Civil litigation brief

In January, it became clear that all Part 36 payments into court are to be replaced by Part 36 offers, in which there are a number of incidental rules.

Non-disclosure of a Part 36 offer

A Part 36 offer is treated as 'without prejudice' except as to costs. The fact of the offer must not be communicated to the trial judge or to the judge allocated in advance to try the case until the case has been decided.

However this rule does not apply:

• Where the defence of tender before claim has been raised.
• Where the proceedings have been stayed under the new r 36.11 following acceptance of a Part 36 offer.
• Where the offeror and offeree agree in writing that it should not apply.

Costs consequences following a judgment

Claimant failing to beat defendant's offer

Where a claimant fails to obtain judgment more advantageous than a defendant's Part 36 offer, the court will '“ unless it considers it unjust to do so '“ order that the defendant is entitled to his costs from the date on which the relevant period expired and interest on those costs ('relevant period' is defined in the previous article).

Defendant failing to beat claimant's offer

Where judgment against the defendant is 'at least as advantageous to the claimant as the proposals contained in a claimant's part 36 offer' the court will, unless it considers it unjust to do so, order that the claimant is entitled to:

• Interest on the whole or part of any sum of money (excluding interest) awarded at a rate not exceeding 10 per cent above base rate for some or all of the period starting with the date on which the relevant period expired.
• Have costs be paid on an indemnity basis from the date on which the relevant period expired.
• Interest on those costs not exceeding 10 per cent above base rate.

Cases where usual costs consequences do not apply

The normal cost penalties do not apply to:

• An offer that has been withdrawn.
• An offer that has been changed so that its terms are less advantageous to the offeree and the offeree has beaten the less advantageous offer.
• An offer made less than 21 days before trial, unless the court has abridged the
• relevant period.

Is it unjust to make the usual costs order?

In considering whether it is unjust to make the usual costs order, the court will take into account all the circumstances of the case including:

• The terms of any Part 36 offer.
• The stage in the proceedings at which the offer was made, including, in particular, how long before trial the offer was made.
• The information available to the parties at the time when the Part 36 offer was made.
• The conduct of the parties with regard to the giving or refusing to give information
• for the purposes of enabling the offer to be evaluated.

Personal injury cases

Where a personal injury claim includes a claim for future pecuniary loss, there are further requirements for Part 36 offers made by claimants or defendants. To be a valid Part 36 offer, it must meet with the further requirements of the (new) Part 36.5.

The offer may contain an offer to pay or accept, the whole or part of the damages for future pecuniary loss in the form of a lump sum; periodical payments; or both a lump sum and periodical payments

The offer must state the amount of any offer to pay the whole or part of any damages in the form of a lump sum and may state what part of that lump sum relates to the damages for future pecuniary loss and what parts relates to other damages to be accepted.

The offer must state what part of the offer relates to damages for future pecuniary loss to be paid or accepted in the form of periodical payments and must specify:

(i) the amount and duration of the periodical payments;

(ii) the amount of any payments for substantial capital purchases and when they are to be made; and

(iii) that each amount is to vary by reference to the retail prices index (or some other named index, or is not to vary by reference to any index).

The offer must state either that damages which take the form of periodical payments will be funded in a way that requires continuity of payment; is reasonably secure in accordance with the Damages Act 1996 ;or how such payments are to be paid and how the continuity of their payment is to be secured.

Acceptance of an offer that contains an offer in relation to periodical payments

Where the offeror makes a Part 36 offer where there is a claim for future pecuniary loss that offers to pay or accept damages in the form of both a lump sum and periodical payments, the offeree may only give acceptance of the offer as a whole.

In other words, the offeree cannot, for example, state that they will accept the lump sum, but reject the offer in relation to annual payments. The entire offer has to be accepted.

Duty on claimant when an offer containing an offer to pay periodical payments is accepted

Where an offer that includes an offer to pay periodical payments is accepted, there is a further duty on the claimant. The claimant must, within seven days of acceptance, apply to the court for an order for an award of damages in the form of periodical payments under Rule 41.8.

Offer to settle a claim for provisional damages

An offeror can make a Part 36 offer over a claim that includes a claim for provisional damages.

When such an offer is made, the Part 36 offer must specify whether or not the offeror is proposing that the settlement shall include an award of provisional damages. And where an award of provisional damages is being agreed to, the Part 36 offer must also state:

• That the sum offered in satisfaction of the claim for damages is on the assumption that the injured person will not develop the disease or suffer the type of deterioration specified in the offer.
• That the offer is subject to the condition that the claimant must make any claim for further damages within a limited period.
• What that period is.
• A claimant must, within seven days of acceptance of an offer that contains an offer to pay provisional damages, apply to court for an award of provisional damages under r 41.2.

Deduction of benefits

There are specific duties imposed on parties making an offer where the case involves Compensation Recovery Unit (CRU) benefits.

A defendant making a Part 36 offer should state either:

• that the offer is made without regard to any liability for deductible benefits; or
• that it is to include deductible benefits.

This gives the defendant a choice. He can say 'we will pay £10,000 and in addition we will pay all deductible benefits'. The claimant knows that he will receive £10,000 in hand. Alternatively, the defendant can say: 'We will pay £10,000 which is to include deductible benefits.'

In the latter situation, there are additional duties upon the defendant. These duties also apply to a claimant making a Part 36 offer in a case that includes deductible benefits.

Before making the offer, the offeror must apply for a certificate of recoverable benefits.

The Part 36 offer must state:

(i) The amount of gross compensation.

(ii) The name and amount of any deductible benefit by which that gross amount is reduced.

(iii) The net amount after deduction of the amount of benefit.

This imposes duties on a claimant making a Part 36 offer, who must always include this information in an offer.

If the CRU Certificate is not available

If the CRU Certificate is not available at the time the offer is made, the offeror must clarify the matters by setting out the benefit details not more than seven days after receipt of the certificate. Remember the certificate has to be applied for before an offer can be made.

When an offer is beaten in a CRU case

The rules make it clear that a claimant fails to recover more than the sum offered if, after deductible benefits identified in the judgment have been recovered, he recovers less than the net amount offered.

Practice points

• New rules as to Part 36 offers come into force on the 6 April this year.
• It will not be necessary to pay money into court. All Part 36 offers will be written offers which should be followed up by payment within 14 days of the offer being accepted.
• There are very specific requirements for the form and content of a Part 36 offer.
• A Part 36 offer can be made in appeal proceedings.
• A Part can withdraw a Part 36 offer after expiry of the 'relevant period' (usually 21 days) without permission of the court.
• A defendant's offer to settle a money claim must be an offer to pay a single sum of money and that payment will be made within 14 days of acceptance.
• On acceptance of a Part 36 offer the action is stayed if the acceptance relates to the whole of the claim.
• Payment must be made within 14 days of acceptance of the offer.
• If an accepted sum is not paid then the offeree can enter judgment for the unpaid sum (and enforce judgment how they will).
• A Part 36 offer should not normally be disclosed to the court.
• There are costs consequences if a party fails to beat a Part 36 offer. These include payment of interest on costs.
• There are very specific and stringent rules governing the drafting of Part 36 cases in personal injury cases where there is a claim for future pecuniary loss, provisional damages or where there are CRU payments. For the most part these rules apply to offers made by defendants and claimants.