The 78th update of the Civil Procedure Rules brings into effect, amongst a number of other changes, a re-written Part 36. The Rules Committee has re-drafted the rules and in doing so has sought to codify a number of key decisions made by the Courts and has introduced some entirely new provisions.
A Self Contained Procedure
There is now, from the outset, an explicit reference in r36.1 to Part 36 being a “self-contained procedural code”. This supports the decision of Gibbon v Manchester City Council that Part 36 is not governed by contractual principles; for example a rejected offer that hasn’t been withdrawn can still be accepted at a later date.
The new r36.9(5)(a) gives clarification on the status of old offers when new improved offers are made. The rule provides that any improved offer “shall be treated, not as the withdrawal of the original offer; but as the making of a new Part 36 offer on the improved terms.” Therefore an improved offer is not a contractual revocation of the earlier offer. The earlier and less favourable offer continues to exist and can have relevance in any later assessment of costs should the offeree fail to beat it.
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The new provisions arguably allow a more flexible and strategic approach to Part 36 offers.
For example r36.5(1) removes the need to use any exact form of words to comply with the rules. Parties will no longer need to include the familiar “intended to have the consequences of Section I of Part 36” as the new rule only requires an offer to “make clear that it is made pursuant to Part 36”.
The new r36.2(3) has removed the uncertainty, considered in F & C Alternative Investments v Barthelemy  EWCA Civ 843, as to whether Part 36 offers can be made in relation to counter-claims. The new rule provides, simply, that “Part 36 offers can be made in respect of … a claim, counterclaim or other additional claim” and this should restrict overly complex interpretations of who is the claimant and who is the defendant for the purposes of any offers made.
Rule 36.9(4)(b) introduces time limited Part 36 offers. This reverses previous cases where the Court of Appeal found that time limited Part 36 offers fell outside the scope of the provisions. However, it is worth remembering that r36.17(7)(a) means that the usual cost consequences that follow judgment for Part 36 offers will not apply to offers which have been withdrawn.
Offers made in relation to split trials are now provided for under r36.16(3)(d) which allows offers made in relation to preliminary issues to be revealed to the court. This should allow costs to be recovered at each stage of proceedings so long as the parties do not reveal any details of any global Part 36 offers or offers which concern unresolved issues.
The new r36.7 specifically allows Part 36 offers to be made pre-action, and CPR 36.13 allows reasonably incurred costs of a Claimant to include ‘recoverable pre-action costs’. This formalises the court’s decision in Solomon v Cromwell Group Plc.
More controversially r36.17(5)(e) gives the Court the discretion, when deciding whether it would be unjust to allow the usual cost consequences of a successful Part 36 offer, to consider whether an offer made ‘was a genuine attempt to settle the case’. The new provisions are aimed at avoiding the situation in Huck v Robson with Claimant Solicitors making very high offers in an attempt to inflate the recovery of their costs. This is a potentially difficult addition to the Rules as it moves away from the position of parties having certainty and predictability of outcome when making an offer to the other side.
Finally the ‘Mitchell problem’ of capped costs is addressed . The issue arises when a party has failed to file a costs budget, and therefore had their budget limited to their court fees. Previously this had not only penalised the defaulting party so far as their own costs were concerned but had removed any commercial need for the other side to make offers to settle. The new rule 36.23 introduces a definition of ‘costs’ to apply when an offeror’s costs have been limited but who nevertheless makes an effective offer. In this situation the costs that apply are calculated as 50% of costs which would have been assessed without the budget restriction together with any other recoverable costs.
In looking for some general trends in the changes that have been introduced, it would seem that there is an appetite to allow a more nuanced approach to offers and a move away from an artificially technical approach. It will be interesting to see how much additional litigation will follow the changes but it is likely that some assistance will be needed to define when an offer is a ‘genuine attempt to settle the case’.