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LexisNexis Dispute Resolution
A LexisNexis mini-mag spotlighting the new Part 36.
Spring 2015
The heart of the matter
Ed Pepperall QC
New Rule 36: The path to change
Natural justice and Part 36 offer
withdrawal
Checklist: Making a Part 36 offer
Settlement negotiations the dangers of email
New Rule 36: Illustrating the changes
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From the Editor
Welcome to this special edition of LexisNexis Dispute Resolution
designed to introduce you to the new look CPR 36, which comes into
force on 6 April 2015. LexisNexis are delighted to collaborate on this
edition with Ed Pepperall QC and St Philips Commercial. As you may
know, Ed chaired the Civil Procedure Rules Committee (CPRC) subcommittee responsible for drafting the new CPR 36, and we are fortunate
to be involved in the seminars, taking place throughout the regions and
London in January, at which Ed will discuss the reforms.
In this mini magazine, you will hear directly from Ed on the changes to CPR
36. We also consider the path to reform, and provide illustrative guides to
the changes as well as a table of the reforms cross-referenced with the
(currently) existing CPR 36 provisions. We have also included relevant
content from across the wider Lexis®PSL Dispute Resolution module.
So, welcome too to the new CPR 36: hot off the press, shiny, new and
raring to go. What do we make of it? Well, for some time now we have
struggled with the somewhat inelegant layout of the rules and their
sometimes tricky application to our cases. The explanatory note to
the enabling statutory instrument confirmed that the changes are to
substitute for the current rules ‘a revised Part [36] ….which aligns the
rules with case law developed since the Part was last amended and
re-arranges the order of the rules in the Part.’ So, to be fair to those
who drafted the new Part, if you were expecting radical reform, you can
think again. This is more of a tidying up exercise, which re-organises the
layout of the Part to make more sense and codifies some of the more
troubling aspects that it has taken the Court of Appeal a fair number of
cases to determine.
The result is that the new Part 36 includes some significant and welcome
changes, such as provision for dealing with Part 36 offers (both in terms
of acceptance and disclosure) in the context of split-trials, clarifying
precisely how Part 36 offers can be withdrawn in the relevant period and
what happens to the original offer when it is amended so as to be more
favourable to the offeree. The addition of a new factor for the court
to consider when deciding if it is unjust to make Part 36 costs orders
for failing to accept a Part 36 offer is the need to consider whether the
unaccepted Part 36 was a ‘genuine attempt to settle the proceedings’. It
remains to be seen what dispute resolution lawyers may yet make of this
and how the courts will deal with that question when it inevitably arises.
There is no escaping that in order for Part 36 to succeed in encouraging
claims to settle, by imposing costs consequences for spurning genuine
settlement attempts, the rules will entail a certain level of complexity.
The re-write has sought, where possible, to alleviate some of the more
obvious issues by its re-organisation and codification. It may not satisfy
everyone, but we suspect it is now clearer than ever that the court is not
going to tolerate the more obvious attempts to manipulate the provisions
for sheer tactical gain, as opposed to genuine attempts at compromise.
Let us hope so and let us hope, too, that the spotlight of judicial scrutiny is
not required to shine too strongly or too soon on this much utilised tool of
the CPR process.
Contents
3Lexis®PSL Dispute Resolution
St Philips Commercial
4
Ed Pepperall QC
5LexisPSL Dispute Resolution
Meet the Team
Contributing Editorial Board
Contributing Authors
New Law Journal
7The heart of the matter
Ed Pepperall QC
Lexis®PSL Dispute Resolution
9The New Rule 36 — the path to change
Ruth Pratt
13
Checklist: New Rule 36 — Making a Part 36 offer
Barry Fletcher
15
Table of Changes: New Rule 36 v existing CPR 36 rules
Neil Smith
19New Rule 36 — Illustrating the changes
Ruth Pratt
25Settlement negotiations — the dangers of email
Barry Fletcher
28 Costs Budgeting Calculator
Dispute Resolution Blog
29 Dispute Resolution Blog overview
11Natural justice and Part 36 offer withdrawal
Ruth Pratt
Lexis®Library
30 Civil Procedure menu card
31
The Civil Court Practice 2015
My email address is below, please let me know what you think and
whether there are any other areas that you’d like us to consider in the
next edition.
Ruth Pratt
Solicitor
Editorial
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This publication is intended to be a general guide and cannot
be a substitute for professional advice. Neither the authors nor
the publisher accept any responsibility for loss occasioned to
any person acting or refraining from acting as a result of material
contained in this publication.
LexisPSL Dispute Resolution
LexisPSL Dispute Resolution is an online practical guidance product for litigation
lawyers which provides a range of procedural and substantive guidance set out in
topics which reflect how disputes are approached in practice, both in terms of the
underlying issues as well as the different stages of proceedings.
Practice Notes set out key principles, supported by the underlying
authority, with examples of how these principles apply in practice.
Related documents are highlighted to enable quick progression to other
documents and further reading links take you through to deeper level
commentary in LexisLibrary; the research work is done for you.
Lexis PSL Dispute Resolution has an in-house team with extensive
dispute resolution experience, dedicated to producing content
specifically for practitioners. Their experience, combined with
hundreds of customer interviews has shaped this ultra-practical
guidance on dispute resolution issues.
In building this product, we also commissioned many experts in dispute
resolution to write for us. Our recognised contributors and authors,
and expert Consulting Editorial Board are comprised of many of the top
performers in the dispute resolution arena today.
To find out more, please visit lexisnexis.co.uk/DR36/DRPSL
St Philips Commercial
St Philips Commercial is a part of St Philips Chambers, an award winning multi-disciplinary
set of barristers with offices in Birmingham, Leeds and London. Widely recognised as one
of the most innovative and forward-looking chambers in the UK, we are well accustomed
to leading the way; we were the first barristers to win the The Chambers Bar Awards
Regional Chambers of the Year award twice.
Although we are very proud of these and our other awards, providing
a first-class yet friendly service for our clients is what really counts for
us. Strong client relationships and an understanding of their needs are
central to how we work, how we assist our clients in achieving their goals,
and how we seek to excel on their behalf.
Our members undertake a wide range of commercial and chancery
work conducted both internationally and in the UK. Our specialist teams
include Banking & Financial Services, Commercial Fraud, Company,
Insolvency, Intellectual Property, Landlord & Tenant, Partnership,
Professional Liability, Property, Restraint of Trade & Confidentiality,
and Wills Trusts & Probate. These teams are made up of individuals who
have demonstrable expertise, many of whom are recognised by the legal
directories as leaders in their fields, with membership of these teams
subject to a strict internal admission policy, designed to give assurance
to clients who are looking for specialist counsel. Working in partnership
with our clients, we aim to exceed expectations and are confident in our
ability to provide a truly exceptional service.
Working with St Philips Commercial should be an enjoyable and
rewarding experience.
To find out more, please visit www.st-philipscommercial.com
3
Ed Pepperall QC
St Philips Commercial
Ed is regularly instructed in multi-million pound commercial and professional negligence litigation
and arbitration. He has particular expertise in the law of restraint of trade and confidentiality and in
commercial fraud work. Ed understands the flexibility required to handle urgent and high value work.
He is numerate and works well with forensic accountants.
Ed’s clients include a number of FTSE100 companies, US and Russian companies, the entrepreneur
Sir Stelios Haji-Ioannou, a serving judge and a leading Formula 1 racing team. Ed is a member of the
Civil Procedure Rule Committee and regularly gives seminars, webinars and TV interviews on both
procedural and substantive law.
He is a lead advocacy tutor for Lincoln’s Inn teaching other barristers both in England and overseas.
Ed sits as a recorder.
His more substantial cases include:
A US$100 million claim in the ICC Court of Arbitration in respect of a panEuropean marketing agreement for a pharmaceutical device.
A £150 million professional claim against a silk, junior and solicitors in
respect of a Commercial Court claim.
A £70 million fraud claim in which Ed acted for the UK’s 5 largest brewers
with a market share of over 82%.
Advice on duties of confidence owed by a former executive in respect of a
£350 million commercial dispute.
Advice on a US$12 million contract for the supply of military equipment to a
Cypriot company for onward supply to Iraq.
What the directories say:
Handles a broad range of matters, predominantly for employers. His areas
of expertise include injunctions, the enforcement of restrictive covenants,
the dismissal of senior executives, complex Employment Tribunals, and
race discrimination proceedings. Expertise: “He is recognised as a specialist
employment silk.” “He is very good and responsive, and has an eye on what the
client wants to achieve. He has a pragmatic approach.” CHAMBERS UK 2015
Recommended for high-profile and high-value commercial litigation. He has
significant expertise in commercial contract disputes and also specialises in
professional negligence cases. Expertise: “He is a top choice for disputes involving
business sales.” “He is very commanding in court and has a polished presence.” –
CHAMBERS UK 2015
Ed is highly recommended by recent editions of Chambers & Partners:
“Much-praised new silk. He’s very knowledgeable and has a very good commercial
sense. He’s an excellent advocate and a very powerful ally to have in the courtroom.”
“He is very impressive, both on paper and on his feet; his mind works incredibly
quickly when faced with curve balls.”
“Someone you go to when you need a win, he instils confidence because his
clients know he’s so good at what he does.”
“He’s very user-friendly and you get none of the pomposity you often get from
counsel. He understands how solicitors operate, and he knuckles down and has a
hands-on approach.”
“He is very good on his feet and has a high degree of gravitas about him.”
“This absolutely brilliant barrister is at the leading edge when it comes to corporate
covenant disputes and has unparalleled expertise in obtaining injunctive relief.”
“Wonderfully organised in his approach, Ed Pepperall QC is noted for his creative,
solutions-driven approach.”
“An extremely pragmatic advocate … what he does is high-value and done
extremely well. He is wonderful with clients and highly recommended.”
“He is very affable and easy to get on with and his relaxed and calm approach
instils confidence.”
“His no-nonsense attitude and diligent, thorough approach ensures that he
remains a favourite.”
Professional Associations:
Chartered Institute of Arbitrators (CIArb)
Commercial Bar Association (COMBAR)
Midlands Chancery & Commercial Bar Association (MCCBA)
4
Reported Cases:
Back Office Ltd v. Percival & Others [2013] EWHC 1385 (QB)
Restraint of trade & commercial fraud claim. Principles applicable to findings of
civil contempt against companies, company directors & individual employees for
breach of undertakings given to settle a restraint of trade case.
Caterpillar Logistics Services (UK) Ltd v. Huesca de Crean [2012] 3 All ER 129 (CA)
& [2012] IRLR 410 (QB)
Injunction: whether available to restrain senior employee / fiduciary from taking
employment on the other side of a highly contentious US$15 million contract.
Breach of confidentiality & conflicts of interest.
George Wimpey v. Valley & Vale [2012] 2 EGLR 113 (CA) & [2011] EWHC 1833 (Ch)
Whether unpaid seller’s lien arises on £5 million agreement to surrender lease.
Whether entitled to partial specific performance on waiving a condition.
Obsession Hair & Day Spa Ltd v. Hi-Lite Electrical Ltd [2011] EWCA 1148, White
Book (Vol 1)
Failure of judge to give reasoned judgment dismissing tort claim in £3 million
professional liability claim. Proper measure of damages in concurrent liability
cases. Court of Appeal’s power to set aside permission to appeal.
Sandhu v. Jet Star Retail Ltd [2010] EWHC 1936 (QB)
Whether retention of title clause operated to prevent title passing to retail items
worth £1 million upon buyer’s insolvency.
Cavendish Corporate Finance LLP v. GIL Investments Ltd [2009] EWCA Civ 368 (CA)
Proper construction of contract for corporate finance fee upon multi-million pound
company sale.
Re Britannia Heat Transfer Ltd [2007] BCC 470 (Ch)
Norris J gave guidance on interplay between a CVA and the employment protection
provisions against contracting out of claims (s203 Employment Rights Act 1996).
Fusion Interactive Communication Solutions v. Venture Investment Placement
[2005] 2 BCLC 250 (Ch)
Injunction to restrain advertisement of a winding-up petition on just & equitable
grounds. Authority of individual directors to instruct solicitors.
Re Zebra Industrial Projects Ltd [2005] BCC 104 (Ch)
Whether assets of failed CVA were held on trust for CVA creditors or general body
of creditors.
Vincent v. Servite Homes Ltd [2002] EWCA Civ 852
Whether employer estopped from denying liability to pay contractual PHI to employee.
English v. Emery Reimbold & Strick Ltd [2002] 1 WLR 2409 (CA)
Leading decision on judge’s duty to give a reasoned judgment (before Lord Phillips MR).
Lennon v. Alvis Industries plc (2000) CA
Whether claim statute barred.
Monnington v. Bonnells Electrical Contractors Ltd (1999) CA
Proper construction of agreement settling professional negligence claims and
expert’s claim for unpaid fees.
