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Update to CPR 36.5 coming in April 2021 pressure on Part 36 offerees - Paul Erdunast, Temple Garden Chambers

24/02/21. On 6 April 2021, the usual yearly amendments will be made to the CPR as per The Civil Procedure (Amendment) Rules 2021. These include a particularly interesting new rule regarding Part 36 offers. The rule allows the offeror to make a provision relating to the accrual of interest on the Part 36 offer if it is accepted after the relevant period expires. It further states that if no such provision is made, the Part 36 offer will be deemed to include all interest up to the date of acceptance.

The provision

The new Rule 36.5(5) will read as follows:

“(5) A Part 36 offer to accept a sum of money may make provision for accrual of interest on such sum after the date specified in paragraph (4). If such an offer does not make any such provision, it shall be treated as inclusive of all interest up to the date of acceptance if it is later accepted.”

The consequences of the new provision

The main consequence is that an offeror can now provide for the accrual of interest beyond the end of the relevant period until the date that the Part 36 offer is accepted. No doubt courts will hear argument in due course as to how reasonable the rates of interest subject to litigation are. I would make the following observations:

1. a party will be able to argue that a relatively high rate of interest is appropriate in circumstances where the objectives of both the offeror and the CPR coincide in encouraging early settlement by the offeree;

2. offerees will not often want to incur the expense of detailed assessment and may therefore be willing to make compromise where the interest level in the relevant clause is relatively high; and

3. the reasonableness of a high interest rate may vary depending on the case; for example, it may be less reasonable to put a high interest rate in a Defendant’s offer which arrives before the Claimant has had the opportunity to finalise their medical evidence in a personal injury claim, than one which is made after the expert evidence is finalised.

If an offeror does not make a provision for the accrual of interest, then nothing changes from the current situation: the offeree can accept the offer, which is treated as inclusive of all interest. Therefore it would it to be advantageous for pretty much every offeror to make provision as to interest on their Part 36 offer, and a relatively high one at that - although always being sensitive to the particular facts of every case.

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