Civil - Part 36

Question 1

What are the formalities for making a Part 36 offer (i.e. what must be done when one is made)?

Answer 1

Part 36 offer must be made in writing, but doesn’t have to be made in any particular form (though usually is).

Must make clear that it is being made pursuant to Part 36, but doesn’t have to say that it is made without prejudice.

Must state whether it relates to the whole claim or part of it and whether it takes into account any counterclaim, so the other party knows to what it relates

The offer must specify a period of not less than 21 days (can be more but not less) within which the defendant will be liable for the claimant’s costs if the offer is accepted. This is known as the ‘relevant period’ (so long as the trial is 21 days away).

Question 2

When is a Part 36 offer made?

Answer 2

When served on the offeree.

Question 3

When can the offer be withdrawn once made?

Answer 3

Once made, a Part 36 offer cannot be withdrawn or reduced during the relevant period unless the court gives permission. In effect, it is there for the taking for the relevant period unless the court withdraws it (which it will rarely do).

If the offer has not been accepted at the end of this period, it may be withdrawn or varied without court’s permission. A notice of withdrawal or change of terms is served on the offeree.

Once made, it cannot be changed or withdrawn if it has already been accepted.

Question 4

How is a Part 36 offer accepted?

Answer 4

By serving written notice on the offeror (an acceptance form is often included with the offer).

Question 5

Until when can a Part 36 offer be accepted? Consequences of this.

Answer 5

So long as the offer has not been withdrawn or automatically expired (a Part 36 offer can be worded to lapse at some stated date after the relevant period), it can still be accepted. Although the offeree will likely pick up a tab for being ‘late’ with acceptance.

Time-limited offer will expire automatically. Otherwise, the only party who can kill of an unaccepted offer is the person who made it by formally withdrawing. As a result, there can be more than one live Part 36 offer on the table at once.

Notwithstanding this, a party can effectively increase an offer at any time. But again this could mean there’s more than one live offer on the table.

Question 6

Relevance of a withdrawn Part 36 offer to costs

Answer 6

A withdrawn Part 36 cannot lead to Part 36 costs consequences but it can go into the mix when the court exercises its general discretion in deciding final costs orders.

Question 7

Rejection of a Part 36 offer

Answer 7

If the offeree doesn’t want to accept the offer: a Part 36 offer is not formally rejected. It is simply not accepted. Even a counter-offer doesn’t operate to extinguish an earlier offer.

Question 8

Clarification

Answer 8

When the offeree is unclear about the terms of a Part 36 offer. He can seek clarification directly from offeror, failing which make an application to the court.

Question 9

When will the court become involved in the process of the making and acceptance of a Part 36 offer?

Answer 9

Where an offeree seeks clarification which hasn’t been answered by the offerer and makes an application to the court to order clarification.

Where offeree wants to accept offer after trial has started.

Court’s permission will be needed if child claimant wants to accept a defendant’s Part 36 offer.

Question 10

What is the trial judge told? Consequences.

Answer 10

If a case goes to trial, trial judge is told nothing about any Part 36 offers until decisions on liability and quantum have been made (as for any without prejudice communication). An inadvertent reference can result in a mistrial. The person who blurted it out may have to pay costs personally, but the judge has a discretion to carry on if satisfied no injustice will be done.

Question 11

What strategy will a defendant have in mind in thinking about making a Part 36 offer?

Answer 11

Defendant will strategically want to make a Part 36 offer before heaviest costs are incurred to take advantage of the costs protection. The earlier an offer, the fuller the protection. However, it would be silly to make an offer without a fair degree of evidential information both as to liability and quantum.

Question 12

Relationship between Part 36 and other sorts of settlements

Answer 12

There is nothing in the rules preventing parties to settle cases in any way they choose, e.g. through a Calderbank letter.

Question 13

Relationship between Calderbank letter, Part 36, and costs

Answer 13

When considering orders as to costs post-trial, the court will look at how the litigants conducted themselves, including whether any attempts to settle were made. In this context, the existence of a Calderbank letter would be highly relevant. However, if the offer is a Calderbank offer then the court’s power to impose costs consequences arises under its general discretion to do so under the costs rules (Part 44) and not under Part 36, where the costs consequences are more mandatory. Might end up with a similar result, but there is no guarantee: both legally and procedurally it is important to remember that a Calderbank letter does not equate to a Part 36 offer.

Question 14

What happens if the Part 36 requirements are not complied with?

