An In-Depth Look at Part 36 Offers

In the UK cost law sphere, Part 36 offers play an indispensable role. Named after Part 36 of the Civil Procedure Rules (CPR) in the UK, these offers are designed to encourage settlement and avoid prolonged litigation. For professionals in the cost law industry, understanding Part 36 offers is essential, as they can significantly influence the outcome of a case and the recovery of costs.

What Are Part 36 Offers?

A Part 36 offer is a settlement proposal made by either the claimant or the defendant in a legal dispute. The primary objective of such an offer is to facilitate an early resolution of the case, thereby saving time and costs for all parties involved. The unique aspect of Part 36 offers is that they carry specific cost consequences, which can be highly advantageous if the offer is strategically timed and crafted.

Handling Part 36 Offers

When making a Part 36 offer, it is crucial to ensure that the offer is clear, unequivocal, and compliant with the requirements set out in CPR 36. These requirements include:

• The offer must be in writing

• It must state that it is intended to have the consequences of Section I of Part 36

• It must specify a period of no less than 21 days within which the defendant will be liable for the claimant’s costs if the offer is accepted (known as the ‘relevant period’)

• It must state whether it relates to the whole of the claim or part of it or an issue that arises in it, and if so, which part or issue

• It must state whether it takes into account any counterclaim

Both parties must also carefully consider the timing of making or accepting a Part 36 offer. Early offers can suggest a willingness to settle, potentially leading to favourable cost consequences if the case proceeds to trial and the final judgement is less advantageous than the offer made.

Part 36 Offers in Action

In practice, Part 36 offers are used as a tactical tool to apply pressure on the opposing party to settle. For example, a defendant may make a Part 36 offer to the claimant to settle the claim for a specific sum. If the claimant rejects the offer and subsequently fails to obtain a more favourable outcome at trial, the claimant may be liable for the defendant’s costs from the expiry of the relevant period.

Conversely, a claimant can make a Part 36 offer to encourage the defendant to settle. If the defendant rejects the offer and the claimant then achieves a better result at trial, the claimant may be entitled to additional benefits, including interest on damages at an enhanced rate, indemnity costs, and interest on those costs.

Part 36 Offers and Fixed Recoverable Costs (FRC)

The interplay between Part 36 offers and Fixed Recoverable Costs (FRC) is particularly noteworthy. FRC applies to certain cases where costs are capped at fixed rates, simplifying the process and making costs more predictable. However, the consequences of Part 36 offers can still apply, potentially altering the costs recovered.

For instance, if a claimant makes a successful Part 36 offer in a case governed by FRC, the claimant may be entitled to costs on the indemnity basis from the expiry of the relevant period. This can result in higher cost recovery than the fixed rates normally applicable. Similarly, defendants who make strategic Part 36 offers can limit their exposure to costs if the claimant does not achieve a better outcome at trial.

Benefits of Part 36 Offers for Clients

The strategic use of Part 36 offers provides several benefits for clients:

Cost Savings
By encouraging early settlement, Part 36 offers can significantly reduce litigation costs. Both parties save on legal fees and other expenses associated with prolonged court proceedings.

Predictability and Certainty
Part 36 offers provide a degree of predictability in terms of cost consequences. Clients can better assess the potential financial outcomes of proceeding to trial versus settling early.

Pressure to Settle
The cost consequences attached to Part 36 offers put pressure on the opposing party to settle. This can expedite the resolution process, providing clients with quicker outcomes.

Improved Rate of Recovery
For claimants, making a well timed and well crafted Part 36 offer can lead to enhanced cost recovery if the offer is not accepted and the claimant obtains a better result at trial. This includes interest on damages, indemnity costs, and additional interest on costs.

Risk Mitigation
For defendants, Part 36 offers serve as a protective mechanism. If a defendant makes a reasonable offer that the claimant rejects, and the claimant fails to achieve a better outcome, the defendant can limit their cost liability

Strategic Leverage
Part 36 offers provide strategic leverage in negotiations. They can shift the dynamics of settlement discussions, compelling the opposing party to seriously consider the offer to avoid adverse cost consequences.

Part 36 offers are a powerful tool in the cost law industry, offering strategic advantages and significant cost implications. Their proper use can lead to better outcomes for clients, encouraging early settlement and reducing the risks and expenses associated with litigation. For cost lawyers, mastering the nuances of Part 36 offers is essential, ensuring they can leverage this mechanism to benefit their clients effectively. At County Cost, our team has in depth experience with the use of Part 36 offers; another component of cost law that adds to our extensive skill portfolio.