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Part 36: All change please

Just when you thought you had got to grips with the updated Part 36 rules and post Jackson benefits, the Civil Procedure Rule Committee announced it was considering reforms to Part 36.

In a report by Ed Pepperall QC in August 2014, it was argued that perhaps the rules were too technical and caused many offers to fail. It was also noted that “cynical”  Claimant lawyers were taking advantage of Part 36.

A proposal is to be put before the subcommittee with the aim of simplifying Part 36 and allowing offers by counterclaiming Defendants. The subcommittee suggested that the current Part 36 rule restricts time limited offers and a more flexible approach to encourage genuine offers is needed

Time limited offers

One of the proposed reforms would be to allow time limited offers. This would remove the burden of sending an initial offer letter and a second letter to withdraw the offer 21 days later.

This would overturn the case of C v D and another [2010] EWHC 2940 (Ch), where Lord Justice Rix held that a time-limited offer, which automatically lapsed, was not capable of being an offer within the meaning of Part 36.

This amendment would also require change to CPR 36.9(2) which states an offer must be capable of acceptance unless and until withdrawn by service of a notice and also CPR 36.3(7) which states that written notice of an offer’s withdrawal is required to be effective.

The risk of any changes might be that there is a loss of certainty by importing common law rules into Part 36. It may also be said that the committee’s proposal ignores the value of common law offers, which can be time limited in any event and offer more flexibility in the terms of the offer being made.

It should also be remembered that making a Part 36 offer and withdrawing it after 21 days, means the offeror fails to achieve the protection of Part 36 in any event.

Cynical offers

The committee suggested that some Claimants make unrealistic offers that were aimed at obtaining the benefits of Part 36 costs consequences in the expectation that the offer would never be accepted.

They advocated reversal of the Court of Appeal ruling in Huck v Robson [2002] EWCA Civ 398 where a Claimant made an offer to split liability 95/5 in her favour. She went on to win outright at trial and sought indemnity costs, having beaten her offer. The trial judge refused saying the offer had been illusionary as a Judge would never split liability that way. However, the appeal was allowed.

Mr Pepperall QC said the problem was exacerbated by the additional Jackson incentives with claimants being encouraged to make high part 36 offers, not in an attempt to settle but to increase the likely recovery at trial.

It remains to be seen what Lord Justice Jackson will think of the proposed reforms, given that the amendments to Part 36 were intended to be part of the entire package of interlocking reforms. Nevertheless, the message from the Civil Procedure Rule Committee seems to be not to get too comfortable as more reforms may well be on the way.