Part 36 Offers

Question 1

what is Part 36 CPR?

Answer 1

Part 36 in the CPR is a self-contained procedural code that encourages party to settle - it sets out:

1) the kind of settlement offers a party can make

2) consequences if an offer is made and accepted

3) consequences if an offer is made and not accepted and the matter proceeds to trial (these consequences depend on outcome of the trial)

–> PART 36 IS A COURT SANCTIONED METHOD TO SETTLE

Question 2

what is the aim of Part 36 offers?

Answer 2

The aim is encourage parties to settle and to make and accept reasonable offers by offering a system of financial incentives and penalties

Question 3

When can a Part 36 offer be made and by whom?

Answer 3

At any stage of the proceedings (even before proceedings are issued) and by any party (claimant or defendant)

Question 4

To be valid, what is the form of a Part 36 offer and what are its contents? (6)

Answer 4

Form: in writing (often in a letter or form N242A)

Contents of offer letter:

• Make clear it is made pursuant to Part 36
• Specify a period of at least 21 days within which the defendant will be liable for the claimant’s costs if the offer is accepted (the ‘relevant period’)
• State whether it relates to the whole or part of the claim, and
• State whether it considers any counterclaim.

Additional contents if the defendant is making the offer:

• A Part 36 offer by D to pay a sum of money in settlement of a claim must be an offer to pay a single sum of money (no instalments)
• D must offer to pay the sum max 14 days after C accepts - otherwise this will not be treated as a part 36 offer

Question 5

What is the ‘relevant period’ in a part 36 offer?

Answer 5

A period of at least than 21 days, specified in a Part 36 offer, within which the defendant will be liable for the claimant’s costs if the offer is accepted

Question 6

when is a part 36 offer actually made?

Answer 6

It is made when it is served on the offeree - normal rules of service apply

Question 7

If the offeree accepts the offer and the relevant period has expired, can a Part 36 offer be withdrawn after the relevant period?

Answer 7

No - offer cannot be withdrawn and terms of the offer cannot be changed

Question 8

if the relevant period has not expired, can a Part 36 offer be withdrawn/changed?

Answer 8

Depends on whether the offeree has accepted the offer during the relevant period:

• If offeree does not serve a notice to accept before expiry of relevant period = the offeror’s notice to withdraw or change the offer will take effect at the end of the relevant period
• If offeree serves a notice to accept within the relevant period = then the offeror can either (1) allow the acceptance, or (2) apply to court for permission to withdraw/change within 7 days of the notice of acceptance (this must be before trial date)

Question 9

The relevant period has not yet expired - the offeror serves a notice to withdraw - the offeree then serves a notice to accept within the relevant period. What does the offeror do if they do not want to accept this?

Answer 9

Offeror can apply to the court for permission to withdraw within 7 days of receiving the notice to accept

The court will grant permission if:

1) there was a change in circumstance since the original offer, and

2) it is in the interests of justice

Question 10

Can an offeror make a time-limited Part 36 offer?

Answer 10

Yes - the offer can be automatically withdrawn in accordance with its terms if the offeree does not serve a notice to accept by the end of the specified period

BUT: the time limit of automatic withdrawal must be after the relevant period expires not before

Question 11

If the trial has already started, can a Part 36 offer be withdrawn?

Answer 11

Yes but the court’s permission is required to withdraw the offer or change its terms

Question 12

if the relevant period has expired and the offeree has not accepted, can the Part 36 offer be withdrawn?

Answer 12

Yes - the offer can be withdrawn without the court’s permission (also it can be withdrawn automatically if its terms allow this)

Question 13

how can an offeree accept a part 36 offer? (2)

Answer 13

1. serve written notice of acceptance on offeror
2. file notice at court if case is issued

Question 14

How long does the offeree have to accept the Part 36 offer?

Answer 14

An offer remains open for acceptance unless it has been withdrawn - this remains the case even after the relevant period has expired, unless a term of the offer is that it is automatically withdrawn at the end of the relevant period

Question 15

What are the consequences of the offeree accepting the Part 36 offer? (3)

Answer 15

1) the claim is stayed - does not continue to trial

2) defendant has 14 days to pay the settlement sum or comply with whatever is agreed - if they do not, the claimant can enter judgment against the defendant

3) cost consequence (this depends on whether the offer was accepted within the relevant period)

Question 16

If the offeree accepts the offer within the relevant period, who pays whose costs?

Answer 16

The claimant is entitled to its costs up to the date that the notice to accept was served (regardless of which party made the offer to settle)

Question 17

If the offeree accepts the offer after the relevant period expires, who pays whose costs?

