Simone Lawson
Part 36 offers are a commonly used tactic during the dispute resolution process, and when used strategically, they can bring a swift conclusion to a case, thus avoiding court altogether. Part 36 offers are made on a without prejudice save as to costs basis, meaning the trial judge is not made aware of the offer until the case has concluded. They are designed to encourage both sides to settle a case before it reaches trial or risk the financial consequences of spiralling legal costs. To be valid, a Part 36 offer must be in writing, specify a period of at least 21 days, and state whether it relates to the whole or part of the claim.
| Characteristics | Values |
|---|---|
| Offer made by | Claimant or defendant |
| Offer made in | Writing |
| Statement | Must state that it is made in accordance with Part 36 of the CPR |
| Offer open for | At least 21 days, known as the 'relevant period' |
| Offer relates to | Whole or part of the claim, or an issue; and whether it takes into account any counterclaim |
| Offer made by defendant | To pay a single sum of money in settlement, and not by instalments |
| Offer accepted | In writing |
| Payment by paying party | Within 14 days of acceptance |
| Offer accepted after the relevant period | Claimant is awarded its costs up until the end of the relevant period and the offeror is entitled to its costs thereafter |
| Claimant succeeds at trial but fails to obtain a judgment more advantageous than the defendant's Part 36 offer | Claimant will be awarded its costs until the end of the Relevant Period; but thereafter, the claimant will pay the defendant's costs plus interest on those costs |
| Defendant's offer not accepted and claimant obtains a more advantageous judgment | Court will apply the usual principles when ordering the defendant to pay the claimant's costs |
| Defendant's offer not accepted and claimant fails to obtain a more advantageous judgment | Claimant will be liable to pay the defendant's costs from the date of expiry of the relevant period plus interest on costs |
| Claimant's offer not accepted but obtains a judgment equal or better than the terms of its offer | Defendant will be ordered to pay interest on the judgment at no more than 10% above the base rate from the expiry of the relevant period onwards; the claimant's legal costs from the expiry of the relevant period, assessed on the 'indemnity basis'; interest on those legal costs at no more than 10% above the base rate; and an additional amount of up to a maximum of £75,000 |
| Court's discretion | Court can exercise its discretion in certain circumstances where it would be 'unjust' to apply the rules under Part 36 |
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What You'll Learn
The offer must be in writing
A Part 36 offer is a specific type of settlement offer that must be made in a prescribed way. It must be made in writing and state that it is being made in accordance with Part 36 of the Civil Procedure Rules (CPR). The writing must specify a period of at least 21 days, known as the "relevant period", within which the defendant will be liable for the claimant's costs if the offer is accepted. This period can be longer than 21 days if both parties agree.
The written offer must also state what the offer relates to, whether it be the whole claim, part of the claim, or an issue that arises in the claim, counterclaim, or appeal. If the offer is made by a defendant, it must be to pay a single sum of money in settlement and not by instalments. The offer must remain open for the duration of the relevant period and can be accepted at any time while it remains valid and has not been withdrawn.
If the offer is accepted, the claim is 'stayed' pending the payment of the sum of money in settlement of the claim. The paying party, usually the defendant, must pay the receiving party within 14 days of acceptance. Following acceptance, the only outstanding issue between the parties will be the treatment of legal costs incurred up to the date of acceptance. If the acceptance is made within the relevant period, the claimant can recover its costs up to the date of acceptance. If the offer is accepted outside of the relevant period, the matter may need to be referred to the court to make an order on costs, or the parties may need to agree on who pays.
It is important to note that a Part 36 offer is made on a "without prejudice save as to costs" basis. This means that the court will not be made aware of the offer until after a judgement has been reached. This allows the parties to make offers and negotiate without prejudicing their case if the matter proceeds to trial.
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It must be made at least 21 days before a trial
A Part 36 offer is a specific type of settlement offer that must be made in a prescribed way and can be made by either the claimant or defendant in any type of claim. It is a provision that encourages parties to try to settle their disputes by setting out the costs of the consequences of offers to settle.
One of the key requirements for a Part 36 offer to be valid is that it must be made at least 21 days before a trial. This period is known as the "relevant period". The purpose of this requirement is to give the recipient enough time to consider the offer and make an informed decision without feeling pressured. It also allows for the potential withdrawal or revision of the offer within the relevant period. If an offer is accepted within the relevant period, the defendant will be liable for the claimant's costs. However, if the offer is accepted after the relevant period, other rules may apply, and the court may need to make an order on costs or the parties may need to agree on cost allocation.
The relevant period is crucial for understanding the costs consequences of a Part 36 offer. If a claimant accepts a defendant's Part 36 offer within the relevant period, they can recover their costs up to the date of acceptance. If the offer is accepted after the relevant period, the claimant is entitled to their costs up to the end of the relevant period, but the defendant is then entitled to their costs from that date onwards. This is because the defendant is only liable for the costs incurred up to the end of the relevant period.
Additionally, the relevant period also impacts the costs consequences if the offer is not accepted and the case proceeds to trial. If a claimant obtains a judgment that is more advantageous than the defendant's Part 36 offer, the defendant will be ordered to pay the claimant's costs, including interest. However, if the claimant fails to obtain a more advantageous judgment, they may be liable to pay the defendant's costs from the date of expiry of the relevant period, even if they win at trial.