Answer 14

Part 36 rules say that if an offer to settle not made in accordance with formal requirements, cannot have usual Part 36 costs consequences. If a party attempts to make a Part 36 offer but makes a mistake, the court might overlook the error if the mistake is very minor and there is no real uncertainty or prejudice on the part of the other party. The court should attempt to give effect to a clear intention to make a Part 36 offer, but it should be exacting about what are fairly exacting requirements. One case in WB: was said that perhaps there can be de minimise errors or obvious slips which mislead no one, but general rule is that for an offer to be a Part 36 offer it must strictly comply with the requirements. Fundamental defects, such as failing to specify a relevant period, will be fatal. Safest option is to make a Part 36 offer using the court form.

Question 15

Who pays costs if the offer is made during the relevant period (i.e. well before trial)?

Answer 15

If accepted during initial relevant period, it’s a given that defendant will pay claimant’s costs up to date of serving notice of acceptance.

Question 16

How will costs be assessed if the offer is made during the relevant period (i.e. well before trial)?

Answer 16

Unless any of the costs are fixed, will be assessed on a standard basis (thus, may include pre-action costs).

Question 17

Can court order a proportion of costs if the offer is made during the relevant period (i.e. well before trial)?

Answer 17

Courts cannot decide to order that only a proportion of C’s costs will be paid. It is such a sure thing that an interim payment could be ordered in respect of this costs liability.

Question 18

If D’s offer (pre-end of relevant period) is in respect of only a specific part of C’s claim and when offer accepted C abandons rest of claim, what happens with costs?

Answer 18

Costs payable will only be those in respect of the specific part of the claim that has been settled.

Question 19

Acceptance after the relevant period but before trial

Answer 19

After expiry of relevant period, assuming offer was not time limited or formally withdrawn, can still be accepted. But party who accepts late will usually bear the cost from the end of the relevant period to the date of acceptance. In a sense, the price of delay. Court will order this unless such an outcome would be unjust. However, parties can agree costs which they usually will do since it’s so predicable what a court would order if they did not, and costs of court making the order would have to be added onto the total. Same is true if an offer made within 21 days of trial is accepted.

Question 20

Acceptance during trial

Answer 20

An attempt to accept an offer once trial has started can be problematic. Court’s permission is required once trial has started. But trial judge is not supposed to know about Part 36 offer! If offeror is happy for it to be accepted, unlikely to be a problem because only remaining issue will be costs. However, if they object (trial may have revealed a weakness in other side’s case). In that scenario, an application to a different judge will be the most sensible way to deal with a problem.

Question 21

If claimant never accepts defendant’s offer

Answer 21

Claimant must obtain judgment that is more advantageous than defendant’s offer in order to avoid costs penalties of failing to accept. For money claims, all required is that C recovers more in money terms, however small the difference. Comparison made at date of judgment and if this involves exchange rates, then relevant conversion rate will be that applicable at judgment.

However, if falls short of this mark, Part 36 sanction kicks in. Usual order will be that C gets costs up to end of relevant period but thereafter will have to pay D’s costs and bear own unless such an order is unjust. Sometimes called a split order since D pays C’s costs up to a certain point then rules reverse.

Question 22

When won’t Part 36 sanctions apply?

Answer 22

When offer is not proper Part 36 offer, or when it was formally withdrawn. Two more scenarios:

Where special costs protection for claimants in personal injury cases is concerned (QOCS - see SA23)

If courts considers a split order would be unjust - Takes all the circumstances into account including terms of offer, when it was made, what parties knew, and parties’ conduct relevant to assessing the offer at that time. Will not normally be considered unjust; there must be something which takes case out of the norm (see WB).

Question 23

Part 36 offers in non-money claims

Answer 23

Defendants can also make Part 36 offers in non-money claims. Process is the same, but one is not dealing with hard cash so can be more challenging to determine whether more advantageous. Court looks at the case in the round.

Question 24

If D doesn’t accept C’s offer

Answer 24

Idea the same, but different perspective. Costs consequences punish D who has lost substantive case and didn’t accept acceptable offer to settle. If C’s offer is made and never accepted and outcome at trial is as or more advantageous to C than his own offer, costs and interests penalties normally ensue. In addition, further reward for Cs making successful Part 36 offers. This comes in form of an additional amount not exceeding £75,000 calculated on sliding scale depending on size of judgment. E.g. if money claim and damages don’t exceed £500,000, additional amount calculated at 10%. So, if the damages were £80,000 the additional amount would be £8000.

The additional amount is an all or nothing award and there is no jurisdiction to order a reduced amount.

Question 25

Genuine attempt to settle

Answer 25

The rules say that such consequences will follow unless the court thinks it unjust. In this context, court will look at whether offer was a genuine attempt to settle (i.e. to stop attempts to settle for 100% of damages claim; there needs to be a genuine element of concession).