Litigation is as much about tactics as any sports contest or military battle. The tactics you employ can wrong-foot your opponent and they are as important as getting the upper hand in the drama of the court room. Sometimes the battle is won without a single shot being fired.
W hat tactics can you employ to force the hand of your opponent to bring about a satisfactory settlement of your claim or defence to a claim in civil proceedings? A major tactic to be employed by either party is the part 36 offer. That is under part 36 of the Civil Procedure Rules. If the offer is pitched at the right level it can put huge pressure on your opponent, by forcing them to make a decision on whether to accept the offer or to risk costs penalties being imposed if the court awards more than or equal to the amount offered.
This article considers the following:
- The background to part 36 offers
- The financial consequences of beating or failing to beat part 36 offers
- Consequences of non-acceptance of a part 36 offer
- Withdrawal or variation of part 36 offers
- Time limited part 36 offers
- Accepting part 36 offers
- Calderbank offers
The Background to Part 36 Offers
The fact that you have made a part 36 offer and the terms of such offer can only be shown to the trial judge after the case has been decided (CPR 36.16 (2)) You can make part 36 offer at any time, including before you commence court proceedings and in appeal proceedings. If either party accepts a pre-action part 36 offer after proceedings have been issued, it will still be possible to recover the costs of any pre-action steps as well as the costs for the period after issuing proceedings.
The financial consequences of beating the Part 36 offer
CPR 36.17
What happens when you get damages of more than the offer? If you beat the part 36 offer you will get an enhanced costs order from the court. If the Claimant does not accept your offer to settle and you obtain a judgment that is equal to, or more advantageous than your offer, (unless it is unjust to do so), the court will order the Claimant to pay
- Your costs (including any recoverable pre action costs) on the indemnity basis for the period from when the relevant period expired with interest on those costs at up to 10% above base rate.
- Interest on the whole or part of the sum awarded (excluding interest) to you at a rate not exceeding 10% above base rate for the period from the start to the end of the “relevant period”.
- An additional amount of not more than £75,000
The court will usually order that the Claimant pays your costs on the standard basis, with interest on the costs from the beginning of the case to the date on which the indemnity costs and enhanced interest start running (CPR 36.17 (4)).
Withdrawing or varying Part 36 Offers
Once your part 36 offer is accepted it cannot be withdrawn, or its terms changed but if it has not been accepted after the relevant period has expired, you may withdraw the offer or change its terms without the permission of the court or the offer may automatically run out if it is a time limited offer.
CPR 36.9 (5) gives you room to manoeuvre by allowing the part 36 offer to be varied to make it more advantageous to the Claimant. The revised offer will be treated as a new offer so that:
- If both the original offer and revised offer turn out to be effective the costs consequences run from the original offer.
- There will be a new relevant period when a part 36 offer is varied.
In order to withdraw a part 36 offer you must serve a written notice of withdrawal.
If a part 36 offer is withdrawn or its terms are changed before the end of the relevant period, then if at the end of the relevant period
- The Claimant has not served notice of acceptance of the offer in the meantime, your notice will take effect
- If the Claimant Defendant has served notice of acceptance, that acceptance will take effect.
Time limited part 36 offers
Time limited part 36 offers are permitted and they run out after a specified period of time only. This puts the Claimant under pressure to accept the offer within the time limit.
Accepting Part 36 offers
Except where a time limited part 36 offer has been made, the Claimant may accept a part 36 offer at any time unless you have served a notice of withdrawal of the offer or if the court’s permission is required.
The Claimant may accept a part 36 offer even where it has subsequently made a different offer or the Defendant has rejected the offer.
A counter offer does not operate as an implied rejection of a part 36 offer and the offer can still be accepted even though the Claimant has made one or more counter offers. Therefore, a party that has received a part 36 offer who does not wish to accept it can make a counter offer, and if it not accepted, it can still go on to accept the part 36 offer.
Even though the part 36 offer has been rejected it can be accepted before the trial starts.
If you accept a part 36 offer within the relevant period, you will be entitled to costs of the proceedings up to the date on which the notice of acceptance is served on the defendant.
Calderbank offer letters
A Calderbank offer is a letter containing a settlement offer and marked “without prejudice save as to costs”. This means that if the offer is not accepted the letter can be referred to the court on the question of costs at the end of the case.
A Calderbank offer that has not been accepted may be examined by the court when considering costs (CPR 44.2.4 (4) (c). However, it does not have the same costs consequences as a part 36 offer.
The part 36 Offer and the Calderbank Offer are vital tools to be used in litigation that have the effect of focussing the minds of the parties upon whether or not to continue the case to trial. When they are made it is inevitable that both sides of the dispute and their advisers will be forced to re-assess not only the prospects success and the merits of the case but also its value. They will be forced to anticipate what the court is likely to award, and their advisors will be asked to assess the prospects of beating the offer or not beating it and the risks of letting the action continuing to trial.
If you have a dispute that is heading for the courts and would like to find out how to bring it to a satisfactory end, don’t hesitate – give me a call for a chat about how you may do so.
