There has been some uncertainty surrounding Part 36 of the Civil Procedure Rules, but there have been two recent developments, which should ease any ambiguity.
The first development is the recent Court of Appeal decision C v D [2011] EWCA Civ 646. The issue here was whether an offer made in accordance with Part 36 can be a time limited offer. Part 36 does not contain an express exclusion of a time limited offer. However, a Part 36 offer to have costs consequences, has to be an offer which has not been withdrawn, but has remained on the table. The Court of Appeal held that the Part 36 regime does not accommodate a time limited offer. The essence of a Part 36 offer is that it lies on the table unless formally withdrawn. Therefore the scheme seeks to encourage offers which are not time limited. Accordingly there is a necessary inconsistency between an offer being time limited and a Part 36 offer.
It was common ground in this case that the offer was intended to be made as a Part 36 offer, but the offer itself stated that it was “open for 21 days”. The precise meaning of “open for 21 days” was disputed. The Claimant submitted that it meant that the offer lapsed after 21 days and it was not open for acceptance. The Defendant submitted that the 21 days was an expression of the relevant period referred to in Part 36, but after 21 days could be withdrawn.
After considering various principles of construction, the Court of Appeal concluded that the words “open for 21 days” meant that the offer would not be withdrawn within those 21 days. Such a construction meant that the offer would be a Part 36 offer and would leave the offeror entirely free to withdraw the offer immediately after the 21 day period. Ultimately the court noted that it was important for the security of the Part 36 scheme that it should be clearly understood that if a claimant wishes to make a time limited offer, in the sense that the offer should lapse after the end of a stipulated period, then this should not be made under the Part 36 regime.
The second development is that the Civil Rules Committee will be amending the CPR to deal with the much criticised case of Carver v BAA [2008] EWCA Civ 412. In that case, the Court of Appeal considered that whether other factors could be taken into account, such as the cost of litigation and stress where a judgment was greater than the defendant’s offer by £51. In that case the Court of Appeal concluded that the defendant’s offer had not been beaten. Many believed that this decision caused great uncertainty and made it difficult for parties to assess the risk of not accepting a Part 36 offer. It is likely that the rules will be amended later this year to implement a reversal of this case so that where a money offer is beaten at trial, by however small a margin, the costs sanction under Part 36 will apply.
Part 36 is an innovative regime with its own consequences and rules, which has led to the numerous decisions on its impact. However, these two developments will lead to greater certainty and therefore are to be welcomed.