Part 36 Offer

Many claims are settled before going to court under a ‘Part 36 offer’. This form of offer can be used to settle all or part of a dispute between parties in civil litigation, which is governed by Part 36 of the Civil Procedure Rules (CPR).

Part 36 Offers has to be made in a prescribed way and needs to satisfy certain requirements:

• the offer must be in writing (36.5(1)(a))
• it must make clear that it is made pursuant to Part 36 (36.5(1)(b))
• it must specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs (the “Relevant Period”) (36.5(1)(c))
• it must state whether it applies to the whole or part of the claim (36.5(1)(d))
• it must state whether it takes into account any counterclaim (36.5(1)(e))

If a Part 36 offer is accepted within the relevant period:

• The claimant is entitled to their costs of the proceedings up to the date of acceptance on the standard basis;
• The claim is stayed upon the terms of the offer.

If a Part 36 offer is accepted after expiry of the relevant period:

• The parties must agree the liability for costs or, failing agreement, the court decides liability for costs;
• The claim is stayed upon the terms of the offer.

Part 36 offers to settle should be considered in all cases, they can avoid wasted time and potential irrecoverable costs associated with court proceedings.

If any offer has been made but is not accepted before the trial commences there can be consequences. The consequences will depend on the outcome of the trial.

• If the Claimant obtains a judgment that is more advantageous than the Defendant’s Part 36 offer, the usual cost order principles will apply.
• If the Claimant fails to obtain judgment that is more advantageous than the Defendant’s Part 36 offer, the Claimant will be liable to pay the Defendant’s costs from date of expiry of the Relevant Period plus interest on those costs. This is a consequence of not accepting the Defendant’s offer which would have stopped the claim for incurring additional and unnecessary costs.
• If the Claimant obtains judgment that is not as advantageous as the Claimant’s Part 36 offer, but equal to the defendant’s Part 36 offer, the court will apply the usual principles in making the costs order.
• If the Claimant obtains judgment that is at least as advantageous as the Claimant’s Part 36 offer, and the offer is made 21 days before trial, the court can then impose penalties on the Defendant. Things can include making interest payable any money awarded, at not more than 10% above base rate for some or all of the period starting with expiry of the Relevant Period.

The consequences are to encourage parties to try to reach an early settlement and to prevent parties refusing offers that should have been accepted, which would have disposed of the claim earlier and prevented further additional costs being incurred.

There are a number of ways to make settlement offers in Commercial Litigation cases. If you would like to find out more about how we can support you, please contact our specialist Commercial Litigation team.

Thank you to Ellisons Solicitors for allowing us to publish this blog.

Need help with a Part 36 offer?

Contact our specialist Commercial Litigation team.