18. Settlement

Question 1

Negotiation is a….[fill in the blank]…process.

Answer 1

Contractual

Question 2

What are the consequences of the fact that negotiation is a contractual process?

Answer 2

• Governed by normal principles of contract formation
• I.e. offers will need to meet contractual requirements; whether a contract has been formed will depend on all the contractual rules; lawyers act as agents; etc…
• Like with any other contract, there aren’t really any formal requirements. This means that any agreements reached becomes immediately binding (once they satisfy the contractual reqs: i.e. sufficiently clear + supported by consideration). To mitigate the risks of this the parties can agree at the start of a negotiation that any agreement reached will only be enforceable when it has been reduced to a final form in writing and signed.

Question 3

What is a joint settlement meeting?

Answer 3

• A meeting at which the parties try to reach settlement
• Involves a particular format that mixes aspects of negotiation and mediation
• Discussions are protected by the without prejudice principle
• The parties attend with their legal reps. They are in separate rooms and the legal reps meet in a third room and can go to get further instructions from their clients
• Can be cost effective as there is no need for a neutral third party to make a decision

Question 4

What does Pt 36 provide?

Answer 4

A self-contained procedural code for the making, withdrawal and acceptance of offers to settle.

BUT crucially, you CAN make offers to settle that do not comply with Pt 36. The point of Pt 36 is that is provides a way of making such offers that, if complied with, will have particular consequences (esp as to costs). It’s not trying to exclude other kinds of offers to settle.

Question 5

What is the consequence of making an offer to settle that does not comply with Pt 36?

Answer 5

It will not attract the Pt 36 consequences, but it still constitutes a valid offer to settle

Question 6

What is a Calderbank offer?

Answer 6

An alternative way of making offers to settle to Pt 36 (will therefore not attract Pt 36 consequences) - specifically, letter written ‘without prejudice save as to costs’ (no strictly prescribed form)

4 features that characterise a Calderbank offer:
(1) It’s an offer to settle
(2) It’s in writing
(3) It’s intended to have costs consequences
(4) It is NOT a Pt 36 offer

Question 7

When will a Calderbank offer be particularly useful?

Answer 7

In cases involving fraudulent claims. In such cases Pt 36 is of little assistance to defendants, as the defendant would have to pay the claimant’s costs. It would be better for D in such cases to make a Calderbank offer to settle the genuine part of the claim on terms that the claimant pay D’s costs incurred in respect of the fraudulent or dishonest aspects of the claim on the indemnity basis.

Question 8

Which claims does Pt 36 NOT apply to?

Answer 8

Small claims

Question 9

What should a court do if an offer states that it is intended to be a Pt 36 offer, but a point arises as to whether it really is such an offer in substance and the point turns on the construction of the offer?

Answer 9

It should aim to construe it in a way that is compliant with Pt 36 (within reasonable limits)

Question 10

Can the court ignore failures to comply with Pt 36 requirements and treat non-compliant offers as Pt 36 offers?

Answer 10

• This was routinely done in the past
• HOWEVER, the courts have now taken a stance against this
• Where the failure is truly de minimis it may still be possible, but generally this should not be done: the requirements must be complied with strictly
• Non-compliant offers can still (under normal Pt 44 rules) be taken into account for costs purposes and are still valid offers (just not Pt 36 offers)

Question 11

Do Pt 36 offers have the costs consequences set out in Pt 36 in relation to appeals?

Answer 11

Only if the Pt 36 offer is made in appeal proceedings. Otherwise, it will have the costs consequences only in relation to the costs of the proceedings in respect of which it is made and not in relation to the costs of any appeal from a decision in those proceedings.

Question 12

What are the formal requirements of a Part 36?

Answer 12

(1) be in writing

(2) make clear that it is made pursuant to Part 36 (sufficient if it states this somewhere, e.g. in a heading)

(3) If the offer is made more than 21 days before the start of the trial, it must specify a period of at least 21 days in which the defendant will be liable for the claimant’s costs (‘the relevant period’). If the offer is made less than 21 days before the start of the trial the relevant period will be until the end of the trial (apparently no requirement to state this in the offer).

(4) state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue; and

(5) state whether it takes into account any counterclaim.

Question 13

If a defendant makes a Pt 36 offer on their counterclaim to the principal claim, who is liable for the costs?

