Andrew Ryan – Head of Dispute Resolution – Answers Questions on Part 36

What is a Part 36 offer?
It is an offer to settle a dispute made in compliance with Part 36 of the Civil Procedure Rules (which govern the conduct of litigation in England and Wales). Part 36 encourages the making of offers to try and settle disputes by providing that if you make an offer in the prescribed form and ‘beat’ the offer at trial then you may make an enhanced recovery in terms of costs, interest and (sometimes) damages: as to which see below.

Can we make a Part 36 offer before legal proceedings are issued?
Yes. A Part 36 offer can be made at any stage in a dispute, before and after proceedings have been commenced.

What is the ‘relevant period’?
A Part 36 offer must specify a period of not less than 21 days within which the Defendant will be liable for your costs if the offer is accepted. This is called the ‘relevant period’.

What happens if the Part 36 offer is accepted within the relevant period?
The Defendant will have to pay the settlement sum and your legal costs, to be assessed by the court, if not agreed. The matter will then be settled.

What if the Part 36 offer is accepted and the Defendant does not pay within 14 days?
Assuming you do not agree the Defendant had a longer period within which to pay, you can enter judgement for the unpaid amount.

What are the costs consequences if the Defendant accepts our Part 36 offer after the relevant period has expired?
The Defendant will have to pay the settlement sum and, unless the parties can agree the liability for costs, the court will have to make an order as to who is liable for the costs of the claim. Normally, the Defendant has to pay the legal costs, to be assessed by the court, if not agreed, to the date of acceptance.

Can we make a Part 36 offer which is inclusive of costs?
No. If you make an offer inclusive of costs this will not be a Part 36 offer and it will be in the court’s discretion as to whether any costs or other advantages will be given to you if the offer is unreasonably rejected.

Is it possible to withdraw or reduce a Part 36 offer during the relevant period?
Yes – but only with the permission of the court.  Once the relevant period has expired, you can withdraw or reduce the offer without permission of the court.

What is the position if the Defendant rejects our Part 36 offer?
Assuming you do not withdraw your Part 36 offer, the offer will usually remain open and the Defendant will be able to accept it at any time. There are certain limited circumstances (such as after a trial has started) where the court’s permission will be required before the offer can be accepted.

If we make a second Part 36 offer does this preclude acceptance of the first offer?
No. Multiple Part 36 offers can co-exist. Take an example: if you make a Part 36 offer to settle for £1 million and then make a Part 36 offer to settle for £5million it is open to the Defendant to accept the £1 million offer if it had not been withdrawn.

Can we make a Part 36 offer to settle our claim and the Defendant’s counterclaim?
Yes. If you do so and your offer is accepted then you can claim your costs of the claim and the counterclaim.

If we make a Part 36 offer will the trial judge think we do not have confidence in our case?
No – making a Part 36 offer is not a sign of weakness. The trial judge will not be told about the offer until all questions of liability and quantum have been decided. It should be seen as a means of putting pressure on the Defendant to settle.

What are the consequences for the Defendant if it fails to ‘beat’ the Part 36 offer at trial?
Unless the court considers it unjust, it will order the Defendant to pay (1) interest on the whole or part of any award at a rate of up to 10% above base rate (2) your legal costs after the expiry of the relevant period on the ‘indemnity basis’(which usually allows for an enhanced level of recover) (3) interest on those costs at a rate of up to 10% above base rate and (4) (if the Part 36 offer was made on or after 1 April 2013) an additional amount of 10% of the damages awarded for awards of up to £500,000; for awards above £500,000 and up to £1,000,000, 10% of the first £500,000 of damages awarded and 5% of any damages awarded above that figure up to an overall limit of £75,000.

What happens if we do not ‘beat’ the Part 36 offer at trial?
Costs will be decided in the usual way. This normally means that the unsuccessful party will be ordered to pay the successful party’s costs, with the costs to be assessed by the court if not agreed; although the court may make a different order having regard to all the circumstances.

Can Part 36 offers only be made by a Claimant?
No – Part 36 offers can also be made by a Defendant. Indeed, it is common in practice to have ‘competing’ Part 36 offers from Claimants and Defendants.

Are there rules concerning the content of Part 36 offers?
Yes.  Part 36 offers must be in writing and comply with the strict requirements of the court. Please speak with one of our Dispute Resolution team if you would like advice on making a Part 36 offer.

To contact Andrew, or to learn more about his work, please click here.

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