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The new Part 36

From 6 April 2015, the structure of Part 36 will change and a number of new rules are to be introduced.  This is the most fundamental change in the Part 36 rules for many years.

Codifying Part 36 case law

There are a number of changes to the wording of existing rules or the addition of express rules which will have little overall impact on Part 36, but will codify the existing case law.

There is now a reference to Part 36 being a self contained code. This has been the position for a number of years following Gibbon v Manchester City Council [2010] EWCA Civ 726.

The new rules also make it clear that general common law offers are still relevant to deciding the issues of costs between the parties under the Court’s General discretion under CPR r.44.2. Again, there is no earth shattering change here.

To the relief of many lawyers, the content and format of a Part 36 offer remain as under the existing rules and there is now an express provision which will state that any offer is deemed to be inclusive of interest until the date the offer expires. The parties remain able to make Part 36 offer pre action and an express rule confirms this point.

Points of note

There are, however, a number of new rules and points worth noting:

Cost consequences

The new rules add an additional factor for Courts to take into account when considering whether it would be unjust to make a costs order where a party has failed to beat a Part 36 offer. Now the Court must consider whether the offer was a genuine attempt to settle. This new rule may have been designed to overcome the situation in Huck v Robson [2002] EWCA Civ 398, which I referred to in the last Summer Personal Injury Newsletter, where a party made an offer to accept a deduction of 5% on a road traffic accident case. It may still be difficult for a party to argue that the offer it failed to beat was not a genuine one (as was the case in Huck v Robson).

Appeals

The new rule makes it clear that Part 36 offers can be made on appeals and an offer made in the original trial of the claim does not have Part 36 consequences thereafter. It’s an important reminder to parties to make a fresh Part 36 offer in the course of an appeal.

Withdrawing an offer

There are now express rules which deal with withdrawing or changing an offer. Where an attempt is made to vary an offer in terms which is more advantageous to the recipient of the offer this is not treated as a variation but as a brand new Part 36 offer. This has important consequences at end of a case where some lower Part 36 offers which were never withdrawn have been beaten, but later higher Part 36 offers were not beaten.

The new CPR 36.10(2) provides that an offeror can serve advance notice to withdraw their offer or to amend it on less favourable terms too by the end of the relevant period. The notice takes effect on the expiry of the relevant period. This reverses the rule that an offer cannot be time limited and we may see a variety of more strategic offers being made for time limited periods (not forgetting that withdrawing the offer means the cost benefits will not later apply if it is beaten).

There is finally some guidance about withdrawing offers in the relevant period too. It has always been the case that Court permission is needed, but the new rules helpfully state an offer can only be withdrawn if the court is satisfied there should be a change of circumstances and that it is in the interests of justice to give permission.

Pre-action costs

The rules on the cost consequences of offers have changed too. There will be an express reference to a party being entitled to recover pre-action costs.

Split trial

The new rules allow a judge, after a split trial, to be told of the existence of a Part 36 offer in relation to the issues decided. The Judge cannot be told about the terms of any other offers that relate to non relevant issues. This is a change in position to how parties previously operated whereby the Judge did not know about the offer at all under the case had been decided in full. This places an emphasis on parties making Part 36 offers in respect of issues on liability and sub divided offers may be become common where there is going to be a split trial to maximize costs recovery.

Costs budgets

There is a new rule to deal with situations in which parties have been restricted to a cost budget of court fees only for failing to file a cost budget.  A party could still get 50% of their costs if they make a realistic Part 36 offer and their opponent fails to beat it. The aim of this rule is to encourage a party to consider appropriate offers where its opponent is limited by a sanction on costs.  
In conclusion, the Part 36 rules will certainly be more comprehensive after these changes come into play and the rules will be able to accommodate the flexibility needed for large and complex cases. However, the downside may well be that the simplicity of the original rules has been lost and certainly all practitioners may well need to do spring holiday reading...