A brand new CPR Part 36 came into force on 6 April 2015, which entirely replaced the previous provisions with new numbering.
Form and content – r36.5(b)
What constitutes a Part 36 offer is now wider. Rather than having to state on the face of the offer that it is “intended to have the consequences of Part 36”, it need only “make it clear that it is made pursuant to Part 36”.
As a matter of best practice, it would be useful to state “This offer is intended to have the consequences of Part 36 and is made pursuant to Part 36”.
Withdrawal – r36.10
A notable change is the rules in respect of withdrawing and changing the terms of a Part 36 offer prior to expiry of the relevant period (i.e. 21 days after the offer was made).
The new rules provide that withdrawing or changing of the terms takes effect only upon expiry of the relevant period. An offeree may therefore validly accept an offer within the relevant period despite having received a notice of withdrawal or change.
Time bomb – r36.9(4)
The new rules now, for the first time, expressly provide for a Part 36 offer to contain terms which withdraw it automatically.
The wording allows for offers to be “withdrawn in accordance with its terms” and do therefore not limit the wording of the offer to specific dates, but also include events.
Such offers can be used strategically by defendants to put pressure on claimants in order to seek to compromise the claim as quickly as possible, possibly even pre-proceedings.
Advantageous terms – r36.9(5)
Changing the terms of a Part 36 offer to make it more advantageous to the offeree does not withdraw the original offer, but the second offer is to be treated as a new offer for the purposes of the relevant period.
Accordingly, if the offeree fails to beat both offers at trial, then the offeror will be entitled to seek the cost consequences from the date of the first order. Logistically, offerors must keep the numbers of offers made under close review and when seeking to withdraw all offers must be careful to explicitly state this refers to “all previous offers”.
Abandoned claim – r36.13(2)
Where a defendant’s Part 36 offer relates to only part of the claim and the claimant accepts that offer and abandons the balance of the claim, the claimant is entitled to its costs of the part of the claim to which the offer related.
This is an extremely useful provision to limit the defendant’s costs liability, particularly for low value personal injury claims. There may be disagreement as to its applicability given that there is usually only one cause of action, which is arguably not capable of being divided into parts. However it is hard to see how the abandoning of significant separate heads of loss would not satisfy this requirement.
Genuine attempt to settle – r36.17(5)(e)
In considering whether it would be unjust to make the usual costs order, the court must take into account whether the offer was a “genuine attempt to settle the proceedings”.
This rule is designed to discourage parties from making purely tactical offers, however there is much uncertainty as to how this will be interpreted. Court of Appeal authority has previously held that a 95% split liability offer was a genuine attempt to settle and there is no reason to suppose this rule alters this proposition. It was stated however that a 99% liability offer would not be a genuine attempt.
The issue for defendants is how to prove that an offer is not a genuine attempt to settle. Indeed this will require access to privileged information from the claimant’s solicitors which defendants are unlikely to secure. Accordingly, it will be difficult for defendants to be properly advised whether issue should be taken with a particular offer and therefore significant satellite litigation on this issue is expected.
Pre-medical offers – r36.20(6)
In a “soft tissue injury” claim (i.e. a claim made via the MOJ Portal) any pre-medical Part 36 offer will not have effect until 21 days after the defendant receives the claimant’s medical report.
This effectively prevents defendants from being proactive and making pre-medical offers in an effort to compromise claims quickly. In such circumstances, it would be better for defendants to make a Calderbank offer, albeit the costs consequences of Part 36 will be lost.
50% costs – r36.23
Where the offerer is treated as having filed a costs budget limited to court fees, it can still recover 50% of its costs assessed without reference to the limited budget where it beats an offer after the expiry of the relevant period.
This provision pushes parties to accept reasonable offers and not simply to continue to run matters to trial. In cases where the costs budget has been so limited, it would be best practice to make an earliest offer possible in order to benefit from this provision.
As can be seen above, the new Part 36 adds additional pressure on parties in a number of ways to avoid protracted litigation.
The principal architect of the new rule, Ed Pepperall QC, Chair of the Civil Procedure Rules Committee’s Part 36 Sub-Committee, has produced an annotated guide which provides useful guidance on the rules. The guide can be accessed here.