Answer 13

The claimant - this is because in relation to the counterclaim, the ‘claimant’ is the ‘defendant’

Question 14

If an offer is not accepted within the relevant period can it still be accepted?

Answer 14

Yes - the fact that the period has expired does not mean that the offer is closed, unless the parties have provided for automatic withdrawal of the offer. Naturally, the offer can also no longer be accepted if the parties have ‘manually’ (so to speak) withdrawn the offer.

Question 15

If an offer contains a term as to costs, can it be a Pt 36 offer?

Answer 15

No - terms as to costs are inconsistent with Pt 36 (this also means that if a party offers to pay a global sum inclusive of costs, the offer is not a Pt 36 offer). Such offers are, however, valid (usually Calderbank) offers to settle.

Two important points to note:

(1) It’s unclear whether an offer can be made by the claimant to forego their entitlement to costs under Pt 36 (i.e. if D accepts, C will bear its own costs). There’s conflicting first-instance authority on this point.

(2) The offer can include a term as to interest which applies after the relevant period has expired. This is not a ‘term as to costs’ that will have the effect of preventing the offer from being a valid Pt 36 offer.

Question 16

Can a Pt 36 offer be exclusive of interest?

Answer 16

No - this would not be a Pt 36 offer. The sum offered must be inclusive of interest during the relevant period or 21 days after the offer was made if there is no relevant period (bc it’s a late offer)

Question 17

If the offer is an offer to pay/accept a sum of money up to what point must it be inclusive of interest to qualify as a Pt 36 offer?

Answer 17

1. In cases in which the parties have defined a ‘relevant period’ bc the offer was made more than 21 days before the start of the trial: the date on which the period expires
2. In cases in which the offer was made less than 21 days before the start of trial, such that it closes at the end of the trial: 21 days after the offer was made

After such time, it is treated as inclusive of interest up to the point of acceptance unless it contains a term stating that interest should accrue from expiry of the relevant period/21 days, as the case may be

Question 18

If a Pt 36 offer does not contain a provision for the accrual of interest after the date on which the relevant period expires, up to what point will it be treated as inclusive of interest?

Answer 18

Up to the date of acceptance.

E.g. If the relevant period expires on 2nd March and the offer is accepted on 30th March, then no additional interest accrues between 2nd and 30th March if the offer does not expressly provide this. But the offer can contain a term for the accrual of interest in this time (although remember that the offer cannot contain a term as to interest for the ‘relevant period’ - this would prevent it from being a Pt 36 offer).

Question 19

What are the consequences of making a Pt 36 offer less than 21 days before the start of the trial?

Answer 19

(1) No obligation to specify a min 21 day period - the ‘relevant period’ will automatically be up until the end of the trial

(2) No automatic costs order upon acceptance of a late offer; the court must decide the appropriate costs order if the parties cannot agree the liability for costs

(3) Late offers do not attract the usual Pt 36 consequences which arise where either party has gambled poorly

Question 20

What are the consequences of an offer being made less than 21 days before the date of trial?

Answer 20

(1) No obligation to specify a relevant period - the relevant period lasts automatically until the end of the trial

(2) No automatic costs order upon acceptance of a late offer; instead the court must decide the appropriate costs order if the parties cannot agree the liability for costs

(3) Late offers do not attract the usual Pt 36 consequences upon judgment unless the court abridges time

Question 21

Can part 36 offers be made to joint claimants?

Answer 21

Case law not entirely clear on this point.

In one case, a Pt 36 offer that was made to joint Cs to settle their claims jointly was held to be valid. But in that case, the Cs were a married couple bringing parallel claims. Unclear whether this would apply to different facts.

Question 22

What are the two rules that apply only to Pt 36 offers made by Ds?

Answer 22

(1) If the offer is for a sum of money, it must be for payment of a single sum (rather than instalments)

(2) Cannot offer to pay the sum in settlement more than 14 days after acceptance of the offer (if it does this it’s not a Pt 36 offer)

Question 23

When can a Part 36 offer be made?

Answer 23

At any time including before the commencement of proceedings

Question 24

When is a Part 36 offer ‘made’?

Answer 24

When the offer is served on the offeree.

Question 25

When can a Pt 36 offer be made?

Answer 25

At any time, including before the commencement of proceedings

Question 26

What are the tools available to the offeree if the offer is not entirely clear?

