In a civil dispute, one party will often carefully consider making a Part 36 offer to the other. These offers are not available in small claims and are only applicable to claims with a value of more than £10,000.
These are not simply offers to settle for a specified amount; their purpose is to place pressure on the other side of the dispute to settle.
In a civil dispute, Part 36 offers are usually only dealt with by solicitors as it is essential that these are made correctly. They can be made at any time – even before the claim has been issued.
Anyone considering going to court should follow the pre-action protocols; their purpose is to establish the positions of both parties and allow them to use Alternative Dispute Resolution (mediations, negotiation etc.) to settle earlier. Often, this allows one party to see that they are likely to lose as they are at fault. They can then make an offer to settle based on this; this way, the costs of litigation through the courts could be avoided.
Costs are key to Part 36 offers. Generally, the way in which costs grow are as follows:
- An initial flurry of activity by legal professionals when the claim is in its very early stages, up to the point of the claim being issued in the court.
- Costs then add up slowly depending how complex the case is. Statements are drafted and disclosure of documents occurs.
- Costs significantly increase in the period leading up to the trial – the most expensive time as many hours are spent by legal professionals preparing the paperwork and often instructing a barrister to attend court.
The earlier an offer to settle is made, the lower the costs will be.
So what is a Part 36 offer?
An offer to settle the dispute, made at any point during the process, with costs consequences. The person making the offer is not admitting fault or liability.
Costs here relate to the billed hours of professionals involved in the claim and other items already paid for such as court fees.
It must be in writing, stating it is intended to have the consequences of a Part 36 offer. It must also state how long the offer to pay costs in addition to the sum will be relevant or valid.
What are the consequences?
The person MAKING the Part 36 offer agrees to pay the other person’s costs, plus a sum to settle the dispute.
Both parties can make Part 36 offers – a claimant can make an offer to the defendant stating the amount they are willing to accept plus their costs.
Within 21 days, the person making the offer must pay the costs of the other. After this, the offer remains open unless removed/withdrawn in writing.
If the offer is accepted after 21 days, the person who accepted the offer late will pay the other side’s costs.
Here’s an example:
A makes a Part 36 offer on 1 May to B to settle for £12,000 plus B’s reasonable costs.
B accepts the offer on 1 July.
A pays B’s costs up to 21 May (21 days after the offer was given to B)
B pays A’s costs from 21 May onwards
If the offer is made less than 21 days before a trial, it will be open until the end of the trial.
It is very important that these offers are removed in writing when no longer wanted.
Once the offer has been accepted in writing, the paying party has 14 days in which to pay.
The claim at court is ‘stayed’ (imagine this as going to sleep). If the amount agreed is not paid within 14 days, the court can enforce payment.
A solicitor will ensure that any Part 36 offer, made on behalf of their client, will be very close to the lowest sum that the other side would be likely to accept.
Offers are usually made by a defendant who thinks he is at fault, to pressure the claimant to take a reasonable amount to settle the dispute. The idea is to make a claimant accept an offer that it would not quite be ‘safe’ to reject.
Part 36 offers are made ‘without prejudice save as to costs’ – meaning the trial judge will not see or be aware of the offer until after his decision has been made and he is deciding who should pay what in relation to costs only.
After this, he will know what offers have been made and, where a person has chosen not to accept a sensible offer to settle, they may find that the court refuses to give them an order to get their costs back from the party at fault. This is what makes these offers a tactical tool to pressure the other to settle.
However, the court can do whatever it sees fit in relation to giving one party costs from the other side.
Part 36 offers are used by legal professionals and not generally something which a person representing himself or herself would become involved in. If in any doubt, consult a solicitor.
Suzanne Alexander, Lecturer in Civil Litigation
DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. This article is merely a general comment on the relevant topic.