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Understanding Part 36 Offers

Small model house and coins

One of the most powerful weapons in a civil litigation solicitor’s toolbox is a Part 36 offer.  And like all ammunition, a Part 36 offer, whether being made or accepted, must be handled with the utmost care.

It is vital for claimants and defendants to understand the mechanics of Part 36 offers.  Used correctly, they can save an enormous amount in legal fees, not to mention the time and stress involved in going to court.  However, accepting one without experienced legal advice could see you settling for a lesser sum than you could have been awarded had you proceeded to the courtroom.

The basics of a Part 36 offer

Part 36 is a provision in the Civil Procedure Rules (CPR).  It is designed to encourage parties to a dispute to settle prior to going to trial (however, they can be entered into at any stage of proceedings).  Lord Justice Moore-Bick stated in Gibbon v Manchester City Council [2010] EWCA Civ 726, [2011] 2 All ER 258:

“Its purpose is to encourage settlement and to enable those who make sensible offers to protect themselves against liability for the costs incurred in the continuation of proceedings to no ultimate advantage.”

Generally, Part 36 offers are made in relation to monetary claims; however, they are not limited to this and can be used in other situations, such as dealing with declaratory actions.

The key feature of a Part 36 offer, designed to encourage settlement is the cost consequence which can follow if the offer is not beaten at trial.  The cost consequences differ depending on the circumstances, and we will discuss them in detail below.

Claimants and defendants may have different motivations for making a Part 36 offer.

A claimant may make a Part 36 offer because:

The defendant to a claim may make a Part 36 offer because:

The legal requirements of a Part 36 offer

A Part 36 offer must be made in writing and state clearly that it is intended to have the consequences of a Part 36 offer.  In addition, it must state whether it is intended to settle all or part of the claim.  If only part of the claim is covered by the offer, the relevant section of the claim must be stipulated.

Part 36 offers are not available for claims allocated to the small claims track (less than £10,000 in value).

Withdrawing or changing the Part 36 offer is prohibited until the Relevant Period has expired, unless the court grants permission.

Prior to the trial, acceptance of a Part 36 offer can be made without the court’s permission.  Acceptance must be in writing to be valid.  After the trial begins, the court’s permission to accept must be sought.  Also, if the offer is made by one defendant to a claim of joint liability and the claimant wishes to pursue their claim against the other defendants, the court’s consent to accept the offer will be needed.

The cost consequences of not accepting a defendant’s Part 36 offer

If the claimant achieves a more advantageous award than what was offered in the defendant’s Part 36 offer, the court will apply its usual principles when determining costs.

Should the claimant fail to beat the defendant’s Part 36 offer, and the offer was made more than 21 days before the trial began, they will be ordered to pay all the defendant’s costs which occur after the expiry of the Relevant Period, plus interest, unless the court deems it unjust to make such an award.

The cost consequences of not accepting a claimant’s Part 36 offer

If the claimant achieves a more advantageous award than what was offered in the defendant’s Part 36 offer, the court will apply its usual principles when determining costs.

If the claimant secures a judgment which is ‘at least as advantageous’ as the claimant’s own Part 36 offer or beats it, the court will (unless it considers it unjust) order the defendant to pay, from the end of the Relevant Period:

The Prescribed Percentage is calculated as follows:

In summary

The cost consequences of failing to beat a Part 36 offer at trial can be significant.  Therefore, parties to a dispute must carefully evaluate the risk of not accepting a Part 36 offer if it is made, and be very tactical about making such offers.  For example, defendants need to ensure they do not pitch a Part 36 offer so low, that any adverse cost consequences would be worth the risk of going to trial.

Hart Reade Solicitors are a full-service law firm with offices in Eastbourne, Hailsham, Polegate and Meads.  We hold a Lexcel accreditation from the Law Society of England and Wales and have vast experience in civil litigation.  To make an appointment, please phone our office on 01323 727 321.

Please note, this article does not constitute legal advice.