Answer 26

• They can request clarification within 7 days of the Part 36 offer being made
• If the offeror does not clarify the offer within 7 days of receiving the request, the offeree can apply to the court to make an order requiring the offeror to clarify the offer
• If the court makes such an order it must specify the date on which the Pt 36 is treated as having been made in the order

Question 27

Will making a Pt 36 offer be sufficient to satisfy the judge that reasonable attempts to use ADR have been made?

Answer 27

Making a Part 36 offer alone may not be considered a reasonable attempt to use ADR prior to the issue of proceedings as it does not provide for the exploration of issues or options. However the fact that a Part 36 offer has been made might be part of a later argument in relation to a possible costs sanction.

Question 28

Does a Pt 36 offer automatically end upon the expiry of the relevant period?

Answer 28

No - however, the parties can include a term in the offer that it is automatically withdrawn at a specified time after the expiry of the relevant period

Question 29

Does the offeror need the court’s permission to change/withdraw a Pt 36 offer after the expiry of the relevant period?

Answer 29

No - at this point the offeror can do this simply by serving written notice

Question 30

What is a change to a Pt 36 offer to make it more advantageous to the offeree conceptualised as and why is this significant?

Answer 30

It’s conceptualised as the making of a new offer, rather than as the withdrawal or change of the previous offer

This is significant because it means that even if you make such a change within the relevant period of the original offer, you can do it without the court’s permission (as you are not withdrawing/changing).

Question 31

If you make a change to an offer within the relevant period that is more advantageous to the offeree than the original offer, what is the ‘relevant period’ of the new offer?

Answer 31

Remember, such an offer is conceptualised as a new offer

The relevant period is 21 days, unless the written notice specifies a longer period (i.e. 21 days is the min)

Question 32

Can you withdraw/change the terms of a Pt 36 offer after the offeree has served notice of its acceptance?

Answer 32

The law allows this (provided certain conditions are satisfied) where the offeree accepted the offer during the relevant period. I assume that this is because, in that time, the offeror is not able to withdraw the offer. I.e. the offeror cannot withdraw the offer during the relevant period so the court allows them to make an application to withdraw it upon acceptance (as a sort of ‘safety valve’). This ‘safety valve’ does not exist where the offer is accepted after expiry of the relevant period, presumably because in those circumstances the offeror could have withdrawn the offer and if they failed to do so they must now live with the consequences. Where an offer has been accepted within the relevant period the the offeror can apply to the court to withdraw it, by the earlier of:

i. 7 days of the notice of acceptance
ii. the first day of trial

The court may give permission to withdraw if there has been a change of circumstances since the making of the original offer and it is in the interests of justice to allow the withdrawal.

Question 33

What rules apply if you seek to change or withdraw a Pt 36 offer within the relevant period?

Answer 33

Remember: if the change is to make it more advantageous for the offeree, no special rules apply -> this is just treated as a new offer

In all other cases:

(1) If the relevant period has expired and the offer has not been accepted, the written notice seeking to change/withdraw the offer takes effect on the expiry of the relevant period automatically

(2) If the offer was accepted within the relevant period (whether or not you tried to withdraw it), you can apply to the court for permission to withdraw. Time limit within which you need to apply: whichever is earlier of (i) within 7 days of the offeree’s notice of acceptance; or (ii) the first day of trial

The court can only give permission if:
(i) there has been a change of circumstances since making the original offer; and
(ii) it would be in the interests of justice to give permission

Question 34

What form must a change of terms/withdrawal of an offer take?

Answer 34

Service of written notice of the withdrawal or change of terms on the offeree

Question 35

When does the written notice of withdrawal or change of terms take effect?

Answer 35

In principle when it is served on the offeree.

However, this is subject to the special rules that apply where the change is sought to be made before the expiry of the relevant period.

Question 36

How is a Part 36 offer accepted and when can it be accepted?

Answer 36

By serving written notice of acceptance on the offeror

At any time (even if the offeree has subsequently made a different offer - basically more than one offer can be open simultaneously), unless
(1) It has already been withdrawn; or
(2) The court’s permission is required

Question 37

When is the court’s permission required to accept a Part 36 offer?

Answer 37

There are 4 circumstances in total but we only really need to worry about 2:

(1) in some cases where one but not all defendants have made the offer;
(2) where a trial is in progress

Question 38

If the court gives permission for a Part 36 offer to be accepted what else must it do at the same time?

Answer 38

The court must make an order as to costs, and may order that the costs consequences in rule 36.13 apply (this is just the bit of the CPR that contains all the costs rules for Pt 36 offers).

Question 39

Explain the costs consequences of a Pt 36 offer

Answer 39

We need to distinguish between two main consequences:

(A) The General Rule

The Rule: the claimant is entitled to the costs of the proceedings (i.e. D has to pay), including their recoverable pre-action costs up to the date on which notice of acceptance was served on the offeror.

This applies in the ‘basic’ or ‘ideal’ case where the offer relates to the entirety of claim, was served more than 21 days before the trial and was accepted within the relevant period.

The approach to ‘non-ideal’ cases

Here we need to distinguish between different ways in which the situation can deviate from the ideal:

(1) The offer is made less than 21 days before the start of the trial

In this case, the costs must be determined by the court, unless the parties have agreed costs

(2) The offer is accepted after the expiry of the relevant period

Again, the costs must be determined by the court, unless the parties have agreed costs. BUT this time the court is bound to make the following order, unless it considers it unjust to do so:

• C must be awarded costs up to the date on which the relevant period expired; and
• The offeree must pay the offeror’s costs for the period from the date of expiry of the relevant period to the date of acceptance

In determining whether it would be ‘unjust’, the court must take into account ‘all the circumstances’, including:

• the terms of any Pt 36 offer;
• the stage in the proceedings when any Pt 36 offer was made, including in particular how long before the trial started the offer was made;
• the information available to the parties at the time when the Pt 36 offer was made;
• the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and
• whether the offer was a genuine attempt to settle the proceedings

(3) Where the offer does not relate to the whole of the claim

The general rule is that again, the costs must be determined by the court, unless the parties have agreed costs. But this is subject to an exception. If (a) the claimant abandons the balance of the claim, (b) at the time of serving notice of acceptance (c) within the relevant period, then the claimant will be entitled to the costs of such part of the claim unless the court orders otherwise.

Basis of assessment of costs

Where the effect is that C is entitled to its costs, they are assessed on the standard basis (rather than the indemnity basis). In cases involving the late acceptance of offers, this is also generally true, but subject to the court’s power to depart from the costs consequences provided by CPR 36.13. However, the court will only depart from the standard basis for good reason (e.g. conduct is in issue).

Question 40

What will happen when a Pt 36 offer is accepted?

Answer 40

The claim will be stayed - if the offer relates to only part of the claim on that part of the claim will be stayed

Question 41

On what terms does a stay pursuant to the acceptance of a Pt 36 offer take effect and when does the stay take effect?

Answer 41

It takes effect on the terms of the offer and at the time of acceptance (so if the court’s permission is needed then it only takes effect once permission has been granted).

Question 42

If the pt 36 offer that is accepted is for or includes an offer to pay or accept a single sum of money, when must that sum be paid? What can the claimant do if the sum is not paid within the relevant timeframe?

Answer 42

Within 14 days of the date of acceptance.

If D does not pay in time, C may enter judgment for the unpaid sum

Question 43

What can a party do if they claim that the other party has not honoured the terms of a Pt 36 offer?

Answer 43

Apply to enforce the terms of the offer without the need for a new claim (despite the fact that the original claim has been stayed).

N.B. this option is only available where the offer is NOT one which is or includes an offer to pay or accept a single sum of money. In such a case the only option is to seek to enter judgment for that sum.

Question 44

What are the rules regarding acceptance of Pt 36 offers which are made by one or more (but not all) of several defendants to a claim?

Answer 44

Need to distinguish between:

(A) Where the Ds are sued jointly or in the alternative

C can accept the offer if:

• (a) C discontinues the claim against those Ds who have not made the offer; and
• (b) the Ds that have not made the offer give written consent to the acceptance of the offer

(B) Where it is alleged that they have a several liability

C can accept the offer and continue with the claims against the other Ds if entitled to do so

In all other cases C needs the court’s permission to accept.

Question 45

What are the rules pertaining to disclosure of Pt 36 offers?

Answer 45

(1) Pt 36 offers are treated as “without prejudice except as to costs”, which means that they cannot be relied on in court except in relation to determining costs.

(2) Additionally, the fact that a Pt 36 offer has been made and the terms of such offer must not be communicated to the trial judge until the case has been decided, unless:

• (i) the proceedings have been stayed following acceptance
• (ii) the offeror and offeree agree that it can be communicated
• (iii) although the case has not been decided in its entirety, a part or issue has been decided and the Pt 36 offer relates only to the parts or issues that have been decided

Where (iii) applies the judge can also be told if other Pt 36 offers have been made, but cannot be told what the terms of these offers are (unless one of the other exceptions applies).

