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The Advantages of Making a Part 36 Offer to Settle

View profile for Graeme Weir
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A Part 36 offer may be made at any time until judgment is handed down; including before proceedings having been issued.

Although making an offer early on can be beneficial, it is wise to assess whether you are informed enough to make the offer if any relevant documents have not been disclosed.

Kingsfords will be able to advise you on your prospects of success within your litigation and the benefits of making such a Part 36 Offer on your behalf. It can act as both a form of insurance policy as regards your legal costs and provide you with financial bonuses if you secure a more advantageous award at trial then your proposed offer.

What Are the Requirements of a Part 36 Offer?

It must specify a period of not less than 21 days within which the offer is capable off acceptance, upon condition that if accepted during that period, the defendant will be liable for your reasonable legal cost. (the “Relevant Period”).

it must state whether it applies to the whole or part of the claim

it must state whether it takes into account part or all of any counterclaim

What Are the Consequences of Making a Part 36 Offer Less Than 21 Days Before Trial?

Part 36 costs consequences do not apply to offers made less than 21 days before trial. However, costs consequences may apply if the court allows the Relevant Period to be shortened. In general terms the earlier you make an offer the better.

Clarification of the Part 36 Offer

The Defendants may, within 7 days of a Part 36 offer being made, request that we clarify the offer if they are uncertain as to its terms.

If the Claimant fails to provide any required clarification within 7 days of receiving the request, the Defendants may, unless the trial has started, apply for an order compelling the Claimant to do so.

Can a Part 36 Offer Be Withdrawn or Changed?

A Part 36 offer can only be withdrawn, or its terms changed, if Defendants have not previously served notice of its acceptance.  Once the Relevant Period has expired, and if the offer has not been accepted, an offer can be withdrawn or changed at any time. Alternatively  a Part 36 offer may be automatically withdrawn in accordance with its express terms.

If the Relevant Period has not expired, it cannot be withdrawn or changed to be less advantageous, unless the party has the court’s permission to do so. A more advantageous offer will be treated, not as a withdrawal of the original offer, but as a new offer.

Accepting a Part 36 Offer

A party must accept a Part 36 offer in writing and it may be accepted at any time. If multiple offers have been made, and not withdrawn or changed, a party may accept any of the offers.

Cost Consequences of Accepting a Part 36 Offer

The Defendant must pay you the offered settlement sum within 14 days of acceptance, (otherwise a Claimant may can enter judgment against the Defendant for the settlement sum).

If accepted within the Relevant Period, a Claimant  would be entitled to its reasonable legal costs, up to the date of acceptance.

If accepted outside of the Relevant Period, or the offer is made less than 21 days before trial, the parties can separately agree liability for costs; otherwise the court will make an order as to costs.

If accepted outside of the Relevant Period, the presumption is that a Claimant will be entitled to costs up to the date on which the Relevant Period expires, and the Defendant will be entitled to its costs from the date of expiry to the date of acceptance. This is unless otherwise agreed separately between the parties.

If the parties cannot agree the amount of costs, they will be assessed by the court on a “standard” (rather than “indemnity” ) basis.

Claimant’s Part 36 Offer – Consequences of Non-Acceptance to the Defendant

If a Claimant obtains a judgment that is at least as advantageous as its Part 36 offer, and the offer is made 21 days before trial, then unless the court considers it unjust to do so, it will order that the Claimant is entitled to:

Additional damages of up to a maximum of 10% of the money awarded.

Enhanced interest on the whole or part of any money awarded at not more than 10% above base rate for some or all of the period starting with expiry of the Relevant Period;

Its legal costs on the indemnity basis (which is more generous than the standard basis) from the date of expiry of the Relevant Period;

Further interest on those costs not exceeding 10% above base rate; and

The Defendant will have to pay the above amounts in addition to the judgment sum as a consequence for not accepting our Part 36 offer, which would have disposed of the claim earlier and on more advantageous terms for the Defendant.

What Does the Court Consider to Be Unjust?

In considering whether it would be unjust to make the orders, the court must take into account all the circumstances of the case including

The terms of any Part 36 offer;

The stage in the proceedings when any Part 36 offer was made.

The information available to the parties at the time when the Part 36 offer was made;

The conduct of the parties or their refusal to engage

Whether the offer was a genuine attempt to settle the proceedings.

If the court decides that it would be unjust to make the usual order under Part 36, it then has wide powers when exercising its discretion as to costs under the Court Rules.

Where you could pitch your offer and its impact.

The offer has to be a figure that would satisfy you if accepted – thus saving you the time, expense and stress inherent in any litigation when going to trial. Those are subjective measures, which are different for every individual. You may feel that your  time is best spent elsewhere pursuing other projects, rather than collecting an outstanding account for example.

For illustration purposes alone please consider the impact if a Claimant  had a principal claim for say £25,000. If any offer was pitched at £23,000, but not accepted what would that figure look like if you were awarded a greater at trial?

Award                                                    £23,001.00

10% up- lift                                            £  2,300.10

Enhanced Interest (for the period

of say one year)                                      £ 2,323.10

Indemnity Costs                                     £17,500.00

Interest on indemnity costs                   £  1,767.50

Combined Judgment award               £46,890.70

 

In addition the Defendants would have to bear their own legal costs of say another £15,000 + vat (being representative for a debt of this size). This would result in a combined liability to any Defendant of around them of around £64,890.60.

If any Defendants receive proper advice they should be made aware of these potential figures. Why would they run the risk of having to paying out sums in excess of £65k+, if they could settle at an early stage by reference to the example of £23,000 plus the Claimant’s reasonable legal costs at that point under the terms of the Part 36 Offer

Is the Defendant really confident of their position?

The Offer figure of £23,000 was purely for illustrative purposes. The lower that figure is set, the greater the level of insurance it will provide to you, if it is rejected and your action goes to trial. Conversely, if the Part 36 Offer is set too low and they accept the proposal you may feel that the Defendant has been able to extricate themselves from the litigation fairly, cheaply. It is imperative therefore that the offer is pitched at a level acceptable to you.

Finally, the court will consider if it was a genuine offer to settle. If they think it is unfairly high – they may not award you the benefits of CPR 36. But by suggesting (in this illustrative example) an 8% discount at an early stage, the court may well feel any Claimant  should reap the benefits of the court’s provision.

Ordinarily, as a rule of thumb a Part 36 Offer would be pitched at around 2/3rds or 3/4qrts of the value of the claim – subject to an assessment of the Claimant’s prospects to succeed at trial. Each case should however be strictly assessed on its own merits.

Should you wish to recover any debt sums owed to you and would wish to consider making a Part 36 Offer please do not hesitate to contact gjw@kingsfords.net or any other members of the Kingsfords Litigation Team.