OFFERS AND SETTLE AND PART 36 OFFERS

A defendant (or a claimant where there is a counterclaim, see later in this chapter) may make an offer to settle the claim. Part 36 of the Civil Procedure Rules 1998 applies. For the offer to be compliant with CPR 36 and take advantage of the cost consequences, five mandatory requirements need to be satisfied as outlined in CPR 36.2. It must:

  • Be in writing either in the form of a letter or Form N242A;
  • Be clearly headed/stated as a CPR 36 offer;
  • Be open for acceptance for a period of (usually) not less than 21 days (the relevant period) and that if it is accepted during this period, the paying party is automatically liable for the receiving party’s costs (CPR 36.10);
  • State whether it is made in respect of the whole or only part of the claim/issue; and
  • State whether it takes into account any counterclaim.

A CPR 36 offer can be made in any type of dispute or proceedings but is not applicable to cases allocated to the small claims track (CPR 27.2). Such offers can be made at any time during the proceedings and are regarded as being made at the point that the offer is served on the offeree (CPR 36.7). For details relating to modes of service refer to CPR 6.7.

It is worth remembering that both the use and timing of a CPR 36 offer can be an important tactical tool. The matter is best dealt with by an example. Suppose that our defendant makes an offer to settle the claim for £80,000 believing that our claimant will not be able to prove damage to his business of £100,000. Let us further suppose that our claimant refuses to accept that offer or any other offer that the defendant might make and issues proceedings. Our defendant should then pay the sum of £80,000 into the court office under Part 36 of the Rules. This gives our claimant a problem. If he proceeds to a full trial and does not get more than the offer (a penny would do), he will be likely to have to pay his costs and the defendant’s from the time of payment in. The claimant’s representatives are informed of the payment in at the time it is made so the possible problems as to costs are known. The judge, in making an award of damages, is unaware of the amount of the payment in. The same is true if the claimant decides to accept the payment in before the trial begins or before its termination. Once again, the claimant will have to pay the costs of both sides from payment in to the date of his acceptance of the offer. Permission of the court is required prior to the acceptance of a payment in. The above rules would apply also to the defendant if he had made a counterclaim (see below) and the claimant had made an offer on this. The moral is to accept an offer when it is made if there is a reasonable doubt about a party being able to recover in full his alleged loss.

Once a Part 36 offer has been made, CPR 36.8 provides that the offeree has seven days within which to request clarification of the offer. This is usually requested where the offeree is trying to break down the overall figure so as to enable him/her to consider how much has been allocated by the offeror for different heads of damage/issues. If no or inadequate clarification is forthcoming from the offeror within seven days of receiving the offeree’s request, the offeree may apply to court for an order to comply with such a request. Responses should be made in writing and be undertaken on a ‘without prejudice’ basis.

Acceptance/rejection of Part 36 offers

The mode of acceptance is in writing but no further guidance is provided in CPR 36 as to the precise form to be used, simply that it is to be sent to the offeror (CPR 36.9). A CPR 36 offer can be accepted at any time by the offeree so long as it has not been withdrawn or subsequently amended by the offeror. Permission from the court is not required by the offeree to accept such an offer but under CPR 36.3(5), the offeror requires permission of the court to amend the CPR 36 offer within the ‘relevant period’. CPR 36.6 provides that the offeror may withdraw or amend the offer without seeking the court’s permission so long as it is outside the ‘relevant period’.

Note that CPR 36.9(3), (4) and (5) set out specific circumstances where a Part 36 offer can only be accepted with the permission of the court, i.e. when the trial has started.

If an offeree decides to accept a Part 36 offer within the relevant period, then the cost implications of a claimant accepting a defendant’s offer are that the defendant is liable to pay the claimant’s costs up until the date the letter of acceptance was served on the defendant. If acceptance took place outside the relevant period, CPR 36.10(5) provides that the claimant will be liable for the defendant’s costs from the expiry of the relevant period to the actual date of acceptance.

If the claimant chooses to reject the defendant’s offer and proceed to trial but subsequently fails to secure a judgment greater than the offer made (see example above) the court has a discretion under CPR 36.14 to make the following orders:

  • Award the defendant his costs from the date on which the relevant period of the Part 36 offer expired;
  • Award interest on those costs.

If the claimant successfully secures a judgment which is more favourable than the Part 36 offer then the court will decide costs in the usual way in accordance with CPR 44.3.