Have you ever been involved in a Court battle and wondered how do you put pressure on the other party to settle?
Are you confident enough in your arguments but you are in a position where you want to try and resolve the matter?
If the above does apply to you, you will want to consider making a 'Part 36 offer' to the other side.
What is a Part 36 offer and why would you make this offer?
A Part 36 offer derives its name from Rule 36 of the Civil Procedure Rules ('CPR'), which apply to Court proceedings. The initial advantage of making a Part 36 offer during Court proceedings is that it is an offer which is recognised and regulated by the Court. As a result, how to provide this type of offer and the consequences of it are more certain.
CPR 36.5 provides the minimum criteria for how a Part 36 offer must be set out. Under this sub-section, the offer must:
- Be in writing;
- State it is made in accordance with CPR 36;
- Refer to a period of not less than 21 days (the 'Relevant Period'). If the offer is accepted within this period, the accepting party will be liable for the offering party's costs up until the date it is accepted;
- Make it clear whether it is an offer to settle all that is being claimed or only part of the claim (and, if it is a partial settlement, which part); and
- If applicable, state whether it is an attempt to settle any counterclaim(s).
As this form of offer is recognised and regulated by the Court, there are codified consequences if an offer is not accepted and the offering party is 'successful' at Trial.
Cost consequences if the offer is accepted within the Relevant Period
If an offer is accepted within the Relevant Period, then the party expected to pay under the offer must pay the amount offered within 14 days of accepting the offer.
The claimant is also entitled to payment of the costs of its proceedings up until the offer is accepted; this includes costs incurred before the Court proceedings were issued and incurred in line with the Pre-Action Protocol.
CPR 36 does not provide for the Defendant to have its costs paid if an offer is accepted during the relevant period.
Cost consequences if a Defendant makes an offer to a Claimant
If the Defendant makes a Part 36 offer, which is rejected, and either the claim is dismissed by the Court or the Court finds that a sum is owed to the Claimant which is the same or lower than the Part 36 offer, then the Court will make the following costs order:
- The Defendant is entitled to the costs it incurred from the end of the Relevant Period; and
- Interest on those costs. The maximum interest awarded is 10% above the base rate.
Cost consequences if a Claimant makes an offer to a Defendant
If the Claimant makes a Part 36 offer, which is rejected, and either they are awarded an amount which is the same or higher than the Part 36 offer, then the Court will make the following costs order:
- The Claimant is entitled to its costs from the end of the Relevant Period;
- Interest on the whole or any part of the amount awarded at a rate no more than 10% above the base rate. Interest will run from the end of the Relevant Period until the Judgment date;
- Interest on the cost of proceedings at a rate no more than 10% above the base rate; and
- An additional amount. This will be 10% of any award up to £500,000 and 5% of any amount which is over £500,000. The additional amount is capped at £75,000.
However, the costs order is subject to the Court deciding whether making such an order would be unjust. CPR 36.17(5) provides that the Court will consider the terms of the Part 36 offer, when the offer was made, the information that was available to the parties at the time of the offer, whether the offer was a genuine attempt to settle the case, and the conduct of the parties when exchanging information to consider the offer.
Therefore, hypothetically, if:
- A party (A) brought a claim without prior warning against another party (B);
- A did not provide a lot of information relating to the claim;
- A subsequently made a Part 36 offer; and
- A was un-cooperative when party B asked for information relating the offer.
Then the Court may decide that the rejection of the offer at that time, even if the Court awarded a higher amount at Trial, was reasonable, and it would be unfair to make the usual Part 36 costs order.
However, the Court is unlikely to find that making a costs order under CPR 36 is unjust. This is because the Court must ensure there are consequences for those who did not accept an offer which was more financially attractive than the Court's award, which would have saved the time and expense of the parties and the Court (see the comments of Briggs J at paragraph 13 in the case of 'Mr Adrian Smith v Trafford Housing Trust  EWHC 3320 (Ch)').
Part 36 offers are a highly complex but useful tool in trying to resolve a matter. If you are currently involved or likely to be involved in litigation proceedings and want to find out more about Part 36 offers, then please contact Barton Legal by clicking here.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.