A Part 36 offer is a settlement offer that can be made throughout court proceedings by either the defendant or claimant. For example –
- A issues a claim against B for alleged outstanding invoices
- During the course of the claim, B makes a Part 36 settlement offer to A
- On making the offer, B specifies how long they want the offer to remain open for acceptance. This is known as the ‘relevant period’ and has to be a minimum of 21 days.
- A accepts the offer and a formal settlement agreement is drawn up and entered into by both parties.
- The settlement agreement provides that B will pay A’s legal costs.
Generally, the exact amount to be paid is agreed by both parties at a later date. Where there is no agreement detailed assessment proceedings are issued by A and determined by the Court.
Where a Part 36 offer is accepted within the relevant period the Claimant will be entitled to the costs of the proceedings up to the date on which notice of acceptance was served on the offeror (CPR 36.13(1)).
In some cases, the claimant may apply to the court after the settlement agreement has been made, and ask for the defendant to pay a proportion of the legal costs, on account, in advance of the parties agreeing or the court deciding on the exact amount to be paid. In the case of Finnegan v Frank Spiers (2018) where a Part 36 offer had been accepted in the ‘relevant period’, the judge could not order the defendant to pay a proportion of the claimants legal costs on account.
In other cases, a party may decide to withdraw their Part 36 offer, but must be aware of the consequences of doing so. In BritNed Development v ABB AB & Anor (2018). ABB made a Part 36 offer which was followed by a counter offer (for a larger sum) by BritNed. ABB’s offer remained opened throughout the course of the trial as well as after the trial. It was however, withdrawn before judgment. Britned’s offer remained open for acceptance throughout. Although BritNed won, they recovered only 10% of their Part 36 offer and also failed to beat ABB’s withdrawn Part 36 offer. ABB argued that since BritNed had received nothing like its own Part 36 offer, and had failed to beat ABB’s offer, ABB should have its costs, and interest on them, from the latest point that its Part 36 offer could have been accepted by BritNed. BritNed countered that quantification of damages was particularly difficult in cases of this nature. While accepting that ABB’s Part 36 offer was a factor he had to take into account, the judge noted that ABB should not have withdrawn its offer. Although he declined to grant a costs order in favour of ABB, the judge accepted that it would be unjust for ABB to pay any of BritNed’s costs, given they had made an early commercial offer. He therefore made no costs order.
As a result, parties should think carefully before deciding to withdraw Part 36 offers, albeit that the Court still retains discretion to consider a withdrawn Part 36 offer when assessing costs.