More changes to Part 36
6th April, 2015
Following a review by the CPR committee the new Part 36 rules came into force applying to offers made on or after 6 April 2015. Highlights include:
Currently the rules state that a Part 36 offer may be made in appeal proceedings, but CPR 36.4 now clarifies the application of the rule including confirmation that reference to Claimant and Defendant is to be treated as a references to the appellant and respondent respectively.
Where a party has failed to file a costs budget in time, it is restricted to recovering court fees only. The problem this creates is that there is no longer the incentive of an opponent to agree a Part 36 offer given the risk of adverse costs has been all but removed. CPR 36.23 states that is those circumstances, any costs recoverable by the defaulting party under the Part 36 provisions will be 50% of the costs that would otherwise have been recoverable and not limited to court fees.
The Court of Appeal have held that in circumstances where a Defendant is, in reality, the Claimant i.e. where the Defendant to a counterclaim has offered to accept a net payment in settlement, the Defendant can be deemed to have made a ‘Claimant’s Part 36 offer’ and benefit from the relevant provisions. CPR 36.2(3) now expressly confirms a Part 36 may be made in respect of a counterclaim or other additional claim.
CPR 36.9(5) now specifies that where an offeror changes the terms of an offer to make it more advantageous to the offeree, it is treated as a new offer rather than the withdrawal of the original offer (which was the previous position).
CPR 36.14(5) now codifies the common law position that where a Part 36 offer is accepted late, the court must make the usual order unless it would be unjust to do so. This is in place of the previous wording which stated the usual order will apply unless the court orders otherwise which gave the court a wider discretion.
The old rules did not allow the existence (or terms) of a Part 36 offer to be communicated to the trial judge until conclusion of the trial. This caused problems in relation to split trials where the judge was tasked with making a costs order in total ignorance of any Part 36 offers made. CPR 36.16 now allows for the existence of a Part 36 offer to be disclosed to the trial judge upon the conclusion of a preliminary issue, and its terms, provided those terms relate solely to the issue being tried. This new rule applies to preliminary hearings occurring on or after 6 April 2015 regardless of when the Part 36 offer(s) were made.
Under the old provisions a Part 36 offer could not specify a time limit for acceptance, otherwise it could not be a Part 36 offer. CPR 36.9(4)(b) now allows an offer to specify that it be automatically withdrawn after expiry of the ‘relevant period’ without having to write a subsequent letter of withdrawal.
Very high Claimant offers
A new factor has been added to those which the court is to consider when deciding if it would be unjust not to depart from the ordinary Part 36 provisions where a Claimant has achieved or bettered it’s offer. At 36.17(5)(e) the court will also consider “whether the offer was a genuine attempt to settle proceedings” and will potentially penalise those Claimant’s taking an inflexible approach to negotiations although the court’s discretion will remain wide.