Answer 17

2 cost consequences:

1) The court decides liability for costs (unless parties agree amongst themselves),

and

2) The court must order (unless unjust)

1- awards the claimant costs up to the expiry of the relevant period, and

2- award the offeror costs from [the date of expiry of the relevant period] to [the date the offeree accepts]

Question 18

If the part 36 offer was made less than 21 days before trial, who pays whose costs?

Answer 18

the court decides liability for costs (unless parties agree themselves)
- if not accepted = part 36 cost consequences do not apply even if triggers are met - court decides
- if accepted = court still decides

Question 19

If a part 36 offer is made by an offeror and it is not withdrawn, what 2 things might the offeree do?

Answer 19

1) accept the offer –> claim will be stayed, sum will be settled, and there will be cost consequences (depend on when the offer is accepted)

2) not accept the offer –> penalties might apply

Question 20

When will the court impose costs penalties on the claimant for failing to accept the defendant’s Part 36 offer? (trigger)

Answer 20

• If defendant makes an offer that the claimant does not accept = penalty on C if C fails to obtain a judgement more advantageous than D’s offer
• this means = penalty on C if court awards C quantum + interest equal or less than D’s part 36 offer

Question 21

What is the penalty if the claimant does not accept a defendant’s Part 36 offer and is not awarded more at trial (i.e., trigger is met)

Answer 21

1) costs after the relevant period expires = claimant pays defendant’s costs plus interest on those costs + its own costs (unless the court thinks it unjust)

2) costs before the relevant period expires = usual costs rule - loser pays the winner’s costs (but court has discretion on this matter)

Question 22

What is the penalty if the claimant does not accept a defendant’s Part 36 offer and is awarded more at trial (i.e., trigger is not met)

Answer 22

The defendant’s Part 36 order has no effect and the court has discretion over who pays costs (usually, loser pays winner’s costs)

Question 23

when will the court impose cost penalties on a defendant for failing to accept the claimant’s part 36 offer? (trigger)

Answer 23

• if the claimant makes an offer that the defendant does not accept = penalty on D if the judgement against D is at least as advantageous to C as the part 36 offer
• this means = if the court awards C quantum+interest equal or more than C’s part 36 offer

Question 24

What is the penalty if the defendant does not accept a claimant’s Part 36 order and the claimant is awarded less than the offer at trial? (i.e., trigger is not met)

Answer 24

Part 36 offer has no effect and the court has discretion over the liability over costs (usually the loser pays the winner’s costs)

Question 25

What is the penalty if the defendant does not accept the claimant’s Part 36 order and the claimant is awarded the same or more at trial? (i.e., trigger is met)

Answer 25

The court must order (unless unjust)

1 - Interest on the award at a rate not exceeding 10% above base rate

2- the costs from when the relevant period expires are assessed on an indemnity basis (not the standard basis)

3- interest on those costs at a rate not exceeding 10% above base rate

4- An additional amount based on a percentage of the award (this is capped at £75,000) (note: if the award is not money then the additional amount will be based on the costs figure)

Question 26

What will the court take into account when considering whether it is ‘unjust’ to impose a penalty for non-acceptance of a Part 36 order? (5)

Answer 26

1 - the terms of the Part 36 order

2 - what stage of the proceedings the order was made in

3 - the information available to parties

4 - conduct of parties in relation to giving or refusing to give information to allow the offer to be made or evaluated

5 - whether the offer was a genuine attempt to settle

the court’s discretion is much more limited than otherwise

Question 27

When will Part 36 penalties NOT apply? (4)

Answer 27

1. offeror withdraws the offer
2. offer by defendant is not accepted by claimant before trial, and court awards the claimant more than what was in the offer
3. offer by claimant is not accepted by defendant before trial, and court awards the claimant less than what was in their offer
4. the offer was made less than 21 days before trial (regardless of whether it was accepted or not)

Question 28

When will Part 36 penalties apply? (3)

Answer 28

UNLESS THE COURT THINKS IT UNJUST:

1. the offeree accepts the offer after the relevant period = offeree must pay offeror’s costs after the relevant period up to the date the notice to accept was served
2. D rejects C’s offer and C gets an award at trial which is equal to or more than C’s offer
3. C rejects D’s offer and C gets an award at trial which is equal to or less than D’s offer

Question 29

can a part 36 offer be disclosed to court?

Answer 29

part 36 offer is without prejudice save as to costs

can only be disclosed when court is deciding on costs

Question 30

how do you compare the value of a part 36 offer with that of the judge’s at trial?

Answer 30

Part 36 offer (deemed to include interest) vs quantum + interest awarded

Question 31

can both a claimant and defendant make part 36 offers at the same time?

Answer 31

yes - and the cost consequences for not accepting will apply the same way depending on what was awarded at trial