Qualifications and Appointments:
1988 Birmingham University LLB (Hons)
1989 Inns of Court School of Law, Bar Finals
2009 Recorder, Crown Court
2010 Recorder, County Court
2010 Member of the Civil Procedure Rule Committee
2012
Consultant Editorial Board, LexisNexis PSL (Dispute Resolution)
2013
Queen’s Counsel
2014MCIArb
LexisPSL Dispute Resolution: Meet the team
Neil Smith
Ruth Pratt
Janna Purdie
Ruth specialises in general corporate and commercial
dispute resolution with particular experience in
shareholder disputes, fraud and warranty claims. Ruth
trained and qualified at Berwin Leighton Paisner where
she remained in practice for ten years. Her work has
involved project managing large-scale cases to trial in
the chancery and commercial courts. Ruth was actively
involved in in-house training with a particular focus on
all aspects of evidence gathering and production,
including authoring a user-manual on E-disclosure. She
is also a contributor to the New Law Journal.
Virginia Jones
Janna is a dispute resolution lawyer with a Masters in
Construction Law and Dispute Resolution. During her
time in private practice at both Herbert Smith and
Dentons she worked on complex international disputes,
both litigation and LMAA arbitrations, dealing with
technical cross border issues. Janna deals primarily
with cross border issues within Lexis®PSL; specifically
at the moment Brussels I (recast) but has also been
actively involved with the Jackson Reforms. She heads
up a LexisNexis costs team which addresses current
costs issues facing the profession, was involved in the
new J codes consultation and was a contributing author
for the Cook on Costs supplement dealing with the
Jackson reforms. Janna is a frequent contributor to the
legal and professional press, including the New Law
Journal and Counsel magazine.
Virginia specialises in general domestic and
international commercial litigation, arbitration and
alternative dispute resolution (ADR). Virginia trained
and qualified with Pinsent Masons, where she remained
in practice for over two years, before moving to Marriott
Harrison where she continued in practice for a further
seven years. Virginia has acted in a variety of general
commercial disputes covering areas such as intellectual
property, fraud, defamation, misrepresentation, breach
of contract, debt recovery, breach of restrictive
covenants and company and shareholders’ disputes.
Melissa Jones
Barry Fletcher
Barry specialises in international commercial
arbitration and has a background in general commercial
litigation. He trained and then practised at Jones Day
before joining Pinsent Masons.
In practice, Barry’s work included general commercial,
aviation and IT arbitrations, under international arbitral
rules, involving UK and international clients. He also
has a background in general commercial, civil fraud and IT litigation,
including experience before the High Court. Whilst in private practice,
Barry worked with a broad range of clients from both the private and
public sectors.
Barry is a member of the Lexis®PSL Arbitration and Dispute Resolution
teams. He also contributes to the LexisNexis Dispute Resolution Blog
and New Law Journal on litigation and arbitration matters.
Siobhan McKeering
Siobhan qualified in Australia and has worked in the
Australian state and federal courts as a Judge’s Associate
and as Legal Assistant to the Northern Territory District
Registry, where she was principally involved in case
management. She has extensive experience in legal
publishing, having written for law reports in both Australia
and the United Kingdom. She has also been a Technical
Editor and Writer for Halsbury’s Laws of England.
Melissa specialises in general commercial litigation and
alternative dispute resolution. Melissa trained at Jaques
& Lewis (now Eversheds) and subsequently practiced at
Stephenson Harwood and Herbert Smith (now Herbert
Smith Freehills) before moving to BPP Law School to
teach on the Legal Practice Course. Melissa has been a
professional support lawyer for over 10 years, firstly at
Nabarro, where she set up the PSL function, and then at
DAC Beachcroft, where she was responsible for drafting
current awareness briefings for both lawyers and clients,
writing dispute resolution articles for the firm and
external publications, providing internal training and
assisting with business development.
Rachel Buchanan
Rachel is the Dispute Resolution blog’s technical editor.
Rachel qualified as a dispute resolution solicitor and
worked in private practice before joining LexisNexis. In
addition to contributing to the Dispute Resolution blog,
she also writes content for the Business of Law blog, the
Future of Law blog and Halsbury’s Law Exchange.
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LexisPSL
Neil is a commercial and corporate dispute resolution
specialist having qualified at Linklaters. He has
experience of a broad range of disputes representing
individuals, owner managed businesses and multinational corporates during fee earning roles in the
commercial litigation departments of Charles Russell,
Travers Smith Braithwaite and Denton Wilde Sapte. Neil’s
expertise includes high value breach of contract claims,
complex aviation disputes, breach of trust/fiduciary
claims, breach of warranty claims, unfair prejudice,
injunctive relief and international arbitrations. Neil has
also taught Civil Litigation at BPP Law school. Neil joined
Lexis®PSL as the head of Dispute Resolution from Clyde
& Co where he was responsible for the firm’s national
legal training programme.
LexisPSL
LexisPSL Dispute Resolution: Meet the team
Consulting Editorial Board
Contributing authors
4 Pump Court Jennie Gillies
4 New Square Stephen Innes, George McDonald, Peter Morcos,
Marie-Claire O’Kane
4 Stone Buildings Jonathan Crow, QC
Addleshaw Goddard Mark Pring
4 Stone Buildings Edward Crossley, Andrew Rose
CMS Cameron McKenna LLP Tim Hardy
4 Pump Court Sean Brannigan QC, James Bowling, Jennie Gillies,
Elspeth Owens, Claire Packman, Adam Temple, Alex Wright,
Luke Wygas
Eversheds Mark Surguy
Addleshaw Goddard Mark Pring
Hogan Lovells Hugh Lyons
Clarke Willmott LLP Jane Dunlop
Pinsent Masons Keith Levene
Cognition Victoria Jones
St Philips Chambers Ed Pepperall QC
Druces Charles Spragge
Brick Court Chambers Bill Wood, QC
DWF Steven O’Sullivan
Eversheds Mark Surguy
Freelance Consultant Lydia Lee
Fountain Court Chambers Giles Wheeler
Hardwicke Chambers Helena White, Sri Carmichael,
Alexander Campbell, Martyn Griffiths, Lina Mattsson,
Aileen McErlean, Charles Raffin, Laurence Page
K&L Gates Ian Meredith, James Boyd
Matrix Chambers Mathew Purchase
Moon Beever Frances Coulson
Nabarro Zaina Bazeez, Sophie Davies
New Square Chambers Mark Hubbard
Radcliffe Chambers Shantanu Majumdar
The Sheriffs Office David W Carter
Southampton Row Solicitors Sallianne Cockerham
St John’s Chambers Nicholas Pointon
St Philips Chambers Andrew Charman, Rosa Dickinson, Ali Tabari,
Iqbal Mohammed
Stone Chambers Rani Noakes
Three Verulam Buildings George Mcpherson
University Of Reading Professor Richard A Buckley
Wilberforce Chambers Harris Bor
6
The heart of the matter
Ed Pepperall QC
Ed Pepperall QC provides an insider’s
guide to the new look Part 36
New Law Journal
A new look Part 36 comes into force on 6 April 2015. In its first major
review of Part 36 in eight years, the Civil Procedure Rule Committee
(CPRC), of which I am a member and chairman of the sub-committee
responsible for drafting the new Part 36, has addressed some of the
most pressing problems encountered in practice.
Part 36 undoubtedly lies at the heart of the Civil Procedure Rules. Its
machinery is used in virtually every case, from modest-value fast track
claims to billion-pound litigation in the Commercial Court. It is therefore
important to ensure that its sophisticated system of carrots and sticks is
fit for purpose. Just as importantly, if the steady flow of satellite litigation
is to abate, Part 36 must work predictably and logically.
Other commentators will, no doubt, provide a critique of the new rules
and lament the missed opportunity to effect more far-reaching reform.
Such analysis is, however, for others since this is an insider’s guide to the
new rules.
Counterclaims
There has been real uncertainty as to the operation of Part 36 in respect
of counterclaims. In F & C Alternative Investments v Barthelemy [2012]
EWCA Civ 843, [2012] 4 All ER 1096, the defendants argued that there
was a glitch in the rules that prevented them from making an effective
Part 36 offer to settle their counterclaim without being exposed to
liability for the claimant’s costs. Accepting this argument, Mr Justice
Sales had crafted a costs order by analogy with Part 36. The Court
of Appeal overturned his order holding that Part 36 consequences
cannot be applied, even by analogy, to offers falling outside Part 36. The
answer was, of course, that the counterclaim should have been treated
as a claim for the purposes of the offer: rr 20.2-20.3. Accordingly,
the defendants could have made a claimant’s Part 36 offer on their
counterclaim, as had been done in AF v BG [2009] EWCA Civ 757, [2010]
2 Costs LR 164.
The new r 36.2(3) clears away any remaining doubt: “A Part 36 offer
may be made in respect of…a claim, counterclaim or other additional
claim.” The point will be underlined by the guidance notes on the new
form N242A.
Appeals
The rules already provide that offers do not have Part 36
consequences in respect of the costs of appellate proceedings
unless they are made in the appeal. Again, the application of Part 36 to
appeals has been clarified:
• First, Part 36 offers can only be made in respect of appeals from
decisions made at trial: r 36.2(3). This mirrors the position at first
instance; Part 36 can be used in respect of issues in the case but
not mere interlocutory applications.
• Second, just as Part 36 can be used by counterclaiming
defendants, so it can be used by respondents seeking to make
offers on their cross-appeals: rr 36.2(3) & 36.4.
Technicality
Part 36 is very technical. Worryingly, offers that were plainly intended
to be, and understood as, made pursuant to Part 36 have in some
instances failed on technical grounds, eg Thewlis v Groupama [2012]
EWHC 3 (TCC), [2012] BLR 259, or have only been held to be valid after
expensive satellite litigation, eg C v D [2011] EWCA Civ 646, [2012] 1 All
ER 302.
As a rule-maker the CPRC sought to strike a balance between:
• certainty—Part 36 consequenctes can be so significant that it is
important that everyone knows where they stand; and
• avoiding technicality—so that offers that were plainly intended to
be made pursuant to Part 36 are not lightly found to be invalid.
For example, the requirement that the offer must state “on its face that
it is intended to have the consequences of Section I of Part 36” has
caused judges to hold that offers which failed to use the magic words
were not Part 36 offers: Thewlis (supra). The new rules no longer require
this formulaic incantation but simply that the offer must “make clear that
it is made pursuant to Part 36”: r 36.5(1).
Part 36 has been interpreted as preventing the making of time-limited
offers: C v D (supra). This restriction is being swept away: r 36.9(4).
This is not to encourage parties to make time-limited offers; after all,
they provide little costs protection once they lapse. However,
we could see no principled reason for the restriction and those
involved in the 2007 reforms confirmed that it had been an
unintended consequence of their drafting. Since an unaccepted Part
36 offer can be withdrawn (or its terms made less advantageous)
after the relevant period without permission, there is no reason to
force offerors to write two letters; one making the offer, and a second
withdrawing it 21 days later.
7
Split trials
New Law Journal
The 2007 reforms introduced a simplified rule on disclosure of Part
36 offers: “The fact that a Part 36 offer has been made must not be
communicated to the trial judge…until the case has been decided.”
There were exceptions but none, absent the written agreement of
the parties, catered for the split-trial position. In Ted Baker plc v Axa
Insurance UK plc [2012] EWHC 1779 (Comm), [2012] 6 Costs LR 1023, Mr
Justice Eder rejected the suggestion that the rule could be interpreted
to allow offers to be considered after the preliminary issues had been
decided. He added: “[T]here is a real problem here. In my view, there is
an urgent need for CPR 36.13 to be reviewed and possibly reformulated
in order to deal in particular with the question of split trials.”
Eder J’s interpretation of when a case has been decided has now been
codified by the new r 36.3. There is, however, no sense in preventing
a judge from being told about Part 36 offers framed by reference to
the issues that have been decided. Accordingly r 36.16(3) now allows
judges to be told about such offers even where the case has not been
finally decided. If the only Part 36 offers in the case are in respect of the
decided issues then the judge will be able to deal with costs and give
appropriate effect to the offers.
The more difficult question was what should happen where the parties
used Part 36 to make global settlement offers or where their offers
encompassed issues beyond those that had been tried as preliminary
issues. In such cases there is a conflict between two principles:
Since Woolf, parties have been encouraged to focus on the merits of
contesting applications. Defeat has led to an immediate costs order and
payment on account of any detailed assessment. Likewise, it could be
argued, judges should determine costs at the end of the preliminaryissue trial without regard to global offers.
Against this, parties are entitled to make global Part 36 offers.
Defendants who offer more than is ultimately awarded should be able to
recover later costs and it is wrong to equate the costs of the preliminaryissue trial with the discrete costs of some interlocutory application.
Ultimately, the CPRC decided to preserve the sanctity of the global offer.
Global offers will still be kept from the judge, but, under the new rules, the
court can at least be told whether or not such offers have been made: r
36.16(4). Costs may still be reserved where there have been global offers
although the new rules are likely to encourage parties to frame their
offers by reference to the preliminary issues.
