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Rule committee backs part 36 reforms

Royal Courts of Justice [1]

Part 36: offers failing on technical grounds

The Civil Procedure Rule Committee (CPRC) is to consider how part 36 can be reformed – to simplify it, allow offers by counterclaiming defendants and discourage “cynical” claimant offers.

In a report to last month’s meeting of the CPRC, Ed Pepperall QC argued that part 36 was “rather technical” and offers under it were failing on technical grounds.

Mr Pepperall, member of the CPRC part 36 sub-committee, said in the report: “The rules should not be over-complex.

“Accordingly the technical requirements should be kept to a minimum so that offers that were plainly intended to be, and understood as, made pursuant to part 36 are not lightly found to be invalid.”

However, he said the consequences of part 36 offers could be “so significant” that it was important that the person who received the offer clearly knew that it was made under the rule.

As an example, Mr Pepperall cited the way part 36 had been interpreted as preventing time-limited offers. He said the sub-committee could see “no principled reason” for this bar.

“We see no reason to force offerors to write two letters – one to make the offer and the second to withdraw it 21 days later.

“Provided that an offer is capable of acceptance for at least 21 days, we see no problem with it indicating that it will be automatically withdrawn without further notice beyond a certain date.”

The CPRC agreed that the problem of undue technicality should be addressed and the rules simplified, without losing certainty. It further agreed with Mr Pepperall that it would be appropriate to amend part 36 to clarify its application to defendants who make counterclaims.

Mr Pepperall said the sub-committee was in favour of introducing a new rule “expressly allowing for part 36 offers by counterclaiming defendants and other parties”.

He went on: “We envisage allowing the party to indicate whether it is seeking to make a claimant’s or a defendant’s part 36 offer, but allowing for a default position in the event that this is not made clear.

“The default position must surely be in a money claim that an offer to pay money is a defendant’s offer while an offer to accept a payment in settlement of the claim and counterclaim is a claimant’s offer.”

Mr Pepperall said part 36 had the potential for abuse by “cynical” claimants, for example by making offers that were simply ploys aimed at obtaining the benefits of part 36 costs consequences in the expectation that the offer would never be accepted.

He said that the Court of Appeal ruling in Huck v Robson [2002] EWCA Civ 398 encouraged claimants to “make very high part 36 offers, not in an attempt to settle their claims but to increase the likely recovery at trial”.

Mr Pepperall said the problem was exacerbated by the additional Jackson incentives. The QC said the courts must be “more alive to this abuse” and consider reversing the decision in Huck. The CPRC agreed that a proposal should be brought forward to deal with the issueo