A well-timed Part 36 offer can materially affect the costs outcome of litigation. Its effect depends on who made the offer, when it was served and whether the eventual judgment meets the relevant Part 36 threshold.

For counsel, the question is not simply how much to offer. Timing, compliance and the likely judgment all affect the protection a Part 36 offer may provide.

Quick answer

A Part 36 offer can be made before or during proceedings, but timing matters because it can affect the costs consequences available. If a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer, adverse costs consequences may follow. If a claimant obtains a judgment at least as advantageous as its own Part 36 offer, enhanced interest, costs and an additional amount may be available, subject to the rules and the court’s power to avoid an unjust result.

What is a Part 36 offer?

A Part 36 offer is a formal settlement offer made under Part 36 of the Civil Procedure Rules. Unlike an ordinary settlement proposal, a compliant Part 36 offer can produce specified costs and interest consequences if it is accepted or if the case proceeds to judgment.

Part 36 operates as a self-contained procedural code. An offer that does not comply with its requirements will not attract the specified Part 36 consequences, although a non-Part 36 settlement offer may still be relevant when the court exercises its general discretion on costs under CPR 44.2.

A Part 36 offer may relate to the whole claim, part of the claim or a particular issue. It can also be made before proceedings are commenced.

What makes a Part 36 offer compliant?

Under CPR 36.5, a Part 36 offer must be in writing and make clear that it is made pursuant to Part 36.

It must identify whether it relates to the whole claim, part of the claim or a particular issue, and state whether it takes any counterclaim into account. Where required, it must also specify a relevant period of at least 21 days within which the defendant will be liable for the claimant’s costs if the offer is accepted.

The requirement to specify that period does not apply where the offer is made less than 21 days before trial.

A defendant’s monetary Part 36 offer must generally be an offer to pay a single sum. There are also specific rules where payment is proposed more than 14 days after acceptance.

Under CPR 36.7, a Part 36 offer may be made at any time, including before proceedings begin.

When should a Part 36 offer be made?

There is no single correct stage at which to make a Part 36 offer.

An early offer may create costs protection before substantial litigation costs are incurred. However, there should usually be enough information available to make a realistic assessment of the case, including liability, causation, quantum and the available evidence where relevant.

The relevant period is central to the timing decision. For an offer made at least 21 days before trial, it is normally the period specified in the offer, or any longer period agreed between the parties.

Where an offer is made less than 21 days before trial, the relevant period runs to the end of the trial.

A late Part 36 offer may still have settlement value, but it should not be assumed to provide the same judgment-stage protection as an earlier offer. CPR 36.17 provides that the usual judgment consequences do not apply to an offer made less than 21 days before trial unless the court has abridged the relevant period.

The practical question is therefore not simply what figure should be offered, but whether the timing is capable of achieving the intended costs protection.

What happens if a Part 36 offer is accepted?

Where a Part 36 offer is accepted within the relevant period, the claimant is generally entitled to the costs of the proceedings, including recoverable pre-action costs, up to the date on which notice of acceptance is served.

Where recoverable costs are fixed, the relevant fixed-cost provisions apply instead.

Acceptance generally stays the claim on the terms of the offer. Where the accepted offer involves payment of a single sum, that amount must normally be paid within 14 days unless the parties agree otherwise in writing or the court orders otherwise.

If a whole-claim offer is accepted after expiry of the relevant period and costs cannot be agreed, the court must, unless it considers it unjust, normally award the claimant its costs up to expiry of the relevant period and require the offeree to pay the offeror’s costs from expiry until acceptance.

What happens if a claimant fails to beat a defendant’s Part 36 offer?

A defendant’s Part 36 offer can create a significant costs risk for the claimant.

Under CPR 36.17, the test is whether the claimant has failed to obtain a judgment more advantageous than the defendant’s offer.

For a money claim, this means obtaining a better result in monetary terms by any amount, however small. A judgment equal to the defendant’s offer therefore does not beat it.

Unless the court considers it unjust, the defendant will normally be entitled to its costs, including recoverable pre-action costs, from expiry of the relevant period, together with interest on those costs.

A claimant may therefore succeed at trial but still face an adverse costs consequence because the judgment was no better than the defendant’s earlier Part 36 offer.

How does QOCS affect a Part 36 offer in a personal injury claim?

In personal injury proceedings, Part 36 must also be considered alongside the qualified one-way costs shifting rules in CPR 44.13–44.16.

Subject to the applicable exceptions, QOCS restricts the extent to which costs orders against a claimant can be enforced. CPR 44.14 limits enforcement by reference to the aggregate monetary value of relevant orders or agreements in the claimant’s favour for damages, costs and interest.