A new r 36.12 regulates the acceptance of offers after a split trial. In
short, offers relating only to issues that have been decided will not be
capable of acceptance and so need not be withdrawn. Any other offers
can be accepted after the preliminary-issue trial but there is a seven-day
embargo on acceptance during which the offeror can decide whether to
withdraw the offer.
“There is a new rule (r 36.23) to cater
for the so-called Mitchell problem”
Withdrawing or changing the terms of offers
The rules already restrict the offeror’s ability to withdraw or change the
terms of an offer to make it less advantageous during the relevant period.
This position is maintained but rr 36.9-36.10 now codify the procedure:
Where the offeree wants to accept, the offeror has seven days to apply
to the court. On such application the court may allow the application
provided that there has been a change of circumstances since the
making of the original offer and it is in the interests of justice to give
permission.
The position in respect of more advantageous offers is also clarified.
Notice to make an offer more advantageous is not treated as the
withdrawal of the original offer but as the making of a new offer on
the improved terms: r 36.9(5). There is therefore a further period for
acceptance.
95% offers
The unfortunate decision in Huck v Robson [2002] EWCA Civ 398,
[2002] 3 All ER 263 has encouraged the practice of claimants making
very high, sometimes 95%, Part 36 offers, not in a genuine attempt to
settle the claim but in a cynical bid to secure the benefits of indemnity
costs, punitive rates of interest and, now, the £75,000-Jackson windfall.
The CPRC has addressed this abuse of Part 36 by adding a new r 36.17(5)
(e) to the criteria that the court must consider in deciding whether it
would be unjust to make the usual order, namely “whether the offer was
a genuine attempt to settle the proceedings”.
Personal injury claimant lawyers object that, in an open-and-shut claim,
a small discount of 5% can be all that is appropriate and can represent
a significant concession, especially in a serious-injury claim. The CPRC
accepted this point but considered that such claimants will be able to
justify only offering a 5% discount in very strong claims. Such cases are
not the focus of this reform.
The Mitchell problem
Finally there is a new rule to cater for the so-called Mitchell problem;
namely how to make Part 36 work when a litigant has been treated as
having filed a budget limited to court fees. The new r 36.23 provides
that litigants subject to such a limitation can nevertheless recover
50% of their costs assessed without reference to the limitation if they
make an effective Part 36 offer. This solution is intended to ensure that
the miscreant is still punished for the default that led to the sanction
while the innocent party does not have a blank cheque to turn down
reasonable settlement offers.
Conclusion
These new rules undoubtedly solve a number of issues with Part 36 but
this rule-maker is not naïve enough to think that the job is done. The new
rules will not solve all problems and inevitably clever lawyers will find
arguments that will lead to unintended consequences. Perhaps all that
can be hoped is that these rules are an improvement on 2007.
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• First, no offer can be withdrawn or changed after acceptance.
• Second, there is now no need to apply for permission to withdraw
or to change the offer unless the offeree wants to accept the
original offer. The notice of withdrawal or change therefore takes
effect automatically at the end of the relevant period unless the
offeree seeks to accept the original offer.
8
To find our more about New Law Journal
visit lexisnexis.co.uk/DR36/NLJ
The New Rule 36 – the path to change
Ruth Pratt
Links in red indicate where subscribers to LexisPSL Dispute Resolution
can find further guidance
A wounded foot soldier in the CPR army
Why so many changes to Part 36? The answer is not hard to find. Since its
very inception a provision intended to assist with effective settlement of
cases, and thus reduce litigation cost, has spawned a not insubstantial
amount of satellite litigation, with practitioners and the courts seemingly
overly taxed by its drafting and application.
Intended as a self-contained code, free from the broader principles of
interpretation of contract law, CPR 36 has become weighed down by an
entourage of case law as litigators struggle to manipulate its provisions to
gain best tactical advantage or to apply it by analogy to fit their specific
case circumstances.
From the battlefield – Part 36 war stories
Here are some of the more telling examples:
The form and content of a Part 36 offer (CPR 36.2) – the technicality issue
Existing CPR 36.2(2)(b) requires that to be a valid Part 36 offer, the offer
letter must ‘state on its face that it is intended to have the consequences
of Section I of Part 36’. This requirement has not been free from
controversy. For example, PHI Group considered whether it was essential
to refer in the offer to the fact that it was being made under Section I of
CPR 36 in circumstances where Section II (which deals with RTA and the
EL/PL protocol cases) could not apply given the circumstances of the
case. The court concluded it did not. This case, along with that of Thewlis,
typified the problem with the regime: as a self-contained code it needs to
operate with certainty and therefore with a fair degree of rigidity, however,
as seen in this case, this can result in the potential to suffer from an over
technical application. See our report: Court of Appeal consider Part 36
offers, specifically the 21 day period and withdrawal of an offer (PHI Group
v Robert West) [PHI Group v Robert West Consulting [2012] EWCA Civ
588, [2012] All ER (D) 34 (Jun)] [Thewlis v Groupama Insurance Company
Limited [2012] EWHC 3 (TCC), [2012] All ER (D) 09 Jan)]
Could you make a Part 36 offer in respect of a counterclaim?
It took the Court of Appeal in 2009 to decide that a defendant’s offer
to settle an, as yet unpleaded, counterclaim could amount to a valid
claimant’s Part 36 offer within the meaning of CPR 36 (AF v BG). It was
a sensible decision but one which had to work its way through what was
meant by ‘proceedings’ under CPR 36 and whether the result of allowing
such a Part 36 offer would be consistent with the then CPR 36.10(6) (which
provided that in terms of costs consequences under Part 36, a claimant’s
costs included any costs incurred in dealing with the defendant’s
counterclaim if the Part 36 offer stated it took such counterclaim into
effect’). See our report: If correctly drafted a Part 36 Offer to settle an
unpleaded counterclaim can dispose of the entire claim (23 July 2009)
[AF v BG [2009] EWCA Civ 757, [2009] All ER (D) 249 (Jul))].
Notwithstanding this decision, the issue of counterclaim arose again in 2011
in F&C Alternative Investments. Here the claimant sought declaratory relief
and initiated proceedings as a tactical manoeuvre in the knowledge that
the defendants would have to bring the real substance of the dispute as a
counterclaim. The defendants wanted to seek a settlement but, faced with
the prospect of having to bear the claimant’s significant legal costs were
their offer made and accepted as a defendant’s Part 36 offer (by virtue of
CPR 36.10(1)), deliberately stated their offer did not take the form of a Part
36 offer and yet sought the court’s indulgence of it when it came to costs
by seeking to apply the Part 36 costs consequences by analogy. Sales J
granted such indulgence (see our report: CPR 36 costs consequences by
analogy (F&C Alternative Investments v Barthelemy & Anor)) but the Court
of Appeal overturned him, stressing the need for compliance with the strict
code of CPR 36 if certainty is to be maintained – its consequences cannot
be implied by analogy, see our report: Court of Appeal: settlement offer
and Part 36 (F&C Alternative Investments v Bartelemy). [F&C Alternative
Investments v Barthelemy [2011] EWHC 2807, [2011] All ER (D) 42 (Nov)]
[F&C Alternative Investments v Barthelemy] [2012] EWCA Civ 843, [2012] 4
All ER 1096]
Time-limited offers
In C v D the claimant made a settlement offer which it expressed to be
an ‘Offer to settle under CPR Part 36’ and in which it set out the costs
consequences of failing to accept the offer as set out in CPR 36.14 before
further stating that ‘….the offer will remain open for 21 days from the date
of this letter (the “Relevant Period”)…’. It was over 12 months later (and just
days before trial) that the defendant sought to accept the offer. Warren
J had to consider whether stating a period for which the offer was to
remain open (albeit, it was the same amount of time as the relevant period
required under CPR 36, ie 21 days) rendered the offer outside CPR 36.
He concluded it did and that the offer therefore failed as a Part 36 offer
(see our report: A time-limited offer cannot be a Part 36 offer (News, 18
November 2010)). The Court of Appeal upheld this decision at least to
the extent of confirming that a time-limited offer could not be a Part 36
offer. However, on the precise wording of this offer letter, given the overall
CPR 36 context in which it had been intended to be made, it concluded
that by saying that the offer would be ‘open for 21 days’ did not mean that
if it were not accepted within that timeframe it would automatically lapse,
rather that for a period of 21 days the offer would not be withdrawn (see
our report: Court of Appeal: CPR 36: time-limited offers and the meaning
of ‘open for 21 days’ (News, 2 June 2011)) . Not an ideal position in which to
leave a self-contained code that should be relatively certain to interpret
and apply. [C v D [2010] EWHC 2940 (Ch), [2011] 2 All ER 404] [C v D [2011]
EWCA Civ 646, [2012] 1 All ER 302]
Part 36 offers and split trials (the Ted Baker issue)
The existing CPR 36 does not cater for split trial scenarios. So, just what
was Eder J to do in Ted Baker when, having found for the claimants on a
preliminary issue hearing, he could not be certain that there were not Part
36 offers out there that might impact on any costs order he might make.
Given that CPR 36 does not currently permit disclosure of a Part 36 offer
after a split trial, even where the offer relates only to the decided issues,
he could only properly consider costs when any such offers as might exist
could be made known to the court. See our report: When can the existence
of a Part 36 offer be communicated to the court? (Ted Baker v AXA). [Ted
Baker v Axa [2012] EWHC 1779 (Comm)]
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Since its introduction in the Civil Procedure Rules in 1998, CPR 36 has undergone a number
of reforms in: April 2007, April 2013 and now, again, April 2015. This latest incarnation
represents more of a tidying up and codifying re-write than a substantive change, but what
has lead us to this new and shiny New Rule 36 which comes into force on 6 April 2015?
LexisPSL
Withdrawing a Part 36 offer in the relevant period
The decision in Evans saw a defendant withdrawing its Part 36 offer within
the relevant period, whilst the claimant was (almost) simultaneously
accepting it, in circumstances where the permission to withdraw had
been given on an application made without notice to the claimant. It was
left to Leggatt J to unravel this apparent breach of the general principles
of natural justice whilst highlighting some of the difficulties that can be
encountered under the existing CPR 36 when seeking to withdraw a
Part 36 offer during the currency of the relevant period. See our report:
Court sets aside without notice order permitting Part 36 offer withdrawal
where offeree in the dark as to reasons (Evans v Royal Wolverhampton
Hospitals). [Evans v Royal Wolverhampton Hospitals [2014] EWHC 3185
(QB), [2014] All ER (D) 86 (Oct)]
Cynical claimant offers
An issue that was discussed at length by their Lord Justices in Huck
was whether a claimant’s Part 36 offer which represented only a small
discount (in this case 5%) from the sum sought would render it unjust
for the court to then make the Part 36 costs consequences when the
claimant achieved a judgment ‘at least as advantageous’ as its own offer,
in circumstances where it was inevitable that the defendant would reject
such an offer. The making of offers by claimants in such a way has been
considered to be on the increase since the introduction of the ‘additional
amount’ under CPR 36.14(3)(d). The indication being that the offer is
made, not as a genuine attempt to try and settle the claim (knowing the
defendant is very unlikely to accept), but rather merely as ‘a tactical step
designed to secure the benefit of the incentives provided by [CPR 36.14(3)
(d)].’ (Tuckey LJ, para 71). These so-called ‘cynical claimant offers’ were
recognised as a problem but one which it was anticipated judges would
deal appropriately with. See our report on the (then proposed) 2015 Part
36 reforms: Part 36—2015 reforms and the decision in Huck v Robson
[2002] EWCA Civ 398, [2002] 3 All ER 263.
General Jackson – April 2013
Revolution? No. There was enough of that going on in the general costs
world for Part 36 to be much affected, other than by the ‘small’ addition of
the additional award - to align itself more with Lord Justice Jackson’s vision
of a more cost-effective and cost-equitable litigation stage, by rewarding
those claimants who pitched their Part 36 offer sensibly and so obtained
a judgment ‘at least as advantageous’ as their proposals, and punishing
defendants who did not accept such proposals with the award of an
additional amount in the claimant’s favour (CPR 36.14(3)(d)) introduced
in April 2013). In part, the intention was to try to balance the effects of
removing ATE premiums from a successful claimant’s recovery.
Beyond that, Part 36 was left alone. But the case law did not die down and
the uncertainties thrown up by the caselaw continued unabated.
Call in the cavalry – the Civil Procedure Rules Committee re-write
Part 36
So, has everything changed? The Civil Procedure Rules Committee
(CPRC) organised a Part 36 sub-committee, chaired by Ed Pepperall
QC, tasked with reviewing Part 36 in order to produce a substitute Part
36 which ‘aligns the rules with case law developed since the Part was last
amended and re-arranges the order of the rules in the Part’.
Thus, this was not hailed as a substantive change of the principles under
which Part 36 operates but more a reorganisation and a codification of
some of the issues that have been thrown up in its operation since 2007.
On that we say, well done!
