Unit 13 Settlement and Offers to Settle (including Part 36)

Question 1

Must a Part 36 offer extinguish the whole claim?

Answer 1

No. A Part 36 offer may be made in respect of the whole, or part of, or any issue that arises in—

a. a claim, counterclaim or other additional claim; or
b. an appeal or cross-appeal from a decision made at a trial.

Question 2

What is a Calderbank offer?

Answer 2

A Calderbank offer is made by letter written “without prejudice save as to costs” or “without prejudice” but subject to an express reservation of the right to refer to the letter on the issue of costs should the claim proceed to judgment.

Question 3

How can Calderbank offers be used in fraudulent claims with part 36 offers? (read)

Answer 3

In Summers v Fairclough Homes Ltd [2012], the Supreme Court accepted that Pt 36 may be of little assistance in protecting defendants against fraudulent claims since, on acceptance, the defendant would have to pay the claimant’s costs. Lord Clarke suggested that the defendant in such a case could make a Calderbank offer to settle the genuine part of the claim on terms that the claimant pay the defendant’s costs incurred in respect of the fraudulent or dishonest aspects of the claim on the indemnity basis.

Question 4

If a Part 36 offer is not constructed or worded correctly, can it still be treated as such?

Answer 4

Where a party makes an offer that is intended to be a Part 36 offer but a point arises as to its construction, the court should prefer the construction, if possible, that would give effect to the stated intention. Fundamental defects, such as a failure to specify at all a period of not less than 21 days, will preclude an offer being treated as a Part 36 offer.

Question 5

Does a part 36 offer apply to all proceedings?

Answer 5

No. It shall have the consequences set out in this Section only in relation to the costs of the proceedings in respect of which it is made, and not in relation to the costs of any appeal from a decision in those proceedings.

Question 6

Describe the form and content of a Part 36 offer

Answer 6

A Part 36 offer must—

a. be in writing;
b. make clear that it is made pursuant to Part 36;
c. specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs in accordance with rule 36.13 or 36.20 if the offer is accepted;
d. state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue; and
e. state whether it takes into account any counterclaim.

Question 7

What interest is treated as included in a Part 36 offer?

Answer 7

A Part 36 offer which offers to pay or offers to accept a sum of money will be treated as inclusive of all interest until—

a. the date on which the period specified under rule 36.5(1)(c) expires; or
b. if rule 36.5(2) applies, a date 21 days after the date the offer was made.

Question 8

Must a part 36 offer be for a single sum of money?

Answer 8

1. A Part 36 offer by a defendant to pay a sum of money in settlement of a claim must be an offer to pay a single sum of money.
2. A defendant’s offer that includes an offer to pay all or part of the sum at a date later than 14 days following the date of acceptance will not be treated as a Part 36 offer unless the offeree accepts the offer.

Question 9

At what time can a Part 36 offer made?

Answer 9

1. A Part 36 offer may be made at any time, including before the commencement of proceedings.
2. A Part 36 offer is made when it is served on the offeree.

Question 10

What should a party do if it requires clarification of a Part36 offer?

Answer 10

1. The offeree may, within 7 days of a Part 36 offer being made, request the offeror to clarify the offer.
2. If the offeror does not give the clarification requested under paragraph (1) within 7 days of receiving the request, the offeree may, unless the trial has started, apply for an order that the offeror do so.
3. If the court makes an order under paragraph (2), it must specify the date when the Part 36 offer is to be treated as having been made.

Question 11

Can a Part36 offer be amended or withdrawn?

Answer 11

1. A Part 36 offer can only be withdrawn, or its terms changed, if the offeree has not previously served notice of acceptance.
2. The offeror withdraws the offer or changes its terms by serving written notice of the withdrawal or change of terms on the offeree.

Question 12

When does notice of withdrawal or variation of a Part36 offer take effect?

Answer 12

Such notice of withdrawal or change of terms takes effect when it is served on the offeree.

Question 13

What happens at the expiry of the 21 day period

Answer 13

After expiry of the relevant period—

a. the offeror may withdraw the offer or change its terms without the permission of the court; or
b. the offer may be automatically withdrawn in accordance with its terms.

