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Part 36: one month (or so) on

As everybody should know by now, a revised version of Part 36 came into force on 6 April 2015. The new rules apply to all Part 36 offers made on or after 6 April 2015. However, even Part 36 offers made before that date may be affected, as new CPR 36.3 (definitions), CPR 36.11 (acceptance of a Part 36 offer), CPR 36.12 (acceptance of a Part 36 offer in a split trial case) and CPR 36.16 (restriction on disclosure of a Part 36 offer) apply to a Part 36 offer made before 6 April, provided a trial of any part of the claim or any issue in it starts on or after 6 April (rule 18, Transitional Provision, Civil Procedure (Amendment No 8) Rules 2014 (SI 2014/3299)).

The aim of the revisions was to simplify Part 36 (the technical complexities of which have led to a great deal of satellite litigation) and to codify some of the more significant decisions on Part 36. While it is certainly helpful to have codified some of the earlier decisions, in my view, it is open to question how far the CPRC sub-committee responsible for drafting the revised version has succeeded in simplifying the Part 36 regime and whether it will reduce satellite litigation. Indeed, the  sub-committee has already acknowledged that there is likely to be satellite litigation in relation to at least one of the new provisions (see below). What is more, it seems that the CPRC is expecting to revisit Part 36 yet again “once the amendments have had a chance to settle and work through in practice”.

Some of the outstanding grey areas and difficulties include the following:

Genuine attempt to settle proceedings

The new criterion, which the court must take into account when deciding whether it would be unjust to make the usual costs order following a successful Part 36 offer as to whether or not an offer was “a genuine attempt to settle the proceedings”, will inevitably be fact sensitive and subjective. The aim is to deter claimants from making very high Part 36 offers, which include little or no concession of value, so they might obtain the Part 36 costs benefits. However, members of the CPRC sub-committee have already acknowledged that there will almost certainly be further satellite litigation in relation to this provision.

Pre-action offers

Following the April 2013 revision to CPR 44.9 to provide that a deemed costs order will not be made where a Part 36 offer is accepted before the commencement of proceedings, it is not clear whether the usual Part 36 costs consequences can follow the acceptance of a pre-action Part 36 offer. Unfortunately, the CPRC sub-committee did not take the opportunity to clarify this.

Interest

The sub-committee also failed to clarify whether a claimant’s Part 36 offer can provide for interest to run after the end of the relevant period.

Appeals from tribunal decisions

Where previously it was possible to make a Part 36 offer in an appeal from a tribunal decision (HM Revenue and Customs v Blue Sphere Global Ltd), it would seem that this is no longer possible. New CPR 36.2(3) provides that a Part 36 offer may be made in an appeal but only from a decision made at trial. From discussions with two members of the CPRC sub-committee responsible for drafting the revised Part 36 rules, it seems that this was an unintended consequence of that particular revision.

Over-generous offers

What should an offeror do if it realises, during the relevant period (RP), that it has made an over-generous Part 36 offer? Unless the offeror is confident that it can make a successful application to withdraw or vary the offer under CPR 36.10(3), the question is whether to sit tight and hope that the offer is not accepted before the end of the RP or take the risk of serving a notice of withdrawal or variation, knowing that doing so might itself encourage the offeree to accept.

Accepting offers

If an offeree serves a notice of acceptance during the RP, when does that acceptance take effect, given that the offeror may apply for permission to withdraw or vary its offer within 7 days of the notice of acceptance (or, if earlier, before the first day of trial)? Similarly, if the offeror’s application is unsuccessful, it is not clear when the notice of acceptance will be treated as having been accepted.

Form N242A

There is a revised Form N242A for making a Part 36 offer for use with the revised Part 36 rules. However, the revised form is still not available. In those circumstances, should practitioners use the old form N242A or write their own offer letter on behalf of the claimant or defendant?

Counterclaims and additional claims

CPR 36.2 provides that a Part 36 offer may be made in a counterclaim or additional claim, and it includes a reminder that CPR 20.2-3 provides that counterclaims and other additional claims are treated as claims. It seems to me that uncertainties remain. For example, if a defendant makes a Part 36 offer in relation to its counterclaim and the original claim, which is accepted within the RP, does that mean that the defendant is automatically “entitled to the costs of the proceedings” (that is, the costs relating to both the original claim and the counterclaim) under CPR 36.13(1)? Or can the court look at the reality of the situation and, in particular, at whether the offer leads to a net payment being made to the defendant/counterclaimant. After all, if the offer involves the defendant/counterclaimant making a net payment to the offeree, it is difficult to see why it should be treated as a claimant’s offer.

Practical Law Dispute Resolution Emma Chown

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