So what are the main changes? Dealing with the issues thrown up by the
cases highlighted above, we now have:
• technicality – we still have a self-contained procedure but at least
now it is sufficient for your Part 36 offer letter to ‘make clear that it
is made pursuant to Part 36’ (New Rule 36.5(1)(b))
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• counterclaims – it is now clear that you can make a Part 36 offer ‘in
respect of the whole, or part of, or any issue that arises in (a) a claim,
counterclaim or other additional claim…’ (New Rule 36.2(3)(a))
• time limited offers – yes, provided your part 36 offer is otherwise
compliant (ie you do not compromise the requirement for a
relevant period) then you can specify in the terms of your offer that
it will automatically expire on a given date if not accepted by then
(New Rule 36.9(4)(b))
• split trials – all now catered for courtesy of New Rule 36.12 (accepting
a Part 36 offer in a split trial case). New Rule 36.16(3)(d) permits you
to communicate to the judge the existence and terms of a Part 36
offer which is limited to issues which have been decided. New Rule
36.16(4) permits you to communicate to the judge the existence
(but not the terms) of a Part 36 offer which is a global Part 36 offer or
includes issues which have not yet been decided
• withdrawing a Part 36 offer or varying its terms so as to be less
advantageous to the offeree during the relevant period: this is
permitted under New Rule 36.10. If the offeree does nothing then the
withdrawal or variation takes effect on expiry of the relevant period.
However, serving a notice of withdrawal or adverse variation does
not prevent the offeree from still accepting the original offer within
the relevant period. Where the offeree does so then the offeror has
seven days (or earlier if trial is earlier) in which to apply to court for
permission to withdraw/adversely vary the offer and the court may
give such permission where satisfied that there has been a change of
circumstance and it is in the interests of justice to give permission
• cynical claimant offers – the CPRC sub-committee did not enter
the debate in percentage terms as to what amounts to a cynical
claimant offer, however, it has added a new requirement in the
form of New Rule 36.17(5)(e) that the court has to consider, when
deciding whether or not it would be unjust to make the costs
consequences of failing to accept a Part 36 offer (under New Rule
36.17(3) or 36.17(4)), whether the unaccepted Part 36 offer was a
‘genuine attempt to settle the proceedings’
The sub-committee also sought to balance the position as regards parties
who have been penalised by having their costs in some way limited to
recoverable court fees as against acknowledging their more positive
behaviour when seeking sensible settlement of the claim to which they are
party. Hence New Rule 36.23 which provides that where a party has had
their costs limited in such way then their costs recovery under New Rule
36 is to mean, in respect of those costs subject to such limitation, ‘50% of
the costs assessed without reference to the limitation’ together with any
other recoverable costs. So, their punishment is not ignored but its effect
diminished if they have acted sensibly as regards seeking to settle the claim.
Peace in our time?
We are rightly concerned when faced with unnecessarily complex and
disorderly drafting and we are all more comfortable, generally speaking,
with at least some degree of certainty, even in what is, inevitably, still
a tactical arena. This is a truth never more so than now. Litigation cost
is being squeezed from every angle. Reducing uncertainty and thus
contributing to maximising efficiency in the conduct of our claims is
something we are ever increasingly striving towards.
There is no doubt that Part 36 requires a certain level of complexity
if it is effectively to wield its carrot and stick encouragement to settle
and there will always be cases that test some of the more intricately
related provisions aimed at achieving this result. But the work of the
sub-committee in dealing with those uncertainties and in its general
re-ordering and tidying up of the rules, resulting in a less ambiguous set of
rules, can only be a welcome change.
To find out more, visit
lexisnexis.co.uk/DR36/PSL
Natural justice and Part 36 offer withdrawal
Ruth Pratt
Mr Justice Leggatt has righted what would appear to have been a
manifest breach of the principle of open and natural justice in the rather
extraordinary case of Evans v Royal Wolverhampton Hospitals NHS
Foundation Trust [2014] EWCA Civ 3185 (QB), [2014] All ER (D) 86 (Oct).
What happened in this case?
The defendant had made a Part 36 offer which it then sought to withdraw
within the relevant period, but the claimant had also sought to accept it
just after the withdrawal notice (but still within the relevant period).
Note: If you wish to withdraw a Part 36 notice within the relevant period,
you need to obtain the court’s permission to do so.
One might have expected, therefore, that the defendant would openly
seek such permission.But no, unbeknownst to the claimant, the defendant
made a without notice application for permission to withdraw the offer.
The court made such an order on an ex parte basis and, even more
surprisingly, dispensed with the requirement under CPR 23.9(2) that when
serving the ex parte order on the claimant, that the defendant need not
serve with it a copy of its application notice, supporting evidence and
note/transcript of the hearing.
So, on receiving the court order giving the defendant permission to
withdraw its Part 36 offer, the claimant was left completely in the dark as to
the basis on which the permission had been given.
Was this an acceptable deviation from the principle of open and
natural justice?
Leggatt J thought not. He considered:
• the case law and legislative history which has resulted in the closed
material procedure as we know it
• adherence to the principle of natural justice is not an optional
feature of litigation from which a court has power to derogate
because it considers that in the particular circumstances the need
to follow a fair procedure is outweighed by a conflicting public or
private interest. Subject only to certain established and tightly
defined exceptions, the right to participate in proceedings in
accordance with the principle of natural justice is absolute
• this principle applies whenever a court is deciding a question of
substantive legal right as between the parties to the litigation
• there was no national security exception that applied here to
permit of a closed material procedure exception
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DR Blog
The following is a post from our DR blog in October last year, summarising the Evans case
– one of those cases typifying the need for amendment and codification of the existing
CPR 36. Evans highlighted issues surrounding withdrawing a Part 36 offer within the
relevant period. This has now been dealt with comprehensively in the New Rule 36.10.
DR Blog
How far did the defendant try to push it?
Whilst recognising it couldn’t maintain a closed material procedure
argument in light of this, the defendant still didn’t back down.
Rather it requested that the court, again without disclosing any of the
evidence to the claimant, adjourn the hearing of the claimant’s application
to set aside the permission order, essentially for a few months until the
defendant determined that it was appropriate for the claimant to have sight
of the evidence supporting the defendant’s original permission application.
In so doing, the defendant argued that an adjournment was essentially
a procedural matter only and did not involve the claimant’s substantive
legal rights and therefore principles of natural and open justice would
not be flouted by the court ordering such an adjournment on the basis of
undisclosed material.
Leggatt L responded with a resounding ‘no’:
• the practice of making orders which determine questions of
substantive legal rights on an application made without notice is
itself an exception to the principle of open and natural justice and,
as such, is subject to vital safeguards
• those safeguards are clearly seen in the context of freezing
injunctions and search orders which are often sought on a without
notice basis that:
• that the application should not be made without notice unless
either giving notice would enable the respondent to take steps to
defeat the purpose of the application or there has been literally
no time to give notice before the urgent assistance of the court is
required
• the standard practice requiring the applicant on such an
application to serve on the respondent when serving the order
granted both a copy of the application notice and the supporting
evidence and also a note or transcript of the without notice hearing
None of these safety guards had been applied in the present case. An
adjournment did engage the claimant’s substantive rights and therefore
he refused to consider an adjournment without disclosure of the
defendant’s evidence to the claimant. The defendant declining to do so he
set aside the permission order and entered judgment for the claimant in
the amount of the Part 36 offer.
12
And what of the Part 36 regime on withdrawal and a change in
circumstance?
Leggatt J concluded his judgment with the following observations:
• Part 36 provides a statutory procedure designed to facilitate and
encourage the settlement of disputes
• this requires a regime that is clear and certain, one such element
being that an offeree knows it has 21 days (the relevant period) within
which to accept an offer and that the offer cannot be withdrawn
within that period unless the court gives its express permission
• in deciding whether or not to give such permission the court
will consider whether there has been a sufficient change of
circumstances to make it just to permit the party to withdraw its
offer, such as the discovery of further evidence (Cumper, a case on
payments in, adopted in Flynn)
• the relevant date for determining whether the change in
circumstance is sufficient to permit the offer to be withdrawn must
be the date on which the offer was purportedly withdrawn; that
being so, what legitimate reason could there be for now seeking to
conceal from the offeree the way in which circumstances were said
to have changed between the making of the offer and its purported
withdrawal
• further, the matter relied on as constituting the change in
circumstance must be one which the offeror is ready to disclose at
the time notice of withdrawal is given and the necessary application
for permission made
The rigidity of the Part 36 regime did not allow for a situation such as the
defendant here contended for, namely leaving the claimant in a state
of limbo for yet further time before disclosing the reasons behind its
purported withdrawal and whether or not such a withdrawal invalidated
the claimant’s purported acceptance.
Published on the DR blog on 14 October 2014
To find out more, visit
lexisnexis.co.uk/DR36/Blog
Checklist: New Rule 36—
Making a Part 36 offer
This checklist identifies the key factors that you should consider when drafting a
Part 36 offer as considered under the New Rule 36 in force as of 6 April 2015.
It is assumed that:
LexisPSL
• the offer is to be made on/after 6 April 2015 and therefore the New Rule 36 will apply in its entirety
• the Part 36 offer is a global offer (ie it is not one which is limited to a specific part(s) or issue(s) in the claim)
Consideration
Comment
New Rule 36 provision
The claim
Offer can be made in relation to whole or any part or
issue of:
New Rule 36.2(3)(a)(b)
• a claim, counterclaim or other additional claim, or
• an appeal or cross-appeal from a decision made
at trial
You cannot make a Part 36 offer in respect of an appeal
from an interlocutory decision
When to make offer
Offer can be made at any time before or after proceedings
start. Make a fresh offer if matter goes to appeal
New Rule 36.7(1) and New Rule 36.4(1)
‘Relevant period’
For offers 21 or more days before trial, state relevant
period, usually 21 days from date offer is served. If made
less than 21 days before trial then relevant period lasts until
trial ends
New Rule 36.3(g) and New Rule 36.5(1)(c)
Content of offer
Offer must:
New Rule 36.5
• be in writing. You can use Form N242A but this is not
compulsory
New Rule 36.6
• make clear it is made pursuant to Part 36
• specify a relevant period of not less than 21 days
within which the defendant will be liable for the
claimant’s costs if the offer is accepted
• state whether it relates to whole or part of claim or
specified issue(s) and, if so, which one(s)
• state whether it takes into account counterclaim
• provide, as required, certain additional information
relevant in personal injury cases (New Rules 36.5(3),
36.18, 36.19 and 36.22)
If defendant is making offer and it is to pay a sum of money
in settlement of the claim, it must be an offer to pay a
single sum of money. If the offer is to pay some/all of
that sum at a date later than 14 days following the date of
acceptance, it will not be treated as a Part 36 offer unless
the offeree accepts the offer
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Consideration
Comment
New Rule 36 provision
Offer in split trial case
If proceedings will/are likely to involve a split trial, be aware
that a global offer or one which includes issue(s) that are
to be covered in the preliminary issue trial (eg if there
is a preliminary trial on liability or limitation) cannot be
accepted until seven days after judgment is handed down
in the trial of specific issues
New Rule 36.12
Time-limit for acceptance
Offer can (if desired) include a term providing that
the offer will be treated as automatically withdrawn if
not accepted by a specified date/event (provided the
requirement for a relevant period is not compromised)
New Rule 36.9(4)(b)
Interest
Offer will be treated as inclusive of interest until end of
relevant period
New Rule 36.5(4)
Clarity of terms
Minimise risk of offeree seeking clarification of terms,
delaying date of offer
New Rule 36.8
Serving offer
Offer is made when served on offeree. Serve on offeree’s
legal representative if they have one. Serve by fax before
4.30pm on a business day for quickest service (note,
however, that dates of deemed service under CPR 6.26
apply only for service effected within the United Kingdom).
Whatever ever method of service is chosen, calculate (1)
date of service and (2) when relevant period ends
New Rule 36.7
If acting for claimant, prepare details of claimant’s
costs to date (including pre-action costs). If the offer is
accepted within the relevant period, the defendant will pay
claimant’s costs until acceptance (on standard basis if not
agreed)
New Rule 36.13(1)
Withdrawing or varying the offer
to be less favourable
Court permission needed if within the relevant period.
Serve written notice of withdrawal or change on offeree’s
legal representative if they have one. Serve by fax before
4.30 pm on a business day for quickest service (if serving
within the United Kingdom). Withdrawal/variation takes
effect on expiry of relevant period unless, in that time,
the offeree serves notice to accept the original offer. If
the offeree does so, file an application (within seven days
of offeree’s notice or earlier if trial is earlier) seeking court
permission to withdraw/vary the offer. Court will give
permission if there has been a change in circumstance
and it is in the interests of justice to give permission
New Rule 36.10
Varying offer to be more
favourable to offeree
Can vary the offer to make it more favourable to the
offeree at any time, this will take effect as a new offer (with
a new relevant period). The original offer is not withdrawn
and therefore may be relevant on the question of costs
should neither offer be accepted
New Rule 36.9(5)
Costs to date
To find out more, visit lexisnexis.co.uk/DR36/PSL
14
New Practice Direction 36A, para 3.1
CPR 6.26
New Rule 36.13(4)(b)
Table of changes:
New Rule 36 v existing CPR 36 rules
Note: although the New Rule 36 applies in its entirety only to Part 36 offers made on/after 6 April 2015, as of that date certain of its provisions (New Rule
36.3: definitions, New Rule 36.11: acceptance of a Part 36 offer, New Rule 36.12: acceptance of a Part 36 offer in a split trial case and New Rule
36.16: restriction on disclosure of a Part 36 offer) will also apply to Part 36 offers made before that date where trial (whether of the whole claim or a
part(s)/issue(s)) is due to commence on/after 6 April 2015.
