken into account and ordered indemnity costs. The philosophy of the rule was to encourage resolution by agreement and for the claimant there was an incentive in indemnity costs and interest. The court was not required to measure the offer against the likely outcome and accordingly the appeal was allowed. Tuckley LJ indicated that if it was “self evident”, the offer was a tactical step to secure the benefit of the incentives provided by the rules (for instance to settle at 99.439%), there would be a discretion to refuse the indemnity costs. What this will mean in practice, only time will tell.

Offers in cases of personal injury with future pecuniary loss or provisional damages

Provision is made for Part 36 offers in personal injury with future pecuniary loss (36.18) and provisional damages (36.19).

What if a cost budget has been limited to court fees?

CPR 36.23 – where the offeror has been limited to court fees – subject to such limitation, they can be 50% of the costs assessed without reference to the limitation together with any other recoverable fees.

Andrew Mitchell

Andrew has a civil practice at Park Square Barristers, specialising in personal injury, civil fraud and commercial & chancery law. Read his profile.