In summary, the requirement for a Part 36 offer to be made at least 21 days before a trial is essential to ensure that all parties have sufficient time to consider the offer and understand the associated costs consequences. It provides flexibility for withdrawal or revision of the offer and helps determine the allocation of costs, especially if the offer is accepted after the relevant period or if the case proceeds to trial.
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It must be a single sum of money
A Part 36 offer is a settlement offer made without prejudice save as to costs. It can be used to settle all or any part of a claim, monetary or otherwise. It can also be used to settle counterclaims and additional claims. A Part 36 offer can be made by a claimant or defendant in any type of claim.
If the offer is made by a defendant, it must be to pay a single sum of money in settlement, and not by instalments. This is a key requirement for a valid Part 36 offer. The offer must be a single, lump-sum payment from the defendant to the claimant. It cannot be offered as a payment plan or in instalments. The purpose of this requirement is to provide a straightforward and clear settlement offer, without the potential for ongoing disputes or complications that could arise from instalment-based payments.
The single sum of money offered must be clearly stated in writing and the offer must specify a period of not less than 21 days, known as the "relevant period", during which the defendant will be liable for the claimant's costs if the offer is accepted. This period allows the claimant time to consider the offer and seek legal advice if needed, ensuring they have a full understanding of the implications of accepting or rejecting the offer.
If the offer is accepted within the relevant period, the claimant will recover its costs up to the date of acceptance. However, if the offer is accepted after the relevant period has expired, the claimant is entitled to their costs up to the end of that period, but the defendant will be entitled to claim their costs from that date onwards. This incentivises both parties to act within the specified timeframe and encourages timely resolution of the dispute.
It is important to note that a Part 36 offer is not the only way to settle a claim. Parties are free to make offers to settle in whatever way they choose. However, only a Part 36 offer will have the specific costs consequences outlined in the Civil Procedure Rules. These consequences can be significant, and parties should carefully consider the potential implications before accepting or rejecting a Part 36 offer.
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It must be made by a claimant or defendant
A Part 36 offer can be made by a claimant or defendant in any type of claim. It is a settlement offer made without prejudice save as to costs. It can be used to settle all or any part of a claim, monetary or otherwise. It can also be used to settle counterclaims and additional claims, and Part 36 offers can be made solely in relation to liability, leaving quantum to be argued over.
The rules on making a Part 36 offer are the same for both claimant and defendant offers, whether made pre-action or after proceedings have commenced. The offer must be made in writing and state that it is made in accordance with Part 36 of the CPR. The offer must remain open for a period of at least 21 days, known as the ‘relevant period’, and state whether it relates to the whole or part of the claim, and if it includes any counterclaim.
If the claimant makes a Part 36 offer that is not accepted and then obtains a judgment that is equal to or better than the terms of their offer, the defendant will be ordered to pay interest on the judgment at no more than 10% above the base rate from the expiry of the relevant period onwards, the claimant's legal costs from the expiry of the relevant period, interest on those legal costs at no more than 10% above the base rate, and an additional amount of up to a maximum of £75,000.
If the defendant makes a Part 36 offer that is not accepted and the claimant obtains a more advantageous judgment following the trial (meaning they are awarded a higher amount than was offered), the court will apply the usual principles when ordering the defendant to pay the claimant's costs. If the defendant makes a Part 36 offer that is not accepted and the claimant fails to obtain a more advantageous judgment, then generally the claimant will be liable to pay the defendant's costs from the date of expiry of the relevant period plus interest on costs.
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It can be changed or withdrawn if not accepted
A Part 36 offer is a settlement offer made without prejudice save as to costs. It can be made by a claimant or defendant in any type of claim. It must be made in writing and state that it is made in accordance with Part 36 of the CPR. The offer must remain open for a period of at least 21 days, known as the 'relevant period', and specify what the offer relates to - whether the whole or part of the claim, or an issue. It must also state whether it takes into account any counterclaim.
If a Part 36 offer is not accepted, it can be changed or withdrawn if the relevant period has expired. Written notice must be given to the receiving party. If the offer is accepted, the claim is 'stayed' pending the payment of the sum of money in settlement of the claim. The paying party must pay the receiving party within 14 days of acceptance.
If the defendant makes a Part 36 offer that is not accepted, and the claimant obtains a more advantageous judgment following trial, the court will apply the usual principles when ordering the defendant to pay the claimant's costs. If the claimant fails to obtain a more advantageous judgment, the claimant will generally be liable to pay the defendant's costs from the date of expiry of the relevant period, plus interest on costs.
If the claimant makes a Part 36 offer that is not accepted, and then obtains a judgment that is equal to or better than the terms of its offer, the defendant will be ordered to pay interest on the judgment at no more than 10% above the base rate from the expiry of the relevant period, the claimant's legal costs from the expiry of the relevant period, interest on those legal costs, and an additional amount of up to a maximum of £75,000.
The consequences of refusing a Part 36 offer before trial can be extreme, so parties are encouraged to settle early where possible unless they are sure that the offer can be beaten at trial.
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Frequently asked questions
A Part 36 offer is a settlement offer made without prejudice save as to costs. It can be used to settle all or any part of a claim, monetary or otherwise. It can also be used to settle counterclaims and additional claims.
A Part 36 offer must be made in writing and must state a period of 21 days or more within which the defendant will be liable for the claimant's costs. It should also specify what the offer relates to and whether it takes into account any counterclaim.
Yes, a Part 36 offer can be withdrawn or changed if it has not been accepted and the relevant period has expired. However, written notice must be given to the receiving party.
