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K7.1. The main changes effected by Part 36
| 319. | The principal changes made by Part 36 are as follows :- |
| * | For the first time, a plaintiff is able to make an offer of settlement which puts a defendant who unreasonably rejects it at risk as to costs and further financial penalty. | |
| * | Part 36 offers made even before commencement of proceedings can subsequently be taken into account by the court in relation to pre-action costs. | |
| * | More flexibility is introduced by limiting the compulsory requirement of actual payment into court to cases where the defendant seeks to settle a money claim, and allowing appropriate terms of settlement to be proposed in respect of non-money claims. |
| 320. | The machinery of Part 36 offers and payments operates as follows :- |
| 320.1 | A distinction is drawn between a Part 36 payment and a Part 36 offer, the former being the same as a payment into court under the HCR. (Note 263) |
| 320.2 | Where a defendant wants the benefits of Part 36 in offering to settle a money claim, he must do so by making a Part 36 payment. (Note 264) |
| 320.3 | Prescribed information must be contained in a Part 36 offer so that the other party knows exactly what is being proposed, eg, as to whether it takes any counterclaim into account, what it says about interest, etc. (Note 265) |
| 320.4 | If the offer or notice of payment is not clear, the offeree is allowed, within 7 days, to seek clarification. (Note 266) |
| 320.5 | If a potential defendant makes an offer of settlement which satisfies certain requirements (as to its duration and contents), the court "will take that offer into account when making any order as to costs." (Note 267) |
| 320.6 | Where a plaintiff accepts a Part 36 offer or a Part 36 payment made by the defendant then (ignoring refinements) he is entitled to his costs up to the date of giving notice of acceptance. (Note 268) If settlement of the whole claim is reached by the plaintiff taking a Part 36 payment, the action is thereupon stayed. If the stay is on the terms of the accepted offer, that offer can be enforced without fresh proceedings being started. (Note 269) |
| 320.7 | Where a defendant accepts a plaintiff's Part 36 offer, the plaintiff becomes entitled to his costs of the proceedings up to the date of the acceptance. (Note 270) |
| 321. | Important consequences may bite where the offer or payment is not accepted. |
| 321.1 | Where a defendant has pitched his Part 36 offer or payment wisely and the plaintiff has failed to obtain a more favourable award at trial, CPR 36.20 provides as follows :- |
| "(1) | This rule applies where at trial a claimant - |
| (a) | fails to better a Part 36 payment; or | ||
| (b) | fails to obtain a judgment which is more advantageous than a defendant's Part 36 offer. |
| (2) | Unless it considers it unjust to do so, the court will order the claimant to pay any costs incurred by the defendant after the latest date on which the payment or offer could have been accepted without needing the permission of the court." |
| This is a consequence similar to that arising under the current rules. | |
| 321.2 | Where a plaintiff has made an offer to settle for less than the amount claimed and after its rejection by the defendant, recovers more at trial than he had offered to accept, CPR 36.21 prescribes the consequences as follows :- |
| "(1) | This rule applies where at trial - |
| (a) | a defendant is held liable for more; or | ||
| (b) | the judgment against a defendant is more advantageous to the claimant, |
| than the proposals contained in a claimant's Part 36 offer. | ||
| (2) | The court may order interest on the whole or part of any sum of money (excluding interest) awarded to the claimant at a rate not exceeding 10% above base rate for some or all of the period starting with the latest date on which the defendant could have accepted the offer without needing the permission of the court. | |
| (3) | The court may also order that the claimant is entitled to - |
| (a) | his costs on the indemnity basis from the latest date when the defendant could have accepted the offer without needing the permission of the court; and | ||
| (b) | interest on those costs at a rate not exceeding 10% above base rate. |
| (4) | Where this rule applies, the court will make the orders referred to in paragraphs (2) and (3) unless it considers it unjust to do so. | |
| (5) | In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3) above, the court will take into account all the circumstances of the case including - |
| (a) | the terms of any Part 36 offer; | ||
| (b) | the stage in the proceedings when any Part 36 offer or Part 36 payment was made; | ||
| (c) | the information available to the parties at the time when the Part 36 offer or Part 36 payment was made; and | ||
| (d) | the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer or payment into court to be made or evaluated. |
| (6) | Where the court awards interest under this rule and also awards interest on the same sum and for the same period under any other power, the total rate of interest may not exceed 10% above base rate." |
| 321.3 | The innovation of allowing a plaintiff to make an offer of settlement has to be backed by a sanction going beyond making the defendant pay the costs where he recovers less than what was on offer at trial. (Note 271) Under the ordinary rule of costs following the event, his liability to pay such costs would in any case have resulted. Part 36 therefore introduces in such cases the potential twin sanctions of having to pay costs on an indemnity basis as well as interest on sums awarded at rates of up to 10% above base rate over the period when the defendant could have, but did not, accept the offer. The rule also makes it plain that such an award will be made unless the court considers it unjust to do so. |
| 321.4 | Plainly, for this regime to operate fairly, the court must be able to take into account, where necessary, any special circumstances relevant to a party deciding to reject a Part 36 payment or offer. The rule, for example, expressly recognizes that such a decision may depend on the information available at the time when the offer or payment was made; and the conduct of either or both of the parties with regard to the giving or withholding of such information. (Note 272) The court's general discretion as to costs provided for by CPR 44.3 applies in this context. (Note 273) |
Notes
| 263 | CPR 36.2. <back> |
| 264 | CPR 36.3. Where only part of the claim against him is a money claim, he must make a Part 36 payment in respect thereof and can make a Part 36 offer regarding the rest of the claim: CPR 36.4. <back> |
| 265 | CPR 36.5. <back> |
| 266 | CPR 36.9. <back> |
| 267 | CPR 36.10. <back> |
| 268 | CPR 36.13. <back> |
| 269 | CPR 36.15. <back> |
| 270 | CPR 36.14. <back> |
| 271 | Because of the opening words of CPR 36.21, this rule applies only to recoveries made at trial and not by way of summary judgment: Petrotrade Inc v Texaco Ltd (Unreported, 23 May 2000; paragraphs 58, 61). <back> |
| 272 | As stressed by Lord Woolf in Ford v GKR Construction Ltd [2000] 1 WLR 1397, 1403. <back> |
| 273 | See Amber v Stacey [2001] 2 All ER 88. <back> |
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