What is a Part 36 Offer?

A Part 36 Offer allows a party in a litigation matter to make a settlement offer before it reaches trial. If the offer is not accepted and the opposing party fails to obtain a better result at trial, the Court is likely to impose severe costs and/or penalties.

A Part 36 Offer must comply with the Part 36 requirements. The Offer will most likely be for a financial sum, with the Defendant paying the Claimant’s costs on the standard basis.

What is the normal cost position at a trial?

At a trial, the Court will not consider any without prejudice correspondence until after they have handed down their judgment. The default cost position is that the losing party pays the winning party’s costs on the standard basis. The Court would therefore assess whether the costs are reasonable and proportionate.

The Court may also award costs on an indemnity basis. Here, the Court will only consider whether the costs were reasonably incurred (and therefore not consider whether they were proportionate). This generally means that you would obtain a higher percentage of costs.

How do I make a Part 36 Offer?

Part 36 Offers can be made in writing at any time and even before Court proceedings have started. However, if it’s made too close to a trial, the cost consequences may not automatically apply. You can make one whether you are bringing or defending a claim. And it’s important to consider your options carefully and contact a solicitor for advice.

A Part 36 Offer must remain open for 21 days; however, a longer offer period (the ‘Relevant Period’) can be stated if the person making that offer chooses.

Unless a Part 36 Offer is expressly withdrawn, it can be accepted at any time, even after the Relevant Period expires.

Can I make more than one?

Yes. Making a second Part 36 Offer will not withdraw the first one. You should seek legal advice on the consequences of making a second Offer.

How do I accept a Part 36 Offer?

If a Part 36 Offer is accepted, the Defendant has 14 days to pay the agreed financial sum to the Claimant.

You will need to inform the Court that a Part 36 Offer has been accepted. You will then try to agree the amount of costs that the Defendant will pay the Claimant. If you cannot agree the amount of costs to be paid, you can apply to the Court for an assessment of the Claimant’s costs.

What are the costs consequences of failing to beat a Part 36 Offer?

In the event that a Part 36 Offer is not accepted and the matter goes to a trial, the following cost consequences will apply:

• If you make a Claimant’s Part 36 Offer and obtain a judgment that is equal to, or more advantageous than your offer, the Defendant will be penalised with the costs as below:
  • The Defendant would be ordered to pay interest on the judgment at up to 10% above base rate per annum
  • The Defendant would be ordered to pay your costs, on the standard basis, up to the expiration of the Relevant Period
  • They would be ordered to pay your costs, on the indemnity basis, from the expiration of the Relevant Period
  • The Defendant would be ordered to pay interest on those costs at up to 10% above base rate per annum
  • They would have to pay an additional amount (10% of the amount awarded, up to £500,000.00 and 5% of any amount awarded above that figure)

• If you make a Defendant’s Part 36 Offer and the Claimant fails to beat your offer, the Claimant will be penalised with the costs as below:
  • You would be ordered to pay the Claimant’s costs on the standard basis up to the expiration of the Relevant Period
  • The Claimant would be ordered to pay your costs from the expiration of the Relevant Period
  • The Claimant would be ordered to pay interest on your costs at 8% per annum

What are the benefits of making a Part 36 Offer?

A Part 36 Offer can be a very powerful negotiating tool in litigation. It provides the incentive to settle a case before it reaches Court. An early offer can have a significant impact on the cost order that is made at trial. The opposing party therefore needs to be confident that it’s going to do better than your Part 36 Offer at trial.

When considering whether to make or accept a Part 36 Offer, it’s important to consider your options carefully and contact a solicitor for advice. Our dispute resolution solicitors provide clear, practical advice in Bristol and South Gloucestershire. To find out more and get the advice you need, call us on 0117 322 6610 or fill out our online enquiry form.