An examination of the rule for settling civil claims – Part 36 of the Civil Procedure Rules
Recent announcements by the government have confirmed that later this year there will be major changes to parts of the Civil Procedural Rules (CPR). This month we will examine Part 36 of the CPR, which deals with how Claimants and Defendants can bring legal proceedings to an early conclusion. Although this can be a complex area of practice, the principles are rooted in common sense and the overriding objective of the CPR (legal proceedings should be quick, cost effective and just).
This article continues our recent focus on litigation procedure. For those students who have completed your Diploma, this topic will give you an insight into one of the subjects on the Institute’s Advanced Civil Litigation Diploma course.
In civil proceedings it is common for the Judge to award costs against a losing party. This means that the losing party will not only pay any damages awarded but also their own legal costs and the costs of the winner. The closer a case gets to a final hearing, the greater the legal costs. If court bundles are being prepared, counsel is being instructed or expert witnesses summoned; these are time-consuming and costly steps in a case. Because of the high level of legal costs, good lawyers have always encouraged their clients to make settlement offers rather than fight a case to the bitter end. A Part 36 offer allows either a Claimant or Defendant to make an offer to settle a claim. The reason these offers are particularly effective is that if they are pitched at the right level, they can save a great deal of legal costs. The table below illustrates the consequences of not accepting a Part 36 offer.
| Claimant makes a Part 36 offer and beats it at trial | Claimant will be awarded damages; they will get their legal costs paid, and the Defendant will have to pay their own costs. As the Claimant has also beaten their Part 36 offer, they will also be allowed an additional 10% of interest on the costs and damages awarded. |
| Claimant makes a Part 36 offer but the final amount awarded is less than the offer. | The Part 36 offer is ignored. |
| Defendant makes a Part 36 offer. Claimant wins less than the offer at trial. | Even though the Claimant has won, if they do not beat the offer then they will have to pay all their own costs from the last date when they could have accepted the offer. They may also have to pay the Defendant’s costs from this date. |
What makes an offer a Part 36 offer? – To comply with the rules in Part 36, an offer must be in writing; it must state whether it relates to the whole or part of a claim; it must clearly state that the offer will have the consequences of Part 36; and it must be open for acceptance for at least 21 days. It is possible to make a Part 36 offer where there is less than 21 days before the start of the trial, but this requires the Court’s permission
Why are we writing about Part 36 offers now? – Part 36 offers have always been useful for putting pressure on an opponent to settle a claim. As solicitors in most parts of the country may be charging in excess of £200 per hour, it is easy to see why the question of ‘who pays the bill’ is important. The Part 36 rules are likely to be ‘beefed up’ in the November update to the CPR as part of the overall reforms to civil litigation. One key change to encourage parties to accept reasonable offers is a new penalty for not beating a Part 36 offer at trial. An additional award of 10% of the damages will be added to the amount a Defendant has to pay where the Defendant rejects a Claimant’s offer.
If you are currently working in the field of litigation or you are planning to do so in the future, there will be substantial reforms happening to the rules this year. Keeping up to date with changes is expected of anyone working in the legal profession, so look out for further news on the reforms this autumn. If you would like to read more about the changes now, you will find articles in the June and July editions of the Journal about proposed increases to the small claims limit and introduction of mediation. Please contact us if you are interested in receiving a copy of our Advanced Civil Litigation Diploma course syllabus.