The New Part 36
In civil litigation, by the time a claim progresses, the Court’s decision on the issue of the parties’ legal costs is often more important than the decision of the underlying dispute itself. Parties to civil litigation should always be on the lookout for strengthening their case on costs – and that is where Part 36 of the Civil Procedure Rules fits in.
Since the Woolf Reforms of 1999, Part 36 of the Civil Procedure Rules has become a much valued tool in the litigator’s tool box. The recent changes, which came into effect on 6 April 2015, seek to fine tune its provisions further whilst retaining the some of the added value provided by previous revisions.
The very first, but subtle, reform at CPR 36.1(1) confirms the position set out in case law in recent years by both Gibbon v Manchester City Council (2010) 1 WLR 2081 and Shovelar v Lane (2012) 1 WLR 637, that Part 36 is a self-contained procedural code, unaffected by the standard law of contract (save in relation to matters such as mistake, misrepresentation and fraud). That the CPR now states this very principle leaves little room for argument on the matter of the procedure of Part 36 offers. Offers are either “in” or “out” of Part 36 based on their construction and presentation, and as such, we are likely to see more rigorous application of that principle by the Courts.
Thereafter, the reforms can be broadly split into 2 categories:
Those which are applicable only to offers made after 6 April 2015; and
Those which are applicable retrospectively.
CPR 36.5: Content of Part 36 offer
CPR 36.5 details the requirements of a valid Part 36 offer, and helpfully dispenses with the need for the offer to state that it is intended to have the consequences of Part 36. Instead, the offer must simply make clear that it is made pursuant to Part 36.
CPR 36.9 (4)(b): Time limited Part 36 offers
This provision sees the return of the validity of sunset clauses within offers, and effectively reverses the previous position requiring an offer to be specifically and separately withdrawn. However, a valid sunset clause giving rise to a withdrawal does still have the effect of erasing the Part 36 benefits and consequences, so careful consideration is required when drafting.
CPR 36.9 (5): Improving offers
Improved offers are treated as new offers (not the withdrawal of the original offer) and as a consequence a new relevant period is created. (Note the distinction between less attractive offers below, which do not trigger a fresh relevant period)
CPR 36.10: Withdrawing or amending Part 36 offers
This rule now allows the offeror to withdraw or amend an offer to make it less advantageous during the relevant period without obtaining the Court’s permission as long as the offeree has not served notice to accept the offer. If this has happened, the offeror can still apply to the Court for permission to withdraw/amend its offer, but it must satisfy the Court that there has been a change in circumstances since the making of the offer which justify the change and that it is in the interests of justice for the Court to give permission. The offeror’s application must also be made on notice as in Evans v Wolverhampton NHS Trust (2014) EWCH 3185 (QB).
CPR 36.13 (5): Late acceptance of an offer
This rule has been varied so that where an offer is accepted outside of the relevant period, the Court must (not may), make the usual order on costs, unless it is considered unjust to do so. In the case of Kunaku v Barclays Bank (2010) EWCA Civ 1035 it was regarded as unjust to make the usual order on costs against a litigant in person where the bank had reminded the Claimant that its historic Part 36 offer was still available for acceptance, but failed to specify the significant costs consequences of accepting the offer. It was held that the Claimant, as litigant in person, could not have been expected to appreciate the costs liability he was accepting and therefore it was unjust for the usual costs order to apply.
CPR 36.17 (e): Genuine attempt to settle
In determining whether it would be ‘unjust’ for the Court to make the usual cost order (above) a new criteria has been added by CPR 36.17 (e) that the Court must consider “…whether the offer was a genuine attempt to settle the proceedings.” There is no further guidance with regards to the concept of ‘genuine’, although it is worth noting that in AB v CD (2011) EWHC 602 (Ch) it was said that an offer which was ‘all take and no give’ would not be regarded as a genuine attempt to settle. There have been other cases which have attempted to set further guidance on this point, but this is unsurprisingly a matter for the judiciary to assess on a case-by-case basis.
CPR 36.3: Definitions
Whilst fairly unobtrusive on its face, CPR 36.3 does helpfully provide definition to the terminology of Part 36, as well as providing new definitions for terms such as “a trial”, which now encompasses a split trial, and “in progress” (with reference to a trial) which is now defined as being ‘from the time when it starts until the time when Judgment is given or handed down.’
CPR 36.11: Acceptance of a Part 36 offer
This is largely similar to its predecessor (CPR 36.9) with 2 exceptions. In line with the changes in the Definitions (as above) the Court’s permission is now needed to accept a Part 36 offer where a trial is “in progress” as opposed to the former of where a trial “had started.” Also, it now allows offers to be accepted with the Court’s permission after the end of the Trial but before Judgment is handed down.
It is worth noting that the acceptance of a Part 36 offer must be a written notice of acceptance in accordance with the provisions of Part 6, including containing an address for service.
CPR 36.12: Accepting a Part 36 offer in a split trial case
CPR 36.12 applies specifically to offers which have been made before 6 April 2015, but where the applicable trial starts afterwards. It clarifies that where there is a trial of a preliminary issue (i.e. a split trial), any offer in relation to that preliminary issue cannot be accepted after the trial of that issue. However, global offers or offers which relate to matters which have not yet been decided at split trial can still be accepted after the trial of the preliminary issue, but only after 7 clear days have passed since Judgment was given or handed down on that preliminary issue. Importantly, this allows an offeror to take stock and consider its position after the split trial, and to withdraw or amend its offer as it chooses, albeit within a limited time frame.
CPR 36:16: Restriction on disclosure of a Part 36 offer
This again applies to offers made before 6 April 2015, but where a corresponding trial starts after. It clarifies the general rule preventing disclosure of an offer to the trial Judge, but now allows disclosure of both the existence and terms of an offer at the end of a split trial, provided that such offers relate to the issues determined at that split trial.
There remains a question mark over what constitutes the ‘costs of the proceedings’ in a matter which has settled by way of an accepted Part 36 offer pre-issue. CPR 36.13 simply states that where an offer is accepted within the relevant period the Claimant will be entitled to the costs of the proceedings up to the date on which the notice of acceptance was served. It does not differentiate between offers accepted pre and post issue. In the case of Solomon v Cromwell Group PLC (2011) EWCA Civ 1584 it was determined that a pre-litigation settlement gave rise to the recovery of the ‘costs of the proceedings’ because the ‘proceedings’ included steps taken in contemplation of proceedings. However, it should be noted with caution that CPR 44.9 (2) remains unchanged in that there is no costs order where a matter is settled pre-issue.
It is intended that a revised Part 36 form (N242A) will published shortly. Either adopting the form itself or using it as a checklist when making Part 36 offers would be advisable in the short term, at least until the revised rules have become fully embraced.
The revisions to Part 36 whilst subtle in substance for the most part, do provide necessary and constructive clarification to matters which have previously given rise to a selection of satellite litigation. Nevertheless, they also require careful consideration and accurate application for litigants to take full advantage of the tactical benefits provided.
Reassuringly, they maintain and potentially strengthen the principle objective of Part 36 – to promote early settlement by encouraging parties to make offers.
For more information please contact myself, Katy Sandel on 01392 455555.