In England, parties to a dispute are encouraged to settle cases through the use of Part 36 of the Civil Procedure Rules (“CPR”). The rationale of the Part 36 regime is to encourage settlement. If a party rejects an offer made under Part 36, and subsequently fails to beat the offer later on in the case, they face an increase of legal fees under the Part 36 regime and the “loser pays” rule.
On 6 April 2015, the provisions of Part 36 changed. There have only been a small number of reported decisions under the new regime. An interesting aspect of these changes relates to the scope of Part 36. Now the Part 36 regime is compatible with cases subject to appeal proceedings (CPR 36.4(2)), and clarifies the operation of Part 36 in the case of a counter-claim (CPR 36.2(3)). It seems incredible that it took a change in the rules to make it explicit that the defendant is able to make a claimant’s offer in respect of his counter-claim.
The changes have also made the drafting of a Part 36 offer much easier. Now, you no longer need to explicitly state that an offer is intended to have the costs consequences of Part 36. It is merely enough to just state that it is a Part 36 offer. Further, Part 36 offers can be structured so that they are automatically withdrawn after a certain length of time, although there is an obvious question mark over the usefulness of making a Part 36 offer that is automatically withdrawn and it cannot therefore have the costs consequences of Part 36.
Although there are other more technical changes to the Part 36 regime, one of the most interesting changes is that it is now possible to make another Part 36 offer without extinguishing a previous offer. This means that a party to an action is free to stack offers to (hopefully) accommodate any outcome and provide them with the necessary costs protection afforded under Part 36.
Another exciting change to the Part 36 regime is that a judge involved in a split trial can be told about the existence of an offer once the first part of the split trial has been concluded. This allows them to know of the Part 36 offer made before making costs orders following the determination of a preliminary issue. This can be nerve racking to a party that chose to gamble and reject a reasonable offer made by another party to avoid the need for a preliminary issue hearing.
Although Part 36 offers have been part of litigation life for many years in England, the new changes to the Part 36 regime seem long overdue. Parties are now finally being held to account regarding the offers that they make under the Part 36 regime. Provided the offers to settle under Part 36 represent a genuine concession, the Court does not need to apply the cost consequences applicable to Part 36. Now claimants cannot just make a Part 36 offer for their entire claim, to secure a higher cost award under Part 36, if they win. They must demonstrate their intentions to the Court that show that the offer was a genuine attempt to settle the claim. Part 36 offers are the litigation weapon of choice. If deployed strategically, they can increase the pressure on the opposing party. There is nothing harsher than winning a case, only to realize that you have been out litigated by the losing party, and you now have to pay their legal fees despite your victory.