Question 14

If the Part 36 offer is varied to be MORE advantageous to the claimant, does the 21 day period remain the same?

Answer 14

Where the offeror changes the terms of a Part 36 offer to make it more advantageous to the offeree such improved offer shall be treated, not as the withdrawal of the original offer; but as the making of a new Part 36 offer on the improved terms; and the period shall be 21 days or such longer period (if any) identified in the written notice.

Question 15

If the Part 36 offer is varied to be LESS advantageous to the claimant, what is the procedure?

Answer 15

Where this rule applies—
a. if the offeree has not served notice of acceptance of the original offer by the expiry of the relevant period, the offeror’s notice has effect on the expiry of that period; and
b. if the offeree serves notice of acceptance of the original offer before the expiry of the relevant period, that acceptance has effect unless the offeror applies to the court for permission to withdraw the offer or to change its terms—
I. within 7 days of the offeree’s notice of acceptance; or
II. if earlier, before the first day of trial.

Question 16

How is a part 36 offer accepted?

Answer 16

1. Part 36 offer is accepted by serving written notice of acceptance on the offeror.
2. A Part 36 offer may be accepted at any time (whether or not the offeree has subsequently made a different offer), unless it has already been withdrawn.
3. The court’s permission is required if the trial is in progress - Where the court gives permission, unless all the parties have agreed costs, the court must make an order dealing with costs, and may order that the Part36 costs consequences apply.

Question 17

What are the cost consequences where a Part 36 offer is accepted?

Answer 17

Where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings (including their recoverable pre-action costs) up to the date on which notice of acceptance was served on the offeror.

Question 18

What are the cost consequences where a Part 36 offer is accepted but it only covers part of the claim?

Answer 18

Where—
a. a defendant’s Part 36 offer relates to part only of the claim; and
b. at the time of serving notice of acceptance within the relevant period the claimant abandons the balance of the claim,
the claimant will only be entitled to the costs of such part of the claim unless the court orders otherwise.

Question 19

What happens where
• a Part 36 offer which was made less than 21 days before the start of a trial is accepted; or
• a Part 36 offer which relates to the whole of the claim is accepted after expiry of the relevant period; or
• subject to paragraph (2), a Part 36 offer which does not relate to the whole of the claim is accepted at any time?

Answer 19

the liability for costs must be determined by the court unless the parties have agreed the costs.
Where this applies but the parties cannot agree the liability for costs, the court must, unless it considers it unjust to do so, order that—
a. the claimant be awarded costs up to the date on which the relevant period expired; and
b. the offeree to pay the offeror’s costs for the period from the date of expiry of the relevant period to the date of acceptance.
In considering whether it would be unjust to make the orders specified in paragraph (a) and (b), the court must take into account all the circumstances of the case including the matters listed in rule 36.17(5).

Question 20

What is the general rule with part 36 offers?

Answer 20

The general rule is that, where a Part 36 offer is accepted within the relevant period, the claimant will be entitled to the costs of the proceedings up to the date on which notice of acceptance was served on the offeror. In a given case, in the normal way “the costs of the proceedings” may include, pre-action costs.

Question 21

What is the effect of accepting a Pt36 offer within the relevant time on costs?

Answer 21

The effect is that where a claimant accepts a defendant’s Part 36 offer within the relevant period, a costs order is deemed to have been made on the standard basis with the result that the claimant is entitled to 100% of his or her assessed costs, that is, the amount payable following a detailed assessment.

Question 22

Can a claimant be ordered to pay the defendant’s costs on an indemnity basis for failing to accept a Pt36 offer within time?

Answer 22

Yes, as was the case in Jordan v MGN Ltd [2017], the claimant accepted a very old Part 36 offer on the eve of trial having failed to engage properly in settlement negotiations and having turned down a number of significantly more attractive offers that had, by trial, lapsed. Mann J held that the court should not only not depart from the usual order (requiring the offeree to pay the costs from the expiry of the relevant period), but that the claimant should pay such costs on an indemnity basis.

Question 23

What happens to the claim if a Pt36 offer is accepted?