Note: this table does not consider those provisions relating to Part 36 offers concerning low value RTA or EL/PL protocol cases.
Nature of
provision
Existing (pre
6 April 2015)
CPR 36 rule
New Rule 36
(in force as of 6
April 2015)
Has it changed much?
Scope of Part
New Rule 36.1
Confirms that Part 36 is a self-contained procedural code about offers to settle made
pursuant to the procedure in Part 36.
Scope of this
Section
(ie Section I)
New Rule 36.2
Confirms that New Rule 36, Section I does not apply to an offer to settle to which New Rule 36,
Section II applies.
Confirms that you can still make an offer to settle in whatever way you wish but if the offer is
not made in accordance with New Rule 36.5 it will not have the consequences set out in New
Rule 36, Section I.
Confirms that for a non-Part 36 compliant offer the court will still be required, by virtue of CPR
44.2, to take into account an offer to settle which does not have Part 36 consequences.
Counterclaims
New Rule 36.2
Specific provision now that you can make a Part 36 offer in respect of the whole or any part
or issue of a counterclaim or other additional claim. This deals therefore with the issue as it
arose in F&C Alternative Investments.
Appeals
CPR 36.3(4)
New Rule
36.2(3)(b)
New Rule 36.4
Confirmation can only make a Part 36 offer on an appeal from a trial (not an appeal from an
interlocutory application).
Relocation of the provision that Part 36 costs consequences of first instance proceedings do
not extend to appeals, unless the Part 36 offer is being made in appeal proceedings.
Check out the ‘corresponding term’ table in New Rule 36.4 to guide you through using New
Rule 36 if making a Part 36 offer in appeal proceedings.
CPR 36 definitions
Various
throughout
the existing
CPR 36
New Rule 36.3
Key definitions are now located in one place, including definitions to cover split trial scenario.
New definitions as to:
• ‘trial’: can mean a trial of all the issues or a trial only of liability, quantum or some other
issue
• a trial is ‘in progress’: defined to mean from the time the trial starts until judgment is
given/handed down
• a case is ‘decided’: when all the issues in the case have been determined, whether at
one or more trials
• ‘trial judge’: includes the judge (if any) allocated in advance to conduct a trial
• ‘relevant period’: maintains essentially the same definition as under the existing CPR
36.3(1)(c)
Requirements
for a valid Part 36
offer
CPR 36.2
New Rule 36.5
Not much has changed but still important:
• you no longer need to state on the face of your offer that it is intended to have the
consequences of Section I of CPR 36
• rather, your offer must ‘make clear that it is made pursuant to Part 36’ – a subtle but
helpful distinction to deal with the so-called ‘technicality’ issue as seen in cases such
as Thewlis.
Defendant’s offer
CPR 36.4
New Rule 36.6
Maintains essentially the same definition as under the existing CPR Part 36.
When can a Part
36 offer be made?
CPR 36.3(2)
New Rule
36.2(3)(b)
and New Rule
36.7
Reorganised the location but the basics remain the same: you can make a Part 36 offer before
commencement of proceedings and you can make a Part 36 offer in appeal proceedings.
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This Practice Note provides a summary analysis, in table format, of the New Rule 36
in force as of 6 April 2015 as against the existing CPR 36 rules (which remain in force
until 5 April 2015). It shows you where to find the existing rules in the new Part as well as
identifying wholly new provisions and amended provisions.
Existing (pre
6 April 2015)
CPR 36 rule
New Rule 36
(in force as of 6
April 2015)
Has it changed much?
Serving a Part 36
offer
CPR 36.7
New Rule 36.7
A Part 36 offer is made when it is served on the offeree. Although not new, the drafters
resisted the temptation to further define what is meant by ‘served on the offeree’ instead
relying on the already set out concepts of service under CPR 6 which is now specifically
referred to in New Rule 36.7.
When and how to
withdraw a Part 36
offer
CPR 36.3(5)(7) and CPR
36.7
New Rule 36.9
and New Rule
36.10
You can still vary or withdraw a Part 36 offer after expiry of the relevant period if it has not
already been accepted without the court’s permission (New Rule 36.9(4)(a)) and you are still
required to serve notice to do so, such notice taking effect when it is served on the offeree
(New Rule 36.9(2)(3)).
Some new provisions, however:
Now, where the terms of your Part 36 offer specify a time when it will expire if not already
accepted (provided such time limit is not within the relevant period) then your offer will be
treated as having been automatically withdrawn after expiry of the relevant period without
you needing formally to serve a notice of withdrawal (New Rule 36.9(4)(b)). A welcome
provision for Part 36 offerors as it will bring an end to overlooked but unwithdrawn Part 36
offers.
For the first time there is express provision regarding varying a Part 36 offer so as to make it
more advantageous to the offeree. Such variation may be made at any time and will not be
treated as a withdrawal of the original offer, but as a new Part 36 offer with a new relevant
period. Thus both the original and the new offer would remain open for acceptance. The
effect of two such offers still being open comes in terms of costs consequences for
unaccepted offers (New Rule 36.17).
If you want to withdraw or adversely vary your Part 36 offer within the relevant period New
Rule 36.10 applies. You may do so but this does not prevent the offeree from still accepting
the original offer if they do so within the relevant period. Where they do so then you can
only withdraw/adversely vary your Part 36 offer by then applying (within seven days of the
offeree’s acceptance or earlier if trial is earlier) to the court for permission. Such permission
will only be given if there has been a change of circumstance and it is in the interests of
justice. If the offeree does not accept your original offer within the relevant period then your
withdrawal/adverse variation of it takes effect on expiry of the relevant period (New Rule
36.10(2)(3)). This should now deal with issues as they arose in the Evans case.
As before:
The costs consequences for failing to accept a Part 36 offer as set out in New Rule 36.17(3)(4)
do not apply where the Part 36 offer has been withdrawn (New Rule 36.17(7)(a)).
If the offeree has beaten a Part 36 offer where the terms were varied so as to become less
advantageous to the offeree then, again, the costs consequences of New Rule 36.17 do not
apply (New Rule 36.17(7)(b)). However, New Rule 36.17 confirms that CPR 44.2 requires the
court to consider an offer to settle that does not have the costs consequences set out in
New Rule 36, Section I and so, presumably, such an offer may yet be capable of consideration
under CPR 44.2 when it comes to costs.
Seeking
clarification of a
Part 36 offer
CPR 36.8
New Rule 36.8
No change. Provision is replicated in full in New Rule 36.8.
When and how to
accept a Part 36
offer
CPR
36. 9
New Rule 36.11
The provisions are generally the same, with one key exception: under existing CPR 36.9(5)
you cannot accept a Part 36 offer after the end of trial but before judgment is handed down
unless the parties agree. This provision has been removed. Rather, it is now apparent from
New Rule 36.3(d) and New Rule 39.11(3)(d) as to when a trial is ‘in progress’ that, in order to
accept a Part 36 offer after trial but before judgment is handed down/given, you would need
the court’s permission (not simply the parties’ agreement).
It remains the case where the court’s permission is required to accept a Part 36 offer that,
unless the parties agree, the court must (rather than ‘will’, if there is a distinction to be drawn)
make an order dealing with costs and may order that the costs consequences of accepting a
Part 36 offer as set out in Part 36 (ie in New Rule 36.13) apply (New Rule 36.11(4)).
New Rule 36.12
This is an entirely new provision. It provides that where you have a split trial, you cannot
accept a Part 36 offer in respect of an issue which has already been decided and that you
cannot accept any other Part 36 offer until seven clear days after judgment has been handed
down in the decided issue(s).
This is to protect those Part 36 offerors who have made separate issue-based Part 36 offers
and wish to withdraw those Part 36 offers made in respect of (as yet) undecided issues as a
consequence of the judgment given in the already decided issues.
LexisPSL
Nature of
provision
Accepting a Part
36 offer in split
trials
16
Existing (pre
6 April 2015)
CPR 36 rule
New Rule 36
(in force as of 6
April 2015)
Has it changed much?
Costs
consequences of
accepting a Part
36 offer
CPR 36.10
New Rule 36.13
No significant change although some points of clarification:
Where a Part 36 offer is accepted within the relevant period the claimant is entitled to his
costs of the proceedings and those are now specifically stated to include the claimant’s
recoverable pre-action costs (New Rule 36.13(1)).
Where a defendant has made a Part 36 offer which relates to only part of the claim and the
claimant accepts this and abandons the balance of the claim, under existing CPR 36.10 the
claimant is entitled to its costs ‘of the proceedings’ up to the date of acceptance unless the
court orders otherwise. Now New Rule 36.13(2) specifies that in such a case the claimant
will only be entitled to its costs ‘of such part of the claim’ (as was accepted under the Part
36 offer) and not costs of the proceedings more generally, again, unless the court orders
otherwise.
New Rule 36.13(3) clarifies that costs are to be assessed on the standard basis if not agreed
unless the recoverable costs are fixed costs.
New Rule 36.13(4) makes it clear that the court will determine the costs liability (unless the
parties agree it) where:
• the Part 36 offer was made less than 21 days before trial is accepted, or
• the Part 36 offer relates to the whole of the claim is accepted after expiry of the
relevant period, or
• the Part 36 does not relate to the whole of the claim and is accepted at any time
Where the Part 36 offer relates to the whole of the claim and was accepted after expiry of
the relevant period but the parties cannot agree the costs such that the court order them,
New Rule 36.13(5) changes the wording subtly so, instead of talking about the claimant’s
entitlement and the offeree’s liability, the language used instead is that the court must order
that the claimant ‘be awarded’ its costs up to the date of expiry of the relevant period and
the court must order that the offeree ‘do’ pay the offeror’s costs from the date of expiry of
the relevant period to the date of acceptance of the offer. In such case, although the costs
consequences of accepting a Part 36 offer are, under the existing regime, to be ordered
unless the court orders otherwise, New Rule 36.13(5)-(6) together impose a requirement
that the court must make such order unless it considers it unjust to do so and, in considering
whether it would be unjust, the court is required to take into account all the circumstances of
the case including the matters listed in New Rule 36.17(5). This requirement under New Rule
36.13(6) is a new provision.
The non-costs
consequences of
accepting a Part
36 offer
CPR 36.11
New Rule 36.14
Under existing CPR 36.11 where a defendant made an offer that was/included a single sum
and that sum was not paid within 14 days of acceptance of the offer, the claimant was entitled
to enter judgment for that sum. There was no corresponding provision where the offer to
accept a single sum in settlement of the claim emanated from the claimant (rather than
the defendant). This meant that an unscrupulous defendant could accept a claimant’s Part
36 offer to settle on payment of a single sum and then not pay that sum, this did not give
the claimant an automatic right to enter judgment on that sum. This lacuna has now been
rectified in the provision appearing as New Rule 36.14(6)-(7).
Otherwise the non-costs consequences of accepting a Part 36 offer remain as per the
existing regime.
Accepting a Part
36 offer made by
one but not all
defendants
CPR 36.12
New Rule 36.15
The New Rule 36.15 maintains essentially the same definition as under the existing CPR 36.12
without substantial change.
Disclosing the
existence of a Part
36 offer
CPR 36.13
New Rule 36.16
The key change here is to accommodate the situation where a Part 36 offer has been made in
relation to one or more issue(s) in a case and there has been a split trial. In such case, it is now
clear under New Rule 36.16(3)(d) and New Rule 36.16(4) that:
• You can disclose to the trial judge the existence and terms of a Part 36 offer which is
limited to the issues which have been decided in the case
• However, if the Part 36 offer is a global offer or includes other issues that have not yet
been decided, you can only disclose the existence of the offer to the trial judge but not
its terms unless one of the criteria in New Rule 36.16(3)(a)-(c) applies
This is a new provision to deal with the so-called ‘Ted Baker’ issue.
17
LexisPSL
Nature of
provision
Existing (pre
6 April 2015)
CPR 36 rule
New Rule 36
(in force as of 6
April 2015)
Has it changed much?
Costs
consequences of
not accepting a
Part 36 offer
CPR 36.14
New Rule 36.17
The same basic provisions apply where a party fails to accept a Part 36 offer, ie certain specified
costs consequences will apply where either the claimant obtains a judgment more advantageous
than a defendant’s Part 36 offer or the claimant obtains a judgment which is at least as
advantageous as the proposals contained in its own Part 36 offer. There has been no change in
terms of identifying what is ‘more advantageous’ or ‘at least as advantageous’ in this respect.
The only key changes are:
New Rule 36.17(3)(a) and New Rule 36.17(4)(b) make it clear that in ordering costs such costs are
to include any recoverable pre-action costs.
