Trooping the Part 36 offer

In this weeks costs blog we hand over to one our Trainee Legal Costs Consultants who looks into the acceptance of a Part 36.

A Part 36 offer must be in writing and must make clear that it is made pursuant to Part 36. The offer must also specify a period of time, no less than 21 days within which the defendant will be liable for the Claimant’s costs. It must also state whether the offer applies to the whole or part of the claim and whether it takes into account any counterclaim.

Any offer made under Part 36 is made on the condition that it is ‘without prejudice, save as to costs’. The court will only be notified of a Part 36 offer if and when the matter of expenses is brought before it for consideration. A Part 36 offer may be in the form of a monetary quantity, but it can also be in the form of a non-monetary offer, such as an offer on liability. A Part 36 offer may be made at any time until judgment, including before proceedings have been issued. A Part 36 offer is made when it is served on the offeree.

The main reasons we would use a Part 36 offer are:

  1. To give the impression that we are taking a stand on that offer, and that it is a sum we realistically think the claim is worth, and to therefore give the impression of increased risk to the opposing party.
  2. To actually take a stand on an offer because it is a sum the court may realistically assess costs at or above on assessment, and therefore increase the actual risk to the paying party by reference to the penalty clauses.

If the Claimant obtains a more advantageous judgment to it than the terms of a Defendant’s Part 36 offer, then (assuming that it has not matched or beaten its own Part 36 offer), all that will happen is that the court will apply the usual principles when considering what order as to costs to make. If Claimant fails to obtain a more advantageous judgment than a Defendant’s Part 36 offer, and the offer is made more than 21 days before trial, then unless the court considers it unjust to do so, the Claimant will be liable to pay the defendant’s costs from the date of expiry of the relevant period and interest on those costs. This means that even though the Claimant may get a judgment in his favour, it will have to pay some of the Defendant’s costs as a ‘penalty’ for not accepting the Defendant’s Part 36 offer which would have disposed of the claim earlier and on more generous terms to itself.

Either party has the option to make an offer to resolve the dispute. If the offer is accepted, the claim is settled, subject to any concerns that may arise in relation to the cost of the offer. If the offer is rejected, the parties will go to trial, which may result in significant financial ramifications for both sides as they may be required to pay more in interest and/or costs than if no offer has been made. This financial risk drives parties to make Part 36 offers and to carefully analyse Part 36 offers made to them.

More Information regarding Part 36 offers can be found at the Civil Procedure Rules.

Whenever possible, you should get legal advice from a Solicitor or other adequately trained professional before deciding whether to accept or reject a Part 36 Offer. Once an offer has been accepted, however, PIC has a team of highly experienced Costs Lawyers and Costs Consultants who are regularly called upon to help with calculation of costs following acceptance of a Part 36 offer. However, if a party fails to accept a realistic offer made from the other side there is a risk of penalised costs and interest at the end of the case. A delicate balance must be achieved between proportionality and cost recovery, and as independent costs experts, we can help receiving parties in maximising cost recovery. Also, for receiving parties, we regularly assist with the preparation of Costs Budgets or a Bill of Costs as well as conducting negotiations and detailed assessment proceedings.

Caitlin Grimson

Trainee Legal Costs Consultant