Under Part 36 of the Civil Procedure Rules, a party involved in litigation can adopt a pro-active, tactical approach by making what is known as a Part 36 offer to their opponent. The general principle is that the person making the offer does so in good faith, with the offer being made as part of a genuine attempt to settle the case. It is also recognised that the amount of the offer should reflect some sort of a discount on the total value of the claim, even if it is a discount as little as only 5%.
Who can make a Part 36 offer?
The offer can be made by either the Claimant (the person making the claim) or the Defendant (the person whom the claim is being made against) at any time within the duration of a claim and can be on the issue of liability, the valuation of the claim or both. For example a party could if they so chose, send a letter making a Part 36 offer to settle liability on a 50:50 basis, as well including a sum to settle the claim.
Any offers on the value of the claim are intended to be without any admission on liability. This means that when an offer to settle the claim is made, the party making it does not necessarily admit liability. A Part 36 Offer can be accepted within 21 days of it being made. However, after 21 days the party making the offer does have the right to withdraw the offer and proceedings with continue as if the Part 36 offer was never made.
As alluded to above, the party making the offer (the offeror) can after the relevant period (being 21 days after the offer was communicated to the recipient, the offeree) withdraw or vary the terms of the offer. If the offer is not withdrawn, then an offeree can theoretically accept a Part 36 offer outside of the relevant period - even if there have been other offers made in the interim – though there will be costs consequences in doing so.
It can therefore be seen that Part 36 offers operate under their own code, and are not governed by normal contract law.
Part 36 Offers are intended to put pressure on a party to accept a settlement and there are costs consequences arising from this.
In particular, if the offer is rejected but you then fail to meet or beat the offer at a later trial or settlement, you would be responsible for the other party’s costs from the date of when you could have accepted the offer (i.e. after the expiry of the 21 days) up until settlement of the claim. This could prove to be very expensive and could result in your compensation being wiped out by paying legal costs to your opponent.
However, if you either matched or bettered your offer then the other side will be responsible for all of your costs, to include indemnity costs from the date that the offer expired until the date of the settlement. Indemnity costs effectively entitle the receiving party to be paid all of the costs incurred during the relevant period – without those costs having to be assessed to ensure that they were reasonably incurred.
Examples of Part 36 offers in practice
KUNAKU –V- BARCLAYS BANK (2010)
In this case the Defendant Bank reminded the claimant that an earlier Part 36 offer was still open for acceptance. The Claimant accepted the offer, whereupon the Defendant sought to claim their costs from the date of the expiry of the ‘relevant period’, to the date of settlement. However the Court of Appeal ordered that each side should in fact bear their own costs from the end of the relevant period, on the basis that Barclays should have specified the costs position to the Claimant when reminding him of the earlier offer.
MAGICAL MARKING –V- WARE & KAY LLP
In this case the Claimant was seeking to claim damages of £12 million, in a Trial that lasted 13 days. The Claimant was in fact awarded only £28,000, as the Court found that the claim had been massively exaggerated.
In this case the Judge did not criticise the Defendants for not making any offers to settle before Trial, as the consequences of doing so would have been that they would be liable to pay the claimant’s costs. Consequently the Claimant was in fact ordered to pay 85% of the Defendant’s costs, effectively wiping out their compensation.
This article merely scratches the surface of the murky world of Part 36 offers – and for further information please do not hesitate to contact our Clinical Negligence department on 01202 315005.