There has been a change from use of the word that the court ‘will’ make such costs orders
(unless unjust to do so) to it ‘must’ make such orders (unless unjust to do so) although it is not
obvious that there is necessarily any practical consequence in this difference in terminology.
New Rule 36.17(4)(d) makes it clear that the ‘additional amount’ that must be awarded where
the claimant obtains judgment at least as advantageous as his own unaccepted Part 36 offer,
can only be awarded if the case has been decided (ie all issues in the case have been decided)
and there has not been a previous order of costs under New Rule 36.17(4) and also confirms
that the additional amount applies to all cases, including those where the amount awarded by
the court exceeds £1 million (by removing this upper threshold).
New Rule 36.17(5)(e) is new and is possibly one of the most interesting of the new Part 36
provisions. In determining whether an order under New Rule 36.17(3) or New Rule 36.17(4)
is unjust, the court must consider the factors listed in New Rule 36.17(5). New Rule 36.17(5)
(e) is a newly added factor which requires the court to consider whether the unaccepted
Part 36 offer was a ‘genuine attempt to settle the proceedings’. Its inclusion arose out of the
issue of cynical claimant offers, ie those claimant offers that were made at such a level as to
be almost impossible to accept as conferring no real benefit of settlement on the defendant
and so were made with little inclination to settle but as a strategic attempt to recover on costs
under the existing provisions of CPR 36.14 when the defendant did not accept the offer. They
were typified in cases such as Huck. Although personal injury claimant lawyers have argued
that, in an open-and-shut claim, an offer to settle for 95% - ie a discount of 5% - can represent
a significant concession of real value to the defendant. However, it was outside the remit of
the Civil Procedure Rules Committee sub-committee’s work on revising Part 36 to consider
those specific types of case and, instead, it elected to include this ‘genuine attempt to settle’
requirement as a means of preventing cynical claimant offers.
Quite what tools will be available to the court to determine whether or not the unaccepted offer
was a ‘genuine attempt to settle’ remains to be seen.
Otherwise the costs consequences of failing to accept a Part 36 offer remain unchanged.
Personal Injury
claims for
pecuniary loss
CPR 36.5 and
CPR 36.6
New Rule 36.18
The new provisions have moved to New Rule 36.18 but we do not consider here the substance
of those changes.
Offer to settle
a claim for
provisional
damages
CPR 36.6
New Rule 36.19
The new provisions have moved to New Rule 36.18 but we do not consider here the substance
of those changes.
Costs
consequences of
acceptance where
Section IIIA of CPR
45 applies
CPR 36.10A
New Rule 36.20
and New Rule
36.21
The new provisions have been moved to New Rule 36.20 and New Rule 36.21 but we do not
consider here the substance of those changes.
Deduction of
benefits and lump
sum payments
New Rule 36.22
There is new provision at New Rule 36.22 but we do not consider here the substance of these
provisions.
Costs budgeting
and Part 36
New Rule 36.23
This is a new provision. It provides that in any case where the offeror is treated as having filed
a costs budget limited to applicable court fees, or is otherwise limited in their recovery of
costs to such fees, then the meaning of ‘costs’ for the purposes of:
• New Rule 36.13(5)(b) (the offeree do pay the offeror’s costs for the period from expiry
of the relevant period to acceptance of the Part 36 offer, unless unjust so to order)
• New Rule 36.17(3)(a) (costs consequences where the claimant obtains a judgment
more advantageous than the defendant’s unaccepted Part 36 offer)
• New Rule 36.17(4)(b) (costs consequences where the claimant obtains a judgment at
least as advantageous as the proposals in its own, unaccepted, Part 36 offer)
means:
(a) In respect of those costs subject to any such limitation, 50% of the costs assessed without
reference to the limitation, together with
(b) Any other recoverable costs
The effect is intended to maintain the ability of an offeror to seek early effective settlement
in the claim (ie some cost benefit to doing so) even where such offeror has been punished in
respect of recoverable costs under the costs budgeting regime.
LexisPSL
Nature of
provision
18
To find out more, visit lexisnexis.co.uk/DR36/PSL
New Rule 36 - Illustrating the changes
Ruth Pratt
LexisPSL
No.1 - The transitional provisions
What is happening and when?
The New Rule 36 comes into force in its entirety on 6 April 2015 and will apply
to all Part 36 offers made on/after 6 April 2015. However, a number of the
new provisions will apply (with effect from 6 April 2015) to Part 36 offers
made before that date. Here we set out those provisions and provide some
illustrations as to when you may be affected by them.
The New Rule 36 provisions which apply to Part 36 offers made before
6 April 2015 are:
• New Rule 36.3: definitions
• New Rule 36.11: acceptance of a Part 36 offer
• New Rule 36.12: acceptance of a Part 36 offer in a split-trial case
• New Rule 36.16: restrictions on disclosure of a Part 36 offer
According to rule 18(2)(a)(b) of SI 2014/3299 (The Civil Procedure
(Amendment No.8) Rules 2014) (the statutory instrument which brings the
new Part 36 into force) the above provisions of the New Rule 36 will apply,
with effect from 6 April 2015, where the Part 36 offer is made before 6 April
2015 but a trial of any part of the claim or of any issue arising in it starts on or
after 6 April 2015.
What does this mean in practice?
It is understood that, in practical terms, the transitional provisions are only
intended to affect the position of acceptance and disclosure of Part 36
offers at and around trials listed on/after 6 April 2015.
Accepting a Part 36 offer
A Part 36 offer was made on 20 December 2014 and trial of the
whole claim is due to commence on 5 April 2015 – which Part 36
This means that during the few months left before 6 April 2015 issues such
as withdrawing or varying a Part 36 offer and whether or not an offer is Part
36 compliant will be considered under the existing CPR 36 provisions.
However, it is anticipated that the consequences of this are unlikely to be of
any real significance in practical terms since the pre-6 April 2015 provisions
have been considerably analysed in a body of case law that will continue to
apply to the pre-6 April 2015 rules.
Note: the existing CPR 36 provisions will continue to apply to this offer even
after 6 April 2015.
If, however, the trial of the whole claim is due to start on/after 6 April 2015,
then the new provisions regarding definitions, accepting the offer and
disclosing its existence/terms, will be those provided for under the relevant
rule of the New Rule 36 as of 6 April 2015, whilst all other issues will continue
to be dealt with under the old CPR 36 regime.
A global Part 36 offer was made on 20 December 2014. There
is a two day preliminary issue hearing listed for 10-12 February
2015 – which rules apply?
In this scenario the existing Part 36 regime applies to the February
preliminary hearing trial. So, under the existing CPR 36 you could not accept
the offer once the trial had started without permission (CPR 36.9(3)(d)) and
could only do so once the trial had ended (but before judgment had been
handed down) if the other side agreed (CPR 36.9(5)).
The existing Part 36 regime will still apply if the global offer is accepted on/
after 6 April 2015 unless the balance of the issues is tried after 6 April and
an attempt is made to accept the offer at the time of this later trial, in which
case the New Rule 36 will apply in terms of accepting the offer (New Rule
36.11 and New Rule 36.12).
rules apply?
As the trial of the whole claim is due to commence before 6 April 2015, the
existing CPR 36 provisions apply in their entirety.
19
A Part 36 offer on liability only was made on 20 December
2014. The liability trial is due to commence on 10 April 2015 –
which rules apply?
LexisPSL
The transitional provisions can best be seen in operation in relation to a Part
36 offer limited to a specific issue(s), eg, where there are split liability and
quantum hearings. If the Part 36 offer is made before 6 April 2015 it can be
accepted at any point up to 6 April 2015 under the existing regime. The new
Part 36 regime will only apply if there is an attempt to accept the Part 36
offer on/after 6 April 2015 in circumstances where the liability trial is due to
start on/after 6 April 2015, such as 10 April in this scenario.
As from 6 April 2015, the new regime will also apply in relation to what
disclosure can be made of such Part 36 offers. So, adopting the above
examples:
• the trial judge can be told of the Part 36 offer (both its existence
and its terms) dealing exclusively with liability once the liability
hearing has been determined but before the quantum hearing has
been decided (New Rule 36.16(3)(d))
• once the liability hearing has been decided but before the quantum
hearing has been decided, the trial judge can be told of the
existence of a global Part 36 offer and/or a Part 36 offer relating
to quantum only but may only be told of the terms of that offer(s)
if both parties agree in writing to this or one of the other factors in
New Rule 36.16(3)(a)-(c) applies
If, following trial, the Part 36 liability offer comes before the court on the
question of costs then to the extent that there are any challenges to, say,
its validity or a purported withdrawal or variation of it, those matters would
be considered by the court with reference to the existing CPR 36 regime as
interpreted in the case law to date.
Making a Part 36 offer
The transitional provisions do not apply to the making of Part 36 offers.
Therefore, to make a valid offer before 6 April 2015 you need to have regard
to the existing CPR 36 regime as interpreted in the case law. If you are
intending to make a Part 36 offer on/after 6 April 2015 then the New Rule 36
provisions will apply,
20
There are minor changes under the New Rule 36 in terms of what
constitutes a valid Part 36 offer. For example, you no longer need to state
on the face of your offer that it is intended to have the consequences
of Section I of CPR 36, rather your offer must ‘make clear that it is made
pursuant to Part 36’ (New Rule 36.5). And there is now clarity that you
can make a Part 36 offer in respect of the whole or any issue or part
of a counterclaim (New Rule 36.2(3)(a)). Matters of service remain
unchanged.
Is there any advantage to be gained by making a Part 36 offer
ahead of 6 April 2015?
If you make your Part 36 offer ahead of 6 April 2015 and it is accepted before
that date then the new provisions in New Rule 36 as regards acceptance and
disclosure of Part 36 offers will not apply. This may be of more benefit to the
offeree than to you as offeror.
As to the consequences of the other side not accepting your Part 36
offer, the only significant change is that, after 6 April 2015, when deciding
whether it is unjust to make the orders set out in New Rule 36.17 as
regards costs, the court will be required to consider whether your offer
was a ‘genuine attempt to settle the proceedings’. Arguably, therefore,
making your offer ahead of 6 April 2015 and provided trial of the whole/
all issues starts before 6 April, avoids your offer being subject to this
new specific scrutiny under New Rule 36.17(5)(e). That said, it would be
surprising if the court did not yet find a way of determining the costs
consequences of not accepting a patently non-genuine Part 36 offer as
being ‘unjust’ in some way and, therefore, as strategies go, this one would
be a particularly risky and unsavoury one to adopt.
On the other hand, making your offer on/after 6 April 2015 would enable
you to make it expressly time-limited, such that it will be automatically
withdrawn if not accepted by a stated date/event (subject to not
compromising the relevant period requirements for valid Part 36
offers) without the need for you to remember to serve a formal notice
of withdrawal (New Rule 36.9(4)(b)). In terms of strategy this is a much
more palatable approach to seeking to apply pressure on your opponent
under the Part 36 regime. See, for example, the penultimate scenario
considered in New Rule 36 – Illustrating the changes No.3 – Split trials on
page 23 and 24.
LexisPSL
No.2 - Varying Part 36 offers
What happens when a Part 36 offer is varied to make it more
advantageous to the offeree?
New Rule 36.9(5) provides that if you vary a Part 36 offer so as to make it
more favourable to the offeree, this is treated as being a new Part 36 offer
(with a new relevant period) and the original Part 36 offer is not withdrawn.
This is a brand new provision. Here we consider what lies behind the New
Rule 36.9(5).
relevant period, costs from expiry of the relevant period, interest
on those costs and an additional amount (New Rule 36.17(4))
As we have always understood to be the case, therefore, when the relevant
period expires is critical for calculating the costs consequences of not
accepting a Part 36 offer.
For the first time we now have a provision in Part 36, in the form of New Rule
36.9(5), that provides:
The fact that a first (original) Part 36 offer is not deemed withdrawn if it is
subsequently varied to the offeree’ s advantage is of benefit to the offeror
when it comes to determining the costs consequences of not accepting the
offer as seen in the illustrations below.
“(5) Where the offeror changes the terms of a Part 36 offer to make it
more advantageous to the offeree—
In the following illustrations, the claimant claims £250,000 and the Part 36
offers are made on/after 6 April 2015 when the New Rule 36 will apply.
(a) s uch improved offer shall be treated, not as the withdrawal of
the original offer; but as the making of a new Part 36 offer on the
improved terms; and
(b) s ubject to rule 36.5(2), the period specified under rule 36.5(1)
(c) shall be 21 days or such longer period (if any) identified in the
written notice referred to in paragraph (2).”
To understand the rationale behind this new provision, you need to consider
the costs consequences of not accepting a Part 36 offer as provided for in
the New Rule 36.17.
