Source: https://www.johnmhayes.co.uk/blog/the-pitfalls-of-part-36/
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The Pitfalls of Part 36
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When seeking to settle a claim, CPR Part 36 is a powerful tool which allows Claimants and Defendants alike to place significant pressure on their opponents in their attempts to reach a pre-trial settlement. However, when treading on Part 36 territory it is vital that practitioners keep an eye on the potential pitfalls, as a misstep can have serious consequences for costs liability or recovery.
The starting point in any such discussion is the following key idea: the law of contract has no place in Part 36. In Gibbon v Manchester City Council [2010] EWCA Civ 726 the Claimant had made a Part 36 offer of £2500. The Defendant made counteroffers, before eventually making their own Part 36 offer in the sum of £2500. This was rejected by the Claimant. The Defendant then sought to accept the Claimant’s Part 36 offer, which had never been formally withdrawn. The Court held that Part 36 was a self-contained procedural code into which the law of contract could not be imported, and that the Claimant’s offer had been validly accepted by the Defendant.
This is of course counter intuitive for lawyers who have learnt since their legal education was in its infancy that a rejection of an offer means it is no longer open for acceptance, and that a counteroffer is an implied rejection. A Part 36 offer remains open until expressly withdrawn by written notice in accordance with r36.3(7). If circumstances change such that a previous offer is no longer appropriate (as for example in a personal injury claim where new medical evidence comes to light) it is vital that an express withdrawal is made.
What then is a Part 36 offer? Firstly it must be in writing, so offers made by telephone conversation are incapable of carrying Part 36 consequences. This is surprisingly easy to forget in the heat of negotiation, especially if the parties appear to be close together.
Second, it must specify a period of not less than 21 days within which the Defendant will be liable to the Claimant for costs if not accepted. This does not mean that a Part 36 offer can be expressed to expire after 21 days: C v D [2010] EWCA Civ 646. We still see Part 36 offers which state that they can only be accepted after 21 days if the parties agree liability for costs or the courts give permission. This is a throwback to the pre-2007 CPR wording, and is inaccurate. Practitioners’ letters should be updated.
Third, Part 36 offers cannot specify costs consequences other than those in r36.10: Howell v Lees Millais [2011] EWCA Civ 786.
Time-limited offers and offers which deal with costs differently to r36.10 can be made, but they must be Calderbank offers and the offeror will be left with the less effective costs protection of r44.3 (4) (c). Although, following C v D, offers stated on their face to be pursuant to Part 36 will be construed in accordance with the Part 36 provisions if possible, care must still be taken if Part 36 protection is sought, and in case of doubt Court form N242A should be used.
Keep an eye out for those Part 36 pitfalls, and negative costs consequences can be avoided.
Part 36 and the law of contract are distinct
Telephone offers are not Part 36 compliant
Part 36 offers cannot be time limited or incorporate offers on costs
Calderbank offers can be time limited or incorporate costs offers, but have limited costs protection
To be sure your Part 36 offer is valid, use Court form N242A