Answer 23

1. If a Part 36 offer is accepted, the claim will be stayed.
2. In the case of acceptance of a Part 36 offer which relates to the whole claim, the stay will be upon the terms of the offer.
3. If a Part 36 offer which relates to part only of the claim is accepted, the claim will be stayed as to that part upon the terms of the offer.
4. If the approval of the court is required before a settlement can be binding, any stay which would otherwise arise on the acceptance of a Part 36 offer will take effect only when that approval has been given.
5. Any stay arising under this rule will not affect the power of the court—
   a) to enforce the terms of a Part 36 offer; or
   b) to deal with any question of costs (including interest on costs) relating to the proceedings.

Question 24

What if there are multiple defendants and only one makes a Pt36 offer?

Answer 24

(2) I f the defendants are sued jointly or in the alternative, the claimant may accept the offer if—
a. the claimant discontinues the claim against those defendants who have not made the offer; and
b. those defendants give written consent to the acceptance of the offer.
(3) If the claimant alleges that the defendants have a several liability to the claimant, the claimant may—
a. accept the offer; and
b. continue with the claims against the other defendants if entitled to do so.
(4) In all other cases the claimant must apply to the court for permission to accept the Part 36 offer.

Question 25

What does it mean that a Pt36 offer is without prejudice except as to costs?

Answer 25

(1)A Part 36 offer will be treated as “without prejudice except as to costs”.
(2)The fact that a Part 36 offer has been made and the terms of such offer must not be communicated to the trial judge until the case has been decided.
(3)Paragraph (2) does not apply—
a. where the defence of tender before claim has been raised;
b. where the proceedings have been stayed under rule 36.14 following acceptance of a Part 36 offer;
c. where the offeror and the offeree agree in writing that it should not apply; or
d. where, although the case has not been decided—
I. any part of, or issue in, the case has been decided; and
II. the Part 36 offer relates only to parts or issues that have been decided.

Question 26

What if the claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer?

Answer 26

The court must, unless it considers it unjust to do so, order that the defendant is entitled to—

a. costs (including any recoverable pre-action costs) from the date on which the relevant period expired; and
b. interest on those costs.

Question 27

What if the judgment entered is only least as advantageous to the claimant than the defendant’s Part36 offer?

Answer 27

The court must, unless it considers it unjust to do so, order that the claimant is entitled to—

a. interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;
b. costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;
c. interest on those costs at a rate not exceeding 10% above base rate; and
d. provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is—
i. the sum awarded to the claimant by the court; or
ii. where there is no monetary award, the sum awarded to the claimant by the court in respect of costs—

Amount awarded by the court
Up to £500,000
Prescribed percentage
10% of the amount awarded

Amount awarded by the court
Above £500,000
Prescribed percentage
10% of the first £500,000 and (subject to the limit of £75,000) 5% of any amount above that figure.

Question 28

What will the court consider in deciding whether it is unjust to implement the cost consequences of failing to achieve judgement more advantageous than a Part 36 offer?

Answer 28

In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including—
a. the terms of any Part 36 offer;
b. the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;
c. the information available to the parties at the time when the Part 36 offer was made;
d. the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and
e. whether the offer was a genuine attempt to settle the proceedings.
The question is not whether the offeree had reasonable grounds for not accepting the offer as if there were some unfettered discretion as to costs, but to consider whether the usual order would be unjust.

Question 29

What Part36 offers to the rules not apply to where the claimant fails to achieve judgement more advantageous than a Part 36 offer?

Answer 29

Paragraphs (3 – less advantageous) and (4 – at least as advantageous) do not apply to a Part 36 offer—

a. which has been withdrawn;
b. which has been changed so that its terms are less advantageous to the offeree where the offeree has beaten the less advantageous offer;
c. made less than 21 days before trial, unless the court has abridged the relevant period.

Question 30

What happens if the Claimant does not accept a Part 36 offer and then loses at trial?

Answer 30

Claimant will not receive any damages and will usually have to pay:

a. Defendants costs on the standard basis until judgment
b. Interest on the costs incurred by the Defendant from and including the day after the relevant period expired (usually day 22) until judgment.