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Part 36 of the Civil Procedure Rules - The most important part?
In England and Wales, a Part 36 offer can be made by the defendant or claimant to try and settle a claim. A Part 36 offer can be made either regarding the value of the claim or the issue of liability, or can include both if relevant.
A Part 36 offer needs to contain specified wording for it to be valid (as set out in Part 36 of the Civil Procedure Rules). Only an offer made in accordance with the Rules can have the costs, damages and interest consequences set out. In most cases the offer must be made available for acceptance for a period of at least 21 days (the “relevant period”) before it can be withdrawn. Offers which are not later withdrawn will remain “open” for acceptance until trial.
If a defendant accepts a claimant’s offer (either during or after the relevant period) then generally the defendant must in addition pay the claimant’s legal costs incurred up to the date of acceptance.
However, if the claimant accepts the offer during the relevant period, in addition to the sum offered the claimant will be entitled to its legal costs. However, if it accepts the offer after the relevant period it will generally have to pay the defendant’s costs incurred from after the relevant period up to the date of acceptance. This rule is subject to a very important proviso in that the Court can dis-apply the rule where it considers it is appropriate to do so.
A number of recent cases have highlighted how the Court can make an exception in cases where claimants have made grossly exaggerated claims.
In one case (a claim for personal injury damages sustained in a road traffic accident) a claimant brought a substantial claim for damages. The defendant admitted liability but did not accept that the seriousness of the injuries justified the damages sum claimed. The defendant made Part 36 offer at substantially less than the sum claimed before the proceedings were issued, which the claimant did not initially accept. The offer was not withdrawn.
The defendant later obtained further surveillance evidence which seriously undermined the claimant’s claims about injuries suffered (at home she walked around on crutches but was then seen at a farm where she ably rode her horse!). Shortly after this evidence was served the claimant accepted the defendant’s Part 36 offer. It was accepted that the defendant was entitled to its costs from the date of the expiry of the relevant period to the date of acceptance but disputed that the claimant should receive her costs for the period up to when the relevant period expired due to the gross exaggeration of her claim. The Judge refused to dis-allow the usual rule but awarded the defendant enhanced costs plus interest for the period after the relevant period expired. The Judge said that upon serving the surveillance evidence the defendant could have protected itself by withdrawing the offer but chose not to do so.
This case serves to demonstrate what a valuable tool a Part 36 offer can be in any area of litigation and also serves as a warning to claimants in all disputes that where they exaggerate their claims (and in particular where defendants make Part 36 offers) they can be heavily punished by the Courts who retain powers to dis-apply the costs rules under Part 36. This is also a reminder for defendants to consider whether it may be prudent to withdraw part 36 offers made but not withdrawn when the evidence in a case significantly shifts in their favour.