What is a Part 36 Offer?

A Part 36 offer is a settlement offer under Part 36 of the Civil Procedure Rules (CPR). A Part 36 offer can be made by the Defendant or the Claimant in order to settle a legal dispute early without having to go to Court. A Part 36 offer can be used to settle all or part of a legal dispute, but accepting a Part 36 offer is not an admission of liability.

There are rules and guidelines that must be followed when making or accepting a Part 36 offer.  

Making a Part 36 Offer

A Part 36 offer can be made by either the Defendant or the Claimant at any time during a legal dispute for all types of claims. 

The rules laid out on the Justice.gov.uk website state that a Part 36 must:

• “be in writing;
•  make clear that it is made pursuant to Part 36;
• specify a period of not less than 21 days within which the Defendant will be liable for the Claimant’s costs in accordance with rule 36.13 or 36.20 if the offer is accepted;
• state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue; and
• state whether it takes into account any counterclaim.”

Costs Consequences of Accepting a Part 36 Offer

An anomaly in the CPR rules regarding Part 36 offers made by Claimants means that a Defendant can delay in accepting a Part 36 offer and may not have to pay the Claimant’s costs, especially if the Claimant fails to engage in previous negotiations. 

The cost consequences of accepting a Part 36 offer as laid out on the justice.gov.uk website are as follows:

“(1) Subject to paragraphs (2) and (4) and to rule 36.20, where a Part 36 offer is accepted within the relevant period the Claimant will be entitled to the costs of the proceedings (including their recoverable pre-action costs) up to the date on which notice of acceptance was served on the offeror.

(Rule 36.20 makes provision for the costs consequences of accepting a Part 36 offer in certain personal injury claims where the claim no longer proceeds under the RTA or EL/PL Protocol.)

(2) Where—

(a) a Defendant’s Part 36 offer relates to part only of the claim; and

(b) at the time of serving notice of acceptance within the relevant period, the Claimant abandons the balance of the claim,

the Claimant will only be entitled to the costs of such part of the claim unless the Court orders otherwise.”

Late Acceptance of a Part 36 Offer: Liability for Costs

In previous cases, it has been shown that late acceptance of a Part 36 offer may help one party escape automatic costs rules.

In the personal injury case of Hislop v Perde, there was question as to whether a Defendant’s late acceptance of a Part 36 offer would help the Claimant escape the fixed costs regime and instead entitle them to claim costs on the indemnity basis.

The Court of Appeal held that, although the Defendant accepted a Part 36 offer 18 months after the expiry of the relevant time period, fixed costs would still apply and a costs order for indemnity costs would not be appropriate on this occasion.

Pallett v MGN Case: Late Acceptance of Part 36 Offer

Circumstances of the Case

In this case, the Claimant (Roxanne Pallett) made a claim against the Defendant (MGN Ltd) for infringement of privacy rights. The Claimant made a Part 36 offer on the 20th October 2020 to settle for £99,500 and ancillary relief. The Claimant’s Part 36 offer stated that if the offer was accepted within 21 days, then the Defendant would be liable for her costs.

However, in an attempt to escape the automatic Part 36 costs rules, the Defendant tactfully waited until the 22nd day to accept the offer, which was outside of the relevant period. Therefore, on accepting the Part 36 offer, the Defendant expressed their right in inviting the Court to consider the liability for the costs.

The Defendant claims that Pallett did not fully engage in the negotiations that took place from 2018 in which she received various offers to settle the claim ranging from £60,000 to £90,000 with different degrees of costs payments. However, Pallet’s Solicitors stated that none of the offers put forward by the Defendant were adequate and that Pallet wanted to have disclosure before accepting an offer or putting forward a counter offer. 

The outcome of the case

The Judge held that under the rules, the Defendant was entitled to delay the date of acceptance of the Part 36 offer under CPR 36.13 (4)

“The one thing that an offeror would not expect is that the offeree can wait until the relevant period (usually 21 days in practice) has passed, accept the offer (and thus bind the offeror) and then seek to avoid the costs by asking the Court to determine them. The offeror will usually not think that that is an appealing option to have forced on him or her; otherwise it would have been offered in the first place. Yet that seems to be the effect of CPR 36.13(4), and Mr Sherborne did not contend otherwise.”

Because the Claimant did not fully engage in the earlier negotiations to settle the case, the Defendant accepted the Claimant’s Part 36 offer one day late, arguing that it should not have to cover the Claimant’s costs from the date of 26th March 2019, which is the date on which the defence was served and 20 months before the Part 36 offer was made. Even though the Defendant’s argument may have been seen as valid, the Judge went on to reject the argument, stating that it was perfectly reasonable for the Claimant to not engage in previous negotiations. 

“In my view, the claimant’s attitude of declining to negotiate until she was better informed was an entirely reasonable one, bearing in mind the one-sided nature of the possession of information in all these cases and, in this one, the failure of the defendant to comply with the early disclosure regime.”

The Court carried out discretion in deciding the Defendant’s liability for costs in this case and decided that it would be unjust to allow the Defendant to escape the Part 36 costs rules as would normally be allowed under CPR 36.13(4) and therefore allowed the Claimant to recover all costs of the case.

“I, therefore, find that those normal consequences should follow and that the claimant should have all the costs of the proceedings on the basis of the normal template order.”

Word of Warning

At the end of this case, the Judge warned that this case “should not be taken as a green light for all claimants to decline to enter into negotiations before disclosure is complete. Such a posture would not be correct in every case”.

How Can ARC Costs Assist?

ARC Costs are a team of specialist Costs Draftsmen and Costs Lawyers who can assist you in your costs matters. We can provide specialist legal advice on all issues relating to costs, including part 36 costs consequences. We can provide our specialist advice in relation to both Claimant Part 36 offers and Defendant Part 36 offers.

We hold vast experience in assisting both the receiving party in recovering their costs and the paying party in disputing any unreasonable costs they may be liable to pay.

We will assist you in all matters relating to costs, from preparing the Bill of Costs, preparing Points of Dispute or replying to the same and assisting you and representing you at Detailed Assessment. We will be able to negotiate with your opponents throughout the case.

We can also assist with any costs matters before your case has concluded, such as the preparation of Precedent H or Statement of Costs for Trial.

Should you wish to discuss your query with us, please do not hesitate to contact us. You may email us on info@arccosts.co.uk or call us on 01204 397302. Alternatively, you may fill out the contact form at the top of the page, and a specialist costs expert will contact you to discuss your case

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