Part 36 offers

Question 1

Define part 36

Answer 1

A formal offer to settle an action or part of an action without prejudice. They have significant cost and interest consequences if they are rejected and so put pressure on an opponent to compromise the dispute.

Question 2

Part 36 offers are made on a without prejudice save as to costs basis. what does this mean?

Answer 2

They cannot be disclosed to any third party, so only the offeror and offered are entitled to know of its existence and the content of the offer; CPR 36.16(2). So it does not put the party who is making the offer at a disadvantage.

Question 3

When does the judge know about the offer?

Answer 3

After deciding liability and after has made a decision on damages.

Question 4

How long are part 36 offers open for acceptance?

Answer 4

Indefinitely unless expressly withdrawn or amended by the offeror.

Question 5

What is the purpose of part 36 offers?

Answer 5

It is a tool used in dispute resolution which is made with the intention of settlement for the whole or part of a claim wither before issue or during the litigation itself.

Question 6

Do part 36 offers always result in settlement?

Answer 6

An offer itself may not resolve in settlement, but it can often result in further negotiations between the parties and those further negotiations may result in settlement; care must be taken then to draft the appropriate type of consent order to record that settlement.

Question 7

How long does a part 36 offer need to be open for?

Answer 7

21 days; the relevant period.

Question 8

When was a part 36 offer introduced?

Answer 8

In 1999 as part of the Woolf Reforms; regard to the overriding objective.

Question 9

What is the form for a part 36 offer?

Answer 9

N242A.

Question 10

What do protocols do?

Answer 10

guide pre-issue conduct and behaviour. one of the main focuses of protocol is to promote prospects of achieving settlement. Part 36 offers can be effectively made in the protocol stage of litigation.

Question 11

How do part 36 offers relate to protocols?

Answer 11

Part 36 has the effect of continuing the focus to promote the prospects of achieving settlement within the litigation process by harnessing an array of costs and interest consequences for a party that has refused which subsequently turns out to have been a good offer.

The cost interest consequences that will be applied in such a situation, can be very grave for the party who has refused a reasonable offer and forced litigation to continue.

Question 12

What is the position of a part 36 offer that only represents part of the action?

Answer 12

If the part 36 offer has been accepted, the number of issues between the parties will be reduced. The person accepting the offer will be entitled to his costs that represent those issues. If such an offer is refused, then the costs and interest consequences will only apply to those parts of the case that the offer had sought to result.

Question 13

What is the standard basis?

Answer 13

CPR 44.3(2) states that only costs that are proportionate are allowed, but if there is any doubt, then the doubt will be resolved in favour of the paying party. Costs must be reasonably incurred, reasonable in amount and proportionate.

Question 14

What are the 5 mandatory requirement of an offer?

Answer 14

CPR 36.2:

1. In writing - letter or form N242A
2. Must state clearly that it is a part 36 offer - usually in bold in the heading.
3. Specify period of not less than 21 days within which offer can decide to accept offer.
4. Must state whether offer made in respect of part or whole of claim.
5. State whether offer takes into account any counterclaim.

Want to be sufficiently sure of how much the claim is worth so may want to get medical evidence and reports to be able to assess.

Question 15

When can an offer be made?

Answer 15

Any time in the proceedings; proceeding’s don’t have to be started; if before, need to make it clear that part 36 cost consequences will apply.

Question 16

What is the only type of proceedings where part 36 offers are not permitted?

Answer 16

Cases allocated to the small claims track as no cost consequences; CPR 27.2

Question 17

How long does the offer have to seek clarification?

Answer 17

Once an offer has been made, the offer has 7 days within which to request clarification of the offer; CPR 36.8.

Question 18

What is clarification?

Answer 18

Requests for clarification are usually made where the offer is seeking a breakdown of the overall settlement figure.

Question 19

Responses to clarification requests

Answer 19

These should be in writing and should be done on a without prejudice basis and the offeror has 7 days to respond. A failure to provide the offer with the clarification information to enable him to decide whether to accept the offer or not does not invalidate the offer.

Question 20

What is the mode of acceptance of offers?

Answer 20

Writing. there is no guidance in CPR 36 or PD as to the form that the notice of acceptance should take, but it should probably be by letter. There is a notice of acceptance attached to the N242A which can be used if the part 36 offer was made by using that form.

Question 21

What do you need to consider when accepting an offer?

