CPR Part 36: Payments into court and offers to settle

Historical position

Prior to Civil Procedure Rules a defendant's’s monetary offer to settle following service of proceedings had to be paid into court to obtain cost benefits. The position persisted following the Woolf reforms. A defendant could make a Part 36 offer but had to back this up with a payment into court 14 days after service of proceedings to ensure full Part 36 costs advantages.

The Maersk Colombo [2001] EWCA (Civ) 717 suggested the court maintained a discretion to treat a financial offer as having Part 36 costs benefits depending on the particular circumstances of the case.

In Crouch v. Kings Healthcare NHS Trust [2004] EWCA (Civ) 1332 and The Trustees of Stokes Pension Fund v. Western Power Distribution (South West) Plc [2005] EWCA (Civ) 854 the Court of Appeal went further confirming an offer could be treated as a payment in if the defendant could satisfy the following criteria:

  • The offer was in writing;
  • The offer was stated as being open for a period of not less than 21 days;
  • It was a genuine offer; and
  • The defendant was “good for the money”.

Changes to Part 36

In light of these decisions the Department of Constitutional Affairs conducted a consultation to explore which categories of defendant might be deemed “good for the money”. The obvious categories of defendant were public sector and insured defendants. Consultation was also taken on the possibility of removing the requirement to make any payment into court. This was the preferred option and as from 6 April 2007 defendants will no longer be required to make payments into court to obtain the costs benefits of Part 36 provided some essential criteria are followed.

To be a valid Part 36 offer, as before, the proposal must:

  • Be in writing
  • Specify it is open for acceptance for at least 21 days
  • Be called a Part 36 offer
  • Refer to which aspect of the claim it is made and whether it includes any counter-claim

The new Rules are different in that:

  • The defendant no longer has to make a payment into court following service of proceedings
  • A Part 36 offer can be stated to be open for acceptance for more than 21 days
  • It cannot be withdrawn or varied prior to expiry without the court's’s permission
  • It must state payment will be made within 14 days of acceptance if it is to be treated as a valid Part 36 offer

Other changes:

  • The Part 36 offer can be withdrawn after the 21-day acceptance period (or such other period as the offer is stated to be open for acceptance) in writing without recourse to the court. The automatic Part 36 cost consequences cannot be assumed with a withdrawn offer although the court may use its overriding discretion.
  • A new Part 36 offer will not extinguish a defendant's’s previous Part 36 offer. Should circumstances change, for example the defendant obtains more favourable evidence and a reduced offer is made, the previous (higher) offer must be withdrawn in writing to avoid it remaining open for acceptance.
  • A Part 36 offer is treated as being made when it is served on the recipient of the offer rather than when it is received.
  • Before making a Part 36 offer the maker of the offer must apply for a Certificate of Recoverable Benefits and the Part 36 offer must set out the gross compensation, the name and amount of deductible benefits which will be taken from that gross sum and the net amount of compensation to the recipient of the offer following deduction of the benefits.
  • If a CRU Certificate is awaited the maker of the offer must provide these details within 7 days of receipt of the Certificate.

Costs consequences

A major change is that the claimant will get costs benefits if at trial he matches his previous Part 36 offer, he need not beat it. In addition the revised provisions assume with such a win a claimant is entitled to interest and costs on an indemnity basis unless the court considers it would be “unjust in all the circumstances of the case” (the previous provision only said the court may order interest and indemnity costs).

Consequences for defendants - CHECKLIST

In summary, as from 06.04.07 for any Part 36 offer to be valid and to have Part 36 costs benefits a defendant must ensure the offer:

  • Is made in writing
  • Confirms to which aspect of the claim it is made
  • Is expressed to be a Part 36 offer
  • Remains open for at least 21 days
  • Is stated to be payable within 14 days of acceptance
  • Confirms CRU position and explains what amounts (if any) are to be deducted and how much the recipient will receive

Changes to CPR Part 14: Pre-Action Admissions and the new difficulties with Resiling

CPR 14 gives a claimant the right to enter judgment where a written admission of liability has been made by the defendant in a monetary claim, unless the claimant is a child or under a disability (where court approval would be required).

Prior to inception of the Civil Procedure Rules, pre-action admissions were treated similarly under RSC Order 27. There was uncertainty whether this position persisted when CPR came into effect. However, Lord Woolf was clear the previous rules should not be the guide for interpreting the new procedures.

In Sowerby v. Charlton [2005] EWCA Civ 1610 the Court of Appeal concluded the wording of CPR was never intended to incorporate pre-action admissions in multi-track claims. They recognised the important exception in personal injury claims with damages less than £15,000 where there was a presumption set out in the Personal Injury Pre-Action Protocol that a defendant would be bound by admissions made in a Letter of Response.

In Stoke on Trent City Council v Walley [2006] EWCA Civ 1137 the Court of Appeal confirmed CPR Part 14 applied only to admissions made in the course of proceedings and a defendant who wished to withdraw a pre-action admission did not need the permission of the court to do so. Whilst a claimant was entitled to apply to strike out a subsequent Defence, his success in such an application would turn on whether he could establish bad faith on the part of the defendant and the possibility of a fair trial having been prejudiced by the defendant's’s actions.

In Walley, LJ Brooke, who had also given the leading judgment in Sowerby, expressed concern at the provisions of CPR Part 14 with regard to pre-action admissions and proposed the Civil Justice Council conduct a review. LJ Brooke recommended greater weight be given to pre-action admissions made within a protocol Letter of Response.

These recommendations have been adopted in the 44th Update to the Civil Procedure Rules. As from 6 April 2007 when these new Rules come into force a claimant may, after commencement of proceedings, apply for judgement on a defendant's’s pre-action admission provided the admission was:

  • In writing
  • Made after 06.04.07
  • Made following receipt of a Letter of Claim, or if before, stated to be a Part 14 admission

The new provisions will also prevent such a pre-action admission being withdrawn prior to service of proceedings unless the claimant agrees. Following service of proceedings a defendant will have to obtain the parties’ consent or the court's’s permission to resile from its pre-action admission.