Question 46

What happens where a Pt 36 offer was not accepted and it turns out that this was an unwise decision bc the judgment entered instead was less advantageous than the offer would have been?

Answer 46

None of the rules below apply if:

(1) The Pt 36 offer has been withdrawn

(2) The Pt 36 offer has been changed and the offeree has beaten the new terms (i.e. it was only more advantageous in its previous form)

(3) The Pt 36 offer was made less than 21 days before trial and the court did not abridge the relevant period

(1) If C gambled poorly

I.e. D made an offer, C did not accept, judgment was entered (either for C or D) and the judgment was less advantageous to C than the offer would have been

• As C did not accept the offer, C is obviously not entitled to its costs (pre-action or otherwise) from D (as C would have been, had C accepted the offer)
• Instead, C now has to pay D’s pre-action costs and the costs incurred from the date on which the relevant period expired - normally costs will be on the standard basis, but may be on the indemnity basis where C’s conduct was unreasonable
• C also has to pay interest on these costs (but interest cannot exceed the normal commercial rate)

(2) D gambled poorly

I.e. C made an offer, D did not accept it and judgment was now entered for C and this is less advantageous to D than C’s offer would have been

D now has to pay:

• interest up to 10% above base rate on the sum that was awarded (exluding interest that the court awarded) from the date on which the relevant period expired;
• costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;
• interest on those costs at a rate not exceeding 10% above base rate
• an additional amount up to £75,00, which is calculated as prescribed by the CPR

The court can refuse to make these orders (under either (1) or (2)), if it considers that it would be unjust to make them

N.B. if the court awards interest in these circumstances and also awards interest on the same sum and for the same period under any other power, the total rate of interest must not exceed 10% above base rate

Question 47

What factors must the court consider in determining whether it would be unjust to make the orders that apply if C/D has gambled poorly? What other guidance have we been given regarding how the court will determine the issue of ‘unfairness’?

Answer 47

Factors to take into account:

• the terms of any Pt 36 offer;
• the stage in the proceedings when any Pt 36 offer was made, including in particular how long before the trial started the offer was made;
• the information available to the parties at the time when the Pt 36 offer was made;
• the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and
• whether the offer was a genuine attempt to settle the proceedings

Other guidance:

• The question is NOT whether the offeree had reasonable grounds for not accepting the offer, but to consider whether the usual order would be unjust (the scheme does not involve an unfettered discretion as to costs) - i.e. there must be smth about the particular circumstances, the judge can’t just decide that they think the scheme is harsh
• The factors above reveal a common thread that they are about the circumstances of the making of the offer and the provision (or not) of relevant information, rather than upon the general conduct of the parties in the proceedings. But since the judge must take into account ‘all relevant circumstances’, the general conduct of the parties can play a role in appropriate cases
• Examples of cases where it was ‘unjust’:
• (i) The case was not primarily about money, but rather reputation and the offer had not included a public apology (but there have been cases where failure to offer an apology did not have this effect)
• (ii) Phone-hacking case: the defendant was unlikely to agree to make a statement in open court. Ordinarily, the desire to have a trial in order to have a finding from a judge in public would not be sufficient, but on those special facts it was.
• (iii) The conduct of the party at trial had been so unattractive that it was seen as unjust to impose the consequences in question
• (iv) The only reason why the judgment was more advantageous was because of dramatic currency fluctuations following Brexit (same thing where this was because of a change in a discount rate)
• (v) Exceptional circumstances created by the Covid-19 pandemic
• But NOT where the extent to which the judgment exceeded the offer was only very small (not unjust to impose consequences)
• Genuine attempt to settle:
• This was introduced to deal with the issue that Cs would make exceptionally high offers just to get the extra protection offered when D (expectedly) did not accept the offer. Therefore, usually cases that fall under this heading will be ones where the offer close to or at 100% of the full value of the claim.
• That being said, where claims are particularly strong, even offers in the range of 99.7% of the full value have been found to be strong (e.g. where C’s chances of success were near 100% bc there was no plausible defence)
• In answering these qs, the judge should take a broad brush approach, rather than looking at all of the ‘without prejudice’ material