Part 36 Offers - What Are They And Why Are They Important In Property Litigation?

Why make a Part 36 offer?

The courts want parties to settle their disputes. Those who do not attempt any realistic settlement can expect the court to penalise them with costs orders and requirements to pay interest. One way of attempting settlement is by making a Part 36 offer. The name comes from Part 36 of the Civil Procedure Rules which governs the specific mechanisms for these settlement offers.

If a party does not "beat" a Part 36 offer at trial, the inference is that they should have accepted that Part 36 offer and were unreasonable to force the case to continue to trial. The key feature of Part 36 is that it allows the Court to impose penalties for that unreasonableness in the form of enhanced interest and costs. The purpose of making a Part 36 offer is to put pressure on the other side to settle the dispute without the need to go to trial.

The risk of rejecting a Part 36 offer and proceeding to trial

Cost and interest penalties can be imposed if Part 36 offers are not accepted within the relevant period (usually 21 days from the date of the offer), the case proceeds to trial and either:

a claimant fails to obtain a judgment more advantageous than a defendant's Part 36 offer; or judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant's Part 36 offer. A claimant who does not "beat" a defendant's Part 36 offer at trial, can be ordered to pay the defendant's costs from the end of the relevant period. This is a significant departure from the usual position that "costs follow the event" where the losing party pays the winner's costs.

If a defendant does not accept a claimant's Part 36 offer and continues the case to trial but the judgment from the Court is the same or better for the defendant than the claimant's offer, then the defendant can be ordered to pay the claimant's costs on the indemnity basis (where a higher...