Three Court of Appeal judges have provided certainty on the conditions of a valid Part 36 offer in the case of King v City of London Corporation.
Following many different interpretations and rulings by the High Court, the Court of Appeal has ruled that Part 36 offers excluding interest are not valid. They stated that making a Part 36 offer in such a way, does not comply with the Civil Procedure Rules.
What is a Part 36 offer?
A Part 36 offer is designed to try and encourage parties to settle claims without the need to go to trial. This type of offer can be made by both Claimants and Defendants. If a Part 36 offer is made 21 days or more before the start of trial, it must specify a period of no less than 21 days for acceptance of the offer. If a Claimant accepts a Part 36 offer then their solicitor will be able to recover most of their costs from the Defendant. If you do not believe the amount offered to be sufficient then you can reject the offer and have your claim heard by the Court.
If you are awarded compensation higher than the Part 36 offer, then this will have no effect on your claim – you will receive your compensation and your solicitor will recover their reasonable costs. On the other hand, if the Judge were to award an amount lesser than the Part 36 offer then you may be ordered to pay the Defendant’s legal costs from the end of the acceptance period to date.
What happened in King v City of London Corporation?
In February 2017 the Claimant, Francis King, had settled his claim for a sum of £250,000 plus costs. With regards to costs, Mr King made what he called a Part 36 offer for £50,000 but specifically stated that this excluded interest. This offer was rejected by the City of London Corporation. In June 2018, Mr King’s bill was assessed at £52,470 (excluding interest).
Mr King’s solicitors therefore argued that, as Mr King had beaten his original Part 36 offer, he should be entitled to the benefits of doing so. However, this argument was rejected on the basis that the offer was not a valid Part 36 offer as it excluded interest. The High Court rejected his appeal.
Now most recently, the Supreme Court have too dismissed his appeal. Lord Justice Newey stated that
“an offer which fails to comply with the requirements of CPR Part 36 in an essential respect, will not take effect as a Part 36 offer even if it is expressed to be one”.
Essentially, Rule 36.2 states that in order for an offer to be valid, the offer must comply with Rule 36.5. Specifically, Rule 36.5(4) highlights that an offer “to accept a sum of money will be treated as inclusive of all interest”. Ultimately, Lord Justice Newey emphasised that interest is part and parcel of a Part 36 offer and cannot be omitted.
One of the other Supreme Court judges involved in this ruling, Lord Justice Arnold, stated that due to the number of cases there have been regarding Part 36 offers and failure to comply with all its requirements, the issue needs to be reviewed by the Civil Procedure Rule Committee to provide further clarity on the making of Part 36 offers.
Fundamentally, it is essential that Part 36 offers are considered carefully – whether that be making or receiving one. A party making an offer must ensure that they make it correctly and accept the potential downsides of making such an offer as well as the benefits (e.g. interest or costs consequences).