What is a Part 36 Offer?

Part 36 offers are made under Part 36 of the Civil Procedure Rules and can be made as an offer to settle all or part of a claim. Put simply, this type of offer is usually made to  allow for a Claimant and Defendant to settle their claim without the Court’s involvement, or by the way of an order. 

Part 36 offers can be made by both the claimant and the defendant. If a party accepts the offer, the matter will be concluded and the issues between the parties resolved. The only issue outstanding would be the issues of costs. If the offer is rejected and the matter proceeds to Trial, there will be costs consequences if this offer cannot be beaten at Trial.

If you are involved in litigation and have received a Part 36 offer, you may be asking yourself the question “should I accept a Part 36 Offer?” In order to answer this question, it is important that you are aware of the rules surrounding these types of offers, as well as the consequences of rejecting or accepting the offer.

Rules for Making a Part 36 Offer (CPR 36.5)

Under CPR 36, certain requirements must be met in order to deem a Part 36 offer as valid. These requirements include:

• The Part 36 offer must be made in writing and must state clearly that it is made in line with CPR 36;
• It must provide a relevant period for the offer to remain open for acceptance. This is a period not less than 21 days, where the Defendant will be liable for the Claimant’s costs;
• The Part 36 Offer must state if it relates to the whole claim or part of the claim only;
• It must also state any counterclaims which are taken into account by the offer;

If a Part 36 Offer is proposed within 21 days before a Trial, a number of costs consequences will apply, including that the benefits of beating a Part 36 Offer are likely not to apply, unless the Court has abridged the relevant period (CPR 36.17(7)(c)

A Part 36 offer can be changed or withdrawn if it has not been accepted. Written notice of the withdrawal or change must be served.

Should I Accept a Part 36 Offer?: Consequences of Acceptance

Under CPR 36.11(1), Part 36 offers must be accepted in writing. They may be accepted at any time while the offer remains valid. Where a few different offers have been made, a party can accept any of these offers, unless they have been withdrawn.

The paying party (often the Defendant) must pay the receiving party (often the Claimant) within 14 days of the date of acceptance of the offer. Failure to do so allows the receiving party to seek a judgment (CPR 36.14(7)).

• If the offer is accepted within the relevant period, the Claimant is entitled to recover its costs up to the date of acceptance as per CPR 36.13(1).
• If the offer is accepted outside of the relevant period, or the offer is made less than 21 days before the Trial is due to take place, the parties will agree liability on costs, or the Court will be required to make a costs order.  It is important to note that a Part 36 Offer accepted outside of the ‘relevant period’ does not provide a deemed costs order under CPR 44.9, and detailed assessment can therefore not be commenced off the back of the same.
• If a Defendant’s Part 36 Offer is accepted outside of the relevant period, the Claimant will be able to recover costs up until the date which the relevant period expired.
• If the parties have agreed liability but cannot agree on the amount of costs, they will be assessed by the Court at detailed assessment on a standard basis.

Should I Accept a Part 36 Offer?: Consequences of Rejecting an Offer

Upon receipt of a Part 36 Offer, it is important that you take time to consider whether the offer is reasonable before deciding whether you should accept or reject an offer. Certain consequences can apply if you reject this type of offer and fail to beat the same at Trial and it is often worth considering counter offering a Part 36 Offer as a Claimant to ensure you enjoy the benefits of beating any such figure on Trial, as detailed below.

In circumstances where the Claimant obtains a judgment that does not beat a Claimant’s Part 36 Offer but is better than or equal to the Defendant’s Part 36 Offers proposed, the Court will usually make a costs order in the Claimant’s favour on the standard basis. For the avoidance of doubt, if a Defendant’s Part 36 Offer is not beaten, the Claimant will only recover their costs on a standard basis up to the date the Defendant’s Part 36 Offer expired, and will have to pay the Defendant’s costs of the litigation thereafter.

If judgment is given however, which beats the Claimant’s own Part 36 Offer, and the offer is made 21 days before Trial, the Court will make the following type of order unless it considers it unjust to do so:

• The Claimant will be awarded interest on the damages awarded at 10% from the date at which the relevant period of the Part 36 Offer expired;
• The Claimant will be able to recover its costs on the indemnity basis, rather than standard basis, from the date on which the relevant period expired;
• The Claimant is entitled to interest on those costs, not exceeding 10% above the base rate;
• The Claimant will receive a 10% uplift on the damages awarded, up to a maximum of £75,000

How can ARC Costs Assist Following the Acceptance of a Part 36 Offer?

Before accepting/making a Part 36 Offer, you should always obtain the legal advice of a Solicitor or other suitably qualified individual.

Once accepted however, ARC Costs are a team of highly experienced Costs Lawyers and Costs Draftsmen who regularly assist with the recovery/contesting of Part 36 costs once an offer has been accepted.

When litigation is conducted, the legal costs of obtaining damages can sometimes place the receiving party in more of a position of loss than the original damages claim, with costs sometimes extending into the tens or hundreds of thousands of pounds.

It is important that a balance is struck as to proportionality, and as independent costs experts, we can assist either receiving or paying parties to maximise/minimise the recovery of costs.

For receiving parties, we regularly assist with the preparation of your Costs Budget or Bill of Costs, conducting negotiations and detailed assessment proceedings.  For paying parties, we narrow the legal areas in dispute, preparing Points of Dispute / Points of Reply, and seek to minimise your costs exposure at proportionate fees.

For further information or to discuss your query, call one of the team or 01204 397302, or email one our experts at info@arccosts.co.uk. Alternatively, you can contact us via submission of our contact form, and one of the team will give you a call back to provide free initial advice.

ARC Costs are registered in England and Wales. Our Costs Lawyers are authorised and regulated by the Costs Lawyers Standards Board and we maintain indemnity insurance to deal with costs claims up to multi-million pounds disputes.

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