Part 36: The New Regime

Following the recent series of seminars in civil law, I have reduced my presentation to this short article.

A number of the Part 36 offers I see are not valid. Regardless of the seniority of lawyer, or the experience of the individual drafting the offer, there are a number of potential pitfalls.

The new Part 36 applies to offers made after 6 April 2015. There are still old  Part 36 offers in existence, but these are outside of the scope of this article.

The definitions section of Part 36 makes it clear that  a trial means any trial in any case, whether a trial of all the issues, or a discrete point such as costs, liability, or some other issue in the case. It is important in a Part 36 offer to set out exactly what the offer relates to. An offer can be made in a claim, counterclaim, additional claim, appeal, and cross appeal.

Always remember to accept a Part 36 offer in writing.  An offer can be accepted at any time unless it has been withdrawn, or a sunset clause has become active. This is regardless of whether or not there has been a new offer.

Remember that Part 36 is a self-contained code. There is nothing in Part 36 preventing a party making an offer to settle in any way the party sees fit, but if the offer is not made in accordance with the rules of Part 36, it will not have the consequences  specified in that section.

A letter without prejudice save as to costs is valid, and can be useful. It is not however a Part 36 offer.

Offers made under the old regime had literally to state that the offer was intended to have Part 36 consequences.

Even the courts get Part 36 wrong. In the case of Haynes v Bis (2014) EWHC 643 QB,  the judge upheld a Part 36 offer that was defective. Because the defendant has not taken the point, the offer was treated as valid.

The major benefit of a Part 36 offer is the uplift. This is a 10% increase in damages and costs, and should be granted unless it would be unjust to do so.

A simple example from a case I dealt with some time ago: The claimant offered £9000 by way of a Part 36 offer. This was not accepted and the matter went to court. At court the claimant won and was awarded £10,000. The actual amount received by the claimant was £11,000 because of the 10% uplift.

The case of Cashman v Mid-Essex NHS Trust (2015) EWHC 1312 Was a decision on appeal. In the original trial the claimant made an offer by way of Part 36 on the bill of costs. This was not accepted and assessment went ahead. The claimant was awarded more than the Part 36 offer but the judge declined to award the 10% uplift.

The judge was unhappy that such an uplift would appear punitive. At the time of the trial, I found this decision a little surprising given that, in my opinion, the purpose of the uplift was to be punitive.

On appeal, the court said that the uplift was intended to be punitive insofar as it was meant to hurt those who did not accept sensible offers.

Under the old regime, when considering a Part 36 offer, the court had to look at a number of factors. These included the terms of the offer, the stage in the proceedings when any Part 36 offer was made, the information available to the parties at the time of the offer, and the conduct of the parties. There is now an additional requirement under 36.17(5)(e):  whether the offer was a genuine attempt to settle the proceedings.

36.5 sets out that a Part 36 offer must be written, it must be clear it is pursuant to Part 36, and it must specify a period of not less than 21 days within which the defendant will be liable for the claimants costs.  The safest way  to draft an offer is to use form N242A.

Historically it has not been possible to time limit a Part 36 offer. Now though, 36.9(4)(b) allows the use of a sunset clause. The benefits of such a clause are obvious. If the offering party forgets to withdraw the offer, the other side is not able to accept beyond the sunset date.

In a case where a costs budget is required, failure to produce such a budget limits costs to the Court fee. This would remove any incentive for a Part 36 offer. However, the new 36.23 deals with this by providing that in these circumstances the defaulting party’s recoverable costs on the back of a Part 36 offer will be 50% of the costs that will otherwise be recoverable, and will not be limited to court fees.