Can Part 36 offers be revealed to case managing judges at interlocutory hearings?

March 21, 2022

Chris Gutteridge

FKJ v RVT [2022] EWHC 411 (QB) is a decision of Mrs. Justice Collins Rice (on appeal from Senior Master Fontaine) in the QB’s Media and Communications List, but it will be of interest to PI and clinical negligence lawyers, especially those dealing with high value claims for claimants.

The case itself was a claim for damages arising from alleged misuse of private information. The point of interest is that when the case came before the Master for CCMC, the Defendant wanted to draw the Court’s attention to a (low) Part 36 offer the Claimant had previously made in order to argue that the costs claimed in the budget were out of proportion to the ‘real’ (as opposed to pleaded) value of the claim.

CPR 36.16(2) sets out the following: “The fact that a Part 36 offer has been made and the terms of such offer must not be communicated to the trial judge until the case has been decided” (emphasis added). There is no express restriction on a judge at an interlocutory hearing being told about a Part 36 offer – but neither is it specifically permitted.

For claimant PI and clinical negligence lawyers, the key benefit of being able to refer to a defendant’s part 36 offer at interlocutory hearings arises in the context of applications for interim payments. I can think of recent a case of mine where, having made a part 36 offer exceeding £600,000, a defendant insurer refused to make an interim payment of £50,000 to my lay client by consent. I advised my instructing solicitors to make an application. We told the defendant in the covering letter that we would be making reference to the £600,000 part 36 in the course of the hearing and pointed them towards this helpful commentary in the White Book:
As stated in r.36.16(2), the general rule restricts disclosure to the ‘trial judge’ and it has long since been understood that it does not prevent disclosure to a judge dealing with interim matters in the course of which it may be both necessary and desirable for the judge to know of offers made (Williams v Boag [1941] 1 KB 1, CA).

That case never went to a hearing because the defendant saw sense and agreed the payment – but I have dealt with other similar applications over the years that made it to a hearing and at which the judge was informed of a defendant’s offer. That has always been done without objection from the defence.

I cannot recall, however, having to make reference to a part 36 offer at a CCMC, and that, perhaps, is an important distinction in FKJ. The Master decided that, in the circumstances of the case before her, knowing the amount of the claimant’s part 36 offer would not be relevant to budgeting exercise. The court would not be assisted by knowing the “undervalue” at which a claimant might be willing to settle. What is more, the settlement sum in the offer expressly referred to the monetary element of the claim only, but the claimant’s Part 36 offer was also subject to the terms which sought undertakings as to the future use of ‘private information’. As such, the Master thought that, in the context of a ‘misuse of private information claim, an offer of compromise of the monetary element at significant undervalue could be understood as underlining the correspondingly high value attached by a claimant to the non-monetary elements rather than being a signifier of the true worthlessness of the whole claim.

On appeal, Mrs. Justice Collins Rice upheld the Master’s decision on those facts – they were conclusions which were understandable, rational and well within the range of decisions properly open to the Master on the facts before her.

More fundamentally, however, the Master had decided she had “no clear legal basis” to permit the defendant to refer to the offer at all. This was having considered CPR 36.16(2) and the various authorities cited to her (none of which dealt directly with the point). The defendant’s appeal was on the basis that the Master had misdirected herself about that and was wrong that she had no legal power to give the permission that was sought. In giving her judgment, Mrs. Justice Collins Rice referred to this as “The question of principle” (at para.12):
Rule 36.16 undoubtedly prevents a judge hearing a final trial from being told about an offer, except in the limited circumstances set out. But does Rule 36.16 mean the fact and terms of a Part 36 offer cannot or should not be communicated to an interlocutory judge either? Or is that something to be decided case by case…as a matter for the ordinary case management discretion of the court?

Mrs. Justice Collins Price concluded that, surprisingly, there is no clear answer to that fundamental question (at 15):
The parties to the appeal concurred in advising me that there is no clear decided authority definitively resolving the question of principle. That was surprising to hear, on what looked on the face of it like a major point of procedure where uncertainty would not be expected to be tolerable for long. I was not, either, offered evidence of established practice in the sort of applications being pursued in this litigation.

Mrs. Justice Collins Price was not persuaded by the reference in the White Book commentary to the Court of Appeal’s decision in Williams v Boag as determinative on this point (at 18):
Williams v Boag was an extremely brief decision of the Court of Appeal in which general dicta are to be found to the effect that restriction on disclosure in court of a settlement offer ‘ does not prevent a Judge on an interlocutory application being informed of the fact of payment in, where it is desirable that he should know it ‘…It was of course a case decided long years before the self-contained Part 36 code came into being, under the old Order 22 ‘payment into court’ system.

Unfortunately, having decided that the Master was entitled to reach the decision she did on the facts of the application, Mrs. Justice Collins Price thought it unnecessary to resolve the question of principle in this case (at 28):
I am inclined to agree that the question of principle remains outstanding, however surprisingly. In an appropriate case, it may be necessary to resolve that question definitively one way or the other. I do not, however, consider the present appeal to be that case

As such, we are left in limbo. This is likely to be a matter for the Rules Committee to resolve, but in the meantime Claimant lawyers will still want to refer to defendants’ part 36 offers in contested applications for interim payments. Without an answer to ‘the question of principle’ we must proceed with care, and not in the expectation that reference to a defendant’s offer will be uncontroversial.

Mrs. Justice Collins Price gave a clear indication that, even if ‘the question of principle’ was resolved in the appellants favour, an application for permission would still be expected (rather than an offeree referring to the part 36 offer as-of-right; at 13):
the Appellants…accepted before me that [referring to a Part 36 offer at an interlocutory hearing] was at least not a ‘routine’ occurrence, and they did not assert an unqualified entitlement to refer to the offer without the consent of the offeror or the permission of the court. Even if the Appellants are right that, as a matter of law and principle, it may be possible for them to rely on a Part 36 offer for the sort of purposes they have in mind, that would clearly be a fact-sensitive question in any given case, the fairness of which it would be the responsibility of Master or Court to consider in all the circumstances and decide on. The Appellants accepted before me that in this respect cases do at least turn on their facts.

For the time being, therefore, claimant lawyers seeking to refer to a defendant’s part 36 offer in the course of an interim payment application should seek permission to do so on the application notice and provide evidence in support of that limb of the application citing the relevance of the offer to the particular facts of the case and issues to be resolved.