Exceptions can apply, including in cases involving fundamental dishonesty and certain circumstances where proceedings have been struck out.

The existence of an adverse Part 36 costs order and the extent to which that order can be enforced are therefore separate questions.

What happens if a claimant matches or beats its own Part 36 offer?

The test is different where the claimant made the offer.

CPR 36.17 applies where the judgment against the defendant is at least as advantageous to the claimant as the proposals contained in the claimant’s Part 36 offer.

The claimant therefore does not have to exceed its own offer. Matching it can be sufficient.

Unless the court considers it unjust, the claimant may be entitled from expiry of the relevant period to:

• interest on all or part of the money awarded at a rate of up to 10% above base rate;
• costs on the indemnity basis;
• interest on those costs at up to 10% above base rate; and
• an additional amount.

For a monetary award, the additional amount is 10% of an award up to £500,000. Above that figure, it is 10% of the first £500,000 plus 5% of the amount above £500,000, subject to an overall cap of £75,000.

When can the court decline to impose the Part 36 consequences?

The court can decline to impose the normal CPR 36.17 consequences where it considers that doing so would be unjust.

Relevant circumstances include the terms of the offer, the stage at which it was made, the information available to the parties, their conduct in providing information and whether the offer represented a genuine attempt to settle the proceedings.

The discretion does not make the Part 36 consequences optional in the ordinary case. The specified consequences apply unless the court considers them unjust.

Can a Part 36 offer be withdrawn or changed?

Yes, but timing matters.

After expiry of the relevant period, an offer may generally be withdrawn or changed if it has not already been accepted.

Different rules apply where the offeror seeks to withdraw the offer, or make it less advantageous to the offeree, before expiry of the relevant period. CPR 36.9 and 36.10 govern when such changes take effect and when court permission may be required.

Practitioners should therefore not assume that a Part 36 offer can simply be withdrawn at will once it has been served.

Part 36 offers, trial judges and fixed recoverable costs

A Part 36 offer is treated as without prejudice except as to costs. Its existence and terms must generally not be communicated to the trial judge until the case has been decided, subject to the exceptions in CPR 36.16.

Part 36 also continues to operate in claims subject to relevant fixed recoverable costs regimes, although the consequences are modified.

Under CPR 36.24, where a claimant would otherwise receive indemnity costs under CPR 36.17(4), additional costs are instead calculated at 35% of the difference between the applicable fixed costs at expiry of the relevant period and those applicable at judgment.

The applicable costs regime should therefore be identified before advising on the effect of an offer.

Part 36 offer vs Calderbank offer

A Part 36 offer is not the only way to make a settlement proposal.

A non-Part 36 offer, often referred to as a Calderbank offer where made without prejudice save as to costs, can provide greater flexibility because it does not have to comply with CPR 36.5.

The trade-off is that it does not carry the specified Part 36 consequences. Instead, the court may take the offer into account when exercising its general discretion on costs under CPR 44.2.

The choice therefore depends on whether the defined procedural consequences of Part 36 are more valuable in the circumstances than the flexibility of an ordinary settlement proposal.

Part 36 checklist for counsel

Before serving an offer, consider:

• Compliance: Does it satisfy CPR 36.5 and any claim-specific requirements?
• Timing: Is there enough time before trial for the intended consequences to operate?
• Valuation: Does the figure reflect a realistic assessment of the evidence?
• Settlement purpose: Is it a genuine attempt to settle?
• Costs regime: Are QOCS or fixed recoverable costs relevant?
• Payment terms: Does a defendant’s monetary offer satisfy the applicable payment requirements?

Frequently asked questions

Can a Part 36 offer be made before proceedings?

Yes. CPR 36.7 permits a Part 36 offer to be made at any time, including before proceedings commence.

Does a Part 36 offer always have a 21-day period?

No. Where an offer is made at least 21 days before trial, it must normally specify a relevant period of at least 21 days. Different provisions apply where the offer is made less than 21 days before trial.

What happens if you do not beat a Part 36 offer?

It depends on who made it. A claimant who fails to obtain a judgment more advantageous than a defendant’s offer may face adverse costs consequences. A claimant who obtains a judgment at least as advantageous as its own offer may become entitled to enhanced Part 36 benefits.

Does a claimant have to beat its own Part 36 offer?

No. The judgment must be at least as advantageous as the claimant’s offer. Matching the relevant threshold can therefore be sufficient.

This article is published for information and analysis only. It is not legal advice and should not be relied upon in relation to any particular case.