Part 36 offers in interlocutory proceedings

Civil Procedure Rule 36.16(1) provides that Part 36 offers are treated as ‘without prejudice except as to costs’, and subparagraph (2) provides that any offer should not be communicated to the trial judge until the case has been decided. But does rule 36.16(2) mean that a Part 36 offer cannot or should not be communicated to an interlocutory judge? That was the question of principle which came before Mrs Justice Collins Rice in FKJ v RVT and others [2022] EWHC 411. Surprisingly, there does not appear to be any authority on the question of principle. 

The respondent issued a claim in misuse of private information against the appellants. The respondent subsequently made an offer to settle both her claim and the appellants’ counterclaim. The offer was headed ‘Part 36 offer – without prejudice save as to costs’, and was open to acceptance for 21 days. The offer was not accepted, and the appellants made a formal application to the court for an order permitting them to refer to the respondent’s Part 36 offer at a scheduled interlocutory hearing for the purposes of case management; costs budgeting; and the appellants’ pending strike-out/summary judgment application. Senior Master Fontaine rejected the application on the grounds that she had no clear legal basis for granting the application and, in any case, it would serve no practical purpose and be unfair, on the facts of the case, given that damages were only part of what a claimant was looking for in misuse of private information claims.

The appellants appealed on the grounds that the master: (i) wrongly failed to apply the decision of HHJ Freedman (sitting as a High Court judge) in Handyside v Lowery (unreported, 2 April 2015)); (ii) wrongly equated the principles applying to ‘without prejudice’ privilege with those applying to Part 36 offers; (iii) ought to have concluded that parties are permitted to refer to Part 36 offers where questions of proportionality arise. In the case of interim payments, it is on this very basis that Part 36 offers are relied upon; and (iv) was wrong to conclude that the ‘costs’ in ‘without prejudice save as to costs’ refers exclusively to final costs orders. Alternatively, the master was wrong to decline to extend the list of common law exceptions to the ‘without prejudice save as to costs’ rule to costs management.

The appellants relied heavily on the words ‘the trial judge’ to suggest that the bar on communication of Part 36 offers is intended to have no application at all to a different judge performing functions at an interim interlocutory stage. In support of this argument, the appellants relied on Williams v Boag [1941] 1 KB 1 CA – a case that was decided well before the introduction of the Part 36 regime – in which the Court of Appeal held that a settlement offer does not prevent a judge on an interlocutory application being informed of a payment into court. The appellants also referred to Foskett on Compromise which suggests that Part 36 offers could be disclosed to a judge performing pre-trial case management functions, and to Handyside, another case which did not concern Part 36 offers. The respondent argued that the express indication in Part 36 that the general or common law prohibition on the disclosure in any court context of a without prejudice offer to settle is the starting point for rule 36.16.

Collins Rice J rejected the appellants’ arguments. The authorities cited by the appellants, including Gibbon v Manchester City Council [2010] 1 WLR 2081 and Johnson v Gore Wood & Co [2004] EWCA Civ 14, were either of limited or no assistance. She noted that, unless there were clearer authorities she was not shown, she was inclined to agree that the question of principle remained outstanding. Collins Rice J did not, however, consider the present appeal to be a case to resolve the question of principle definitively. She found the master’s conclusions to be understandable, rational, and well within the range of decisions properly open to the master on the facts for the reasons she gave. She observed that the decision to refuse the application on the facts was, in essence, because the purpose for which the appellants wished to use the Part 36 offer was to compare and contrast the figures in the Part offer, the claim form, and the sums in the respondent’s costs budget to help show the court the disproportionality between their own costs and the respondent’s costs. Collins Rice J held that the master correctly decided that the settlement sum was not relevant to any of the purposes proposed, and that it was not relevant in general because, since Part 36 should be ‘a genuine attempt to settle the proceedings’, it must necessarily involve a claimant offeror giving up a part of the claim of some value, in return for, inter alia, avoiding ongoing exposure to the risk of litigation costs. Therefore, knowing about the settlement sum – or even the whole of the Part 36 offer – was of no assistance to a court considering the future if any, and management, of a claim which, if liability were established, would on the facts alleged amount to, as the master put it, ‘a very serious breach of [the respondent’s] private information’.

Collins Rice J also explained that one of the reasons for the lack of definitive authority on the question of principle may be because it will be rare that the existence and terms of a Part 36 offer are relevant to the issue of proportionality in a decision of this sort at the interlocutory stages of a case. She went on to explain that: ‘Other than in the limited cases provided for in rule 36.16(3), the fact or terms of a Part 36 offer will never be before that judge. So, an interlocutory judge will rarely need to proceed on any other basis.’

Although the decision in FKJ was confined to its particular facts and did not determine the issue of disclosure, it remains significant. By upholding the decision at first instance, in particular in firmly rejecting the appellants’ proportionality argument, Collins Rice J reinforced the principle that Part 36 offers will rarely be of relevance to case management issues, costs budgeting and a pending strike-out application. The question of principle does, however, remain outstanding and it is for a court to resolve that question definitively in the future.

Masood Ahmed is an associate professor at the University of Leicester and research fellow on the Vici Affordable Access to Justice project, Erasmus University, Netherlands