The rules governing offers to settle under Part 36 of the Civil Procedure Rules 1998 (CPR) were amended on 6 April 2015. The changes affect all parties engaged in litigation, and are therefore of particular relevance to retailers and insurers facing claims.
Kendrah Graham, retail claims lawyer, provides an overview of the changes introduced by the Civil Procedure Rules Committee so that you can continue to take advantage of the protection that Part 36 can provide.
Part 36 contains a set of rules aimed at encouraging parties to settle their disputes. It imposes sanctions where a party refuses an offer to settle made under Part 36 but then seeks to accept the offer much later, or fails to get a better result at trial.
The rules surrounding these offers can be complex, and while the rules work well in some scenarios there has also been a great deal of criticism of late.
As a consequence, Part 36 has been amended and the new provisions will apply to all offers made on or after 6 April 2015. The amendments aim to simplify the rules and clarify the ambiguity in how it is applied.
Time limiting offers
Under the current rules, an offer which limits the time it is available for acceptance cannot be a Part 36 offer. The new rule allows for an offer to be automatically withdrawn or amended after a set date or specific event.
This may encourage more strategic offers made for time limited periods, but as with any Part 36 offer, once withdrawn that offer will no longer carry the costs protection that makes Part 36 so attractive in the first place.
In matters where an offeror changes the terms of an offer to make it more advantageous to the offeree, it will be treated as a new offer. The new Part 36 states that these offers ‘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’. This means that the original offer will still remain available for acceptance unless expressly withdrawn, and with it the costs protection for that offer will still apply.
This amendment aims to avoid any confusion when an improved offer is made as to whether or not the later offer stands alongside or replaces the earlier offer.
Under the current rules, if a party fails to file a costs budget in time it is treated as having filed a budget limited to court fees only. In these circumstances, there is little incentive for an opponent to settle in the face of a Part 36 offer from a party in default as their costs risk would be minimal.
The amendments address this difficulty by providing that a party who fails to file a costs budget in time will, for the purposes of Part 36, be able to recover 50% of the costs that would otherwise have been recoverable had they complied. In other words, they will not be limited to court fees only. However, this will only apply to costs incurred from expiry of the relevant period. Where it is the claimant in default and the offer is accepted within the relevant period the new rule does not allow the claimant to avoid the limitation to court fees.
The new provisions will scrutinise whether an offer is a genuine attempt to settle. This amendment aims to avoid tactical offers being made simply to secure a costs advantage, such as claimant offers for the full value of the claim. Under the new Part 36, only genuine attempts to settle will afford the offeror cost benefit.
Part 36 offers can be made in appeal proceedings, and the new provision clarifies exactly how it will apply to appeals. A Part 36 offer made in the initial proceedings will carry costs consequences only for the proceedings in which it was made, and these consequences will not carry over to the appeal. For a Part 36 offer to affect the costs of the appeal, a fresh Part 36 offer will need to be made.
A lot of case law has highlighted the difficulties which arise from the application of Part 36 in the context of a split trial or trials of preliminary issues. The new provisions allow the judge to be told of the existence of, but not the terms of a Part 36 offer after judgment has been given on a preliminary issue (unless the Part 36 offer relates only to the issues that have been decided). The parties cannot reveal to the court any details of Part 36 offers which relate to the remaining unresolved issues which would include global offers to settle although they can confirm an offer does exist.
The new provisions confirm that Part 36 will apply to additional claims and counter claims. The counter claimant making an offer will be able to rely on the consequences applicable to claimants’ offers, including the entitlement to costs if the offer is accepted.
Overall it appears that the Civil Procedure Rules Committee has addressed many of the issues that had arisen with Part 36. They have also improved the flexibility of the rules to deal with more complex issues however is Part 36 now more complex than it ever was? Regardless, it is imperative that anyone making Part 36 offers ensures that the offer complies with the new rules if they do not want to fall foul of the protection it affords.