This guide provides an overview of Part 36, highlighting the issues that can arise in practice and how to deal with them. A Part 36 offer is a settlement offer made without prejudice save as to costs. Like other forms of settlement it can be used to settle all or any part of a claim, monetary or otherwise. It can also be used to settle counterclaims and additional claims, and Part 36 offers can be made solely in relation to liability, leaving quantum to be argued over.

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This guide provides an overview of Part 36, highlighting the issues that can arise in practice and how to deal with them. A Part 36 offer is a settlement offer made without prejudice save as to costs.

Like other forms of settlement it can be used to settle all or any part of a claim, monetary or otherwise. It can also be used to settle counterclaims and additional claims, and Part 36 offers can be made solely in relation to liability, leaving quantum to be argued over.

A Part 36 offer can be made at any time, including before the commencement of proceedings. If not made at the outset, Part 36 should be reconsidered throughout the case. The rules on making a Part 36 offer are the same for both claimant and defendant offers, whether made pre-action or after proceedings have commenced.

Particular provisions apply to offers made within 21 days of trial but these are not covered in this guide. Part 36 offers have to be made in writing and must state a period of 21 days or more within which the defendant will be liable for the claimant's costs. Other terms frequently used are offeror and offeree. The offeror makes the offer and the offeree is the recipient of the offer.

In this example, if the claimant C accepts the offer within the relevant period, C will recover its costs up to acceptance. If the offer is accepted after the 21 days, C is entitled to its costs up to 21 March, but the defendant D , as offeror, will be entitled to payment of its costs from that date unless considered unjust in the circumstances — see below. If the offer had been made by C and accepted late by D, C would have been entitled to its costs up to the date of acceptance.

But what if the offer is not accepted and the case goes to trial? This is where the costs consequences of Part 36 have real impact. The costs consequences are different depending on whether the offer was made by the claimant or defendant.

In addition, they do not apply to offers that have been withdrawn, or offers that have been revised to be less advantageous and the less advantageous offer is beaten. A defendant will reap the benefit of its Part 36 offer if the claimant fails to obtain a judgment that is "more advantageous" than the offer see the box: When is a judgment more advantageous? In other words, has the claimant recovered a sum that is less than or equal to the offer?

In those circumstances, the defendant will recover from the claimant:. If the claim is dismissed or the claimant recovers nothing, the Part 36 offer has not improved the defendant's position on costs — the defendant would have been entitled to its costs anyway.

The costs consequences of a claimant Part 36 offer apply where the claimant obtains a judgment which is "equal to or more advantageous" than the offer. In those circumstances, the court will order the defendant to pay:. At first glance Part 36 appears quite generous. However, given that the claimant would have recovered its ordinary costs anyway, the CPR had to provide additional incentives to encourage claimants to settle.

The benefit of Part 36 is that costs consequences are automatic. However, they will not be applied if, in the circumstances, the court considers that it would be unjust to do so. In considering whether it would be unjust, the court will take into account "all the circumstances of the case". The court may also take into account any other settlement offers made and the conduct of the parties generally.

When Part 36 was revised in April , the test for determining whether a claimant had beaten an offer was changed. For both monetary and non-monetary claims the court had to determine whether the judgment was "more advantageous" than the offer. Prior to this, courts had decided whether a claimant had beaten offers in monetary claims by applying a strict financial comparison.

In other words, had the claimant been awarded more or the same as the sum offered? However, the change in wording was interpreted by the Court of Appeal as requiring a change of approach so that the courts could also take into account other circumstances, including the conduct of the parties, in deciding whether an offer had been beaten.

However, the Court of Appeal decision was controversial. Following the decision there was less certainty in relation to when the costs consequences of Part 36 would apply. Circumstances when Part 36 will not be appropriate. P art 36 is attractive because the costs consequences are automatic.

It is particularly attractive to claimants with all or nothing claims where either the claimant will recover in full or not recover at all. Provided the offer is genuine i. However, Part 36 is just one way of settling litigation. It is open to parties to use other forms of settlement, e. Calderbank letters offers made without prejudice save as to costs. Although Part 36 consequences will not follow, the court's discretion on costs under CPR There will often be circumstances where a Part 36 offer is inappropriate or another form of settlement offer is more attractive.

The following are examples:. Whereas Part 36 is attractive to claimants in all or nothing cases, there is little to be gained by a defendant making a Part 36 offer. If the claimant wins, the offer is beaten and the defendant must pay the claimant's costs. If the claim is dismissed, the defendant is paid its costs in any event although the position on interest on costs may be more attractive under Part However, that should not deter a defendant from making some form of settlement offer.

If coupled with attempts to mediate or negotiate settlement, and it can be shown that the claimant unreasonably refused to mediate or engage in settlement negotiations, a defendant may be able to use an offer to argue that a successful claimant is not entitled to all of its costs.

