Part 36 Offers Flashcards
What are Part 36 offers?
Part 36 offers are offers for settlement that include the terms of Part 36.
This means that the offer can have potentially significant penalties for the recipient party if they make the ‘wrong’ decision and reject an offer that the court subsequently deems to be suitable.
What are the relevant formalities for a Part 36 offer to be valid?
The Part 36 offer must:
- be in writing;
- make clear it is made pursuant to Part 36;
- specify a period of not less than 21 days during which, if the offer is accepted, the defendant will pay the claimant’s costs (‘the relevant period’);
- state whether it relates to the whole of the claim or to part of it, and whether it takes into account any counterclaim.
When is a Part 36 offer validly made?
A Part 36 offer is validly made when it is served on the other party - rules of deemed service apply here.
Is a Part 36 offer inclusive of interest until the relevant period expires?
Yes.
Will the trial judge see any Part 36 offers?
Not initially.
Part 36 offers are ‘without prejudice save as to costs’, meaning that the trial judge will not be made aware of the offer until the case has been decided, on both liability and quantum.
Only when the issue of costs is dealt with will any relevant offer be produced to the judge.
When may a Part 36 offer be accepted?
Part 36 offers may be accepted at any time unless notice has been given of its withdrawal.
(Makes the relevant period of at least 21 days somewhat redundant, but late acceptance may have adverse costs consequences.)
What are the effects of accepting a Part 36 offer WITHIN the relevant period?
(a) If the claimant accepts a Part 36 offer within the relevant period, the sum must be paid to the claimant within 14 days and, if not, the claimant can enter judgment.
(The claimant is also entitled to their costs of the proceedings up to the date on which the notice of acceptance is served on the defendant.)
(b) If the claimant makes a Part 36 offer which is accepted by the defendant within 21 days, the consequences are the same - the claimant will be entitled to their costs up to the date of acceptance on the standard basis.
If costs cannot be agreed by the parties, a judge will assess them on the STANDARD basis.
What are the effects of accepting a Part 36 offer OUTSIDE the relevant period (late acceptance)?
If claimant accepts defendant’s offer late:
(a) The defendant pays the claimant’s costs up to the date on which the relevant period expired; and
(b) the claimant pays the defendant’s costs thereafter until the date of acceptance.
However, if the defendant accepts a claimant’s offer late, the defendant will usually be ordered to pay the claimant’s costs of the proceedings up to the date of acceptance.
What is the effect of non-acceptance?
If a Part 36 offer is not accepted, the proceedings will continue.
However, penalties could potentially be imposed where the relevant party ‘should’ have accepted the offer but didn’t.
The penalties will be imposed from the day after the relevant 21 day period for acceptance expires (Day 22) and will apply unless the court rules that it would be unjust to do so.
An order will be made in vast majority of cases - it is an exception not to do so.
What happens when a defendant refuses a claimant’s offer, which the claimant subsequently beats at trial?
Here, in addition to being awarded damages as well as interest (on the standard basis) by the court, the court will impose these additional sanctions:
- Additional damages (usually a percentage of the damages):
(a) For damages of up to £500,000, the defendant must pay an additional amount of 10% of the sum awarded.
(b) For damages in excess of £500,000 and up to £1 million, 10% of the first £500,000 is payable and thereafter, 5% up to a maximum of £75,000.
Where the remedy awarded is non-monetary, the term ‘sum awarded’ refers to the costs.
The remaining penalties take effect from Day 22.
- Enhanced interest on damages:
From day 22 onwards, the percentage rate of interest that is charged on the damages awarded increases to a rate not exceeding 10% above the base rate. - Costs on an indemnity basis:
The defendant will be ordered to pay the claimant’s costs on the INDEMNITY basis from day 22 onwards. - Interest on indemnity costs:
Interest will be awarded on the indemnity costs, and interest rate may be as high as 10% above base rate.
What happens when a defendant refuses a claimant’s offer, and the claimant obtains a judgment that is less than their offer?
Part 36 has no effect - neither party did anything ‘wrong’.
What happens when a defendant refuses a claimant’s offer, and the claimant loses at trial?
Part 36 has no effect - neither party did anything ‘wrong’.
What happens when a claimant refuses a defendant’s offer, and the claimant wins at trial, beating the defendant’s offer?
Part 36 has no effect - neither party did anything ‘wrong’.
What happens when a claimant refuses a defendant’s offer, and the claimant wins at trial, but fails to beat the defendant’s offer?
Claimant was ‘wrong’ to continue with the claim when they should have accepted the offer.
- The defendant will pay the claimant’s costs on the standard basis from when those costs were incurred until the relevant period (day 21);
- Thereafter, the claimant pays the defendant’s costs on the STANDARD basis from the date of the expiry of the relevant period (day 22) until judgment; plus
- Interest on those costs (a commercial rate of 1% or 2% above base rate usually).
What happens when a claimant refuses a defendant’s offer, and the claimant loses at trial?
Here, in addition to paying the winner’s (defendant’s) costs, the claimant will also be penalised by being ordered to pay interest on those costs from Day 22 until judgment.
Typically at 1-2% above base rate.
