Client Alert: Part 36 Offers – A Spring Clean?

Counter claims and Appeals - A party may make it clear that Part 36 applies to the whole or part of a claim to include specific issues, heads of loss, counterclaims, additional claims, appeals, cross appeals and detailed assessment.

The clarification allows all parties to take advantage of the cost consequences of making a Part 36 offer when pursuing a claim whether that is a Part 20 claim, an appeal or an assessment of costs.

Split Trials and Part 36 offers – New definitions have been introduced under CPR 36.3 as follows

• A “trial” means, “any trial in a case whether it is a trial of all issues or a trial of liability, quantum or some other issue in the case;”
• a trial is ‘in progress’ “from the time when it starts until the time when judgment is given or handed down;”
• a case is ‘decided’ when “all issues in the case have been determined, whether at one or more trials;”

CPR 36.12 provides that any Part 36 offer that relates solely to an issue that has been determined can no longer be accepted.

CPR 36.16(3)(d) provides that although the case may not have been decided, there is no restriction on disclosing to the court the offers in relation to issues that have been decided.

The old rules set out that the fact a Part 36 offer has been made must not be communicated to the trial judge “until the case has been decided”.

This means that the court may have to determine entitlement to costs of the issue in ignorance of Part 36 offers that may bite. The old rules allowed acceptance of Part 36 offers after determination.

The new rules address these difficulties. Offers can no longer be accepted after the issue has been determined. The court can now be shown the Part 36 offers that related only to the decided issues. There is plainly no mischief in this since those issues will have been decided. Furthermore disclosure of these offers might allow the judge to give effect to the Part 36 offer.

Although most of the provisions of the new Part 36 will apply only in relation to offers made from 6 April onwards, the rules relating to offers in split trial cases will apply where the split trial starts on or after that date, even if the offer was made before it.

Form of offer – Part 36.5 removes the need for a valid offer to “state on its face that it is intended to have the consequences of Section I of Part 36”

The offer need only state that it is made pursuant to Part 36.

This avoids an issue of an otherwise valid offer being found not to be a Part 36 offer.

Automatic withdrawal of offer – Part 36.9(4)(b) specifically provides that a Part 36 offer may be automatically withdrawn in accordance with its own terms.

This reverses the decision in C v D and effectively allows “time bomb” Part 36 offers to be made.

Genuine offer to settle - In considering whether it would be unjust to impose the normal costs consequences of failing to beat the claimant’s Part 36 offer the court must consider whether the offer was a genuine attempt to settle the proceedings. [Part 36.17(5)(e)]

The new rule seeks to address the perceived difficulty of claimants being able to obtain the costs benefits of Part 36 where they have made very high offers.

Whilst it must be considered it does not prevent the court from imposing the additional consequences of

(a) interest on the damages awarded
(b) costs on the indemnity basis
(c) interest on those costs
(d) award of an additional amount of damages

This is paltry recognition that the pendulum has gone too far.

Fixed apply – under the rules the starting off point appeared to be standard basis costs.

Under the new rules the position is clarified. Where a claimant accepts a Part 36 offer and their claim is within a fixed costs regime, they will not be awarded costs on the standard basis.

Part 36 and failure to file a costs budget – Where a party had been limited to court fees there was little or no incentive to make a Part 36 offer under the old rules.

From 6 April if the defaulting party is successful they will be able to recover 50% of their costs assessed without regard to that limitation and any other recoverable costs. Costs before the date of the default will not be caught by this limitation.