The fact of the offer may also help a successful defendant defeat any argument that it should not be entitled to all of its costs, or may assist in securing indemnity costs. When an offer is accepted within the relevant period, a defendant will automatically be liable for the claimant's costs up to the date of acceptance.

Part 36 will therefore not be appropriate where a defendant seeks a "drop hands" settlement or only wants to pay a proportion of the claimant's costs. Part 36 offers cannot be made inclusive of costs. A defendant will therefore not want to make a Part 36 offer in circumstances where it wants to know in advance how much it has to pay. The other side's solicitors could be asked for their costs to date on a without prejudice basis. However, the claimant will be entitled to all costs reasonably and proportionately incurred up to the end of the relevant period.

If further substantial work is carried out in order to evaluate the merits of the offer, the defendant will be liable for those costs as well. Difficulties arise with Part 36 where there are multiple defendants, particularly if not all of them want to settle. In those circumstances a Calderbank offer may be more attractive. Part 36 does not provide for settlements on commercial terms, e. This will usually arise in the context of wider settlement costs negotiations.

However, where settlement is not achieved and a party wants to make an offer for costs protection purposes, a Calderbank offer is recommended. Part 36 is very strict with regard to when and how the defendant has to make payment. Payments have to be made in a lump sum within 14 days of acceptance — payment by instalments is not provided for. Defendants wanting to settle but unable to satisfy these requirements cannot use Part 36 and will instead need to make a Calderbank offer.

For a Part 36 offer to attract Part 36 costs consequences it has to comply with the provisions of Part 36, in particular CPR The offer must be in writing and can be made in the form of a letter or in Form NA.

It must be clear that it is made pursuant to Part This will always be a difficult exercise as you need to ensure that the offer is realistic enough to place the other side under pressure. You also need to ensure that the offer is genuine. This can cause difficulties if you consider that you have a watertight claim or defence: what level of discount do you have to give in order to satisfy this Part 36 requirement?

Judicial guidance is not that helpful: the offer has to be more than a tactical step in order to secure the benefit of the Part 36 incentives — there must be some "offer to settle in the ordinary sense of the word". The authorities on this issue conflict.

But in another case, a 5 per cent reduction was found to be merely tactical given: 1 the late stage at which the claimant's offer was made three weeks before trial and 2 the nature of the case.

What is genuine will always be dependent on the circumstances and, in particular, the strength of the parties' arguments. A claimant with a cast iron debt claim is in a different position to a claimant with an all-or-nothing claim where the arguments are finely balanced.

This is always going to be a difficult decision and requires careful thought. Prior to the April revisions, an offer that was specified to be open for acceptance for a certain period only could not be a Part 36 offer.

In such circumstances, once expired, the offer will be regarded as withdrawn. Part 36 was changed to permit automatic expiry in order to avoid parties inadvertently falling foul of the strict Part 36 requirements by making their offers time-limited. Given that offers could be withdrawn after the relevant period in any event, it was considered sensible to remove this technical hurdle. However, careful thought should be given before including a "sunset provision".

It may be preferable to leave an offeror's options open as, once withdrawn, the offer cannot attract Part 36 consequences. The relevant period has to be for a period of not less than 21 days. It is therefore open to the offeror to give the offeree more time in which to consider the offer.

However, it will rarely be in a defendant's interests to extend the relevant period as it will also extend:. The scheme of Part 36, and the automatic costs consequences that flow from Part 36, mean that a Part 36 offer cannot be inclusive of costs. In addition, it would be difficult for a court to determine whether the offer is beaten at trial.

Any costs-inclusive offer cannot therefore be a Part 36 offer and the effect of such an offer will depend on the court's general discretion on costs. The sum offered should be inclusive of interest up to the date on which the relevant period expires.

In addition, any claimant making an offer should consider providing for future interest. Otherwise, the claimant could lose any entitlement to interest on the offered sum after expiry of the relevant period as, on acceptance of the offer, the defendant is agreeing to pay a fixed sum in settlement which does not take into account any interest that has accrued in the meantime. Although not expressly permitted by Part 36, it is difficult to see how providing for future interest would make the offer defective.

That said, it may be argued by the defendant, particularly if the interest rate is unreasonable. The converse is true for defendants: they have nothing to gain by providing for interest after the relevant period and the omission of any future interest mechanism will not make the offer non-compliant. It also encourages the claimant to accept the offer sooner if the value of the offer is diminishing in real terms.



We use cookies to collect information about how you use GOV. We use this information to make the website work as well as possible and improve government services. You can change your cookie settings at any time. Use this form to make an offer to settle all or part of a claim, counterclaim, additional claim, appeal, cross-appeal or detailed costs assessment proceedings. PDF , KB , 5 pages. If you use assistive technology such as a screen reader and need a version of this document in a more accessible format, please email hmctsforms justice.


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