Part 36 Offers PDF

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Part 36 offers...

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Part 36 Offers P36 offers are settlement offers that carry cost consequences, thereby providing a financial incentive for an action to be settled. Rationale: a sensible offer to settle should get some benefit if it is not accepted and it turns out at trial that they should have been. 

A Part 36 offer can be made ‘in writing’. CPR 36.5(1)(a)

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CPR 36.5(1)(b) - must ‘make clear that it is made pursuant to Part 36’ and

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CPR 36.16(1) - states that it is not necessary to head the letter ‘Without prejudice’ as it will be treated as such.

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CPR 36.7(2) - A Part 36 offer is made when it is ‘served’ on the offeree. The White Book commentary states that “service” is calculated pursuant to CPR 6 (see SGS2)

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CPR 36.5(1)(d) - says that the offer must state whether it relates to the whole of the claim or part of it. It can attempt to settle a counterclaim under CPR 36.5(1)(e)

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Although Part 36 offers are in relation to settling quantum, they can be in relation to liability only i.e. does the defendant accept that he was 100% negligent?

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CPR 36.5(1)(d) - A Part 36 offer may relate to an issue that arises in the claim.

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CPR 36.5(4) – A Part 36 Offer will be treated as inclusive of all interest until the expiry of the relevant period.

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Specify a period of not less than 21 days. This is called the ‘relevant period’.

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CPR 36.13(1) - If an offer is accepted within the relevant period, the defendant will be liable for the claimant’s costs of the action up to the date on which notice of acceptance was served on the offeror.

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CPR 36.11(1) - The offeree may accept a Part 36 offer in writing.

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CPR 36.6(1) - An offer must be to pay a single sum of money.

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CPR 36.14(6)(a) - Once a claimant accepts a Part 36 offer, payment must be made within 14 days of acceptance unless agreed otherwise.

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CPR 36.14 (7) - If claimant does not pay within the time specified, he may enter judgment for that sum

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CPR 36.14(1) - Once the claimant has accepted a Part 36 offer, it is stayed

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CPR 36.11(2) - If a Part 36 offer is accepted after the relevant period has expired, the court’s permission is not needed.

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A Part 36 offer can be accepted at any time unless it has been withdrawn.

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CPR 36.11(3) – Sets out circumstances where the court’s permission is required: where a trial is in progress or the relevant period has expired and further deductible amounts have been paid to the claimant since the date of the offer

SCENARIO A

You are acting for the defendant. You receive a letter from Price Prior, solicitors for the claimant, in which the claimant makes a Part 36 offer, asking the defendant to pay £3,500,000, exclusive of interest, in full and final settlement of all Ritchisons’ claims. You contact Bono Weller and Co LLP (defendant) to inform them of the offer. They ask you to explain the following: 1.

Assuming that the defendant accepts the offer, explain the costs/interest/damages consequences of accepting the offer. If the offer is accepted within the period the offer was open (the ‘relevant period’): a)

The claimant (Ritchisons) gets the amount offered in the Part 36 letter (paid within 14 days) i.e. £3,500,000.

b)

Ritchisons gets its costs to the date upon which notice of acceptance is served on the offeror (the claimant) – CPR 36.13(1). Subject to paragraphs (2) and (4) and to rule 36.20, where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings (including their recoverable pre-action costs) up to the date on which notice of acceptance was served on the offeror.

c) The claim will be stayed – CPR 36.14(1). 2.

What happens if defendant rejects the offer and the matter proceeds to trial and:

Ritchisons (claimant) wins at trial and is awarded the same as the offer Ritchisons wins and gets a judgment at least as advantageous as its own offer i.e. £3,500,000 or more at Court (i.e. the claimant has obtained a judgment that is at least as advantageous as its own offer). CPR 36.17(1)(b) and CPR 36.17(4) apply. 1.

Ritchisons gets damages as awarded by the court.

2.

Ritchisons gets its costs of the whole action under the general rule in CPR 44.2 (subject to the court’s discretion) that the unsuccessful party pays the costs of the successful party. The court may then apply the following consequences because the defendant (Bono Weller) should have accepted the offer, so Ritchisons will be compensated and the defendant will be penalised:

3.

Ritchisons receives interest on all/some of the damages, at a rate not ex ceeding 10% above base rate, for some/all of the period starting from the date the relevant period expired (CPR 36.17(4a).

