Part 36 Offer Update

Introduction

A party to English court proceedings can mitigate its costs exposure (as a defendant) or enhance its costs recovery (as a claimant) by making a well-judged settlement offer that complies with Part 36 of the Civil Procedural Rules.

The current version of Part 36 dates back to 2007. If the changes made then were intended to reduce the legal wrangling surrounding such offers post-trial, they do not appear to have achieved that aim. Recent months have seen a flurry of cases concerning Part 36 offers and a further amendment to the rules is anticipated this October. We set out below some of the key areas which have attracted judicial comment in the last year and provide tips on how to avoid the potential Part 36 pitfalls.

Is your offer a Part 36 offer at all?

1) Is it even an offer? This may seem an obvious point, but the recent case of AB v CD & Ors1 demonstrates the potential problems of "strategic" offers. The concept of an "offer to settle" is not defined in Part 36. However, the judge said it was clear that a request to a defendant to submit to judgment for the entirety of the relief sought by the claimant cannot be an offer to settle within Part 36: "In my judgment, the offer must contain some genuine element of concession". For claimant offers, this can be something which it is in the claimant's power to give up either at the time the offer is made or only at or after the trial (provided that agreeing to forgo the opportunity to obtain it is not "merely an empty gesture").

On the facts of the case, the claimant had not made a valid Part 36 offer because he had not stated any specific sum which he would be prepared to accept and nor had he made any real concession of significant value. Forgoing an advantage which could have been used in future proceedings against third parties was not a genuine concession either.

2) What does it say about costs? CPR r36.10(1) provides 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 London Tara Hotel Ltd v Kensington Close Hotel Ltd2 an offer was sent by the claimant to the defendant. The letter in question was headed "Claimant's Part 36 Offer to Settle made on the Counterclaim - Without Prejudice save as to costs". One of the terms of the offer was that the defendant would pay only 10% of its costs of the litigation. Roth J held that the result of that term was that the offer was not a valid Part 36 offer. When a Part 36 offer is accepted, the claimant is entitled to its costs up to the date of acceptance and: "This is not a matter of discretion but results by operation of the rules. The court has no power to disallow a proportion of those costs".

Similarly, in Howell & Ors v Lees-Millais & Ors3, the offer letter offered the claimant 75% of her costs of an application. The Master of the Rolls said the offer was not Part 36- compliant because it "specifically excluded the offeree from recovering all her costs, as it gave her the option of recovering only a proportion of...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT