Defendants to litigation have historically been able to make a payment into court, in order to pressure the claimant to settle – know as a Part 36 payment. The defendant made its best estimate of the likely damages it would be expected to pay if it were to lose at trial and paid the amount into a bank account operated by the Court. The claimant could either accept the sum offered - bringing the lawsuit to an end - or gamble that the trial judge would award more than the sum paid in, and proceed to trial.
Claimants awarded at trial less or no more than the amount paid in by the defendant, were liable not only for their own costs of the trial but also those of the defendant.
Among the ranks of claimants who have guessed wrong is Coronation Street star William Roache, who rejected a £50K payment by The Sun in a libel action, was awarded exactly £50K at trial and was subsequently bankrupted by the ensuing bill for his own, and The Sun’s costs.
Significant changes signal the end of the payment into court system and enable both parties to make binding offers of settlement without paying money up front, increasing pressure on parties to settle or risk costs consequences. The Civil Procedure Rules (Amendment No.3) 2006, which came into force on 6 April 2007, mean that a defendant no longer needs to pay money into court to make a binding offer under CPR Part 36, but can simply make a written offer of settlement. There are however concerns that unscrupulous or cash-poor parties may abuse the system since defendants no longer have to "put their money where their mouth is” at an early stage.