The basic provisions of New Rule 36.17 remain largely unchanged from the
old CPR 36.14 – the key difference is that in determining whether it is unjust
to make a Part 36 costs orders for not accepting a Part 36 offer, the court
has to consider whether or not the unaccepted Part 36 offer was a ‘genuine
attempt to settle the proceedings’ (New Rule 36.17(5)(e)). Other than this,
the basic concepts remain in place:
• if a claimant fails to obtain a judgment more advantageous than
the defendant’s Part 36 offer then the defendant is entitled to his
costs from expiry of the relevant period (New Rule 36.17(3))
• if a claimant obtains a judgment ‘at least as advantageous’ as the
proposals in his own Part 36 offer then the claimant is entitled to
interest on his judgment for a period starting from expiry of the
Claimant’s Part 36 offer
The claimant makes a Part 36 offer to settle for £200,000. The claimant
then varies that offer to make it more advantageous to the defendant, eg, by
offering to accept the lower figure of £150,000. Under New Rule 36.9(5) this
variation amounts to a new Part 36 offer with a new relevant period.
Neither offer is accepted by the defendant.
At trial the claimant obtains judgment of:
• £200,000. It is important that the claimant’s first Part 36 offer
remained on the table by virtue of New Rule 36.9(5)(a) (and was not
deemed withdrawn) since when considering the costs consequences
of non-acceptance under New Rule 36.17, as the claimant has
obtained a judgment ‘at least as advantageous’ as its original Part 36
offer, he will benefit from the costs consequences as from the date
of expiry of the relevant period of that first in time Part 36 offer (ie a
longer period of time for the costs consequences to apply)
• If at trial, the claimant had only been awarded £175,000 then he
would still have been able to rely on the varied offer and the expiry
of its (later) relevant period in terms of the costs consequences
under New Rule 36.17(4)
21
LexisPSL
Defendant’s Part 36 offer
The defendant makes a Part 36 offer to settle for £150,000. The defendant
then varies that offer to make it more advantageous to the claimant, eg, by
offering to pay the higher figure of £200,000. Under New Rule 36.9(5) this
variation amounts to a new offer with a new relevant period.
Neither offer is accepted by the claimant.
At trial the claimant obtains judgment of:
• £200,000. As the claimant did not obtain a judgment ‘more
advantageous’ than the defendant’s varied offer, then the costs
consequences of New Rule 36.17(3) apply in the defendant’s favour
as from expiry of the relevant period of his varied (ie ‘second’) offer
• If at trial, the claimant had only been awarded £150,000 then
because the defendant’s first offer remained on the table by virtue
of New Rule 36.95)(a) (and was not deemed withdrawn), and the
claimant failed to obtain a judgment ‘more advantageous’ than
this first in time offer, the defendant will be entitled to the costs
consequences as from expiry of the relevant period of this earlier
in time offer under New Rule 36.17(3) (ie a longer period of time for
the costs consequences to apply)
failed to obtain a judgment ‘at least as advantageous’ as the proposals in
its own Part 36 offer, ie the defendant ‘beat’ the less advantageous offer
(New Rule 36.17(7)(b)). In such case, however, the court may yet take into
account the fact that the claimant had made a settlement offer under CPR
44.2 (ie the court’s general discretion as to costs).
Had the claimant obtained judgment in the sum of £220,000 or above then
New Rule 36.17(4) would apply. Since there is no ‘new offer’ where a Part 36
offer is varied so as to be less advantageous to the offeree then the only
relevant period whose expiry date is relevant for New Rule 36.17(4) purposes
is that which commenced when the original offer was made.
If the offeror had required court permission to vary the offer so as to make
it less advantageous to the offeree (New Rule 36.10) this does not give rise
to the imposition of a new relevant period for that variation and so, again,
the relevant period for the purposes of New Rule 36.17(4) is that relating
to the original offer before it was varied. Note: any application to the court
for permission to vary the offer so as to make it less advantageous to
the offeree must not be made to the trial judge, unless the parties agree
otherwise (New Practice Direction 36A, para 2.2 in force as of 6 April 2015).
Defendant’s Part 36 offer
What happens when a Part 36 offer is varied to make it less
advantageous to the offeree?
The defendant made an offer to settle for £200,000. After expiry of the
relevant period the defendant then varied its offer to reduce it to £175,000.
And what is the position under the New Rule 36.17(7)(b) as regards
non-acceptance of a Part 36 offer whose terms have been varied so as
to become less advantageous to the offeree? In such circumstances,
the costs consequences of New Part 36.17 do not apply. This does not
represent a change in the rules (since a similar provision is contained in
the existing CPR Part 36.14(6)(b), however, it is worth a reminder of this
provision in operation.
The varied offer was not accepted by the claimant.
Again, assuming the claimant is claiming £250,000 and the Part 36 offers
are made on/after 6 April 2015 when the New Rule 36 will apply.
Claimant’s Part 36 offer
The claimant makes a Part 36 offer to settle for £200,000. After expiry
of the relevant period the claimant then varied its offer by increasing it to
£220,000.
The varied offer was not accepted the defendant.
If at trial the claimant was only awarded £200,000 or £210,000 then the
New Rule 36.17 costs consequences would not apply since the claimant
22
If at trial the claimant was awarded £176,000 then it would have obtained a
judgment ‘more advantageous’ than this varied offer and so ‘beaten’ it, with
the result that the costs consequences of New Rule 36.17(3) do not apply
in favour of the defendant (New Rule 36.17(7)(b)). In such case, however,
the court may yet take into account the fact that the defendant had made a
settlement offer under CPR 44.2.
Had the claimant obtained judgment for £175,000, £174,000 or lower then
it would not have beaten the defendant’s varied offer and so the costs
consequences under New Rule 36.17(3) would apply in the defendant’s
favour as regards its varied offer. Again, since there is no ‘new offer’ where
a Part 36 offer is varied so as to be less advantageous to the offeree then
the only relevant period whose expiry date is relevant for New Rule 36.17(3)
purposes is that which commenced when the defendant’s original Part 36
offer was made, not the date of its later variation.
Again this would apply equally where the offer was varied within the relevant
period with the court’s permission under New Rule 36.10.
No.3 - Split trials
The new split trial provisions
The relationship between Part 36 and split trials has not previously been
dealt with in the rules. Here we consider how the New Rule 36 provisions will
operate in practice.
Split trials are considered in:
• New Rule 36.12: acceptance of an offer in a split-trial case
• New Rule 36.16: restriction on disclosure of a Part 36 offer
The following scenario assumes the New Rule 36 applies in its entirety, ie
the Part 36 offer(s) was made on/after 6 April 2015. But, be aware, as from
6 April 2015 even where the Part 36 offer pre-dates 6 April but a trial of any
part of the claim or any issue arising in it starts on/after 6 April 2015 then New
Rules 36.3, 36.12 and 36.16 (as well as New Rule 36.11 – acceptance of Part 36
offers) will apply to such offers.
Case study scenario
The claim is for loss of profit arising out of an agreement which the claimant
terminated on the basis of the defendant’s alleged repudiatory breach. The
court has ordered the hearing of a preliminary issue in relation to whether or
not there the defendant was in breach and, if so, whether such breach was
repudiatory such as to give the claimant the right to terminate.
A hearing date for this preliminary issue has been set for 1 July 2015 listed for
five days.
On 10 April 2015, the defendant makes a Part 36 offer in which it accepts
liability in respect of three of the alleged instances of breach but denies it
in relation to the other four alleged breaches. The defendant’s case being
that the breaches which it did cause give rise to a claim in damages only but
were not sufficient so as to amount to a repudiation of the agreement and
therefore the claimant’s termination for breach was a wrongful termination
and therefore its quantum claim based on loss of profit fails. The Part 36
offer is limited to liability only (the Part 36 Liability Offer).
On 10 May 2015, the defendant makes a further, second Part 36 offer this
time limited exclusively to quantum in which it offers to pay £50,000 in
respect of the quantum claim which has been pleaded at £500,000 (the
Part 36 Quantum Offer).
As both offers were made after 6 April 2015, the New Rule 36 applies.
As there is a split trial situation then New Rule 36.12 applies in relation to
accepting either of the Part 36 offers and New Rule 36.16 applies in relation
to the restrictions on disclosure of the offers.
Day 2 of the liability trial – can the claimant accept the
defendant’s Part 36 Liability Offer?
The trial is in progress (ie it has started and judgment has not yet been
handed down, New Rule 36.3(d)) and so the claimant can only accept
the defendant’s Part 36 Liability Offer with the court’s permission (New
Rule 36.11(3)(d)). Note: the application for permission to accept the
offer must not be made to the trial judge, unless the parties specifically
agree that the trial judge can hear the application (New Rule 36 Practice
Direction 36A, para 3.2 in force as of 6 April 2015).
Note: under New Rule 36.9 and New Rule 36.10, given that the relevant
period for accepting either offer has now expired, there is nothing
preventing the defendant from now withdrawing or varying (so as
to be less advantageous to the claimant) either its Part 36 Liability
Offer or its Part 36 Quantum Offer.
Nor is there anything in the New Rule 36 to prevent the defendant
from varying either of its offers so as to make either of them more
advantageous to the claimant, however, the effect of so doing is not to
withdraw the original offers but to create new offers with new relevant
periods. Since the liability trial has commenced then a variation of the
Part 36 Liability Offer would mean that the relevant period for this new
offer would be until the end of the liability trial (New Rule 36.3(g)(ii)).
If the Part 36 Quantum Offer was now varied so as to be more
favourable to the claimant then it too would have a new relevant period
23
LexisPSL
• New Rule 36.3: definitions – a number of definitions have been
included to assist in interpreting those new provisions specific to
split trial scenarios
Split trials are commonly seen in cases where discrete issues on liability
and quantum arise such that the court can and will split out determination
of those issues. This is because the court anticipates that, in at least some
cases, a preliminary determination on liability will dispose of the case such
that the quantum issue falls away or is considerably narrowed.
LexisPSL
expiring only at the end of the liability trial (New Rule 36.3(g)(ii), unless
you made the variation of the Part 36 Quantum Offer only after the
liability trial had ended.
Note: any varied offer which for whatever reason failed to take effect as a
valid Part 36 offer could still be considered on the issue of costs by
virtue of New Rule 36.2 and CPR 44.2.
Day 2 of the liability trial – can the claimant accept the
defendant’s Part 36 Quantum Offer?
Since New Rule 36.11 does not make a distinction between Part 36 offers
for the whole or a part of a claim, it is understood that by virtue of New
Rule 36.11(3)(d) commencement of the liability trial also means that the
claimant cannot accept the defendant’s Part 36 Quantum Offer unless
the court gives its permission. However, since the relevant period for
this offer has expired, the defendant could now withdraw its offer or
vary it to make it less advantageous to the claimant without first seeking
the court’s permission. It could also vary this offer so as to make it more
advantageous to the claimant in which case it would be treated as a new
offer with a new relevant period (New Rule 36.9(5)) as noted above.
The liability trial has ended – what offers can the claimant
accept, if any?
New Rule 36.12 applies where there has been a split trial but the case has
not been decided within the meaning of New Rule 36.3. New Rule 36.3(e)
provides that a case has been ‘decided’ when all issues in the case have
been determined, whether at one or more trials. Therefore, given that
the quantum trial has yet to be listed, let alone heard, this case has not
yet been ‘decided’ for the purposes of New Rule 36 and therefore New
Rule 36.12 applies.
In such a case, New Rule 36.12(2) provides that the claimant cannot
accept any Part 36 offer which relates only to parts of the claim or issues
that have already been decided – therefore the claimant cannot now
accept the defendant’s Part 36 Liability Offer.
If we assume that the defendant was largely successful in the liability
hearing then it may well want to rethink whether or not it wants its Part 36
Quantum Offer to remain open for acceptance by the claimant. This is
why New Rule 36.12(3) provides that, unless the parties agree, any other
Part 36 offer (ie a Part 36 offer which includes or covers other matters
not yet dealt with) cannot be accepted earlier than seven clear days after
judgment is given or handed down. Therefore the claimant must wait for
seven clear days after judgment is given/handed down in the liability trial
before it can serve notice to accept the defendant’s Part 36 Quantum
Offer, giving the defendant time formally to withdraw that offer if it
considers it appropriate to do so.
24
What if the defendant had expressed a time limit for
acceptance of its Part 36 Quantum Offer?
Under New Rule 36.9(4)(b) specifying a time limit for acceptance in
the Part 36 offer does not render such offer invalid as a Part 36 offer
(provided the relevant period requirement in New Rule 36.5 is not
compromised). So the defendant could have made its Part 36 Quantum
Offer limited in time, eg, by stating in its terms that it remained open for
acceptance for a period of (say) three days after the handing down of
judgment in the liability trial. If not accepted by that deadline then the
Part 36 Quantum Offer would automatically be withdrawn without the
defendant being required to serve a formal notice of withdrawal.
To link the time limit for accepting the Part 36 Quantum Offer to the liability
trial would be a very strategic step for the defendant to take. Clearly, given
the existence of New Rule 36.11(3)(d) as to not accepting offers whilst a trial
is in progress and New Rule 36.12(3) (the requirement for seven clear days
to accept any other Part 36 offer in a split trial) the reality is that regardless
of the defendant’s time limit being expressed as being three days after
handing down of the liability judgment, if the claimant wanted to accept the
Part 36 Quantum Offer it would have to do so before the commencement
of the liability trial or seek the court’s permission to accept it whilst the
liability trial was in progress but before judgment was handed down. Such is
the interplay of the complex provisions of New Rule 36. For the defendant
in this case scenario it may provide a useful strategic weapon to increase
pressure on the claimant to settle.
