Judge considers whether Part 36 offer was a genuine attempt to settle

One of the factors the court can take into account when deciding whether it would be unjust to order the usual, enhanced costs consequences following a successful Part 36 offer is: "whether the offer was a genuine attempt to settle the proceedings". In this case, the claimant offered to accept 90% of his claim and went on to beat that offer at trial. The defendant argued that the usual Part 36 costs consequences should not be applied because the offer "did not reflect any realistic assessment of the risks of the litigation" (i.e. it was a significant under-evaluation of the litigation risk) and the offer letter did not explain why only a 10% discount was being offered (something which the White Book suggests would be prudent in such a situation).

The judge held that an argument about how a party perceives the litigation risk will hardly ever succeed: "How one side perceives the risks in a piece of litigation ... will almost invariably be different from the way the other side perceives them". As such, the court should adopt a broad brush approach, rather than a mini-trial as to how the case should have looked to the offeror at the time of the offer.

The offer here had been a genuine attempt to settle: 10% is not a token discount and, as the claim ran into several million pounds, it also represented a significant amount of money. The judge was also critical of the parties' written submissions about what had taken place at negotiation meetings. The judge also awarded interest on indemnity costs of 5% above base rate.

The argument that a successful Part 36 offer was not a genuine attempt to settle is a very difficult one to run. In Jockey Club v Willmott Dixon [2016], an offer of 95% of the claim in an "all or nothing" case was held to be a genuine attempt to settle, even though the claimant was unlikely to have been awarded 95% at trial. In reaching that decision, the court took into account not only the percentage of the claim being discounted but also what that equated to in monetary terms. Only "extreme" offers are likely to fail.

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