One of the abiding frustrations of trying to guide clients through the maze of the Civil Justice system is the need to explain concepts which may not need to be as complicated as they are.
One of the problems is the insistence on the part of those who make and apply the rules on speaking in jargon, often referable to the various groups of rules or “parts” of the Civil Procedure Rules. Thus we bandy around terms such as “part 8 claim”, “part 18 requests” and, until relatively recently “part 20 claims” and “part 20 defendants”.
But one of the most important, and potentially confusing, references is to “part 36 offers”.
Anything that looks or smells like a “part 36 offer” must be carefully explained and considered.
This note is an attempt to explain the position in the most simple terms.
The rules collected in part 36 of the Civil Procedure Rules are intended to encourage the settlement of disputes. In doing so, litigants save costs and time and court resources are freed for other cases.
The rules work by stick and carrot: they penalise failure to settle and encourage the making of offers.
The justification is as follows. If you refuse to accept an offer which would have been as advantageous to you as the eventual court judgment, you are being unreasonable.
You therefore deserve sanction. The making of such an offer merits reward.
What can a claimant do?
A claimant can make a well-judged offer based on what he expects to recover. If it is an all-or-nothing case, he can offer to accept a relatively small discount from the full amount or something pretty close to it (there are however provisions which require the court to consider whether the offer amounts to a genuine attempt to compromise).
The offer must be subject to an acceptance period of not less than 21 days (“the relevant period”) during which notice of withdrawal will not be effective and during which the defendant will continue to be liable for the claimant’s costs.
If the claimant were to win without having made an effective part 36 offer, he would get:
- The amount due
- A contribution to the costs incurred as assessed by the court.
- Interest at a rate up to 8%
However, if having made an effective offer, he gets the same or more than what he offered, he gets:
- The amount due
- A ten percent bonus (subject to limits, not exceeding £75,000)
- Interest at a rate not exceeding 10 percent above base rate on the enhanced amount above for all or some of the time following end of the relevant period.
- Costs assessed on a more generous basis from the date of expiry of the relevant period.
- Interest on those costs at a rate not exceeding 10% above base rate.
What can the defendant do?
A defendant can make a well judged offer based on what he expects to pay.
- If the claimant wins more than the sum offered, the claimant gets (in addition to the sum awarded and interest) his costs as assessed by the court together with interest on those costs.
- However, if the claimant gets the sum offered or less, he only gets his costs up to the last day of the acceptance period and thereafter has to pay the defendant’s costs as well as his own.
Some key points
- An offer can be withdrawn after the relevant period but thereafter will be of no effect (although it may affect the exercise of the court’s general discretion on costs).
- An offer can be accepted late if it is not withdrawn but the general rule is that the offeree must pay the offeror’s costs from the date of expiry of the relevant period to the date of acceptance.
- The court has an overriding discretion to vary the prescribed consequences based on the circumstances and the conduct of the parties. Nevertheless, the presumption is that these rules apply generally.
What do you do if you are faced with an offer?
- Do not ignore it, consider it very carefully, assess the risks and make a decision within the relevant period if possible.
What to do if you want to settle on a reasonable basis?
Make a carefully pitched offer. There really is little to lose.