Part 36 – rule changes and an unhelpful decision.
The Rule Change.
It has always been a requirement of Part 36 CPR (in order to be sure of securing the favourable consequences in the event that the offer was not bettered at trial) that the offer to settle a money claim be supported by a payment into court of the sum offered in settlement. The person to whom the offer was addressed therefore had the comfort of knowing that, if he accepted it, the money was secure. The disadvantage, for both sides, was the need to use the ponderous procedures for paying money into and out of court.
As from 6 April 2007 the requirement to back up an offer by a payment into court has been removed. It is replaced by a rule that, if the offer is accepted and payment is not then made within 14 days, the receiving party will be entitled to enter judgment for the amount accepted. Although, therefore, the party making the offer does not have to tie up funds in court for a lengthy period, it must be sure that it will be able to produce the money quickly. (Note also that from 1 April 2007 the Court Funds Office and the Office of the Official Solicitor merged to become the Offices of Court Funds, Official Solicitor and Public Trustee. The office to go to in order to make a payment into court remains at 22 Kingsway for the time being – see http://www.courtfunds.gov.uk/contact/contact_cfo.htm )
The Case.
One of the difficulties of applying the Part 36 procedures to IP infringement cases lies in the split trial procedure that is invariably applied, as well as in determining whether an offer has been matched or beaten when it needs to deal with the issues of injunction, delivery up and damages/profits. The difficulty of formulating an effective offer before the liability trial has been illustrated in a non-IP case decided earlier this month. A company brought a claim against some of its directors for breach of fiduciary duty. One of the remedies available to a company in a claim of that nature is an account of the profits made by the directors from their unlawful activities. The company made a Part 36 offer to accept £1 in full and final settlement, but the offer was not accepted.
A split trial was ordered and the company established liability, but could not show any loss. It elected to take an account of profits but asked the trial judge to award it costs to date on an indemnity basis. The judge decided that the cost issue should be reserved until after quantum had been determined. The Court of Appeal refused to overrule the decision, which it said was a matter of discretion that should not be disturbed. The company was therefore forced to go through the trouble and expense of an account of profits, and to establish that the directors had made more than a nominal £1 from their wrongdoing, before it could trigger the favourable cost consequences of its earlier offer.
It should be stressed that the exercise of a discretion in the circumstances of one case does not set a precedent of general application. But the decision does highlight the challenge of using the Part 36 procedure in infringement cases, or at least of securing the available benefits before the end of the quantum trial. (The case, incidentally, was Shepherds Investments Ltd v Andrew Walters & Ors. It was decided on 3 April. I have not been able to find it on www.bailii.org, so there is currently only a summary report that appeared in the Law Society Gazette recently.)
Chris Ryan
April 2007