Withdrawal symptoms

At the heart of the current part 36 regime is the concept that an offer, once made, stays on the table until it is formally withdrawn. This is the balance achieved by the Civil Procedure Rule Committee (of which I was a member until 2009) when it agreed to remove the need for a payment into court to back up a valid offer in money claims.

Under the previous regime, the approach to withdrawing a part 36 payment by a defendant was simple enough. It was rather like the advice Geoffrey Boycott gives to England cricket captains on winning the toss, paraphrased thus: 'You either bat first, or you think carefully about bowling first '“ and then bat first anyway.' It was rare that withdrawing a part 36 payment was the right tactic, as all too often you would end up regretting taking the offer (and the costs protection it provided) off the table.

I have always felt that the same logic applies to part 36 offers under the current regime and should apply equally to claimants' offers and defendants' offers. Unless there has been a significant change of circumstances, the only reason for withdrawing a defendant's offer, for instance, might be a tactical one to substitute a lower offer, but even then the judgment call is a risky one for the defendant. The whole point of the regime we put together in 2007 was to avoid purely tactical offers and to promote genuine attempts to settle.

In claimant offers received recently, I have seen various attempts to make offers that are not in some way binding or immediately available after the expiry of the 21-day period for initial acceptance. This has been particularly noticeable since the Court of Appeal decision in Gibbon v Manchester City Council [2010] EWCA Civ 726. Why should this be?

Caught out

The problem seems to be that in Gibbon the claimant's solicitors were caught out, because an offer to settle made at a relatively early stage was no longer a good offer from the claimant's perspective by the time the defendant accepted it sometime later. Of course, the solution for the solicitors would have been to withdraw the original offer once it became apparent that circumstances had changed to make it a bad offer for the claimant, but they did not do this. Fear of being caught out in this way seems to be driving behaviour.

The relevant requirements for a valid part 36 offer are in CPR 36.2 and are straightforward. A valid offer must:

• be in writing;
• state that it is a part 36 offer;
• provide a period of at least 21 days for acceptance to trigger an automatic liability for the defendant to pay the claimants costs to that point; and
• be clear as to what is offered '“ whether it relates to the whole of the claim and whether it takes account of any counterclaim.

As an important proviso to these requirements (CPR 36.9(2)), an offer once made can be accepted at any time, unless written notice of withdrawal is served by the maker. It is this provision which has prompted some parties to try making offers time limited, but the courts have recently said in C v D and D2 [2010] EWHC 2940 (Ch) that a time-limited offer could not be a part 36 offer. In that case, the decision worked to the offeror's advantage as it meant the claimant's offer '“ which the defendant then tried to accept much later '“ did not remain open for acceptance. In most cases it will not work that way, as it means that the automatic costs consequences of a valid offer do not kick in.

Better incentives

The recent Ministry of Justice consultation on Lord Justice Jackson's costs reforms includes his idea of providing betterincentives for claimants' offers by providing for the claimant's damages to be increased by ten per cent if the claimant does better than his own part 36 offer at trial.

There is little doubt that at least in certain types of case such as personal injury there need to be better incentives for claimants to make good early offers; the current entitlements to interest and indemnity costs are often not sufficient motivation.

The trap for the unwary is that, once Jackson's proposals are brought into force, it will then be incumbent on every claimant solicitor to make a good (and valid) part 36 offer to protect the client's possible entitlement to additional damages.

With this in mind, solicitors should look to their offer wordings. There is a real risk that anything in an offer wording which seeks to limit the time in which it is available for acceptance, or even say that after a particular date it is only available on terms, will take the offer outside part 36. Once outside, the client's automatic entitlement to the benefit of part 36 sanctions disappears.