In legal disputes, particularly in civil litigation, the resolution of cases is often reached through settlement negotiations to avoid any uncertainties, rather than matters having to proceed to a final hearing/Trial, which carries risks for all parties. Two critical mechanisms that parties may use to facilitate negotiated settlements are Calderbank offers and Part 36 Offers.

A Calderbank offer is a type of settlement proposal written on a “without prejudice save as to costs” basis, meaning it cannot be disclosed to the court until costs are being considered. Also referred to as “without prejudice save as to costs” offers, Calderbank offers provide an alternative to Part 36 offers.

While they offer greater flexibility compared to Part 36 offers, the cost implications are left entirely to the court’s discretion, unlike the more predictable outcomes associated with Part 36 offers.

Holden v Holden & Anor [2024] EWHC 453 (Ch)

The judge had previously delivered a judgment on certain preliminary issues in a dispute concerning a farming partnership. He was now tasked with deciding the matter of costs. A key issue that arose was whether specific offers made by the defendant qualified as Part 36 offers.

According to the rules, a judge cannot determine costs following a preliminary issue trial if Part 36 offers have been made. However, there was contention over whether these offers were indeed Part 36 offers. Both parties agreed that the judge should examine the offers to make this determination.

Upon examination, Mr Nicholas Thompsell (sitting as a Deputy High Court Judge) stated “… it was my determination that the offers should not be regarded as being offers under CPR 36. Now that I had seen the offers, I considered that they should be regarded as admissible Calderbank offers for me to take account of under CPR rule 44.2(4)(c).”

According to CPR rule 36.6(2), a defendant’s offer that proposes payment of all or part of a sum more than 14 days after the offer is accepted will not be considered a Part 36 offer unless the offer is accepted. In this case, both of the offers in question involved payment beyond this 14-day period. They were not accepted, and therefore not to be treated as Part 36 offers. There was also doubt whether an acceptance of the offer created a binding contract between the parties.

The court concluded that the offers made by one of the parties, despite resembling Part 36 offers, did not meet the technical requirements under CPR 36.6 and thus were treated as Calderbank offers. This distinction was crucial because it influenced how costs were awarded, reflecting the court’s emphasis on procedural compliance in determining the validity of settlement offers​.

This case underlines the importance of correctly structuring settlement offers to ensure they are recognised as Part 36 offers, which can have significant cost implications in litigation.

Calderbank vs Part 36 offer

Calderbank offers and Part 36 offers are both tools used in litigation to encourage settlement and influence the awarding of costs, but they differ significantly in their formal requirements, flexibility, and consequences.

Formality and structure

• Part 36 offers: These are governed by Part 36 of the Civil Procedure Rules (CPR) in England and Wales and must adhere to strict procedural requirements. A Part 36 offer must specify a period for acceptance of not less than 21 days within which the defendant will be liable for the claimant’s costs if the offer is accepted (the “relevant period”).
• Calderbank offers: These are more informal and are made “without prejudice save as to costs.” They are not subject to the strict procedural requirements of Part 36 and can be more flexible in their terms.

Cost consequences

• Part 36 offers: If the offeree accepted the offer, the claimant is entitled to their costs on the standard basis. If the party ‘fails to beat’ the offer and the offeror achieves a better outcome at trial, the offeree may face significant cost penalties. The rules specify that the offeree could be required to pay the claimant’s costs on an indemnity basis from the expiry of the offer, along with interest on those costs and potentially an additional sum of 10%, if the Part 36 Offer is beaten at Trial.
• Calderbank offers: The cost consequences of a Calderbank offer are entirely at the discretion of the court. While a court may penalise a party that unreasonably refuses a Calderbank offer, it has broader discretion and is not bound by the specific cost consequences that follow from a Part 36 offer.

Flexibility

• Part 36 offers: These are less flexible because they must comply with strict court rules as they are a time limited offer.
• Calderbank offers: These allow for more flexibility, as the terms of the offer can be tailored to the specific circumstances of the case. A Calderbank offer, if accepted, can be helpful when settling disputes that a Part 36 Offer would not apply to. For example, claims allocated to the small claims track and arbitration proceedings, or for setting offers which have an expiry period of less than 21 days.

How can ARC Assist?

ARC Costs are expert Costs Draftsman and Costs Lawyers that regularly assist both receiving and paying parties in resolving costs disputes in the jurisdiction of England and Wales. We assist in the negotiation of the settlement of legal costs and throughout detailed assessment procedures. We pride ourselves on our excellent success rates and can ensure that our knowledge will help to provide the best results within your case.

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