Gaining Advantage Together

0330 0947777

By William Jones

Mar 12th, 2015

What's New with Part 36?

Part 36 of the CPR has been significantly amended by The Civil Procedure (Amendment No. 8) Rules 2014 (SI 3299 of 2014) which come into force on 6 April 2015 and will apply to offers made on or after that date.

Will Jones summarises the 7 key changes.

7 KEY CHANGES

1. Offers limited in time

Currently a Part 36 offer must remain open for 21 days and can only be withdrawn in writing after that period has elapsed. Unlike other offers, it cannot be limited in time at the point at which it is made.

The new CPR 36.9 (4) (b) will allow a Part 36 offer to be limited in time, providing 21 days has passed. If the offer states an expiry date, it will be treated as automatically withdrawn after this date. However, as a withdrawn offer, the automatic costs consequences will be lost and the successful party will have to make general submissions on costs under CPR44. It is hard to see any advantage in making a Part 36 offer limited in time, save where the offer is very good and the claimant may be put under pressure to accept or lose the offer. For example, where an expert’s report is awaited which may limit the claimant’s claim.

2. Additional offers

The new CPR 36.9 (5) (a) confirms that the making of a second, improved offer “shall be treated, not as the withdrawal of the original offer; but as the making of a new Part 36 offer on the improved terms”. Both offers will therefore be open for acceptance until one or the other is expressly withdrawn. However, this was the case previously so it is not entirely clear why this amendment was considered necessary.

3. Late acceptance and adverse costs

Currently, if an offer is accepted after the expiry date, the accepting party will be subject to the adverse costs consequences set out in CPR 36.1 from the end of the relevant period (normally 21 days), unless the Court makes a different order. This discretion is diluted by the new CPR 36.13 (5) which states that the Court must make an order for costs unless to do so would be unjust.

4. Claimant’s high Part 36 offers

Under the rules, costs consequences apply where a claimant has obtained judgment which is “at least as advantageous” as its Part 36 offer. However, in Huck v Robson [2002] EWCA Civ 398, an offer which equated to 95% of the value of the claim was considered valid. In AB v CD [2011] EWHC 602 (ch) the Court held that offers must be a “genuine attempt to settle”. The new CPR 31.17 (5) (e) addresses the issue of claimants obtaining automatic costs benefits in such cases by making the Court take into account “whether the offer was a genuine attempt to settle proceedings”, thus codifying AB v CD. This will no doubt lead to satellite litigation on what is a “genuine attempt to settle”.

5. Split trials

Under the existing rule, a judge is only made aware of a damages offer when the claim has concluded. This means that following the trial of a preliminary issue, the Court may have to consider whether to make a costs order in respect of the preliminary issues without knowing whether a Part 36 offer was made.

For split trials beginning after 6 April 2015, a Part 36 offer which relates to an issue determined at a preliminary hearing can be brought to the attention of the judge. Thus, costs consequences can be achieved at an earlier date. This will include offers made before 6 April 2015 providing that the split trial is after this date.

6. Appeals and counterclaims

The costs consequences under Part 36 are more favourable to claimants than defendants because as a minimum, the claimant will get their costs up until the offer is accepted. This can become confusing when a defendant brings a counterclaim or when a defendant subsequently appeals a judgment and they make a successful offer. In relation to counterclaims, CPR 36.2 (3) now confirms that for Part 36 purposes, the counterclaim will be treated as a distinct claim and the party bringing the claim will be the claimant and vice versa. Similarly, an appellant will be treated as the claimant in appeals (CPR 36.4) thus ensuring that the more favourable costs consequences will apply, bringing clarity to this area.

7. Costs budgets

If a party fails to file its cost budget in time, it is treated as having filed a budget limited to Court fees only. In circumstances where the defaulting party has made a Part 36 offer, there is little incentive for the paying party to accept, given that their exposure to costs is limited to court fees.

The new CPR 36.23 addresses this by providing that the defaulting party’s recoverable costs for the purposes of Part 36 will be 50% of the costs which would otherwise be recoverable and not limited to the court fees. However, this provision only applies to the costs from expiry of the relevant period. If it is the claimant in default and the offer is accepted within the relevant period, the claimant will not be able to avoid the limitation to court fees.

Did you Know?

Part 36 offers can be made on Part 7 claims which were originally submitted through the MOJ portal. The current Part 36 Notice of Offer refers to costs and subsequent consequences by the use of Part 36.10. In order to make a relevant Part 36 offer with fixed recoverable costs being applicable, Part 36.10A needs to be referred to. Acceptance of the offer will lead to the claimant’s solicitors receiving fixed recoverable costs, as detailed in Part 45.29, table 6B (RTA), 6C (EL) and 6D (PL).

Also, under Part 36 II (Stage 3 procedure), offers made are called ‘protocol offers’ rather than Part 36. Offers made prior to the stage 3 settlement hearing can be made with cost consequences similar to those of a traditional Part 36. To make the offer, the offering party must update the Form B and send to the court for costs consideration after the hearing. Unless an offer is made in this form, it cannot be brought to the court’s attention following the hearing, even if the claimant does not beat that subsequent offer.

<< back to news