Answer 21

Must think about the costs and ensure that the offer includes costs and a case isn’t settled completely unless decided who is paying legal expenses.

Question 22

What happens when the offer is accepted within the relevant period?

Answer 22

Paying party is agreeing to pay receiving party’s costs on standard basis up until acceptance. Inclusive of interest until expiry of relevant period.

Question 23

When can an offer be accepted?

Answer 23

At any time, even outside the relevant period, by the offer without seeking the court’s permission.

Question 24

How is a withdrawal of an offer made?

Answer 24

Must be done expressly in writing. The withdrawal and amendment of the terms of a part 36 offer are now contained in CPR 36.9 and 36.10.

Question 25

Can the offeror withdraw/amend offer within relevant period?

Answer 25

Offeror can withdraw/amend offer within relevant period but only with court’s permission; CPR 36.3(6)

Can also be done outside this period without court’s permission, provided the offeree has not accepted it in writing; CPR 36.10(4)

Question 26

What is the purpose of withdrawal of an offer?

Answer 26

To put additional pressure on the opponent, as this can have the effect of altering the position power in negotiations. The withdrawal can be read as a signal that the party withdrawing the offer is taking the bolder negotiating position.

Question 27

What is the mode of accepting the claimant’s offer?

Answer 27

Once the decision has been made by D to accept the offer, this is done by letter or the notice of acceptance attached to N242A.

Question 28

How does D accept C’s offer if proceedings have not yet been issued?

Answer 28

D notifies C in writing and the parties proceed to comply with the terms of the part 36 offer.

Question 29

How does D accept Cs offer if proceedings have been issued?

Answer 29

D sends a notice of acceptance, usually in letter form, to C and files a copy with the court. The claim is automatically stayed; CPR 36.11(1).

Question 30

What are the cost implications of accepting C’s offer within relevant period?

Answer 30

D is liable to pay C’s costs up until the date of acceptance; CPR 36.13(1); C has an automatic entitlement to these costs which are assessed on the standard basis. costs no longer in discretion of court.

Question 31

What are the cost implications of accepting C’s offer outside relevant period?

Answer 31

CPR 36.13(4)(b) provides that the parties can try to agree liability for costs, but in the absence of agreement, the court must decide the liability for costs on the standard basis.
CPR 36.13(5) states that the court will decide, unless unjust, the following in relating to those costs:
-that D pays C’s costs up until the end of the R period AND
- the offer will be liable for C’s costs incurred thereafter on the standard basis.

Question 32

How does D reject C’s offer?

Answer 32

D merely notifies C in writing or simply fails to respond to the offer. There is no requirement to give reasons for the rejection.

Question 33

Gibbon v Manchester City Council

Answer 33

The rejection of the offer by D does not have the effect of withdrawing the offer; this can only be done by C and must be done expressly by letter/notice. If not done then the offer will remain open for acceptance indefinitely.

Question 34

What is the good thing about giving reasons for the rejection>

Answer 34

A party who gives reasons for his rejection is giving more info to his opponent but in giving his reasons, he is in effect leaving the door open for further negotiation. This is a good thing and wholly within the spirit of the overriding objective.

Question 35

Cost implications for rejecting C’s offer

Answer 35

CPR 36.17(4): Where D rejects C’s offer made more than 21 days before trial and the matter eventually proceed to trial, if C is successful and awarded a sum that is the same or greater than his part 36 offer, then C is entitled to:

1. Penalty damages
2. Interest on damages
3. costs on indemnity basis from same date and interest on those costs at the enhanced rate of up to 10% above base rate on amounts of up to £500,000 and 5% on amounts above £500,000 total amount capped at £75,000.
4. costs on standard basis up to end of r period
5. split costs order

Question 36

What if C failed to equal or beat his own offer at trial?

Answer 36

The offer is irrelevant and the costs will be decided on the usual way, in accordance with CPR 44.2 i.e. D still pays C’s costs but on normal standard basis.

Question 37

What if C wins at trial and gets sum more advantageous than offer?

Answer 37

C is entitled to penalty damages and interest damages.

Question 38

What are penalty damages?

Answer 38

A payment of an additional amount of damages to a successful claimant also now forms part of the part 36 regime in CPR 36.17(4)(d). These damages are based on percentages and are payable in the following circumstances;

• c has made a valid offer;
• d has not accepted the offer and
• the court has given judgment for c which is at least advantageous to c as the c’s offer.

