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A Part 36 offer is a powerful tool designed to encourage parties to settle early, thus reducing costs and court time. Part 36 offers are usually employed strategically and regardless of whether you are offeror or offeree, advice from an expert civil litigation lawyer is essential. This is because if a Part 36 offer is rejected and not beaten at trial, a party can be liable for some or all of the other side’s costs, even if they win the case. And in complex commercial cases, costs can easily run to six figures.
The law surrounding Part 36 offers is complex. Below is a brief guide as to how and why they are used and the associated risks.
Part 36 offers refer to case settlement offers made pursuant to Part 36 of the Civil Procedure Rules (CPR). Lord Justice Moore-Bick described Part 36 offers in Gibbon v Manchester City Council [2010] EWCA Civ 726, [2011] 2 All ER 258 as:
“to encourage settlement and to enable those who make sensible offers to protect themselves against liability for the costs incurred in the continuation of proceedings to no ultimate advantage.”
Part 36 offers can be entered into at any time during the claim proceedings, including throughout the trial. They are usually related to monetary claims but can be used in other scenarios, such as dealing with declaratory actions.
Part 36 offers must state a ‘relevant period’ in which it can be accepted. The ‘relevant period cannot be less than 21 days. If the Part 36 offer is accepted within the ‘relevant period’, the Claimant can recover most costs (legal fees and expenses relating to the case, such as expert fees) up until the acceptance date. If the offer is accepted after the ‘relevant period’ has expired, the Court can decide on liability for costs if the parties cannot reach an agreement between themselves.
If the offeree has not accepted the Part 36 offer, then the offer can be amended or withdrawn but only by way of written notice. Change or withdrawal at this stage will result in the Part 36 cost consequences terminating.
If the ‘relevant period’ has expired the offer can be withdrawn or changed without the Court’s permission. However, until the ‘relevant period’ expires, a Part 36 offer cannot be amended or withdrawn in a way that makes it less advantageous to the offeree unless permission from the Court is granted.
One of the reasons Part 36 offers are so tactically important in a civil litigation claim is non-acceptance can result in serious consequences. This is because Part 36 offers are specifically designed to encourage early settlement. Generally, if you receive a Part 36 offer and do not accept, should the judge at trial award compensation less than the Part 36 offer, you will only receive the lower amount and may be ordered to pay a proportion of the other party’s legal costs.
It is important to note that Part 36 offers are made without prejudice, meaning if it is rejected and the trial proceeds, the judge will not know a Part 36 offer has been tabled until after he or she has made their decision and are considering who should pay the litigation costs.
By making a Part 36 offer you can focus your opponent’s mind on achieving a settlement. Experienced litigation lawyers understand the ramifications of when and how to offer or accept a Part 36 offer and how you can protect yourself from having to pay the other party’s costs should your case not succeed.
