Topic
Part 36 offers and other settlement offers are mechanisms in civil litigation that encourage parties to settle disputes without proceeding to trial. Part 36 offers, governed by Part 36 of the Civil Procedure Rules (CPR), provide a formal structure for making and accepting offers to settle, with specific cost consequences. Other settlement offers can also be made outside the framework of Part 36 but may not have the same cost implications. These mechanisms aim to facilitate early resolution, reduce litigation costs, and manage the risks associated with proceeding to trial.
Part 36 offers are formal offers to settle made under the CPR, which have specific procedural rules and cost consequences:
Claimant A sues Defendant B for £100,000. During the proceedings, Defendant B makes a Part 36 offer to settle the claim for £75,000. Claimant A does not accept the offer within the relevant period.
The case proceeds to trial, and the court awards Claimant A £70,000. Since Claimant A failed to obtain a better outcome than the Part 36 offer, the court orders Claimant A to pay Defendant B's costs from the end of the relevant period, including interest on those costs.
In a personal injury case, Claimant C makes a Part 36 offer to settle for £50,000. Defendant D does not accept the offer and opts to go to trial.
At trial, the court awards Claimant C £60,000. Because Claimant C's Part 36 offer was not accepted and Claimant C achieved a better outcome, the court orders Defendant D to pay additional interest on the damages awarded, as well as indemnity costs from the end of the relevant period.
Settlement offers outside the Part 36 framework can also be made, although they do not carry the same automatic cost consequences:
In a commercial dispute, Defendant E makes a Calderbank offer to settle for £30,000, marked "without prejudice save as to costs." The offer is not accepted, and the case proceeds to trial.
At trial, the court awards the claimant only £25,000. Defendant E seeks a costs order, arguing that the Calderbank offer was reasonable and should have been accepted. The court exercises its discretion to order the claimant to pay part of Defendant E's costs from the date of the offer, reflecting the reasonableness of the offer compared to the trial outcome.
In a property dispute, Claimant F verbally offers to settle the case for £40,000 during a negotiation meeting, marking the offer "without prejudice." The offer is not accepted, and the case proceeds to court.
The court awards Claimant F £35,000. Since the offer was made without the specific provisions of a Part 36 or Calderbank offer, there are no automatic cost consequences. However, the parties may use the offer as a basis for negotiation on costs, or the court may consider it in its discretion when making a costs order.
Part 36 and other settlement offers are critical tools in civil litigation, encouraging early resolution and managing litigation costs. Part 36 offers have specific procedural requirements and cost consequences, while other offers, such as Calderbank and informal offers, provide more flexibility but less certainty in terms of costs. Understanding the strategic use of these offers and their potential implications is essential for effectively navigating settlement negotiations and managing litigation risks.