Neil Hickman on when an offer to settle is as good as a payment into court

Rule 36.3(1) of the Civil Procedure Rules 1998 (CPR), states that 'subject to rules 36.5(5) and 36.23, an offer by a defendant to settle a money claim will not have the consequences set out in this part unless it is made by way of a part 36 payment'.



Can a defendant avoid the rigid terms of rule 36.3(1)? In Amber v Stacey [2001] 2 All ER 88, Amber claimed £7,579 for building work. After a three-day trial the claimant was awarded £2,321. The letter before action was dated 23 September 1997, and the claim was issued the following day. On 1 October 1997, Stacey's solicitors offered to settle at £4,000 plus VAT and costs on the summons, stating that if this offer was rejected, the sum would be paid into court. In fact, only £2,000 was paid in on 7 August 1998, with a further £1,000 on 20 January 1999.



'That's quite plain! If you offer to settle and offer to pay into court, you may be treated as having paid in, but costs might be ordered as if you have not - or the court might make a different order!'
However, Amber's solicitors had written on 10 October 1997, saying tartly: 'our client... is not going to accept the sum of £4,000 plus VAT whether paid into court or otherwise'. On 30 April 1999, only four days after the CPR came into force, the trial judge ordered Amber to pay Stacey's costs from 1 October 1997. The Court of Appeal held that went too far; it was the same costs order as the judge would have made had Stacey made the payment in and succeeded on all issues at trial.


However, the discretion under part 44 allowed an order that Amber pay half of the defendant's costs from 1 October 1997 to 20 January 1999. The partial success on the appeal was Pyrrhic, as Amber had to pay Stacey's costs of the appeal.



In The Maersk Columbo [2001] All ER (D) 40 (May), the Court of Appeal upheld the trial judge's order for a claimant to pay the whole costs from 21 days after the offer letter. In that case, the claimant had argued that to obtain the benefit of part 36, a defendant must pay the money into court and, unlike the defendant in Amber v Stacey, the defendants had, ultimately, paid in the amount they had offered.



In Crouch v Kings Healthcare NHS Trust and Murry v Blackburn NHS Trust [2004] All ER (D) 189 (Oct), defendant NHS trusts made offers of settlement but did not pay money into court. In Crouch, the offer letter referred to parts 36 and 44 and recited that the defendant was an NHS public authority and the claimant could be in no doubt that if the offer were accepted, payment would be made promptly, and that NHS funds would be better employed providing patient services rather than lying in court.



Mr Crouch sought loss of earnings alone totalling about £175,000. He was offered £35,000 in settlement of his whole claim and at trial he recovered £29,000. The judge awarded Mr Crouch his costs, reasoning that where a defendant wished to obtain the benefit of part 36, he must, as rule 36.3 stated, make a payment into court.



In Murry, an offer of £150,000 was made on 21 February 2003, stated to be open for acceptance for 21 days. It was rejected on 11 March 2003 but then accepted two days later, within the 21 days. The trial, set for 24 March 2003, was vacated save for an approval hearing, the claimant being a child. The claimant's counsel then said that he could not advise approval pending an appeal against the withdrawal of public funding. A meeting took place in June 2003, where the February offer was rejected, and the case was proceeding to trial again when, in January 2004, the claimant's advisers indicated that they wished to accept the original offer. The trust retorted that there was no offer extant for the claimant to accept.



Eventually, Mr Justice Wright held that, by asking for the indulgence that its offer should be treated as if it were a payment into court, the trust had implicitly undertaken that it would not withdraw the offer without the permission of the court. A payment in, of course, cannot be withdrawn without such permission. He allowed the claimant to accept the offer subject to paying the costs from 24 March 2003, there being no order as to the costs of the hearing before him.


Lord Justice Waller in the Court of Appeal held that offers of settlement could be taken into account among all the other circumstances of the case in considering the proper order for costs. The court must ask whether it is right to apply the rule 36.20 presumption that the claimant pay the defendant's costs from the last date for acceptance of the offer. It may be right to apply the presumption, or it may be appropriate to make a different order, depending on the circumstances. That gives proper effect to the fact that a payment into court has not been made.


Dealing specifically with the case of an NHS trust, Lord Justice Waller concluded that the court could properly take into account the factors mentioned in the offer letter. 'This form of offer from an NHS trust,' he said, 'is as sound as a payment in, and unless there is some factor special about the circumstances of the case, a court should treat such an offer in the same way as a payment in.'


Mr Crouch was ordered to pay the trust's costs from 21 days after the offer letter. Ms Murry was more fortunate, in that the Court of Appeal held that the judge's exercise of discretion could not be disturbed. However, Lord Justice Waller made it clear that the trust had been entitled to withdraw the offer. Had the case been appealed on that ground, the appeal would have succeeded.


Therefore, it appears that not only can a defendant NHS trust rely on an offer letter as offering equivalent protection to a payment into court, it will in doing so retain the freedom to withdraw the offer without needing the court's permission.



Public bodies will presumably be able to rely on offers of settlement in the same way. Other defendants may be able to do so, but, as Lord Justice Clarke pointed out in The Maersk Columbo, they refrain from paying in at their peril; the court may not be prepared to reflect the offer in its order for costs. If challenged on the point, they should pay in, as The Maersk Columbo defendants did. While an impecunious defendant may be able to obtain some protection in costs by making an offer to settle, the court in considering that offer will take into account his inability to pay.



District Judge Neil Hickman sits at Milton Keynes County Court