Should I Accept a Part 36 Offer?
What is it?
A Part 36 Offer is a special type of settlement offer that is made in litigation cases. A settlement offer is a sum of money that the defendant pays the claimant to resolve the claim and end litigation before the trial. The claimant can make an offer of the sum they would accept from the defendant, or the defendant can make on offer of the amount they would willingly pay the claimant.
This type of settlement offer has special rules that it must comply to as part of Rule 36 in the Civil Procedure Rules (CPR 36). Part 36 Offers are also not admissible during a trial, this means that the judge will only see that these types of offers were made after they have reached their judgement.
Normally in litigation , the loser will be ordered to pay the winner's legal costs. Any rejected offers may affect how they allocate the parties' legal costs.
What are the benefits of a Part 36 offer?
If the court considers the offer to have been a genuine attempt to settle proceedings, then the party who did not accept the offer may face significant cost implications, as we will explain below. This means that there is significant pressure to accept any reasonable offer made.
If accepted, a settlement is beneficial to both parties, by ending litigation, saving any further legal expenses, time and stress.
Should I accept a Part 36 offer?
Usually, if the offer is reasonable it is best to accept. Partly to save all parties, and the court, the cost and hassle of ongoing litigation, but also, due to the Part 36 costs consequences of refusing the offer:
If you lose, or if you win and the settlement ordered by the court is better than the offer, then costs will be awarded in the normal way, and the defendant will be ordered to pay your legal costs. However...
If you win, but fail to secure a more advantageous settlement from the court, then you will have to pay the defendant's costs, dating from 21 days after the offer was made.
If you win, or you lose but the claimant is awarded less than their offer, then costs will be awarded in the normal way, and the losing party will be ordered to pay the winners legal costs.
If you lose, and the court orders a settlement which is as, or more, advantageous to the claimant than the claimants offer, then you will have to pay:
- The sum awarded by the court
- Interest on the whole or part of the sum
- The Claimant’s legal costs on an indemnity basis (meaning they can get an extra 10%)
- An additional sum, normally around 10% of the amount that was awarded.
Part 36 offer tactics
This type of offer is a powerful negotiating tool. The general tactic for both sides is to pitch the offer low, so that the risk of facing Part 36 Costs consequences is high to the other party if they do not accept
The Claimant will make an offer on the lower bounds of any likely award, so that they still get their 'win' but low enough that the Defendant would be unwise to refuse, risking the extra costs involved if the claimant goes on to win more in court.
The Defendant will make an offer at a level that is on the lower bounds of any likely award, but just high enough for the Claimant to be worried about the risk of refusing it and having to pay the Defendants costs if they lose, or win less than the offer.
Can a Part 36 offer be negotiated?
You can negotiate on a Part 36 offer, however, the making of a counter-offer does not affect the validity of any existing offer.
CPR 36.11(2), the offer made to you remains open and capable of acceptance, unless the offering party serves a written notice of withdrawal,
OR
CPR 36.9(4)(b), it is automatically withdrawn in accordance with its terms and the deadline for acceptance expires without the offeree having served notice of acceptance.
So, if you make a counter-offer which the other party rejects, you are still free to accept their original offer, as long as it has not been withdrawn/expired (confirmed by the Court of Appeal in Gibbon v Manchester City Council).
Frequently Asked Questions
You cannot withdraw a the offer if it has already been accepted. To withdraw the offer you must serve written notice of withdrawal, or a change of terms of the offer, to the other party. It takes effect when it is served. However, this may effect your Part 36 costs consequences. You can find out how in CPR 36.17 (7)
Withdrawing or changing the terms of a P36 offer if it has not been accepted:
After the expiry of the relevant period (21 days after serving the P36 Offer):
- Can be withdrawn or changed without the court’s permission.
- Can be automatically withdrawn if in the original offer it stipulated the offer was automatically withdrawn after expiry of the relevant period.
Before expiry of the relevant period (21 days after serving the P36 offer)
- If you are withdrawing the offer or making it less advantageous to the other party the notice you are sending will have effect at the end of the relevant period (21 days after serving the P36 Offer), provided that the other side does not accept the original P36 offer before then. If the other side accepts before the end of the relevant period, then you would need to apply to the court for permission to withdraw the offer or change its terms.
- If you are changing the P36 offer to make it more advantageous for the other side, it will be treated as making a new P36 offer with a new relevant period.
CPR 36.16 (1) The offer will be treated as “without prejudice except as to costs”.
CPR 36.16 (2)The fact that a Part 36 offer has been made and the terms of such offer must not be communicated to the trial judge until the case has been decided. Exceptions to this rule can be found in CPR 36.16 (3).
Need help reaching a settlement?
Litigation can be long and complicated. If you don't know whether to accept a part 36, or you need help making an offer of your own, get in contact with us and see how we can help.
We can assist with your litigation:
- Pre-action negotiations
- Application to court
- Preliminary hearing
- Mediation
- Court appearance
We have on hand counsel to support your claim and offer guidance along the way.
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Find Out More:
- Property Litigation Solicitors
- Deed of Trust, to protect against property litigation
- What is beneficial interest in property?
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