C v D - time limit on a Part 36 offer
C v D in subsequent cases
Fox v Foundation Piling Ltd
Further developments

Part 36 of the Civil Procedure Rules (CPR) has been the focus of judicial consideration over the past few months. This update looks at recent decisions in this area and forthcoming reforms to this part of the CPR.

C v D - time limit on a Part 36 offer

C v D(1) came before the Court of Appeal in April 2011. C had made D an offer entitled "Offer to Settle under CPR Part 36". The offer was expressed to "have the consequences set out in… Part 36" and C stated that the offer would be "open for 21 days". D did not accept the offer within 21 days. However, three weeks before trial - and almost a year after the offer had been made - D sought to accept it.

One of the key issues for the Court of Appeal was whether the phrase 'open for 21 days' meant that the offer was time limited and therefore invalid under CPR 36. The court unanimously confirmed that an offer which is limited in time cannot be a Part 36 offer. However, on the facts the court held that C's offer was not limited in this way - in the context of the letter, the phrase 'open for 21 days' could simply mean that the offer would not be withdrawn for 21 days. The Part 36 offer had not been withdrawn by C, was still capable of being accepted by D and was therefore valid.

Significantly, the Court of Appeal stated that where it is clear from the wording of the offer that Part 36 is to be invoked, a court will consider whether the offer can reasonably be construed in a way that does not involve it being time limited. It stated that:

"The relevance… of the claimant's expressed intention to make its offer a Part 36 offer is that if there are any ambiguities in raising a question as to whether the offer does or does not comply with the requirements of Part 36, the reasonable man will interpret it in a way that is so compliant."(2)

C v D in subsequent cases

The decision in C v D was followed by the Court of Appeal in July 2011 in Howell v Lees Millias,(3) where it was referred to as being "sensible and right".

Many experts see the judgments in these two cases as an indication that the courts are keen to deter parties from taking technical points about flawed Part 36 offers and will, wherever possible, find that offers comply with Part 36. It was stated in C v D that "any ambiguity in an offer purporting to be a Part 36 one should be construed wherever possible as Part 36 compliant".(4)

However, two recent decisions of the lower courts show that there are limits to how far the courts will go in construing offers as being compliant with Part 36, particularly where there is a clear failure to adhere to the requirements of Part 36.

In June 2011, in Carillion JM Ltd v Phi Group Ltd,(5) the High Court held that even where an offer is described as a Part 36 offer and is intended to have Part 36 consequences, it will fail if it does not specify a period of at least 21 days within which the defendant will be liable for the claimant's costs if the offer is accepted. It was stated that:

"the failure to spell out a 21-day [period] is an important one because it provides not only a timetable within which the offeree needs to accept the offer but also points the offeree to the costs consequences of accepting it."(6)

Also in June 2011, in Shah v Elliot,(7) the court adopted the approach recommended in C v D in considering whether there was a reasonable construction of an offer which was clearly intended to be a Part 36 offer that did not involve it being time limited. However, in this case it was held on the facts that although certain passages in the offer letter pointed to the fact that the offer might not be time limited, it was not a valid Part 36 offer because it failed to state that it was intended to have Part 36 costs consequences - in fact, the proposed costs consequences were inconsistent with those specified in Part 36.

Fox v Foundation Piling Ltd

In Fox v Foundation Piling Ltd(8) the Court of Appeal considered the situation in which a claimant and a defendant have both made Part 36 offers, both of which have proven to be over-optimistic. In its judgment in July 2011, the court confirmed that in such a case, where the claimant recovers more than the defendant has previously offered to pay, but less than the claimant has previously offered to accept, the claimant should be regarded as the 'successful party' under CPR 44.3(2), the rationale being that "the claimant has been forced to bring proceedings in order to recover the sum awarded. He has done so and his claim has been vindicated to that extent".(9)

The court also confirmed that in awarding costs, the starting point will be that the successful party should recover its costs from the other side under CPR 44.3(2). However, the next stage is "to consider whether any adjustment should be made to reflect issues on which the successful party has lost or other circumstances".(10) These "other circumstances" can include costs that the unsuccessful party was forced to incur by the unreasonable conduct of the successful party.

Further developments

Proposals to reform Part 36 largely centre around CPR 36.14 and the costs consequences of failing to beat an opponent's Part 36 offer at trial. The existing rules provide as follows:

  • If a defendant makes a Part 36 offer and the claimant does not accept the offer, but fails to obtain a more advantageous judgment at trial, the court will order the claimant to pay the defendant's costs from the date on which the relevant period expired, plus interest on those costs. However, the defendant is to pay the claimant's costs before that date.
  • If a claimant makes a Part 36 offer which is not accepted by the defendant and the judgment against the defendant is at least as advantageous to the claimant as the offer, the court can order the defendant to pay the claimant's costs on an indemnity basis from the date on which the relevant period expired, plus interest on those costs and on all or part of any sum awarded (excluding interest on that sum) at a rate of up to 10% above the base rate.

The issue of what amounts to a 'more advantageous judgment' was considered in Carver v BAA plc,(11) where the Court of Appeal held that all circumstances must be taken into account in determining whether the final outcome of a case is more advantageous to a claimant than the acceptance of a defendant's Part 36 offer. The decision was widely criticised by many, including in the Jackson Report on civil litigation costs, for introducing an unwelcome degree of uncertainty into the Part 36 regime.

However, in Fox v Foundation Piling Ltd it was confirmed that the effect of Carver v BAA will be reversed by a new CPR 36.14(IA) from October 1 2011. The rule will be that where a money offer is beaten at trial, by however small a margin, the Part 36 costs consequences will apply.

Another proposed change was set out in the government's response to the report, where it was stated that Part 36 would be amended to equalise the incentives between claimants and defendants to make and accept reasonable offers. The precise changes to Part 36 are yet to be finalised and are not expected to take effect until late 2012, but it is proposed that an additional penalty (equivalent to 10% of the value of the claim) will be payable by a defendant which rejects a claimant's offer and fails to better it at trial.

In Fox v Foundation Piling Ltd, commenting on the "large number of authorities" which have "accumulated"(12) on the provisions of Part 36, by Lord Justice Jackson stated that Part 36 is "intended to provide a clear and simple framework within which parties can settle litigation". It is hoped that the proposed reforms will resolve the ambiguities created by case law so that parties in litigation can be confident of the effect and consequences of Part 36 offers.

For further information on this topic please contact Helen Fairhead at Reynolds Porter Chamberlain LLP by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email ([email protected]).


(1) [2011] EWCA Civ 646.

(2) Id, Lord Justice Rimer at Paragraph 75.

(3) [2011] EWCA Civ 786.

(4) Id, Paragraph 84.

(5) [2011] EWHC 1581 (TCC).

(6) Id, Paragraph 18.

(7) [2011] EW Misc 8.

(8) [2011] EWCA Civ 790.

(9) Id, Paragraph 46.

(10) Id, Paragraph 47.

(11) [2008] EWCA Civ 412.

(12) Paragraph 36, [2011] EWCA Civ 790.