Lord Jackson has recommended changes to part 36 of the Civil Procedure Rules. The recommendations propose to reward claimants for making reasonable part 36 offers in settlement of their claims.  Where the claimant makes a successful part 36 offer, damages are to be increased by 10% which has a detrimental effect on the defendant for failing to accept a reasonable offer.

It is hoped that this change will lead to claimants making reasonable part 36 offers at an early stage and the penalties imposed on the defendants will prompt early offers. Defendants will not receive the same incentives for making successful early part 36 offers, other than costs protection and qualified one way costs shifting, which is dealt with below. If a case is settled early, both parties will benefit from a reduction in their costs.

At present this will apply to personal injury claims but it could be extended to apply to other types of litigation. This means that claimants can receive costs if they win and they will receive protection from costs ordered against them unless they have acted unreasonably in bringing a claim or acted fraudulently.

Qualified one-way cost shifting ought to be read alongside proposed changes to part 36 and may not apply where a claimant does not beat a defendant’s reasonable offer. In this instance, the court could make costs orders against the claimant for the period after the offer, in a situation where (a) the claimant was acting unreasonably in rejecting the defendant’s offer and (b) the costs in the period before the offer and the compensation awarded to the claimant meet some of their costs.

There is concern in some quarters that qualified one-way costs shifting could result in satellite litigation arising from the original action because the new proposals provide that costs orders can only be made against the claimant for the period after the offer in circumstances where the claimant has been unreasonable.  How do we define “acting unreasonably”? It seems to us that this proposal is bad for defendants because the introduction of qualified one-way costs shifting will give claimants security provided that they behave reasonably as  no costs will be ordered against them in the event that their claim is unsuccessful.

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