Part 36: difficulties in split trials

A recent High Court decision has highlighted difficulties arising from the application of Part 36 in the context of split trials, or trials of preliminary issues: Ted Baker Plc v Axa Insurance UK Plc [2012] EWHC 1779 (Comm). Under CPR 36.13 the fact that a Part 36 offer has been made must not be communicated to the trial judge "until the case has been decided". There is no carve-out for split trials, as there was under the previous version of the rule.

The judge in this case (Eder J) was not convinced by the argument that "until the case has been decided" could be construed to refer to a decision on the preliminary issues, saying that this would "stretch the present wording beyond its proper limit". If that approach is adopted in other cases, the court may have to decide whether to make a costs order in respect of preliminary issues in ignorance of whether or not a Part 36 offer has been made (unless the parties agree to disapply the prohibition, but this will often be against the interests of one or other party).

Here, the judge proceeded on the basis that he could not exclude the possibility that a Part 36 offer had been made which might affect the court's discretion in relation to the costs of the preliminary issues. This was a consideration he could take into account in deciding what order (if any) to make about costs under CPR 44.3. Accordingly, he concluded that he should not make any immediate order for costs in respect of the preliminary issues, but instead reserved those costs for final determination at the end of the case.

The judge commented that there is an "urgent need for CPR 36.13 to be reviewed and possibly reformulated in order to deal in particular with the question of 'split trials' and the kind of difficulties which have arisen in the present case". This reflects similar comments made by Henderson J in AB v CD [2011] EWHC 602 (Ch). We understand that the Civil Procedure Rule Committee is currently considering various issues relating to Part 36, including its operation in split trials.