A Part 36 offer to settle can be used:
- By the claimant or the defendant. So, if you are the claimant, you can consider making a Part 36 offer. You also need to be ready to deal with a Part 36 offer made by the defendant. To do either you will have to carefully and realistically value your case.
- In fast track and multi-track claims only. You cannot use the Part 36 process in small claims. (In small claims, the parties can make offers to settle, and have “without prejudice” or “without prejudice save as to costs” communications, but the formal rules in Part 36 do not apply.)
- Before or after the start of court proceedings, right up to near trial (special rules apply close to trial).
Just like informal offers made on a “without prejudice save as to costs” basis, if the attempt to settle formally using Part 36 is unsuccessful, the judge doesn’t get to know that the process has been attempted or what has been offered and rejected until after the trial. This means that they cannot be affected by the value of the Part 36 offer when giving judgment. It only becomes relevant after trial when the judge decides what to do about legal costs.
Tactical and financial advantages
The financial pressure created by a Part 36 offer to settle comes about because of the possible effect on the amount of legal costs you could end up paying.
The costs consequences available under the Part 36 procedure depend on:
- which party makes the offer
- whether or not the offer is accepted
- if it is accepted, whether this was within or after expiry of the Relevant Period (see below)
- if it is not accepted, what happens at trial.
For example, if you turn down a Part 36 settlement sum, but don’t get a better result from the judge at the trial than what you have already been offered, you will have to pay all the other side’s legal costs from the end of what is known as the Relevant Period. This is the period (usually 21 days from when the offer was made) during which the offeree can accept the offer and take advantage of the more favourable costs consequences. The Relevant Period has to be set out in the offer
Mark claims £12,600. The defendant, Joan, makes a Part 36 offer to pay Mark £11,000 on 1 February giving Mark a Relevant Period of 21 days to accept. Mark decides it’s not enough, and chooses to let the case go to trial.
At the trial on 10 July he wins. The court awards him £10,900. This award doesn’t beat the Part 36 offer to settle made by Joan. Mark will therefore be very likely to have to pay all Joan’s legal costs from 22 February to 10 July including the costs of the trial, plus interest. Mark needed to be awarded £11,000.01 or more to avoid being ordered to pay any of Joan’s legal costs.
If Joan is a litigant in person, Mark will have to pay her costs of preparation, probably at £19 per hour. If Joan is legally represented, he will have to pay her solicitor and barrister’s costs, which could run to many thousands of pounds.
The tactical advantage of making a Part 36 offer is that it forces the other side to pause and think very hard about the strengths and weaknesses and value of their case.
Receiving a Part 36 offer
It’s more common to get a Part 36 offer if the defendant is legally represented. You need a good idea of what your claim is worth, and what you are prepared to accept. Your ideas about this may change as more evidence comes your way, for example the defendant’s witness statements or expert reports, as the claim progresses.
You must take any Part 36 offer made to you very seriously. You will usually only get 21 days to accept and take advantage of the more favourable costs consequences of doing so (the Relevant Period). Most reasonable defendants will extend that time for a few days if you have a good reason, but you will need to ask – don’t just ignore the deadline! A Part 36 offer can be accepted after the Relevant Period unless it has been withdrawn. But if it is accepted after the Relevant Period, this is on the basis that the offeree accepts the less favourable costs consequences from the end of the Relevant Period to the date they accepted the offer.
It is often very difficult to assess whether an offer is good or reasonable, and a defendant isn’t obliged to explain how they came to the amount. If you can, get legal advice to help you decide, although you will need to find someone who can help within the Relevant Period you have to accept (which is usually 21 days). Needing a short period of extra time to consider the offer with a solicitor would be a reasonable reason to ask the other side to agree to extend the Relevant Period.
One big factor in many cases is that if the defendant says you are partly at fault, and the judge agrees, you are at risk of losing a proportion of the value of your claim. For example, if you are found to be one third to blame, you will lose one third of the value of your claim. This is often known as 'contributory fault' or 'contributory negligence'.
You slipped on a wet floor at work and fell injuring your leg. You were off work and lost earnings, and had other losses and expenses. You used the Judicial College Guidelines for the Assessment of General Damages in Personal injury Cases and valued your leg injury at £6,000 and your loss of earnings and other losses and expenses at £5,000, totalling £11,000. The defendant said despite the floor being wet (which was their fault), you were 50% at fault for running and not looking where you were going, that your leg injury was less serious, and that you were off work longer than you medically needed to be. They offered £4,800 to settle. You didn't agree, and have issued proceedings. They have now made a Part 36 offer of £7,000.
If the judge decides the defendant was at fault, you were not at fault at all, and you were reasonably off work, you could get the full £11,000. But if the defendant is successful in what they say about you at trial, you might end up, for example, with:
- as little as £5,000 if the judge decides you were 50% to blame, and that you should have been back at work sooner, or
- £7,260 if the judge accepts the amounts you have claimed, but decides you were one third to blame, or
- just under £7,000 if the judge decides you were one third to blame, but slightly reduces your losses and expenses claim (for example deciding you could have been back at work a few weeks earlier). This award fails to beat the Part 36 offer.
Any award that does not beat the £7,000 Part 36 offer will be very likely to result in you paying the other side's legal costs and interest on those costs, from the end of the Relevant Period. How confident are you about the amounts you have claimed? And about a judge agreeing or disagreeing about the accident being partly your fault and the level of deduction that might follow on from that?
Some claims are simpler to assess, as they don't involve any possible contributory fault, and are simply a matter of value.
Your caravan was written off when parked in your driveway by your neighbour's builder's digger. You have claimed £15,000. The builder's insurers have made a Part 36 offer of £14,000. Are you prepared to accept less than the value of your claim to put an end to all the risks involved in going to trial? How confident are you that you will get the full £15,000? Any award that does not beat the £14,000 Part 36 offer will result in you paying the other's side's legal costs and interest from the end of the Relevant Period.
Making a Part 36 offer
A claimant can also make a Part 36 offer to encourage the defendant to agree a settlement. Again, the costs consequences depend on whether or not the defendant accepts and, if so, when.
If the defendant accepts the offer, the defendant will be very likely to have to pay the claimant’s costs.
If the defendant does not accept the offer and the dispute goes to trial, the court is likely (unless it is unjust) to order the defendant to pay the claimant’s costs on an indemnity basis (which is likely to be higher) from the end of the Relevant Period, plus interest on costs and the sum awarded. The defendant also pays an additional amount of a percentage of the amount awarded, up to £75,000, calculated by applying rules set out in Part 36.
If you are a successful claimant and a litigant in person, you will only get your costs for preparing the case at £19 per hour, or whatever your earning loss rate is if that is higher. However, a represented defendant may be incurring costs at between £100 and £400 per hour, depending on the charging rate and location (central London or elsewhere) of their solicitor and barrister, if they have one.
Part 36 and personal injury and road traffic claims
Part 36 can be used in fast track and multi-track personal injury and road traffic accident claims but operates slightly differently, because costs in fast track personal injury and road traffic cases are fixed on a scale (see Low value Personal Injury Guide).