The liability trial has ended – what can the trial judge be told of
the existence and terms of any of the Part 36 offers?
Under New Rule 36.16, at the end of the liability trial, the judge may be
told of the existence and terms of the Part 36 Liability Offer (New Rule
36.16(3)(d)) and no doubt the defendant will make certain to do so when
the costs of that hearing are dealt with.
The judge may also be told of the existence of the Part 36 Quantum Offer
but may not be told of the terms of that offer unless New Rule 36.16(4)(b)
applied, ie one of the factors in New Rule 36.16(3)(a)–(c) applied, ie:
• the defence of tender before claim had been raised (New Rule 36.
16(3)(a))
• the proceedings had been stayed under New Rule 36.14 (New Rule
36.16(3)(b)). Note, however, that acceptance of the Part 36 Liability
Offer would have stayed only the liability issue (New Rule 36.14(3))
not the whole proceedings and therefore this would not be a basis
for permitting disclosure of the terms of the Part 36 Quantum Offer
to the judge
• the parties agree in writing to the judge being told of the terms of
the Part 36 Quantum Offer (New Rule 36.16(3)(c))
Therefore it is unlikely that there would be occasion to tell the judge of
the terms of the Part 36 Quantum Offer on the above scenario though
he may be told of its existence.
Settlement negotiations—the dangers of email
Barry Fletcher
This News Analysis piece from LexisPSL Dispute Resolution discusses some of the key
issues that parties and practitioners should bear in mind when negotiating the terms of a
settlement in light of the High Court’s decision in Bieber & Ors v Teathers (In Liquidation).
On 11 December 2014, HHJ Pelling QC, sitting as a judge in the
Chancery Division, held that the parties had settled their litigation
by an agreement contained in, or evidenced by, an exchange of
emails between their solicitors. Although the settlement agreed
by the parties contemplated that a Tomlin order would be filed at
court, the judge found that settlement was not conditional upon
the agreement of the terms of that order or the terms of a formal
settlement agreement, ie it was not ‘subject to contract’.
Practical implications
As many of you will understand, negotiating the settlement of a
dispute can be challenging and is rarely straightforward. In the heat of
negotiations, it can be easy for both sides to focus attention on agreeing
the all-important settlement figure and lose track of the important, and
practical, matter of ensuring that the ancillary terms of the settlement
are also agreed and, if appropriate, recorded accurately in a formal
settlement agreement.
order to be filed at court. Having considered the facts and circumstances
surrounding the relevant emails exchanged by the parties’ senior lawyers,
the judge found that the parties had reached agreement on all essential
terms and had not objectively proceeded on the basis that agreement of
a settlement figure would be the first stage of a two stage process to be
completed before settlement would be finally agreed.
It is important to note that making statements during the course of
extended negotiations that a settlement is conditional on the agreement
of final terms may not be sufficient to prevent a court determining,
on an objective assessment of the facts and circumstances, that an
unconditional binding settlement has been reached when the relevant
offer and acceptance is expressed to be in full and final settlement.
Accordingly, the lesson for practitioners is to be absolutely clear at
all times if the agreed settlement is ‘subject to contract’ and/or the
agreement of any further terms.
The factual context
To avoid uncertainty and the risk of being unintentionally bound by a
settlement, it is crucial to expressly state if any agreement reached in
respect of settlement is intended to be ‘subject to contract’.
The claimants were individuals who invested in a series of film and TV
production partnertships formed by the defendant, known as the Take
partnerships. The aim of the Take partnerships was to invest in TV and
film productions so as to take advantage of tax concessions made
available under a series of Finance Acts between 2000 and 2007. The
schemes were failures because most of the productions that were
financed failed commercially and none generated the tax relief that had
been intended. The claimants considered that to be the result of default
on the part of the defendant. They pursued their claims collectively by
reference to the particular scheme they had invested in. A number of
orders were made by the court to manage the complex litigation.
In this case, the parties were found to have agreed to settle their dispute for
£2m unconditionally, even though they were subsequently unable to agree
to the terms of the settlement agreement to be annexed to the Tomlin
A mediation took place in May 2014, but was unsuccessful. The claimants
sought a declaration from the court that the parties had reached a
binding settlement by an exchange of emails between their solicitors
In many cases, such an approach won’t result in any adverse
consequences if the parties are able to agree any ancillary matters or
formal documentation after agreement on the settlement figure has been
reached. However, as this case clearly demonstrates, failure to be clear
about the basis on which a settlement is ‘agreed’ may result in one party (at
least) being bound by a settlement that they may not have intended.
25
LexisPSL
Bieber and others v Teathers Ltd (in liquidation) [2014] EWHC 4205
(Ch); [2014] All ER (D) 168 (Dec)
on 29 June 2014, by which the claimants had agreed to settle the
proceedings in return for a payment by or on behalf of the defendant to
the claimants collectively of £2m.
Two main questions arose:
• first, whether the parties had reached a concluded agreement;
and,
LexisPSL
• secondly, if an agreement had been reached, whether the
agreement had been subject to contract.
The defendant disagreed that a binding settlement had been agreed
as the parties had failed to agree final terms. When it came to agreeing
the formal settlement agreement, the defendant was particularly
concerned to reserve its position in relation to claims against it by third
parties.
Key points from the judgment
What are the applicable legal principles?
The judge provided a useful summary of the principles applicable
when determining whether or not the parties have reached a binding
settlement agreement:
• w
hether the parties have reached a concluded agreement is to
be determined objectively by considering the whole course of
the parties’ negotiations. Once the parties have to all outward
appearances agreed in the same terms concerning the same
subject matter, a contract will have been formed and that is so
even though it is understood that a formal agreement will be
entered into that records or even adds to the terms agreed.
26
However, where it is understood that a formal agreement will
be entered into, whether the parties intended to be bound
immediately or only when a formal agreement has been executed
depends on an objective appraisal of their words and conduct (RTS
and Air Studios)
Air Studios (Lyndhurst) Limited v Lombard North Central Plc [2012]
EWHC 3162 (QB), per Males J at para 5; RTS Ltd v Molkerei Alois
Muller GmbH & Co AG [2010] UKSC 14, per Lord Clarke at para 45
• generally, the subjective state of mind of a party to negotiations,
and thus any subjective reservations that have not been
communicated to the other party to an alleged agreement, are
irrelevant and evidence of their existence is inadmissible (RTS, per
Lord Clarke at para [45]). This is because subjective reservations
do not prevent the formation of a binding contract (Air Studios,
per Males J para [5]). At most subjective belief may be relevant
and thus is admissible to demonstrate that objectively a particular
term has been agreed where the consensus depends on oral
exchanges or conduct (Chartbrook)
Chartbrook Limited v. Persimmon Homes limited [2009] UKHL 38,
per Lord Hoffmann para 64-65
• if, on an objective appraisal of the parties’ words and conduct,
the parties intended to conclude a legally binding agreement, the
fact that certain terms of economic or other significance had not
been agreed does not prevent it being concluded that the parties
had concluded a binding agreement. The only requirement is that
the parties shall have agreed all the terms necessary for there to
be an enforceable contract (RTS, per Lord Clarke at para [45]).
In the context of settlement agreements, this may mean that
the failure to agree terms concerning confidentiality and other
allied matters will not prevent a court from concluding that
the parties have objectively entered into a binding settlement
agreement
Winn v Bull (1877) 7 Ch D 29, per Sir George Jessel MR at para 32
• it is not essential that there be an express stipulation that the
negotiations are to be conducted ‘subject to contract’ if that
was nevertheless the mutual understanding of the parties (RTS,
per Lord Clarke at paras [46]-[49])
• whilst negotiations being conducted ‘subject to contract’ are
most commonly encountered in transactions concerning land,
the rule is capable of applying to any contractual negotiation
(RTS, per Lord Clarke at para [48])
• whether there was a mutual understanding that negotiations
would proceed on a ‘subject to contract’ basis is a question of
fact in each case: ‘...where as here, solicitors are involved on
both sides, formal written agreements are to be produced and
arrangements made for their execution the normal inference
will be that the parties are not bound unless and until both of
them sign the agreement. In a sense this case is an a fortiori
case in that on any view there are at least three agreements
to be executed and the respective parties are not the same’
(Whitehead Mann)
Whitehead Mann Ltd v Cheverny Consulting Ltd [2006] EWCA
Civ 1303 [2007] 1 All ER (Comm) 124
• however, even if the parties have initially agreed to proceed
‘subject to contract’ it is open to them subsequently to
agree either expressly or by necessary implication to remove
that qualification or waive that stipulation; but, whether the
parties have so agreed is a question of fact that needs to be
approached with care since the Court should ‘not impose
contracts on the parties which they have not reached’ (RTS, per
Lord Clarke at para [55])
Did the parties agree to settle?
On an objective assessment of the relevant facts and
circumstances, the judge considered that the parties agreed to
the full and final settlement of the claims, counterclaims and costs
claims by and between the parties by the exchange of emails
between their lawyers on 29 June 2014.
Counsel for the defendant suggested that a case as complex as the
underlying litigation could not be settled other than on the basis
of a careful consideration of all the relevant ramifications and in
particular the impact of future contribution claims brought against
the defendant as a result of claims brought by the claimants or
some of them against third parties in respect of the same losses.
The judge stated that this factor was of ‘limited weight’ in his
objective assessment. He considered that although the underlying
litigation was complex, settlement of the dispute was not. In his
view, there was no complexity in the settlement negotiations that
led necessarily to the conclusion that the parties could not have
intended that a binding settlement could be reached other than by
formal agreement signed by the parties.
Having agreed on the settlement figure, the solicitor for the claimants
stated in email that he would send across a ‘consent order’ the next
day. The defendant’s solicitor replied, ‘Noted, with thanks’. The
judge interpreted the ‘consent order’ email as implying that there
was nothing of substance left to agree other than the form of words
necessary to carry into effect the agreement reached. The judge
continued that if this had not accorded with defendant’s solicitor’s
understanding, he would not have ‘said simply “Noted, with thanks.”
He would have responded at that point by identifying at least the
issues concerning which agreement needed to be reached before
a final agreement could be made.’ The judge was influenced by the
fact that timing was crucial for the purposes of settling due to the
availability of finance and the need to incur more costs in the next
stage of the litigation.
LexisPSL
• where the parties wish to ensure that a contract otherwise
capable of being made orally is only made in a formal document
the parties may ensure that is so by expressly stipulating that
their negotiations will take place ‘subject to contract’. Where
there is such a stipulation then there is no binding agreement
until a formal written agreement has been duly executed (Winn
v Bull)
In relation to the defendant’s desire to reserve its position in relation
to claims by third parties, the judge stated that there had never been
at any stage any attempt by the defendant to do so. The judge was
clear that if the defendant was to reserve its position then it needed
to be made clear in the course of negotiations as a ‘subjective and
internal reservation of position is entirely immaterial to the question
of whether in fact agreement [had] been reached’.
Note: there was an issue between the parties as to whether as a
matter of law what happened after the 29 June 2014 was admissible
for the purpose of deciding whether or not a binding settlement was
agreed on that date. In this regard, the judge stated:
‘[56] In my judgment, if on an objective analysis a binding agreement
had been reached on 29 June 2014, then what happened thereafter
cannot undo that agreement unless what happened amounts to a
rescission or variation of what had been agreed previously. Since it
is common ground that nothing was agreed after 29 June, on any
view what occurred could not be either. Thus the only significance of
conduct after 29 June is for the purpose of informing a conclusion
as to whether an agreement was in fact reached then. If, as here, all
other factors point to the conclusion that a concluded and binding
agreement was reached on that date, only conduct which very
clearly and unambiguously demonstrates that no final agreement
had been reached is likely to assist.
[57] The conduct after 29 June relied on by the defendant does not
in my judgment lead to the conclusion that an agreement had not
been reached on the 29 June. In essence, the defendant submits
that the parties engaged in protracted negotiations concerning
the terms of a settlement agreement that in the end broke down.
It was submitted that this conduct on the part of the claimants is
consistent only with the mutual understanding of the parties being
that the agreement reached on 29 June was subject to contract or
was an agreement in principle subject to the agreement of all other
terms and conditions. I do not agree. That parties are prepared to
negotiate concerning the terms of a settlement agreement does not
lead necessarily to the conclusion that the parties had not earlier
entered into a binding agreement to settle the dispute. It might be
thought convenient for agreement to be reached on outstanding
points if at all possible but there is nothing in such conduct that is
necessarily inconsistent with an agreement having been reached
earlier.’
Court and judgment details
The application for a declaration was heard on 1 and 2 December
2014 in the Chancery Division by HHJ Pelling QC sitting as a judge of
the High Court. Judgment was handed down on 11 December 2014.
To find out more, visit
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