Part 36 Offers - Costs Penalties For Claimants: Beating The Payment In Is Not Necessarily Enough

It has never been a level playing field for Defendants when

it comes to Part 36 offers, but arguably, recent case law and

changes to the Part 36 rules go some way to improving the

situation for Defendants.

The Part 36 rules have been overhauled and simplified to

encourage more Defendants to make offers to settle. These

changes come in the wake of cases such as Crouch v Kings

Healthcare NHS Trust [2004] CA and Trustees of Stokes Pension

Fund v The Western Power Distribution plc [2005] CA. These

decisions paved the way for the DCA consultation on reform of

the Part 36 rules and subsequent redrafting of the same. In

both cases, the courts allowed written without prejudice

offers, made by Defendants who were "good for the

money", to be treated as payments into court. With effect

from 6th April 2007, Defendants are no longer able to make

payments into court under new court rules.

The other notable changes, are in respect of the costs

consequences.

Under the old rules a Claimant would have been entitled to

costs on an indemnity basis plus interest at a rate not

exceeding 10% above base rate, where they bettered a

Defendant's payment into court or Part 36 offer, even if

only by £1. If a Claimant failed to better a Part 36

payment or offer, or fail to obtain a judgment which was more

advantageous than a Defendant's Part 36 payment or offer,

they would be ordered to pay the Defendant's costs.

Now, under CPR rule 36.14, the Claimant will be entitled to

indemnity costs plus interest as above if the Claimant obtains

judgment against the Defendant, which is at least as

advantageous as the proposals within a Claimant's Part

36 offer. If a Claimant fails to obtain a judgment more

advantageous than a Defendant's Part 36 offer then the

Defendant is entitled to costs and interest on those costs. In

addition, when considering whether it is unjust to make these

orders, the court will take into account all the circumstances

of the case.

The reference to payment in has been removed and the term

"more advantageous" applies to both money and

non-money claims, where previously it referred only to the

latter. A purely monetary comparison can be made to determine

whether a party has beaten the payment in. For non-money claims

all the circumstances of the case have to be taken into account

to determine whether a more or less advantageous award has been

made, before consideration can be given to costs

consequences.

Whilst the new rules simplify Part 36 offers...