There has been much debate amongst lawyers in the last couple of years about whether the Courts are becoming more ‘franchisee-friendly’.
What is a CPR Part 36 offer?
Disputes in court proceedings are dealt with according to the Civil Procedure Rules or CPR.
Part 36 offers are a useful tactical step a party can take in legal proceedings to attempt to focus the other side on settling proceedings. It can put pressure on an opponent to come to the table and settle a case whilst importantly protecting the offeror’s position on costs.
However, if a well-judged Part 36 offer is not accepted by an opponent, then it can have serious consequences if a Court awards a judgment for the amount of the Part 36 offer or above.
Formalities of a Part 36 offer
It is important to ensure that a Part 36 offer meets the requirements and formalities required by the CPR to ensure that it is valid. An offer must be made in writing, be clear that it is made pursuant to CPR Part 36, state a relevant period for acceptance and state the scope of the offer (i.e. for the whole of the claim, part of the claim or counterclaim).
If a Part 36 offer is made more than 21 days before a trial is due to start, then the offer must remain open for acceptance for a period of not less than 21 days.
When can a CPR Part 36 offer be made?
A Part 36 offer can be made at any stage of a dispute, even before proceedings are issued.
Can a CPR Part 36 offer be withdrawn or changed?
If a Part 36 offer is to be withdrawn then the offeror must serve written notice to the other side withdrawing the Part 36 offer clearly stating it has been withdrawn or that there has been a change to the terms of the Part 36 offer.
What happens when a Claimant accepts a Defendant’s Part 36 offer?
If a Defendant’s Part 36 offer is accepted by the Claimant during the Relevant Period, then the Claimant will be entitled to the amount of the offer plus the costs of the proceedings up to the date on which the notice of acceptance was given to the Defendant.
The Defendant must pay the Claimant the amount of the offer within 14 days of acceptance and the Defendant will pay the Claimant’s costs on the standard basis (either agreed between the parties or assessed).
What happens when a Claimant rejects a Defendant’s Part 36 offer?
If a Defendant’s Part 36 offer is rejected by the Claimant and the Claimant wins at trial but is awarded less than the amount of the Defendant’s Part 36 offer, then the Defendant will pay the Claimant’s costs up to the end of the Relevant Period, plus the court’s award.
The Court will usually order the Claimant to pay the Defendant’s standard costs from expiry of the Relevant Period plus interest, as well as their own costs from that date.
If a Defendant’s Part 36 offer is rejected by the Claimant and the Claimant wins at trial and is awarded more than the Defendant’s Part 36 offer, then the Defendant will pay the Claimant’s costs of the whole action, subject to assessment.
What happens when a Defendant accepts a Claimant’s Part 36 offer?
If a Defendant accepts a Claimant’s Part 36 offer then the Defendant must pay the amount of the offer plus the Claimant’s costs on the standard basis up to the date of acceptance.
What happens when a Defendant rejects a Claimant’s Part 36 offer?
If a Defendant does not accept a Claimant’s Part 36 offer and the Claimant is awarded at trial judgment equal to the Claimant’s offer or higher, then unless the Court considers it unjust to do so, the Court will order the Defendant to:
- Pay the Claimant the judgment sum;
- Pay interest on the whole or part of the sum awarded by the Court at a rate of not more than 10% above base rate;
- Pay the Claimant’s costs on the indemnity basis (i.e. a higher more generous rate) following expiry of the Relevant Period, with interest on these costs at up to 10% above base rate;
- Pay an additional amount of 10% of the judgment up to a maximum of £75,000.
If a Defendant does not accept a Claimant’s Part 36 offer and the Claimant fails to equal or beat its own Part 36 offer, then costs will be decided by the Court in the usual way.
Can a CPR Part 36 offer be accepted after expiry of the Relevant Period?
A Part 36 offer may be accepted at any time, whether or not the offeree (recipient of the offer) has subsequently made a revised offer, unless the offeror (maker of the offer) has served notice of withdrawal of the offer on the offeree.
An offeree may wish to accept a Part 36 offer after expiry of the Relevant Period, however there can be adverse costs consequences of late acceptance.
Part 36 offers can be a highly effective tool, when pitched at the right amount and at the right time, to get the other side to think carefully about the importance and implications of acceptance or rejection. It raises the stakes for them continuing to contest the case.
If you have any questions please contact our specialist Dispute Resolution team.