CPR 36 has changed so that it is no longer possible to make payments into court. There are now new rules for making offers to settle.

The new CPR Part 36  

When originally drafted, it was envisaged that, to secure the full protection of Part 36, a Defendant should pay the money into court.  However, by the development of a number of decisions, the courts had eventually reached the point where a Defendant which was clearly "good for the money" could expect the full protection of Part 36 merely from making a Part 36 offer and without the need to pay into court.  Following a consultation, the Rules Committee have settled on a new regime which abolishes payments into court altogether.  The new rules apply from 6 April 2007, after which not only will it not be necessary but it will not be possible to support a Part 36 offer by paying the money into court.

Part 36 now expressly allows a Part 36 offer to be made prior to the issue of proceedings, without requiring any payment in or other step after service of proceedings to ensure it carries the usual costs consequences.

The new Part 36 has the following main provisions.

CPR 36.2 – Form and content

There is no change to the actual format of a Part 36 offer.  It must be in writing and state:

• that it is intended to have the consequences of Part 36,
• that it is open for acceptance for a period of 21 days or more, within which time the Defendant will be liable for the Claimant’s costs if accepted,
• whether it relates to the whole of the claim or to certain specific issues
• whether it takes into account any counter-claim.

A Part 36 offer may be made solely in relation to liability.  Certain other information is required in personal injury claims where there are significant future losses, a claim for provisional damages or a CRU repayment.  (See below).

CPR 36.3 – Withdrawal of offer

Once a Part 36 offer is made, the person making the offer cannot without permission of the court withdraw the offer until the acceptance period has expired.  Once the acceptance period has expired, the offeror may withdraw the offer or change its terms without the permission of the court by serving a written notice.

CPR 36.4 – Defendant’s offer

Save for personal injury claims involving periodical payments or provisional damages, a Part 36 offer must be to pay a single sum of money.  If accepted, the money must be paid within 14 days. A Defendant may make an offer to pay more than 14 days after the date of acceptance but such an offer will not be treated as a Part 36 offer (with the consequences of a Part 36 offer) unless it is accepted.

If a Defendant thinks it may have difficulty paying the money within 14 days, it could request the Claimant to agree a longer period when making a Part 36 offer but it cannot impose a condition that full payment be made more than 14 days after acceptance. A Defendant can always make such an offer but it would not carry the costs consequences of Part 36 and would fall to be considered under the Court’s wide discretion as to costs under CPR Part 44.

CPR 36.5 – Personal injury claims including future pecuniary loss 

Where there is a personal injury claim including a claim for future pecuniary loss, the Part 36 offer "may contain an offer to pay, or an offer to accept" the whole or part of the future pecuniary loss in the form of

• a lump sum, or
• periodical payments, or
• a combination of a lump sum and periodical payments. 

If a lump sum only is offered, it must of course be specified but the offer "may state (i) what part of the lump sum, if any, relates to damages for future pecuniary loss; and (ii) what part relates to other damages to be accepted in the form of a lump sum".  (CPR 36.5(4)(b)). 

Claimants may attempt to argue that this rule means that a Defendant must specify what element of a lump sum Part 36 offer relates to future pecuniary loss.  Defendants will argue that there is no clear obligation to break down a Part 36 offer.

If the Defendant wishes to make an offer of periodical payments, full details of the proposed payments must be specified.  If the Claimant accepts an offer including periodical payments, he must within 7 days apply to the court for an order.

CPR 36.6 – Provisional damages

Where the Claimant is seeking provisional damages, the Defendant may make a Part 36 offer specifying:

• the damages offered;
• the conditions to trigger a further claim;
• the period within which such further claim may be made.

CPR 36.9 – Acceptance of offer

An offer is accepted when written notice if served.  An offeree may accept a Part 36 offer at any time after it is made unless the offeror has served notice of withdrawal.  The offeree does not require the court’s permission to accept out of time unless :

• the offeree is a child or Patient and court approval is required;
• in a personal injury claim, the CRU repayment has increased since the offer was made;
• an apportionment to a minor (or Patient) is required in a Fatal Accidents Act claim;
• the trial has started
• where there is more than one Defendant sued jointly or in the alternative and the Claimant wishes to accept an offer of part settlement from one and does not intend to discontinue against the other Defendants (CPR 36.12)
• where there is more than one Defendant sued jointly or in the alternative and the Claimant wishes to accept an offer in settlement from one and discontinue against the other Defendants but they do not consent (CPR 36.12).

Unless the parties agree, a Part 36 offer cannot be accepted after the end of trial but before judgment is handed down.

