CPR rules – Part 36 April 2007

With the coming into force of the Civil Procedure (Amendment No 3) Rules 2006 on 6th April 2007 the need to make a payment into court for money only claims will be abolished.

Part 36 is being replaced entirely by new Part 36 provisions set out in Schedule 1 to the Regulations. The most important changes affected by the new rules are as follows :-

1. Any party (primarily Defendants of course) can protect themselves by means of a Part 36 offer to pay. There is no need, therefore to put your hand in your pocket and pay money into court. All references to payment into court i.e. the old rules as an alternative are deleted.

2. The procedure laid down by the new Part 36.2 requires the offer to be in writing which must expressly state “on its face” that “it is intended to have the consequences of Part 36”.

3. The same 21 day period for acceptance applies.

4. There are the same costs consequences on acceptance or after judgment as applied previously. Thus, acceptance within the 21 days entitles the Offeree to his costs up to the date of acceptance : Part 36.10(1) failure to obtain a judgment more advantageous than the Defendants offer entitled the Defendant to his costs from the date for acceptance : Part 36.14(1)a (unless that would be unjust). If the judgment is at least as advantageous as the Claimant’s offer entitled the claimant to the 10% uplift on interest and costs (unless that would be unjust) : Part 36.14(1)b

5. The Defendant Offeror is not stuck with his offer because he may withdraw it without needing the court’s permission if it has not been accepted within the 21 days : See 36.63(6). So a threat to withdraw can be used to pressurise the other side.

6. There is no requirement that the Defendant Offeror has to notify the court of the terms of the offer as was required by the old Part 36.6(2). Thus the need to give details as to interest included in the offer has been abolished.

7. The offer is deemed to include interest. However, the Offeree can still request clarification of the offer : see Part 36.8.

8. A Part 36 offer can now be made purely limited to liability.

9. A Defendant can make a Part 36 offer prior to commencement of proceedings; so the Court of Appeal decision in Huck v Robson [2002] EWCA 398 has been adopted.

10. Part 36 offers can now be made in small claims cases (old Part 36.2(5) is abolished).

Discussion

It seems obvious that insurers will be assisted greatly by removal of the need to find the money to pay in. Equally, more pressure will be put on Claimants/Offerees since the Defendant/Offeror can withdraw the offer at will after the 21 days limit.

In the commercial sphere Claimants will lose the security that the payment in represented because it was well established that monies paid in were treated as giving the beneficiary of the payment in a form of security against other creditors (although a liquidator/trustee in bankruptcy could apply to contest this). It follows however that if the Claimant is concerned about the solvency of the Defendant a mere Part 36 offer has no kind of security.

In addition of course, funds in court received interest at 6% which represented (and still represents) a pretty reasonable return. This will no longer be available as a consolation to the litigant with a money only claim.

One wonders whether the change to the rules is not motivated by an intention to save the Government the expense of finding such payments!