Question 39

What are the penalties that will be imposed on him?

Answer 39

Unless the court considers it is unjust to do so;

-he will have to pay the damages awarded but these will be enhanced with added interest’ at 10% above base rate and he will be ordered to pay C’s costs on indemnity basis; 10% above base rate.

Question 40

When will those interests and cost penalties be applied?

Answer 40

To the damages and costs from the date when the part 36 offer could have been accepted. this can be very costly.

Question 41

What is the procedure when C decides he wants to accept an offer made by D?

Answer 41

Procedure is the sam.

Question 42

What if C accept’s D’s offer within relevant period?

Answer 42

C gets sum offered plus costs up to date of acceptance; CPR 36(1)(1). C has automatic entitlement to these costs, assessed on standard basis if not agreed.

Question 43

What if C accepts D’s offer outside relevant period?

Answer 43

C gets sum offered. C and D can try to agree liability for costs. If no agreement then court likely to order D to pay C’s costs from end of r period till date of actual acceptance.

Question 44

Where the part 36 offer made by D includes an offer to pay a single sum of money

Answer 44

In addition to there being a stay of proceedings, on acceptance of the lump sum, the D is obliged to pay the sum accepted directly to C within 14 days of the date of acceptance; CPR 36.14(6), failing which C is entitled to enter judgement.

Question 45

Where there are multiple defendants to an action and the claimant wishes to accept an offer from one of them

Answer 45

Claimant needs to seek the court’s permission to accept.

Question 46

Costs implications of accepting D’s offer

Answer 46

Same as a D accepting C’s offer.

Question 47

Is there a legally binding contract?

Answer 47

The part 36 offer of both a C and D and the letter of acceptance create a contractually binding arrangement between the parties. If the receiving party doesn’t abide by the agreement, then it can be enforced within the same set of proceedings without having to go to the time and expense of issuing fresh proceedings on the breach of that agreement.

Question 48

Procedure of rejecting Ds offer

Answer 48

This is done in writing and unless D expressly withdraws offer, it is open for acceptance at any time.

Question 49

Cost implications of rejecting D’s offer

Answer 49

If C rejects D’s offer and proceeds to trial, but fails to secure a judgement that is more advantageous than D’s offer - then court has a discretion to make the following order unless unjust to do so;

• C gets costs on standard basis from start of claim to last date for acceptance of offer i.e. relevant period
• but C pays D’s costs from that date (end of r period) on standard basis
• split costs order

Question 50

Reviewing offers

Answer 50

Party whose offer is rejected but not withdrawn should review it from time to time to check relevance because if circumstances change, the fresh offer may be needed to be effective.

Question 51

Qualified cost shifting

Answer 51

Introduced on 1st April 2013; ability of D to recover costs of PI claims only (LASPO 2012, CPR 44). Losing C will not have to pay winning D’s costs except where C fails to beat D’s offer or C is fundamentally dishonest.

Question 52

Discretion

Answer 52

Costs always remain in discretion of court. court will only award the cost penalties contained in part 36 if just to do so; CPR 36.14.

Question 53

Advising your client

Answer 53

Advise on procedural and costs consequences of accepting/rejecting offer as soon as it is made to your client; especially the facts costs increase dramatically if case goes to trial.

act quickly; relevant period

parties should have a very clear idea of the strengths and weaknesses of theirs and their opponents case; advise whether client will beat offer.

Question 54

Can a legal rep make decision for the client?

Answer 54

It is not good practice to make these decision for the client; client must decide.

Question 55

The impact of part 36 offers on CFA and insurance policies a party may have has in place or taken out to put in against a losing costs order

Answer 55

clearly any legal practitioner who is handling a legal action for the client and CFA will need to advise their client that a win for the client may still be a win, even though he may have not beaten a part 36 offer and is therefore bearing the burden of the part 36 offer that was rejected. such a client will still have to pay his own solicitors costs under the CFA and the success fee.

Question 56

Effect of rejecting an offer on the insurer

Answer 56

All part 36 offers received and intended to be rejected must be notified to the insurer. The insurer will want to be sure that the grounds for rejecting the offer are good and if they feel will carry a greater risk because of it, will notify those insured whether they will continue the insurance cover or because of the increased risk, will only do so upon payment of a further premium.

Question 57

Protected party

Answer 57

Must have a litigation friend.