A simple summary guide to Part 36 settlement offers

The Khan Partnership LLP's Commercial Litigation team examines the fundamental elements of Part 36 settlement offers.

A simple summary guide to Part 36 settlement offers

The Khan Partnership LLP's Commercial Litigation team examines the fundamental elements of Part 36 settlement offers.

A Part 36 offer is an offer made pursuant to Part 36 of the Civil Procedure Rules (“Part 36 offer”).  On 6 April 2015, the Civil Procedure (Amendment No 8) Rules 2014 (SI 2014/3299) brought into force a completely re-written Part 36.

Part 36 offers can be made by any party, at any time in proceedings or even prior to proceedings being issued. The unique element of Part 36 offers s that their use is encouraged throughout costs consequences.

A Part 36 offer can be made at any time and relate to the whole or part of a claim. However , the cost consequences of a Part 36 offer do not have effect in Small Claims Track cases.

Elements of a Part 36 offer

To trigger the costs consequences under Part 36, an offer must be made in accordance with CPR rule 36.5. In its most basic form, this requires that a Part 36 offer must:

  1. Be in writing;
  2. Make it clear that the offer is made pursuant to Part 36 of the Civil Procedure Rules;
  3. Specify the relevant period, which is not less than 21 days within which the Defendant will be liable for the Claimant's costs if the offer is accepted (“the Relevant Period”);
  4. State the scope and extent of the offer; for example, whether it relates to the whole of the claim or part of it; and
  5. State whether the offer takes into account any counterclaim.

Costs consequences

Part 36 offers can be used as a tactical step for parties to Litigation by virtue of the costs consequences that can arise from accepting or rejecting such an offer..Those consequences include the following:

  1. If a valid Part 36 offer is made in respect of the whole of the claim, made at least 21 days before trial and is accepted within the Relevant Period, the Claimant is entitled to the costs of the proceedings, assessed on a standard basis, up to the date of service of the acceptance of the offer;
  2. If a valid Part 36 offer is accepted after the expiry of the Relevant Period and the parties cannot agree on costs liability, then the Court must order that the Claimant be awarded costs up to the date when the Relevant Period expired;
  3. If a Claimant does not accept a valid Part 36 offer and obtains a more advantageous Judgment, then costs will be awarded in the normal course;
  4. If a Claimant does not accept a valid Part 36 offer and fails to obtain a more advantageous Judgment, then the Court must order the Claimant to pay the costs of the Defendant from the expiry of the Relevant Period plus interest on costs;
  5. If a Defendant rejects a valid Part 36 offer and the Claimant fails to receive a Judgment that is more advantageous or equal, then the Claimant must pay the Defendant’s costs from the expiry of the Relevant Period plus interest;
  6. If a Defendant rejects a valid Part 36 offer and the Claimant receives a Judgment that is more advantageous or equal, the Defendant must pay the Claimant’s costs on an indemnity basis from the expiry of the Relevant Period plus interest; or
  7. If a Defendant rejects a valid Part 36 offer and the Claimant receives a judgment less advantageous than its offer, then costs will be awarded in the normal course.

It is worth noting that a Part 36 offer can only be withdrawn or its terms changed if the offeree has not previously served a notice of acceptance. Further, A Part 36 offer may be automatically withdrawn after expiry of the Relevant Period if the terms of the offer provide for this.

Parties in litigation should be mindful of the benefits and costs consequences when making, accepting or rejecting a Part 36 offer. However, if well judged, a Part 36 offer can be a useful litigation tool to help protect a party’s position and bring early settlement of otherwise long running Litigation into focus.

Should you require any information or advice, please contact The Khan Partnership LLP Commercial Litigation team on 0207 612 2530 or info@thekhanpartnership.com.