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  • pg 1

By William Hanbury of Zenith Chambers, Barrister

Every litigation solicitor knows the basic rules for offers and payments. To recap they

   1. either side may make a Part 36 offer;
   2. in a money claim the defendant (i.e. claimant defending a counterclaim or
      defendant to the action) must pay the money into court if it is to have the
      automatic costs consequences in Part 36 (36.3);
   3. the claimant then has 21 days to accept that payment-in;
   4. it appears that where there is a mixed claim (i.e. a money and non-money claim)
      the offeror may withdraw a Part 36 offer without the court’s permission provided
      the time fixed for acceptance has elapsed (36.5);
   5. a payment-in, however, may only be withdrawn or reduced with the court’s
      permission (36.6 (5));
   6. A claimant may withdraw his own Part 36 offer at any time after the time set for

Does the defendant have to pay money in to gain protection in a money claim?

An important exception to the 2nd rule summarised above (Part 36.3 (1) -a defendant’s
offer to settle should be backed up by a payment-in) has now been recognised in Crouch
v Kings NHS Trust [2004] EWCA Civ 1332. in that case, the court recognised,
Effectively, that where the defendant is a public authority an offer would be as good as a
payment given that the payor was undoubtedly “good for the money” unless there was
some special feature to the offer. The court was able to reach the same position via a
different route, i.e. by applying its general discretion on costs under Part 44.3. They
recognised that public authorities had other calls on their resources than making
payments into court many months before the trial.

Can the defendant withdraw or reduce a payment into court?

A number of recent cases have considered rules 5 and 6 summarised above (the
circumstances where the court will give the permission required by Part 36.6 (5) to
withdraw or reduce a payment-in).

In James Marsh v Frenchay Healthcare (2001 TLQ 001284) the claimant, in a clinical
negligence case, was filmed on video on 28 November 2000. The defendant claimed that
it showed him to be “gilding the lily” and applied to withdraw the sum it had paid into
court on 17 November 2000 which the claimant had accepted on 4 December 2000 (i.e.
within the 21 days).

Curtis J did not find that the video evidence raised the issue of credit in the way that had
been suggested by the defendant. He concluded that, in fact, the payment-in had been
made because of a calculated “across the board” decision by the defendant and not
specifically because of any representation by the claimant. The judge therefore agreed
that the claim had been correctly stayed following acceptance by the claimant.

What if the claimant applies to accept before the withdrawal application is heard?

In the Marsh case the defendant applied to remove the money from court before the time
for acceptance had elapsed and before the claimant had given notice of acceptance. The
question that arises is whether the defendant can withdraw the payment-in during the 21
days allowed for acceptance if the claimant has already given notice of acceptance. There
appears to nothing in the rules to deal with that situation.

The problem was considered by the Court of Appeal in Flynn v Scougall [2004] EWCA
Civ 873. There the defendant had paid £14,500 into court on 14 March 2003, shortly
before it received its own expert’s report into the claimant’s injuries on 20 March 2003.
That report attributed a much shorter period of symptoms to the accident than had
previously been thought the case and the defendants wasted no time in applying the same
day to reduce the payment into court to £10,000. They gave the claimant notice of their
application by fax that day. On 25 March 2003 the claimants decided to accept the
payment into court. On 8 April 2003 the district judge acceded to the claimant’s
application and ordered the reduction of the payment into court but a different district
judge set aside that order and ordered payment out of the full sum of £14,500 to the
claimant’s solicitors. The circuit judge on appeal reinstated the original order and allowed
the claimant until 4 November 2003 to accept the £10,000 in court.

The Court of Appeal first identified that a payment into court was not contractual but
procedural and that the rules of procedure laid out in Part 36 must be strictly followed if
the desired costs consequences are to follow. One of the procedural conditions was that
the payment could only be withdrawn with the court’s permission. After the 21-day
period for acceptance then, unless the parties reach agreement, the party who wishes to
withdraw a payment-in and the party who wishes to accept the payment-in would require
the court’s permission but it was not the case that a claimant required permission to
accept where, as here, the full 21 days had not elapsed. What happens if, as in this case,
the parties conflict over what is to happen within the 21days? The rules appeared to give
the claimant an unfettered right to accept and the court an unfettered discretion to allow a
defendant to withdraw the payment.

It was held that the key issue was not the timing of the respective applications or notices.
The parties should avoid “an unseemly adversarial scramble” to make their respective
applications. The court would strive to deliver a just and economic result. The fact that at
the time of the application by the defendant the claimant had actually given notice of
acceptance was not the sole matter of importance. Even though that has the effect of
staying the action the court could notionally remove the stay and allow the defendant to
proceed with his application. The defendant would need to show good reasons for doing

so. On the facts of this case the claimant’s acceptance of the payment in was precipitated
by the application to withdraw but that was not decisive.

Lord Justice May thought that fraud or mistake affecting the original decision to make the
payment in or top up payment would constitute good reason for allowing withdrawal
even after a notice of acceptance had been sent. On the facts of that case he thought the
circuit judge had attached too little weight to the fact that the application to withdraw was
made within the 21 days and that to allow withdrawal would remove an unfettered right
by the claimant to accept the money in court. The court concluded that the defendants
here had made a tactical decision to pay money into court before receiving their own
medical evidence. They had taken a risk that they might be paying in too much.

Why Part 36 offers are different

As the editors to the current Green Book observe (at 36.5 [3] in the 2004 edition) the
rules affecting Part 36 offers are different from those affecting payments-in because they
are regarded as primarily contractual. Once accepted a binding compromise is brought
into effect and there is no question of withdrawal. However it appears that a Part 36 offer
may be withdrawn at any time, although the desirable costs consequences will of course
only apply if it is kept open for at least 21 days (see 36.5 [8]).

But this means that the position is different for offers in money claims than payment-in.
As Lord Justice Waller commented in the Crouch case (at paragraph 37):
       “why he (the defendant) should not be able to withdraw (an) offer without the
       permission of the court when the defendant in a non-money claim who makes a
       Part 36 offer may do so (compare Part 36.5 [6] with Part 36.6 [5]) seems
       somewhat harsh and indeed harsher still when it is clear that a claimant can make
       a Part 36 offer in a case involving a money claim, and is free withdraw at any
       time without permission of the court, where a defendant cannot. But that seems to
       be the effect of the rules”


The courts, more than five years after the inception of the CPR, are starting to resolve
some of the problems created by Part 36.

The stance taken by the Court of Appeal in Flynn v Scougall, to the effect that
defendant’s solicitors have the luxury of holding off the payment into court for a little
longer until their own expert’s report is received shows a rosy view of litigation very far
removed from reality. In fact defendants with suspicions about a claim being fraudulent
cannot reveal that to the claimant or to the court. They often have to wait to obtain
suitable expert evidence to back up their suspicions. If they do not make a payment in
they risk being punished on costs. If they do they risk having over paid. There is likely to
be a case where the defendant, very late in the day, discovers that the claimant had lied
about or exaggerated his claim and in such a case an application to withdraw would

appear to be compelling. Unfortunately for the defendants in Flynn theirs was not such a

Crouch, whilst pointing out certain problems with the present rules on payment-in and
offers, provides practical assistance to public authorities which is likely to be of some
long-term importance in this area. Costs have been made unnecessarily complex by the
CPR and they are not made any easier by being hidebound by inflexible rules. It is
encouraging that the Court of Appeal took a more flexible approach in Crouch than the
rules appeared to compel them to.


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