Parties must therefore retain a record of all Part 36 offers as they would payments into court and keep them under review. If new evidence comes to light that means that a Part 36 offer made some time previously is now too high (or, if a Claimant’s offer, too low), it should be withdrawn in writing. This is because it is no longer necessary to have the Court’s permission to accept a Part 36 offer out of time. Whereas before a party could object to late acceptance even when it would be subject to the costs penalty, it will not now be possible to do so in many cases. It remains to be seen whether the Court retains a discretion to refuse to allow late acceptance where a Part 36 offer has not been withdrawn but clearly should have been.

CRP 36.10 – Costs consequences following acceptance of Part 36 offer

Where the offer is accepted in time, the offeror will pay costs.  Where the Defendant’s Part 36 offer is accepted after expiry of the acceptance period, unless the Claimant establishes that it would be unjust and the Court orders otherwise, the Claimant will recover his costs to the expiry of the acceptance period and will have to pay the Defendant’s costs thereafter.

The provision does not appear to envisage circumstances in which the Defendant may accept the Claimant’s Part 36 offer out of time.  In those circumstances, there is no automatic provision for the Claimant to recover penalty interest and indemnity costs as he would do after a judgment beating his Part 36 offer (see CPR 36.14 below). He is entitled simply to standard costs to date of acceptance. Moreover, as the court’s permission is not required to accept a Part 36 offer out of time save in specific circumstances (see above), it is arguable that the Claimant would not even be entitled to ask the court to exercise its discretion to penalise the Defendant. 

CPR 36.11 – Effect of acceptance 

The effect of acceptance is as if a Consent Order has been signed. Unless court approval is required (see CPR 36.9), the claim is immediately stayed and cannot be re-opened even if the Defendant defaults on payment. The Defendant must pay the sum it has offered within 14 days of the date of acceptance.  If the sum is not paid within 14 days, the Claimant may enter judgment for that sum and enforce it. However, just as would be the case if he had signed a Consent Order, a Claimant cannot resile from the agreement to compromise. 

The same applies to a Part 36 offer accepted before proceedings are issued. Acceptance constitutes a binding agreement. If payment is not made, the Claimant can issue proceedings for the sum of the Part 36 offer but not the sum he may originally have claimed.

This may be a problem for a Claimant who wishes to accept an offer at a less than full value only on the basis that he will be paid immediately. In such a case, the Claimant should state that his acceptance is conditional upon payment of the sum offered being made within the 14 days and that, in default, he will continue with the claim. This would amount to a counterproposal which the Defendant could accept to conclude an agreement. If the Defendant refused because he was not in a position to pay the damages, there would be no valid acceptance. If the Claimant did not then go on to beat the Part 36 offer, he may be able to argue that it would be unjust to penalise him in costs.

CPR 36.14 – Costs consequences following judgment

Where, after a Court judgment, the Claimant fails to beat the Defendant’s Part 36 offer (which has not been withdrawn), the Court will, unless the Claimant satisfies the Court that it would be unjust, order the Claimant to pay the Defendant’s costs from the expiry of the acceptance period, with interest.

Where the Claimant obtains a judgment which equals or beats his Part 36 offer, the court will, unless the Defendant satisfies the Court that it would be unjust, order the Defendant to pay interest on the whole or any part of the damages at a rate not exceeding 10% above base for some or all of the time following the expiry of the acceptance period, together with indemnity costs.

CPR 36.15 – Deduction of benefits

A Part 36 offer in a personal injury claim may state that the offer is made without regard to any liability for recoverable benefits, ie it is a net offer and the compensator will pay benefits in addition.

Alternatively, the offer should state that it is intended to include any deductible CRU benefits. 

The offer must state:

• the amount of gross compensation before CRU benefits are offset;
• the name of any deductible benefit;
• the amount of any deductible benefit by which the gross amount is reduced; and
• the net amount after deduction. 

Remember, when calculating what benefits can be offset, that specific benefits can only be offset against certain heads of claim and must not exceed the amount claimed under that head. Where it is agreed or alleged that the Claimant was contributorily negligent, the damages from which benefits can be offset must be net of the deduction for contributory negligence. 

For the purpose of establishing whether the Claimant has failed to beat a Part 36 offer, the sums to be considered are those after deduction of the deductible benefits.  In other words, the court will look at what sum the Claimant was offered net of benefits and what sum he recovered net of benefits. 

Where the Claimant accepts a Part 36 offer out of time and the CRU repayment has increased, the court may (and surely would) direct that the additional benefits should be deducted from the net offer.

Simon Cradick can be contacted on 029 2038 5464 or by email.