What Happens If A Part 36 Offer Is Rejected?

Commercial disputes are an all too frequent fact of life. They can be time-consuming and stressful and you can find yourself facing some degree of financial uncertainty. Battling things out in court often seems like an inevitability but there are alternatives to this. A Part 36 is a provision in the Civil Procedure Rules (“CPR”) designed to encourage parties to settle disputes without going to trial. Under Part 36, both claimants and defendants can inform the other side what they will accept or offer to resolve a dispute. If a party does not accept an offer made under Part 36 (a “Part 36 offer”), it risks being made liable to pay more in interest and/or costs on a judgment than if no offer had been made. . This financial risk encourages parties to make Part 36 offers and to seriously consider Part 36 offers made to them. In this article, what happens if a part 36 offer is rejected, we take a look at the mechanism behind this process.

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The tactics of when and how to make a Part 36 offer

Making a well-judged Part 36 offer is an important tactical step. A Part 36 offer focuses the opponent’s mind on settlement and, if this isn’t achieved, will protect the offeror’s position on costs. Consequently, parties should consider whether making a Part 36 offer is appropriate at all key stages in the lifespan of a dispute. If a Part 36 offer has been made, the relevant parties should regularly review as to whether it should be accepted, revised or withdrawn.

Making a Part 36 offer is one of the most important tactical steps that a party, especially a claimant, can take during the course of legal proceedings. The offer allows the offeror to apply pressure to the other side in order to settle a case. Additionally, it will protect the offeror’s position on costs. If the opponent does not accept a Part 36 offer, that person or entity takes a significant risk as to costs and interest. Similarly, you will need to give careful consideration to any Part 36 offers made by the opponent.

The importance of Part 36 offers is such that parties should consider at all key stages in the life-span of a dispute whether a Part 36 offer should be made, accepted, revised or withdrawn (and keep a careful record of all Part 36 offers made or received). Making an offer will not be appropriate in all cases, and parties may sometimes prefer to make a without prejudice save as to costs offer to settle. This is also known as a Calderbank offer

What are the considerations of making a Part 36 Offer?

1. They are made without prejudice save as to costs. This means the judge does not know about the offer until after judgement and then considers offers to decide how it will impact the cost order.
2. Part 36 offers can be made at any time up to the time of judgment, and even before court proceedings are issued.
3. They do not apply to claims allocated to the small claims track.
4. It must be in writing, state that it is intended to have the consequences of Part 36, state whether the offer is made to settle the whole claim or only part of it (and if so which part) and whether it takes into account any counterclaim.
5. If an offer is made 21 days or more before the start of trial, it must also specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs if the offer is accepted.
6. If the offer is being made by a defendant and the offer is to pay a sum of money in settlement of a claim, then the offer must be to pay a single sum as opposed to being paid in instalments.
7. The defendant must offer to pay the sum no later than 14 days after acceptance by the claimant, otherwise the offer will not be treated as a Part 36 offer, unless the claimant accepts the offer.
8. It needs to be a genuine offer to settle reflecting risks of litigation.

In what circumstances should you consider making a Part 36 offer to settle?

• They should be considered in all cases in order to achieve the best costs and interest on costs scenario if the matter has to proceed to trial
• Claimants should consider making early Part 36 offers in order to resolve disputes and to potentially recover an enhancement on damages or costs of up to £75,000 pursuant to CPR 36.147(4)(d) if the offer is not accepted and the matter proceeds to trial (for offers made from 1 April 2013)
• The making of a Part 36 offer to settle can focus an opponent’s mind and, even if not accepted, may lead to a commercial settlement of the dispute. They increase the risk of proceeding with the litigation for the opponent
• If accepted, a Part 36 offer to settle can avoid the time and potential irrecoverable costs associated with court proceedings
• A Part 36 offer to settle will not be appropriate where a defendant does not wish to pay a claimant’s costs or in respect of claims being dealt with on the small claims track.

What happens if a defendant’s offer is rejected?

If the claimant obtains a more advantageous judgment to it than the terms of a defendant’s Part 36 offer, then (assuming that it has not matched or beaten its own Part 36 offer), the court will then apply the usual principles when considering what order as to costs to make. If claimant fails to obtain a more advantageous judgment than a defendant’s Part 36 offer, and the offer is made more than 21 days before trial, then unless the court considers it unjust to do so, the claimant will be liable to pay the defendant’s costs from the date of expiry of the Relevant Period and interest on those costs. Consequently, defendants need to pitch their offers carefully as claimants will not accept offers which they consider so low that the risk of adverse costs consequences is acceptable to them.

What happens if a claimant’s offer is rejected?

If the claimant obtains a judgment that is not as advantageous to it than the terms of the claimant’s Part 36 offer, then (assuming that he has not failed to beat a defendant’s Part 36 offer), the court will apply the usual principles when considering what order as to costs to make. If the claimant obtains a judgment that is at least as advantageous if not better than the terms of the Part 36 offer, and the offer is made more than 21 days before trial, then unless the court considers it unjust to do so, it will order that the claimant is entitled to:

• interest on the whole or part of any money awarded at not more than 10% above base rate for some or all of the period starting with expiry of the Relevant Period
• its costs on the indemnity basis (which is more generous than the standard basis) from the date of expiry of the Relevant Period
• interest on those costs not exceeding 10% above the base rate
• an additional amount of up to a maximum £75,000 (calculated as being 10% of the money awarded up to £500,000 and 5% above this amount up to £1m; if it is a non-money claim, this additional amount is calculated on the amount of costs ordered instead).

Consequently, claimants need to decide carefully what offers to make, as defendants will not accept offers that are so high that the risks of adverse costs consequences are acceptably low; and defendants need to carefully assess the risks that a claimant will match or beat its Part 36 offer when it is made and, if not accepted at the time, to re-assess those risks as the claim progresses.

How we can help

We have a proven track-record of dealing with and advising on alternative forms of dispute resolution and Part 36 offers. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.

How to Contact our Commercial Litigation Solicitors

It is important for you to be well informed about the issues and obstacles you are facing. However, expert legal support is crucial in terms of saving you money and ensuring you achieve a positive outcome.

To speak to our litigation solicitors today, simply call us on 0345 901 0445, or allow a member of the team to get back to you by filling in our online enquiry form. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

Authored by Ben Posted in Litigation, News Tagged as