Understanding the effect of making a Part 36 Offer

The courts encourage methods chosen to resolve a dispute before it reaches court which are collectively referred to as Alternative Dispute Resolution (ADR).

One option to parties to settle a claim before going to court is a ‘Part 36 offer’. This is a form of offer used to settle all or part of a dispute between parties in civil litigation, which is governed by Part 36 of the Civil Procedure Rules (CPR).

The Part 36 offer must be put in writing and is required to state whether the offer is to settle either all or only part of the claim. A breakdown of how the settlement figure being offered has been reached is not a necessary requirement to be included in the offer.

If the offeror makes a Part 36 offer that is not accepted and the offeree fails to obtain a more advantageous judgment when the case reaches trial, then generally the offeror will be ordered to pay the offeree’s costs from the date of expiry of the offer. Therefore, if the offer is not accepted, the receiving party of the offer has a significant risk as to costs and interest.

It is important for the Part 36 offer to be clear as to whether it relates to the whole of or part of the claim. If the latter then it needs to be clear as to which part of the claim it relates to so that there is no opportunity for the offeree to be confused. The offeree may require clarification regarding the matter rather than just accepting or rejecting it. If the offer is particularly badly drafted then the offeree may send a “without prejudice save as to costs” or “Calderbank” letter to advise that no offeree could reasonably be expected to accept such a badly drafted offer and make a counter-offer. This puts the pressure back on the offeror to reach an agreement based on the offeree’s clearer terms. The offeree could not rely on the ambiguity of the offer if they did not reply within 7 days of the offer being made to advise that it wasn’t clear enough to be accepted. There is nothing to state within Part 36 that the offeror must provide the requested clarification, however the offeree can request that they do so under CPR 36.8(2), although a refusal to provide clarification will be a factor that the court considers when making the usual costs order.

If the offer is not accepted, it will need to be frequently reviewed to assess whether it should remain on the table or whether it should be revised or withdrawn. Unless it is a time limited offer, the offeree can accept the offer at any time prior to trial unless a notice of withdrawal has been served on the offeree. It is important to withdraw the offer as the case progresses if the offeror’s circumstances change. If subsequent offers are made and the original offer has not been properly withdrawn then the offeree is entitled to accept the original offer regardless of the further offers being made.

Once a Part 36 offer has been accepted, it cannot be withdrawn or revised (pursuant to CPR36.9(1)). This is with the exception of the following circumstances; if the claim is by or against a protected party, then the court has to approve the claim even if it has been accepted by the protected party. In the event that the offer had an obvious mistake in it and the offeree appreciated this at the time of the acceptance, this can invalidate the offer.

Time-limited Part 36 offers came into force under the revised Part 36 on 6th April 2015. The advantage of a time-limited offer is that it puts the offeree under pressure to accept the offer but the disadvantage is that if not accepted within the expiry period, then the offer will be automatically withdrawn and will not have the same Part 36 consequences on the offeree. The court will “have regard” to the offer when assessing the costs in the matter, but no more than that.

For further advice and assistance please contact our Litigation and Dispute Resolution team on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk