TT Talk - When a 'Payment In' is not a Payment

With effect from 6 April 2007, significant changes have been made to the Civil Procedure Rules in England. As a result, it is no longer necessary for a Defendant party to litigation, who wishes to protect his position in regard to costs, to make a payment into court under Part 36 - the relevant Rule. A Part 36 payment represented what the Defendant believed to be a fair valuation of the claim. If the Claimant failed to accept this money and thereafter his case settled or he was awarded less than this sum at trial, then the Claimant was obliged to pay all of the Defendant's costs incurred from 21 days after the payment had been made into Court. As Tony Allen, a Director of CEDR, the Centre for Effective Dispute Resolution, wrote in an article dated March 2007:

"One of the drawbacks for defendants over Part 36 offers has always been that... the money offered had to be paid into court to await the outcome of the case. Interest accrued on it at a reasonable rate and would normally be returned to the defendant on settlement or judgment, but this tied up huge sums of money in court, requiring investment administration by staff. A trail-blazing initiative was made by the [National Health Service] Litigation Authority, which was keen to reduce the huge sums of NHS money it had to invest in payments into court, by arguing that a Part 36 offer unaccompanied by a payment into court gave sufficient protection to claimants. The court approved this practice in the decision of Crouch v Kings Healthcare NHS Trust [2004] EWCA Civ 1332 and, as a result, following a consultation process by the [Department for Constitutional Affairs], Part 36 has been revised so as to remove the requirement that sums offered under Part 36 have to be paid into court."

Instead, Defendants will simply have to make a written Part 36 Offer to settle. This offer must specify a period of 21 days or longer (the "relevant period") within which the offer will remain open and the Defendant will be liable for the Claimant's costs if the offer is accepted. The Rules then require that an accepted offer must be paid within 14 days, or the Claimant will be able to enter judgment and the Defendant will lose the costs protection afforded by the Rules.

The Rules in relation to withdrawal and changes of Part 36 Offers have also been amended so that a Defendant can now withdraw an offer, or change it so that the terms are less favourable, without the permission of the Court if the relevant period for accepting without cost consequences (usually 21 days) has expired and if the Claimant has not accepted the offer in the meantime. A Claimant accepts a Part 36 Offer by serving written notice of acceptance and may accept such offers even after expiry of the relevant period (unless it has already been withdrawn) without the permission of the Court.

Therefore, this new procedure is helpful to Defendants as it removes the need to pay money into Court in order to protect its position on costs. It also allows tactical offers to be made and then withdrawn.

Our thanks to John Caddies, a Partner in the firm of Hill Dickinson, London, for his help in putting this Item together.

Staff Author

TT Club