Part 36 of the Civil Procedure Rules - Key Points:
- The court can take into account non-Part 36 offers under its general costs discretion but it cannot impose the Part 36 costs consequences - If you want the costs consequences of Part 36 you must comply with it.
- The minimum 21 day “relevant period” runs from the date of receipt of the offer not the date it is sent.
- A Part 36 offer cannot be time limited.
- More than one Part 36 offer may be available for acceptance at any one time.
- A Part 36 offer must be formally withdrawn if it is to be no longer available for acceptance.
- An offer that has been withdrawn will not have the costs consequences under Part 36.
The concept behind Part 36 of the Civil Procedure Rules will be familiar to most legal advisers. However, recent case law suggests that interpretation of the rule is still causing difficulties for practitioners and mistakes are still being made in drafting and dealing with offers. A number of amendments have been made to the rule in the last few years and it is vital that those making offers understand the requirements of making and withdrawing offers.
Making an offer which inadvertently fails to comply with the principles of Part 36 can have potentially enormous costs consequences and can generate unnecessary satellite litigation. This update therefore provides a brief reminder of some of the key principles and how they have been clarified by recent case law.
To be a valid offer in accordance with Part 36, rule 36.2(2) provides that it must:
- Be in writing
- State on its face it is intended to have the consequences of Section I of Part 36
- Specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs in accordance with CPR 36.10 if the offer is accepted. This is defined in later parts of the rule as the “relevant period”
- State whether it relates to the whole or part of the claim or to an issue
- Whether it takes into account any counterclaim
Rule 36.9 provides that a Part 36 offer may be accepted at any time (whether or not the offeree has made a different offer) unless the offeror serves notice of withdrawal on the offeree.
Once an offer has been withdrawn, the offeror can no longer rely on it to obtain the costs and interest protection of Part 36 (although the court may still consider the offer using its general discretion under Part 44.3).
In Gibbon v Manchester City Council  the court heard two appeals together which concerned issues arising out of the interpretation of Part 36. Moore-Bick LJ emphasised that Part 36 is a self contained code. He went on to say that it did not follow that:
“Part 36 should be understood as incorporating all the rules of law governing the formation of contracts, some of which are quite technical in nature…[Part 36] is to be read and understood according to its terms without importing other rules derived from the general law, save where that was clearly intended”.
Gibbon considered whether an offer remained open for acceptance even though it had previously been rejected. The court found that an offer could only be withdrawn in accordance with Part 36.9 (referred to above). A Part 36 offer therefore does not lapse on rejection in the same way as an offer made in accordance with common law principles. Furthermore there was no room within Part 36 for the concept of implied withdrawal. Provided that an offer has not been withdrawn or varied it therefore remains open for acceptance notwithstanding that it may have previously been rejected.
In the second appeal, LG Blower Specialist Bricklayer Ltd v Reeves, Moore-Bick LJ considered the question of whether later offers superseded an earlier offer. In his view there was nothing in Part 36 which meant that only one offer could be open for acceptance at any one time. As a result a later offer will not supersede an earlier offer unless the earlier offer is expressly withdrawn or varied in accordance with the provisions of Part 36.
What about time limiting your offer so it is automatically withdrawn after 21 days? This used to be standard practice but the wording to Part 36 has now changed. The court considered this question in C v D  AllER (D) 176 (Nov). The letter in issue stated, “the offer will be open for 21 days from the date of this letter”.
Warren J was of the view that “If the words used cannot fit with Part 36, then the result is simply that Part 36 does not apply whatever may have been intended”. He determined that a time limited offer is not capable of being a Part 36 offer. An offer must be capable of acceptance unless and until withdrawn by service of a notice in accordance with 36.9(2) (although an offer may also be varied).
Parties therefore need to keep Part 36 offers under review, particularly at key stages in the claim such as disclosure and exchange of witness statements.
A damaging expert report for example may drastically alter the assessment of the quantum of the claim.
Whilst withdrawal of an offer may result in the loss of potentially valuable costs and interest consequences, a failure to withdraw following a change in circumstances may result in an offer being accepted on terms which are no longer as favourable as they were at the time of the offer.
Parties can therefore no longer leave Part 36 offers open for acceptance for a period of only 21 days and then forget about them until costs are dealt with post-trial.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.