Either party may offer to settle a case at any time, up until when the judge makes his ruling. The CPR encourage offers of settlement to be made, and if offers are made in accordance with the rules there can be very significant costs savings for the party making the offer. Whereas the usual rule is that the loser pays all the legal costs of the winner, Part 36 CPR allows a party to make a formal offer up until three weeks before trial, which will give protection from an adverse costs order, in the event of the offer not being accepted and the amount of that offer not being beaten following trial. A defendant who accepts that he owes the claimant something but that the amount claimed is too high, should always make a Part 36 offer.
A defendant who refuses a claimant’s offer to settle and continues to trial will face serious penalties, if the amount awarded against him is the same or more than the amount the claimant agreed to accept in settlement. He is likely to be ordered to pay an additional 10% of the amount awarded, together with the claimant’s costs on an indemnity basis, plus interest on the costs at and entranced rate.
To be effective, a Part 36 offer must:
- be in writing;
- state specifically that it is a Part 36 offer;
- specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs;
- state whether it relates to the whole of the claim or to part;
- state whether it takes into account any counterclaim.
If you receive a Part 36 offer, you are entitled to ask for clarification within seven days of receiving the offer if anything is unclear. When an offer is made to pay a sum of money, the rule requires that it is paid within 14 days of acceptance. An offer to pay by instalments can be accepted, but will not automatically provide costs protection, which will be at the discretion of the judge. It is also quite permissible to make an offer outside of the Part 36 procedure, and although automatic protection from costs will not be provided, a judge will consider all offers of settlement when deciding costs at the end of the trial.
All Part 36 Offers are treated as being made ‘without prejudice, save as to costs’, and a judge will not be aware of them until after giving judgement at a trial.
A Part 36 offer must be accepted in writing. Once accepted, the claim is stayed on the terms of the offer and can be enforced without the need for further proceedings. Judgement can be entered for the amount agreed.