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Part 36 and PI Claims: Truth and Myths - John-Paul Swoboda, 12 King’s Bench Walk

  1. Part 36 was brought into existence to encourage settlement between the parties. However it can sometimes feel that as opposed to encouraging settlement Part 36 has imported an additional layer of complexity into proceedings. This two-part article will consider some essentials truths about part 36 and some myths about part 36.

    1. The truths - Part 36 offers, Part 36 acceptance and withdrawal

  1. Given Part 36 is a code and not a contract the common law doctrines of offer and acceptance do not apply. In other words to benefit from the code you have to be within it, which in turn means complying with the codes requirements.

  1. The basic mandatory requirements for part 36 offers are as follows:

    1. The offer must be in writing (CPR36.2(2)(a))

    2. The offer must state on its face that it is intended to have the consequences of of Part 36 (CPR 36.2(2)(b))

    3. The offer must specify a period of not less than 21 days within which the Defendant will be liable for the Claimant’s costs (CPR 36.2(2)(c)). The requirement is applicable to both Claimants and Defendants and the period specified is sometimes referred to as ‘the relevant period’.

    4. State whether the offer relates to the whole of the claim or part of (or an issue in) the claim (CPR 36.2(2)(d))

    5. State whether it takes into account a counterclaim (CPR 36.2(2)(e)). If there is a counterclaim in the case do not forget to mention it as it could conceivably invalidate an otherwise legitimate part 36 offer.

  1. As well as the basic mandatory requirements there are additional requirements for part 36 offers which are also mandatory.

    1. CPR 36.5 requires, in personal injury claims for future pecuniary loss, the offer must state what part of the offer is to be paid by way of periodical payments.

    2. CPR 36.6 requires, where provisional damages are claimed, to state whether the offer is of provisional damages or final damages. Further the return factors, under an offer for provisional damages, must be specified in the offer.

  1. Finally there are two requirements which only defendants have to meet when making a part 36 offer. Again these two requirements, in relation to defendants’ offers, are mandatory.

    1. CPR 36.4(1) states that on offer by the defendant must be an offer to pay a single sum of money

    2. CPR 36.15, deduction of benefits and lump sum payments, relates only to defendant offers but states that a defendant should state whether the offer takes into account recoverable benefits.

  1. In total therefore there are seven requirements to fulfil if you are a Claimant making a part 36 offer and nine requirements if you are a Defendant making a part 36 offer: no wonder mistakes are made!

  1. The requirements for accepting a part 36 offer are simpler but still not without nuance. To validly accept a part 36 offer acceptance must be in writing (CPR 36.9(1)). The same is also true for withdrawal of a part 36 offer (CPR 36.3(7)).

ii. The myths - Part 36 offers, Part 36 acceptance and withdrawal

      1. To properly effect service of a Part 36 acceptance or withdrawal it needs to be at the address for service as stated by CPR 6.22(2). That invariably will be the solicitors’ office. A situation arose in Sutton Jigsaw Transport Ltd v Croydon LBC [2013] EWHC 874 where one party was seeking to accept and the other to withdraw an offer simultaneously. However counsel for the accepting party used a scrap of paper to seek to accept the part 36 offer whilst counsel for the withdrawing party cunningly instructed his solicitors to urgently fax withdrawal of the offer to the opponent solicitor’s office, the address for service. Notwithstanding that the accepting party was first to get his notice in, the withdrawing party was successful as only the notice of withdrawal had been validly served. The myth therefore is that acceptance or withdrawal of a Part 36 offer can be undertaken at the door of court. Whilst in reality acceptance or withdrawal at the door of court is unlikely to be controversial where it is if you fail to serve at the solicitors office you may find you acceptance or withdrawal was invalid.

      1. The second myth about part 36 offers is that they can be accepted at any time. The times for acceptance are set down by the CPR 36. The time and circumstance restrictions on accepting a part 36 offer are as follows:

        1. A part 36 offer cannot be accepted without the courts permission where the trial has started (CPR 36.9(3)(d)) nor between the end of trial or before judgement unless the parties agree (CPR 36.9(5)). The restriction is also relevant in cases where a preliminary issue is tried as in Wilson v MOD LTL 23/4/13. As, per the judgement of HHJ Hughes, trying a preliminary issue amounted to starting the trial so one party cannot accept a part 36 offer after the preliminary issue had started without permission of the court.

        2. In certain circumstances permission is also required where there are multiple Defendants (apart from CPR 36.12(3) &(3))

        3. Where further recoverable benefits have been paid since the offer was made (CPR 36.15) – which can quite easily occur in a short period of time where the injury is serious and the Claimant is claiming benefits.

        4. In a fatal accident claim where apportionment is required under CPR 41.3A

        5. Withdrawal within the ‘relevant period’ (i.e. the 21 days for which the offer must be kept open before part 36 cost consequences can apply) can only be made with the courts permission pursuant to 36.3(5). In other words if you make a part 36 offer but evidence comes to light shortly thereafter to show the offer is too high or too low, you either have to hope it is not accepted, or make an application to withdraw the offer, and in the process risk tipping off your opponent as to the change in circumstances.

      1. The third myth about Part 36 offers is the concept of rejection of an offer. This is virtually meaningless, in so far as there is no scope for rejection within the part 36 scheme. It is unnecessary to reject an offer and, should you later wish to accept the offer, because of a change in evidence or circumstances, your earlier rejection may become a cause of contention.

iii. Truths - Offers which are not quite Part 36 offers

      1. Some principles can be distilled:

        1. Technical breaches of the requirements of part 36 may be overlooked especially where they have no impact on the decision to accept the offer (Huntley v Simmons [2009] EWHC 406)

        2. The court will go strive to construe an offer as a part 36 offer if it is labelled as such (and if the circumstances are right) (C v D [2011] EWCA Civ 646)

        3. Offers which fail to engage in any way with the fundamental requirements under part 36.2 are likely to fail (PHI Group Ltd v Robert West Consulting Ltd [2012] EWCA Civ 588).

          Examples include:

          1. Offers which are time limited or insert no relevant time period before which part 36 cost consequences follow

          2. Offers which assert they can be withdraw at any time

iv. Myths – the consequences of non-part 36 offers

      1. Any non part 36 offer is governed by part 44 CPR (general rules about costs). If the offer is not a part 36 offer the cost consequences of part 36 will not apply. The Court of Appeal has very recently indicated in Coward v Phaestos Ltd &ors [2014] EWCA Civ 1256 that the consequences of part 36 offers are unique:

‘…the starting point is to recognise that Part 36 and Part 44 are separate regimes with separate purposes. Part 36 is a self-contained code dealing with offers of settlement made in accordance with and subject to the terms of Part 36, which specifies particular consequences in the event that such offers are not accepted. That those consequences include features which go far beyond that which might be ordered by way of costs under Part 44 only serves to underline that it is a separate regime from Part 44.’

To be continued...

John-Paul Swoboda
12 King’s Bench Walk

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