Part 36 offers have been in the news following Hugh Grant’s decision to settle his dispute with The Sun. You may have seen his series of tweets explaining why he made his decision.
In this guide, we will explain what a Part 36 offer is, the benefits and disadvantages of making one, and how offerees (the party to whom a Part 36 offer is made) can respond.
What is a part 36 offer?
A Part 36 offer is a type of settlement offer that claimants or defendants can use to encourage the opposing party in a civil litigation case to settle. Under Part 36 of the Civil Procedure Rules, if a valid Part 36 offer is made and rejected, the offeree risks incurring potentially significant additional costs, even if they go on to win their case. When used effectively, Part 36 offers can be a powerful litigation tool, as demonstrated by Hugh Grant’s recent settlement with The Sun.
What are the advantages of making a Part 36 offer?
Early resolution of disputes
A well-thought-through and pitched Part 36 offer can lead to an early resolution of disputes, saving considerable time, costs, and resources, and providing a range of enhancements for a claimant at trial.
Pressure on opponent
Making a Part 36 offer should not be regarded as a sign of weakness but an appropriate way of putting pressure on an opponent to settle. There can be damages, costs, interest, and tactical advantages in making a formal offer to settle which complies with the rules of court.
What are the disadvantages of making a Part 36 offer?
As well as the fact that a poorly pitched, timed or drafted Part 36 offer can leave a party liable for the other party’s costs. Offers are limited in that they cannot specify alternative terms for payment of any sums offered, such as payment by instalment or specify as a term of the offer that each party bear its own costs of the proceedings.
Potential for increased costs and interest
If a party fails to accept a realistic Part 36 offer, it risks being made liable to pay more in interest and/or costs on a judgment than if no offer had been made.
Strict compliance with rules
A Part 36 offer must strictly comply with the rules of court. If an offer does not meet these requirements, it will not have the cost consequences of a Part 36 offer, although the court will take such offers into account when considering what order to make about costs.
Timing of the offer
The timing of the offer is crucial. If the offer is made too early, it may be seen as a sign of weakness. If it’s made too late, it may not have the desired effect.
Withdrawal or change of offer
A Part 36 offer made during proceedings cannot be withdrawn or changed to be less advantageous to the other party until the relevant period (the 21 days provided to consider a Part 36 offer) has expired, unless the court’s permission to do so is obtained. This could potentially lock a party into an unfavourable position.
Clarification requests
A party is able to request clarification of the offer within 7 days of receiving it. If the offering party does not provide such clarification, the other party can ask the court to make an order requiring the offering party to supply it.
Discretion
The court takes into account all the circumstances of the case, including the stage in the proceedings at which the Part 36 offer was made, the conduct of the parties in respect of information provision regarding the offer, and whether the offer was a genuine attempt to settle the proceedings. It is important to note that the court has the discretion to consider whether it would be unjust to make an order about costs consequential to a Part 36 offer.
Therefore, while making a Part 36 offer can be a powerful tool in litigation, it should be used strategically and with full understanding of the potential risks and consequences.
What happens if a Part 36 offer is rejected?
If a party rejects a Part 36 offer, the offeree risks incurring significant costs depending on the outcome of the case, including being required to pay the opposing party’s legal fees from the end of the relevant period.
If a defendant fails to beat a claimant’s offer at trial, the court must, unless it considers it unjust to do so, order that the defendant pays interest on the whole or any part of the sum awarded, at a rate not exceeding 10% above the base rate; costs including any pre-action costs on the indemnity basis; interest on those costs at a rate not exceeding 10% above the base rate; an additional amount, which shall not exceed £75,000.
If the claimant rejects a defendant’s Part 36 offer and the judgement is less advantageous (worth less) than the offer, the court must unless it considers it unjust, order that the claimant pays the defendant’s costs (including any recoverable pre-action costs) from the date of expiry of the relevant period plus interest.
The cost of rejecting a Part 36 offer can be significant, making it a highly effective tool for claimants and defendants.
Can you negotiate a Part 36 offer?
If you have received a Part 36 offer, you can attempt to open negotiations by submitting a counteroffer. If it is accepted or leads to successful negotiations, your counteroffer could result in a settlement agreement or a revised Part 36 offer. Regardless of the outcome, making a counteroffer will not invalidate the original Part 36 offer.
Making a Part 36 counteroffer and handling negotiations effectively requires legal expertise and significant litigation experience. Seeking expert legal advice will help you deliver a strong counteroffer and navigate any ensuing negotiations professionally, giving you the best chance of a successful outcome.
How many Part 36 offers can you make?
You can make unlimited Part 36 offers before or during legal proceedings. As a result, litigators frequently use these offers as a strategic tool throughout a case. As proceedings progress and your position changes, increasing or decreasing your offer may make strategic sense.
There is no requirement to wait till the end of the relevant period before making a new Part 36 offer, but this can be complicated as the court will take a view if there is a dispute and there is a lack of clarity as to which offer is live or open for acceptance.
Should I make or accept a Part 36 offer?
Whether you should make or accept a Part 36 offer depends entirely on the offer itself and your case. The best way to decide what to do is to consult an experienced civil litigator.
Scott Bailey’s highly skilled litigators have extensive experience advising both businesses and individuals. Whether you are making a Part 36 offer or responding to one, we are here to help. With a proven track record representing both claimants and defendants, our expert litigators will be by your side, providing reliable legal advice and guiding you through the process to help ensure you achieve the best possible outcome. Contact us to get started.
