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Part 36, interim payments, liability offers and costs

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By David Williams & Peter Allchorne


Published 02 July 2018


2018 has already seen five judgments on the application of Part 36 offers which should be borne in mind when making offers and assessing those made by other parties. The judgments are a helpful reminder of the consequences of a failure to use Part 36 correctly and when to select another more appropriate form of offer.


JMX v Norfolk and Norwich Hospitals NHS Foundation Trust

On 7 February, the High Court handed down its judgment in JMX v Norfolk and Norwich Hospitals NHS Foundation Trust, in which the question of whether a Claimant's offer on liability was a genuine attempt to settle the claim.  Shortly before the trial on liability, in a clinical negligence claim with a value of several million pounds, the Claimant made a Part 36 offer on liability of 90-10 in his favour.  The Claimant succeeded in his claim with no finding of contributory negligence.  As the Claimant had beaten the Part 36 the Court was required to consider whether the consequences set out in r.36.17(4) should be applied.  Rule 36.17(4) provides for a successful Claimant to be rewarded with costs assessed on the indemnity basis from the expiry of the offer, enhanced interest on those costs and an additional sum in damages.  Would it be unjust to impose the consequences, and was the offer on liability a genuine offer to settle the claim?

Foskett J, noted the introduction in 2015 of the requirement that the offer be genuine as a response to  the emerging practice of Claimants making very high offers on liability in order to secure enhanced costs and the additional payments.  He then concluded that the offer was a genuine attempt to settle the claim, and therefore the Claimant should receive the enhanced costs and additional sum.

Defendants should be alive to the risk of Claimants making offers of this nature, exposing the Defendant to risks on costs and to the risk of additional sums in damages. In claims commencing within the Low Value Protocols, where Claimants beat their own Part 36 offers the costs payable from the expiry of the offer's relevant period are assessed on the indemnity basis, and therefore the claims fall out of the fixed costs regime of r.45.29.  Care must be taken in assessing the risk of the Claimant beating the offer, including offers making a limited concession where the expectation is that the Claimant will succeed in full, particularly in ensuring that reserves are appropriate for the costs which may be awarded.


James v James

The second judgment, handed down on 13 February 2018, saw the High Court consider whether an offer complied with the requirements of Part 36 and, therefore, whether it was a valid Part 36 offer. James v James involved a challenge to the validity of a will.  The Defendant made an offer, stated to be a Part 36 offer, which included a provision that the Claimant pay the Defendant's costs of the claim and the counterclaim. 

The costs provisions applying to Defendants' Part 36 offers, set out in r.36.13, provide that the Defendant shall pay the Claimant's costs up to the expiry of the relevant period. This offer contained a costs provision which differed significantly from the provision set out in r.36.13 and therefore, whilst its terms were clear, the offer was not consistent with the rule and was not a valid Part 36 offer.  The consequence of this inconsistency was significant. Despite the Claimant's failure to beat the Defendant's offer the consequences of r.36.17 did not apply and, save for the costs of a discrete issue, the parties were ordered to bear their own costs.


El Gamal v Synergy Lifestyle Limited

In El Gamal v Synergy Lifestyle Limited, judgment was handed down by the Court of Appeal on 16 February 2018. The case related to the impact of interim payments on Part 36 offers, the Defendant having made an interim payment on account of damages after making a Part 36 offer.  The Court had reduced the offer by the sum paid, which resulted in the Claimant's beating the offer (after deduction of all payments), as a consequence of which the Defendant was required to pay the Claimant's costs of the action.

The Court confirmed that there is a presumption, where an interim payment is made following a Part 36 offer, that the interim payment is made on account of the sum offered in the Part 36 offer. If the Defendant does not wish the interim payment to reduce the sum offered, for example if it relates to a head of loss not included within the offer, the Defendant should state this within the offer or promptly after making the offer.


Ballard v Sussex Partnership NHS Foundation Trust

In Ballard v Sussex Partnership NHS Foundation Trust the Court considered the impact of a Part 36 offer, which was later withdrawn, on costs.

The Defendant, a year before the trial, made a part 36 offer in the sum of £50,000. One month before the trial, the Defendant withdrew the offer and replaced it with one in the sum of £30,000. The second offer, included an offer to pay the Claimant's costs if it was accepted within 21 days.  At trial the Claimant failed to beat either offer and the question for consideration by the Court was the extent to which the Defendant was to pay the Claimant's solicitors' costs, and the extent to which the Claimant was to pay the Defendant's costs. 

Whilst the Claimant had failed to beat the first offer, the second offer expressly offered to pay the Claimant's costs up to 21 days after the offer, if accepted. The second offer was not a variation of the first offer, as permitted by rule 36.9, and included a proposal to pay costs until 21 days after the second offer.  Having offered to pay the Claimant's costs until 21 days after the second offer, the Defendant was not then entitled to seek to vary the period for which it was liable for costs.

Had the Defendant varied the offer to reduce the damages payable, as permitted by rule 36.9, the date of the offer, and the period over which the parties would have been liable to pay one another's costs, would have remained as set out in the original offer.


Tucson v Murphy

Finally, the Court of Appeal considered the Court's discretion on costs in Tucson v Murphy, the judgment in which was handed down on 22 June 2018.  The Claimant had presented a claim following her suffering injuries in a riding accident, alleging that her injuries were such that she would not work again.  Her witness evidence failed to make reference to her having obtained a playgroup franchise and run a number of sessions before the business failed, and her medical experts' and employment expert's evidence failed to make mention of it.

The Defendant's solicitors became aware of the Claimant's playgroup business, and indicated this knowledge in correspondence to the Claimant's solicitors. The Defendant then made a Part 36 offer, which the Claimant accepted two months after expiry of the relevant period (the period of twenty-one days from the offer); as the parties were unable to reach agreement on costs, the claim proceeded to a hearing on the questions of costs.

At first instance, the Judge limited the Claimant's costs to a period eighteen months before the Defendant's Part 36 offer, and ordered the Claimant to pay the Defendant's costs thereafter. The Claimant appealed to the Court of Appeal. 

Whilst the Claimant's failure to disclose her having run the playgroup business was dishonest and misled the Defendant and its advisers, the Defendant's offer had been made as a Part 36 offer, which includes the provision that acceptance within 21 days would give the Claimant her costs to that date as of right. Had the Defendant intended to make an offer which made different provisions in relation to costs, the Defendant could have chosen to make a Calderbank offer instead of a Part 36.

As the Defendant was aware of the Claimant's failure to give disclosure of her failed playgroup venture at the time the offer was made and those facts did not change before it was accepted, this case was very different from one in which new facts come to light after the offer has been made. It would be unjust not to apply the default costs Rule in Part 36, and therefore the Claimant recovered her costs to expiry of the relevant period.



The judgments above are salutary reminders of the importance of taking care when making offers. It is important to ensure that the content of Part 36 offers are checked and that the basis on which interim payments are made is confirmed.  As judgment after judgment has confirmed, if the benefits of Part 36 are to be secured, the rule must be followed precisely.

If different benefits are sought then an alternative form of offer should be used as using Part 36 will not secure a different outcome to that prescribed in the rule. Parties should give proper consideration to the benefit of the variation of an offer rather than its withdrawal and replacement, to whether an offer should be made as a Part 36 or Calderbank, and of the risks presented by offers on liability, whether or not they are viewed as properly reflecting the risks to a party.