Disease - June 2011

The alternative to Part 36 offers

CPR Part 36.2 states :

1. An offer to settle which is made in accordance with CPR Part 36 is called a Part 36 Offer
2. A Part 36 offer must :   
   (a)    be in writing
   (b)    state on its face that it is intended to have consequences of section 1 of part 36
   (c)    specify a period of not less than 21 days within which the offeree will be liable for costs in accordance with rule 36.10 if the offer is accepted.

Part 36.3 states :

1. A Part 36 Offer :
   (a)    may be made at any time, including before commencement of Proceedings

6.   After Expiry of the relevant period and provided that the offeree has not served Notice of Acceptance, the offeror may withdraw the offer or change its terms to be less advantageous to the offeree with out the permission of the Court

7.   The offeror does so by serving notice of the withdrawal of change of terms on the offeree

Part 36.9 states :

2.   A Part 36 offer may be accepted at any time (whether or not the offeree has subsequently made a different offer) unless the offeree serves notice of withdrawal on the offeree.

The case of C v D & D2 [2010] EWHC 2940 confirms the strict application of the Civil Procedure Rules (CPR).  In particular, it highlights that Part 36 offers cannot be time limited.   For example, if the offer remains open for 21 days, it is not a Part 36 offer.  

In C v D which involved an action for damages for breach of contract, the Claimant made an offer to settle.  This was expressed as a Part 36 offer.  Some time later and just before the trial, the Defendants indicated acceptance of the offer, arguing that it was a Part 36 offer that had never been withdrawn and according to Part 36, remained open for acceptance. 

The Claimant argued the offer was not open for acceptance as it was limited to a period of 21 days for acceptance and therefore did not comply with the rules. 

The Court had to decide whether an offer which expressly stated “offer to settle under CPR Part 36”, can be construed as a Part 36 offer in accordance with the CPR, or as the terms of the offer were not strictly Part 36 compliant, did it fail for being defective?

It was held that for an offer to be an effective Part 36 offer, it had to be consistent with the rule under which it was purported to be made.  If it is not,  then regardless of intention, the Part 36 Rules do not apply.

The current position following the decision is that an offer will only held to be a Part 36 offer and compliant with Part 36 the CPR if it is not time limited.  That is, the offer must be capable of acceptance unless and until it is formally withdrawn in writing.  The terms of the offer must be open for acceptance at any time.

Warren J, found that the offer made on behalf of the Claimant which was purported to be a Part 36 offer was defective and made without a clear understanding of the application of the Part 36 Rule.

Whilst a Part 36 offer which is CPR compliant will remain open for acceptance if not formally withdrawn, it is still subject to the costs consequences set out in Part 36 (10).

If you do not want an offer made in the past to be accepted, it must be formally withdrawn (this may occur for example if the Claimant’s case does not appear as strong as it once was and you wish to make a lower offer).  A later offer does not automatically withdraw the previous offer.

If  you wish to make an offer which is compliant with Part 36 of the CPR, it is recommended that the offer :

1. Is not time limited.
2. Is clear and concise in respect of the damages being offered.
3. Provides for settlement in respect of the whole claim and not part of the claim.
4. Is in writing.
5. Does not include an offer in relation to costs.
6. Does not include an offer involving payment over a period of time (for Part 36 offers involving future pecuniary losses, such as periodical payments, consider Part 36.5 and Part 36.6 CPR).

If the purported Part 36 offer is not Part 36 compliant, there is no cure.  It is better to remake the offer in the correct terms. 

The alternative to making an offer under Part 36 is to make a “Calderbank” offer.  The offer is then made on a contractual basis and is subject to the usual rules of offer and acceptance.

The Calderbank letter should be headed “Without Prejudice Save as to Costs”.

By using this heading, privilege is preserved and the right to refer the offer to the Court on the question of costs is expressly reserved.

Calderbank offers can include :

(a)        Any damages offers.
(b)        Costs inclusive offers.
(c)         Separate damages and cost offers.
(d)        Drop hands offers.

If the offer does not include an amount for costs, it must provide a provision for costs to be paid.

A Part 36 template letter is attached to this article, but it is important that you still give careful consideration to the wording which will vary depending upon the particular case and offer involved.

Lorna Hives, Legal Executive, and Gloria Ginvert, Partner, Weightmans LLP. 

PS    The Court of Appeal decision in C v D has just been handed down and a more detailed commentary will be circulated shortly. 

In essence, the Court of Appeal held that an offer said to be ‘open for 21 days’ meant it could not be withdrawn within 21 days although after that period had lapsed, withdrawal was on the cards.  If it was not withdrawn, it was open for acceptance. 

This Court was more flexible than at first instance over the application of the Civil Procedure Rules, finding that what mattered was the intention and what a reasonable solicitor would take this to be.  To determine this it was necessary to look at the surrounding words.  If a time limited offer is made and the intention is that it lapses after a specifically stated time period then it is not a Part 36 offer.   The earlier warning to ensure offers are CPR compliant remains.   

Gloria Ginvert, Partner.