4.

Ritchisons will get indemnity costs from the date the relevant period expired (CPR 36.17(4b).

5.

Ritchisons will get interest on those costs at a rate not exceeding 10% above base rate (CPR 36.17(4c); and

6.

Ritchisons will get an additional amount. As the money claim awarded is more than £500,000, Ritchisons will get the maximum amount allowed (£75,000) given the tapering amounts available in CPR 36.17(4d).

Points 3-6 are subject to the court’s discretion under CPR 36 and therefore will be awarded unless the court considers it unjust (CPR 36.17(4) and (5)). Ritchisons wins at trial and is awarded less than the offer

Ritchisons wins but gets less than three million, five hundred thousand £3,500,000 (i.e. Ritchisons wins and obtains a judgment that is less advantageous than its own Part 36 offer): 1.

Ritchisons will get its damages.

2.

Ritchisons will get its costs under the general rule in CPR 44.2 (subject to the court’s discretion) – that the unsuccessful party pays the costs of the successful party.

3.

There is no penalty for Ritchisons for making an unreasonable offer.

4.

There are no other Part 36 consequences for Ritchisons.

Ritchisons loses at trial 1.

Ritchisons will get no damages – it has lost.

2.

The defendant will get costs in the normal way following the general rule under CPR 44.2 (subject to the court’s discretion), the unsuccessful party (here Ritchisons) pays the costs of the successful party.

SCENARIO B You are acting for the claimant. You receive a letter from Russell & Co solicitors in which the defendant makes a Part 36 offer to pay Ritchisons £2,000,000, exclusive of interest, in full and final settlement of all Ritchisons claims. You contact Francis Vollbehr at Ritchisons to inform him of the offer. He asks you to explain the following: 1.

Assuming that Ritchisons accepts the offer, explain the costs/interest/damages consequences of accepting the offer. If the offer is accepted within the period the offer was open (the ‘relevant period’): a) The claimant (Ritchisons) gets amount offered in the Part 36 letter (paid within 14 days) i.e. £2,000,000.

2.

b)

Ritchisons gets its costs to the date upon which notice of acceptance is served on the offeror (the defendant) – CPR 36.13(1).

c)

The claim will be stayed – CPR 36.14(1).

Assuming that Ritchisons (claimant) rejects the offer and the matter proceeds to trial, explain the costs/interest/damages consequences of rejecting the offer in each of the following circumstances:

Ritchisons wins at trial and is awarded more than the offer; Ritchisons wins and gets more than £2,000,000 at trial (i.e. Ritchisons wins and obtains a judgment which is ‘more advantageous than’ the defendant’s Part 36 offer): 1.

Ritchisons will get damages.

2.

Ritchisons will get its costs under the general rule in CPR 44.2 (subject to the court’s discretion) – that the unsuccessful party pays the costs of the successful party.

3.

No other penalty is imposed on the defendant for making an offer which was less than the amount Ritchisons was awarded at trial.

4.

There are no other Part 36 consequences for the defendant.

Ritchisons wins at trial and is awarded the same as the offer; Ritchisons wins at trial and is awarded less than the offer; Ritchisons wins and gets £2,000,000 or less (i.e. the claimant wins but fails to obtain a judgment that is “more advantageous” than the defendant’s Part 36 offer) therefore CPR 36.17(1) (a) and CPR 36.17(3) applies. The reasoning for the consequences below is that Ritchisons should have accepted the defendant’s offer, and therefore will be penalised (even though it has won the claim). 1.

Ritchisons will get damages (of £2,000,000 or less).

2.

Ritchisons will get its costs until the date on which the relevant period expires. This is under the general rule that the unsuccessful party pays the costs of the successful party – CPR 44.2 (subject to the court’s discretion).

3.

However, the defendant will get its costs plus interest (unless the court considers it unjust) from the date on which the relevant period expired. (CPR 36.17(3) and (5)). This is known as a “split costs order”.

Ritchisons loses at trial. 1. The defendant will get its costs in the normal way under CPR 44.2 – the general rule that the unsuccessful party (Ritchisons) will pay the costs of the successful party (subject to the court’s discretion). 2.

The defendant may also get interest on those costs from the end of the relevant period as long as the court considers this just. (CPR 36.17(3)(a) and (b) – this is on the basis that under CPR 36.17(1)(a) the “claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer”.)...