Upcoming changes to Part 36 offers:
New rules relating to Part 36 offers are due to come into force on 6 April 2015. Many of the new provisions reflect current caselaw, but there are some more substantive changes being introduced, namely:
- Time-limited offers. Although there is no express exclusion in Part 36, it is not currently possible to make a time-limited offer, ie an offer which expires automatically after a certain period and need not be formally withdrawn (although it did use to be possible to make such offers prior to April 2007). The courts have tried to be flexible on this issue though. For example, in C v D (see Weekly Update 20/11), the offer stated that it “will be open for 21 days from the date of this letter”. The Court of Appeal found that the offer in question was not a time-limited offer. Reading the offer as a whole, Rix LJ said: “In the context of Part 36, it seems to me to be entirely feasible and reasonable to read the words “open for 21 days” as meaning that it will not be withdrawn within those 21 days.” It also served as a warning that a withdrawal of the offer after 21 days was “on the cards”.
Under the new rules, it will now be possible to make an offer which “may be automatically withdrawn in accordance with its terms” (new CPR r36.9(4)(b)), although it will also remain possible to continue to make offers which are not automatically withdrawn (in which case, a formal notice of withdrawal will still have to be sent).
- Split trials. CPR r36.13(2) currently provides that: “The fact that a Part 36 offer has been made must not be communicated to the trial judge or to the judge (if any) allocated in advance to conduct the trial until the case has been decided”. There is conflicting caselaw on whether a judge can be told about a Part 36 offer at the end of a trial on liability, where there will be a trial on quantum at a later date. Henderson J in AB v CD & Ors (see Weekly Update 12/11) was not required to decide the issue but suggested that “it may be that in appropriate circumstances, the new wording [of the Part 36 rules in April 2007] should be construed as referring to the conclusion of the first part of a split trial”. However, in Ted Baker & Ors v Axa & Ors (see Weekly Update 24/12), Eder J said that he thought Henderson J’s “tentative” suggestion stretched the wording of CPR r36.13(2) “beyond its proper limit”. In Beasley v Alexander (see Weekly Update 36/12), Jack J was required to decide the point and he concluded (“with regret”) that: “It is clear that ‘the case’ is used in the sense of ‘the action’ or ‘the proceedings’. The reference to ‘the case’ cannot be construed as referring to part of a case”. Under the new rules, CPR r36.16 will allow a judge to be told of the existence of, but not the terms, of a Part 36 offer where a case has not been decided but “any part of, or issue in, the case has been decided and the Part 36 offer relates only” to those parts or issues.
- Strategic offers. The court can take various factors into account when deciding whether it would be unjust to order the usual Part 36 costs consequences. A new factor will be added in April under 36.17(5)(e): “whether the offer was a genuine attempt to settle the proceedings”. However, there is already caselaw to the effect that the court must be persuaded that the offer is a genuine attempt to settle and that some concession is being made. This caselaw will still be relevant in assessing whether this criterion has been met.
In AB v CD & Ors (see Weekly Update 12/11), the judge said it was clear that a request to a defendant to submit to judgment for the entirety of the relief sought by the claimant cannot be an offer to settle within Part 36. In Huck v Robson (2002), the claimant was entitled to the costs consequences of Part 36 even though she had offered to accept 95% of her claim. However, the Court of Appeal commented that an offer to accept 99.9% would have been seen as a purely tactical step which could not trigger the Part 36 costs consequences. That might be contrasted with the case of Jolly v Harsco (see Weekly Update 40/12) - which was possibly a one-off - where the claimant offered to accept 99% of her claim and the judge was clearly prepared to accept that that was a valid Part 36 offer. In Uren v Corporate Leisure (see Weekly Update 14/13), though, the claimant offered to accept 90% of the damages he was seeking and that was said to be a true offer (because 10% of a large sum is itself a large sum). So, generally, only “extreme” offers are likely to fail.
- Failing to file a costs budget in time. As has been previously reported, if a party fails to file its costs budget in time, the court can order that only court fees will be recoverable by that party. Since the other side will therefore never face paying a large amount of costs in such circumstances, that can act as a disincentive for the other side to accept a Part 36 offer. Accordingly, the new rules will provide that the defaulting party’s costs will be treated as 50% of its assessed costs which it would otherwise have been able to recover (but this only applies to costs incurred after the expiry of the relevant period).
It is worth noting that some other changes to Part 36 which have been mooted are not to be included in these new rules. For example, it had been suggested that it might be possible to make an offer on costs and that defendants would be given a greater financial incentive to make Part 36 offers.