From 6 April 2007, Defendants will no longer be required to pay money into Court post-proceedings in order to enjoy the costs protection given by Part 36.

The original Part 36 framework is to be replaced by a new Schedule which streamlines the rule, but contains important differences.

Defendants can now rely on written Part 36 offers, made before and after issue of proceedings, avoiding the need to deposit often large sums of money (at less than advantageous rates of interest) for long periods. An offer made before issue of proceedings does not need to be backed up by a payment and the offer remains effective throughout the proceedings, unless withdrawn.

The new Schedule allows any party to make offers at any time. The general mechanisms remain the same. Offers must be in writing, must state the offeror’s intention that the consequences of Part 36 will apply, and confirm whether the offer relates to the whole or part of the claim. The offer must also specify a period for acceptance of not less than 21 days (“the relevant period”). As before, special rules apply if the offer is made less than 21 days before trial.

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Prior to expiry of the relevant period, the offer can only be withdrawn, or its terms changed to be less advantageous to the offeree, with the Court’s permission. After expiry, the offer can be withdrawn (or its terms changed in writing without permission). It would be unusual to seek to withdraw or alter an offer within the relevant period, although it could happen if new evidence - eg Claimant misrepresentation - came to light.

Offers for future financial loss can incorporate lump sums, periodical payments or a combination of both, but the offer must specify the amount and duration of the periodical payments. The offeree can only accept the whole of the offer, rather than “cherry pick”.

A Part 36 offer can be accepted at any time unless it has been withdrawn. As before, Court approval is needed if the Claimant is a minor or a patient, and special rules apply if there are multiple defendants, or where deductible benefits have been paid since the offer was made.

The costs consequences or accepting or rejecting a Part 36 offer remain. To recap, the Claimant is entitled to his costs up to the date of acceptance of the offer if he accepts within the relevant period. If the offer is made less than 21 days before trial, or is accepted after expiry of the relevant period, the parties can either agree costs or apply to the Court. The general rule is that late acceptance means that the Claimant’s costs are paid up until the date of expiry of the relevant period, and that he is then responsible for the Defendant’s costs until the date he accepts.

An important new change concerns payment of the damages. Unless the settlement includes periodical payments, the Defendant must pay the damages to the Claimant within 14 days of the date of acceptance or of any Court order. If payment is not made within 14 days, the Claimant can enter judgment for the unpaid sum. Insurers must therefore take care to ensure that funds will be available if an offer is accepted.

As before, Part 36 offers are made “without prejudice except as to costs” and are not to be communicated to the trial judge.

Deductible benefits must be dealt within offers. The offer should state if benefits are ‘ignored’ or included, and the offer should also specify gross and net values. If a CRU certificate is awaited at the time the offer is made, the details must be confirmed within 7 days of receipt of the certificate. If the Claimant accepts the offer out of time and additional recoverable benefits have accrued, the Court may direct the Defendant to reduce the damages paid to the Claimant and repay the benefits.

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