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A trap for the unwary

Alexander Learmonth warns of the dangers of split trials and part 36 offers

5 May 2015

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One aspect of the new Civil Procedure Rules (CPR) part 36 that has not attracted much comment is the new rule 36.12. However,
it presents a potential trap for offerors, with a serious risk
of professional liability,
and lawyers need to review urgently their current litigation files to see if any of their cases might be caught.

Subtle change

Under the new CPR rule 36.11(3), 'the court's permission is required to accept a part 36 offer where… (d) a trial is in progress'. Therefore, as before, one cannot just interrupt a trial when it starts to go badly and accept an offer to settle.

But there is a subtle change from the old rule 36.9(3), which applied where 'the trial has started'. The new rule thus allows for the possibility that there may be more than one trial, and that a trial may not be 'in progress' once it has 'started'.

The old rules were unclear about whether a part 36 offer could be accepted where the trial of a preliminary issue had already taken place. Many probably assumed that the offer simply lapsed. In fact, an offer could be accepted, with the permission of the court.

In Wilson v Ministry of Defence [2013] CP Rep 33, the defendant purported to accept the claimant's offer, having lost the trial of a preliminary issue about its limitation defence. The court held that there was only one 'trial' within the meaning of the old rule 36.9(3), from the start of the first trial until determination of the whole case. Accordingly, the court's permission was required.

But, having to rely on the discretion of the court is unsatisfactory. How can the court determine whether it
was fair for the offer still to be accepted without determining the rest of the case? Now, the rule makers have decided
that the parties themselves
can decide.

Although one might think
a definition of 'trial' would be unnecessary, rule 36.3(c) now provides that it means 'any trial in a case whether it is a trial of
all issues or a trial of liability, quantum or some other issue in the case'. By rule 36.3(d), a trial
is 'in progress' from the time
it starts until the time when judgment is given or handed down. This is distinct from
when the case is 'decided',
which by rule 36.3(e) is 'when
all issues in the case have been determined, whether
at one or more trials'.

This armoury of definitions allows the rule makers to set out the status of an offer between trials, so that parties keep control of their offers in that interim period. Sometimes, litigants will want to leave their offers open after the first trial in an action. After all, if an offer is withdrawn, the consequences of part 36 no longer apply (rule 36.17(7)(a)), and the offeror will have to rely on the less certain provisions of part 44. But often, as in Wilson, an offeror will want to withdraw his offer after the first trial before it is accepted.

Unseemly rush

The new rule 36.12 lays down a sensible procedure to prevent an unseemly rush to accept or withdraw the offer the moment judgment is handed down. It applies 'in any case where there has been a trial but the case has not been decided within the meaning of rule 36.3'. Chiefly, rule 36.12(3) provides: 'Unless the parties agree, any other part 36 offer cannot be accepted earlier than seven clear days after judgment is given or handed down in such trial'.

So the offeror has a grace period of seven days in which
he can consider whether to withdraw any current offers in the light of the judgment in the first trial and, if so, serve notice
of withdrawal under rule 39(2) before the offeree can accept it.

This is subject only to rule 36.12(2): 'Any part 36 offer which relates only to parts of the claim or issues that have already been decided can no longer be accepted.' So an offer that
was limited in its effect, and has been dealt with by the result of the first trial, cannot
be accepted.

In any other case, an
offer which is not expressly withdrawn within the seven-day grace period is open for acceptance immediately thereafter. This is the trap for litigators: make sure you review any earlier offer in the week
after the first trial and withdraw it if appropriate. Otherwise,
your opponent may accept it
the moment that week expires.

A final word of warning: even pre-April offers are not safe. The transitional provision states that these rules apply in relation to part 36 offers made before
April 6, where the trial of any
part of the claim starts after
that date. SJ

Alexander Learmonth is a chancery barrister at New Square Chambers, specialising in succession and property

@NewSqChambers

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