Settlement

Question 1

What is a Part 36 Offer?

Answer 1

• A Settlement Offer Without Prejudice save as to Costs; and
• With certain automatic Cost consequences.

Question 2

What is a Calderbank Offer?

Answer 2

• A Settlement Offer Without Prejudice save as to Costs; that
• Lacks the procedural requirements and automatic Cost consequences of a Part 36 Offer.

Question 3

What are the Procedural Requirements of a Part 36 Offer?

Answer 3

The Offer must:

• Be Written.
• Declare itself as a Part 36 Offer.
• State whether it addresses any Counterclaims.
• State whether it concerns all or part of the Claim.
• State the period during which the Offer is may be Accepted (the “Relevant Period”).
  • This cannot be less than 21 Days.
  • Acceptance during the Relevant period has favourable Cost consequences for the Offeree.

Form N242A is the Precedent Document.

Question 4

What is the Further Procedural Requirement of a Part 36 Offer made by a Defendant?

Answer 4

The Defendant can only offer to pay a lump sum within 14 days.

Question 5

How can the Offeree of a Part 36 Offer be clarified?

Answer 5

By request within 7 Days of Service.

Question 6

When can a Part 36 Offer be Withdrawn or Changed to be Less Advantageous to the Offeree?

Answer 6

Before Acceptance or Trial Commencement:

• Upon Expiry of the Relevant Period, whether:
  • Automatically, as per its Terms; or
  • Subject to Notice of Withdrawal or Change.

After Acceptance:

• With the Court’s permission, requested within:
  • 7 Days from the Notice of Acceptance; or
  • If earlier, First Day of Trial.

Before Trial Commencement:

• With the Court’s permission, requested as soon as practicable.

Beware: A Part 36 Offer remains Open even after the Relevant Period expires unless its Terms state otherwise.

Question 7

When will the Court grant Permission to Withdraw or Change an Offer?

Answer 7

It is in the interests of justice considering present circumstances.

Question 8

What is the Effect of Changing an Offer to be More Advantageous to the Offeree?

Answer 8

• The Original Offer will continue to run.
• The Improved Offer is treated as a new Part 36 Offer, whose Relevant Period runs from when the Notice of Change is deemed Served.

Question 9

How is a Part 36 Offer Accepted?

Answer 9

When a Notice of Acceptance is Served on the Offeror.

Notice must be Filed at the Court if the Case has been Issued.

Question 10

What are the General Consequences of Accepting a Part 36 Offer?

Answer 10

Staying:

• The Claim is stayed and does not continue to Trial.

Settlement Sum:

• The Defendant must pay the Settlement Sum within 14 Days of the Notice of Acceptance being Served, unless otherwise agreed in writing.
• Failing which, the Claimant can enter Judgment against the Defendant.

Question 11

How do the Cost Consequences of Accepting a Part 36 Offer differ based on When it was Accepted?

Answer 11

Acceptance Within the Relevant Period:

• The Claimant is entitled to Litigation Costs up to when the Notice of Acceptance was Served.

Acceptance Outside the Relevant Period:

• Unless the Parties can agree Liability for Costs, the Court will determine the issue.
• Unless it considers it unjust, the Court must Order that:
  • The Claimant be awarded Costs up to the Relevant Period’s expiry; and
  • The Offeree to pay the Offeror’s Costs from the Relevant Period’s expiry to the Date of Acceptance.

Making and Acceptance within 21 Days of Trial:

• Unless the Parties can agree Liability for Costs, the Court will determine the issue.

Question 12

In considering what Order to make regarding a Part 36 Offer Accepted Outside the Relevant Period, what will the Court consider?

Answer 12

• The Offer’s Terms.
• The Procedural Stage at which the Offer was made.
• The Offer’s authenticity as a Settlement attempt.
• The information available to the Parties at the time.
• The Parties’ conduct regarding the Disclosure of information relevant to the Offer.

Question 13

What are the Cost Consequences of Accepting a Part 36 Claim that only concerns Part of the Claim?

Answer 13

• If the Claimant abandons the Claim at Acceptance, it is only entitled to Costs for the Settled Part.
• If it does not, and the Parties cannot agree Liability for Costs, the Court will determine the issue.

Question 14

What determines whether a Defendant’s Non-Acceptance of a Claimant’s Part 36 Offer has Cost Consequences?

Answer 14

The Claimant obtains a Judgment that is at least as financially advantageous as the Offer.

This is called the “Defendant Cost Trigger”.

Question 15

If Triggered, what are the Cost Consequences for a Defendant’s Non-Acceptance of a Claimant’s Part 36 Offer?

