We aim to reach a settlement with your opponent throughout the life of your claim. We encourage our clients to make an early offer to settle. An early offer can help you minimise your legal costs involved with progressing your claim. Making the offer a ‘Part 36 offer’ puts further pressure on your opponent to settle, as the cost consequences can be significant.
What is a Part 36 offer?
Part 36 is a provision of the Civil Procedure Rules that is aimed to encourage parties to settle their claims and to penalise parties that do not accept an offer that they do not beat at trial.
Offers can be made by both parties, and will be deemed either a claimant’s offer or a defendant’s offer. In both a claimant’s offer and a defendant’s offer, the defendant will also be liable to pay the claimant’s reasonable costs.
Requirements of a Part 36 offer:
- The offer must be in writing;
- It must be clear that it is pursuant to Part 36;
- It must specify a period of not less than 21 days (which is known as ‘the relevant period’) within which the offer can be accepted;
- It must also state that the defendant will be liable for the claimant’s costs if accepted;
- It must state whether it applies to whole or part of the claim;
- It must state whether it takes into account any counterclaim.
What happens if the offer is accepted?
If the offer is accepted, the claim is stayed. The defendant will have to pay the sum within the offer and the claimant’s legal costs. The legal costs will be assessed (by a court) if they cannot be agreed between the parties.
What happens if the offer is rejected?
If the offer is rejected, and the matter proceeds to trial, the judge will not be aware of the offers until after the claim has been decided. Once the claim has been decided the judge will then consider the costs. If the judgment is equal to or better than the offer, the judge will penalise the person that has rejected this offer.
Example: at the hearing, the judge awards the claimant a sum of £35,000.00.
Scenario 1: the claimant made a part 36 offer of £30,000.00. As the claimant has done better than their offer, the defendant will be penalised with the following cost consequences:
- Interest on the judgment at 10% above base rate from the date on which the relevant period expired;
- Costs on the ‘indemnity basis’ from the date that the relevant period expired. This means that the court would only deduct any costs it considered unreasonable (whereas on the ‘standard basis’ would also deduct any costs it considered disproportionate);
- Interest on those costs at 10% above base rate;
- An additional sum of 10% of the amount awarded (up to a maximum of £50,000) and 5% of any amounts awarded above £500,000 (up to a maximum total of £75,000).
Scenario 2: the defendant made a part 36 offer of £40,000.00. As the defendant has done better than their offer, the claimant will be penalised with the cost consequences below:
- Costs on the ‘indemnity basis;
- Interest on those costs at 10% above base rate.
How AMD can assist you
A strategic early part 36 offer can place significant pressure on a party to settle and provides the offerer with cost protection. It is therefore imperative that the offer complies with the requirements of part 36 and that it is pitched at the right level.