Answer 15

The Defendant must pay:

• Litigation Costs from the Relevant Period’s expiry, or some point thereafter, on an Indemnity Basis.
• Interest on Litigation Costs at a rate not over 10% above the Base Rate.
• Interest on the Award at a rate not over 10% above the Base Rate from the Relevant Period’s expiry.
• A Lump Sum not exceeding £75,000 based on the Award.
  • Sums of 10% are payable on Awards up to £500,000.
  • Sums of 5% are payable on Awards over £500,000.

All of this is unless the Court considers it unjust.

If the Claim is not for a monetary sum, then the Lump Sum is calculated using the Claimant’s Cost Award.

If the Offer is made within 21 Days of Trial, these consequences will not transpire, unless the Court abridges the Relevant Period.

Question 16

If Triggered, what are the Cost Consequences for a Defendant’s Non-Acceptance of a Claimant’s Part 36 Offer if Recoverable Costs are Fixed?

Answer 16

Instead of recovering on Indemnity, the Claimant is entitled to 35% of the difference between the Fixed Costs for:

• The Procedural Stage at the Relevant Period expiry; and
• The Procedural Stage at the Date of Judgement.

The rest is the same.

The Stages set out in PD45, Table 12 (Fast Track) and Table 14 (Intermediate Cases).

Question 17

What determines whether a Claimant’s Non-Acceptance of a Defendant’s Part 36 Offer has Cost Consequences?

Answer 17

The Claimant fails to obtain a Judgement that is more financially advantageous than the Offer.

This is called the “Claimant Cost Trigger”.

Question 18

If Triggered, what are the Cost Consequences for a Claimant’s Non-Acceptance of a Defendant’s Part 36 Offer?

Answer 18

• The Claimant must pay the Defendant’s Costs from the Relevant Period’s expiry, plus interest; unless
• The Court considers it unjust.

Question 19

What will the Court consider when determining whether it is Unjust to impose Cost Consequences following a Trigger?

Answer 19

• The Offer’s Terms.
• The Procedural Stage at which the Offer was made.
• The Offer’s authenticity as a Settlement attempt.
• The information available to the Parties at the time.
• The Parties’ conduct regarding the Disclosure of information relevant to the Offer.

The Court’s discretion under this provision is much more limited than its general discretion under normal cost rules.

Question 20

When will Part 36 Consequences be avoided?

Answer 20

• The Offer was Withdrawn.
• The Offer was made within 21 Days of Trial, and the Court did not abridge the Relevant Period.
• The Offer was Changed to be Less Advantageous to the Offeree, and the Offeree secured a More Advantageous Jugement than the Changed Offer.

Question 21

What must the Offeror do to ensure that Part 36 Consequences will apply?

Answer 21

• Leave the Offer open.
• Make the Offer as early as possible, and in any case, at least 22 Days before Trial.

Question 22

What are the Cost Consequences if both Parties make Part 36 Offers and neither Offer is Accepted?

Answer 22

Judgment Exceeds the Claimant’s Offer:

• The Claimant’s Offer takes effect, and Consequences are imposed on the Defendant.

Judgment Does Not Exceed Either Offer:

• Neither Offer takes effect, and Costs are awarded on standard principles.

Judgment Exceeds the Defendant’s Offer:

• The Defendant’s Offer takes effect, and Consequences are imposed on the Claimant.

Question 23

What are the Potential Court Orders after Settlement?

Answer 23

• Consent Order.
• Tomlin Order.

Question 24

What is a Consent Order?

Answer 24

• A Court Order that mirrors the Terms of the Parties’ Settlement Agreement.
• This usually gives rise to the Defence of Estoppel against Fresh Proceedings.

Question 25

What are the Two Types of Consent Order?

Answer 25

• Contractual: A mirror of the Parties’ Settlement Agreement.
• Non-Contractual: A declaration of the Terms of Settlement themselves, variable by the Court.

Question 27

What are is the Main Type of Order following Settlement?

Answer 27

Consent Order.

These Orders also apply to the Settlement of Interim Issues and Applications.

The Parties must Apply to Court, like any other Order. If one is made during a Stay, it is treated doubly as an Application to Lift Stay.

Question 28

What are the Two Types of Consent Order?

Answer 28

Contractual:

• The Order is a mirror of the Parties’ Settlement Agreement and is largely unalterable by the Court.

Non-Contractual:

• The Order contains the Term’s of the Parties’ Settlement and is alterable by the Court.

Question 29

What is a Tomlin Order?

Answer 29

A type of Contractual Consent Order, used when:

• The Parties wish to keep certain Terms confidential.
• The Settlement Terms go beyond what the Court can generally Order, enforceable by a Subsequent Order.

Such provisions are in the Order’s Schedule (i.e. Part 2).

Question 30

Which Provisions in a Tomlin Order must be Public?

Answer 30

Directions for:

• Payment of money out of Court; or
• Payment of Costs and associated Assessments.