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Part 36 offers explained
Details of the procedure for making Part 36 offers and payments in civil cases are
set out within CPR Part 36. Generally the idea of a Part 36 offer is to compel the
other party to the proceedings, whether claimant or defendant, to bring a matter
to a swifter conclusion by making a realistic offer to settle. A Part 36 offer may
be made in respect of liability and/or in relation to a material monetary amount.
Where a defendant makes a Part 36 offer in litigated proceedings that party must
make a payment into court whereupon the claimant will have 21 days to consider the
If the offer was not accepted and the matter proceeded to a trial and the claimant
recovered less than the amount recovered by the defendant he would generally have
to pay the defendant's costs from the date of that payment in.
A Part 36 offer is really only made where it was not possible to make a Part 36 Payment
into Court. As soon as proceedings were issued, assuming the offer relates to a monetary
item, the defendant had to make a Part 36 payment within 14 days of service of the
claim form. A Part 36 offer made by either party to the proceedings had to be made
in writing headed "Without Prejudice Save As To Costs" and state that the offer made
was open for 21 days. It also had to specify exactly whether the offer related to
the whole or part of the claim and whether the offer was inclusive of interest.
CPR Part 36.5(6) stated that a Part 36 offer may only be accepted on expiry of the
21 days if (a) the parties agreed liability for costs; or (b) the court gave permission.
In the past the Court would only give permission for late acceptance of an offer
where there had been a significant changes in the risk of litigation in the case.
If the offer related to the whole of the claim then, if accepted the claim is stayed.
If the offer related to part of the claims then the claim was stayed as to that part
with liability for costs to be agreed or decided by the court.
The Claimant's Part 36 offer under the “old” regime
The claimant could make a Part 36 offer on the same terms as a defendant Part 36
offer at any stage in the proceedings, the difference being that no payment into
court was made once the proceedings were issued. If the offer was accepted by the
defendant the claimant would be entitled to his costs up to the date that a Notice
of Acceptance was filed. In addition the claimant was entitled to interest on his
costs from the date of that acceptance. If the claimant's Part 36 offer was rejected
and the claimant was awarded more at trial than he had offered to accept then CPR
Part 36.21 applied. In this part, where a claimant did better than his Part 36 offer,
the court, unless it considered it unjust to do so, might award costs on the greater
indemnity basis and with enhanced interest on the damages and/or the costs, up to
10% above the base rate. Interest in these circumstances could even be awarded on
damages that would otherwise not attract interest, like future losses. CPR Part 36.21(5)
set out the considerations given by he courts when making such an order. The court
would also consider the terms of the offer, when the offer was made, the information
available to the parties at the time the offer was made and the conduct of the parties.
In the case of Earl -v Cantor Fitzgerald International (No. 2)  3 May 2001
the claimant had made a Part 36 offer in August 1999 and then a further, lower Part
36 offer in February 2000. The matter proceeded to trial and the claimant did better
than both of the offers. The issues of great significance of the case were that the
defendant could have concluded the matter much earlier. The period from which the
enhanced rate of interest that was allowed ran from the date of the first offer.
When considering the rate of interest to be awarded the court considered whether
such an award would be of disproportionate benefit to the claimant or disproportionate
forfeit on the defendant.
Defendants would often argue that orders for costs awards on the indemnity basis
with enhanced interest should only be made when a case is settled at trial. In reality
this was not the case. The Court of Appeal decision in Petrograde Inc -v- Texaco
Ltd  1 WLR 947 provided for orders to be made by the Court for costs on the
indemnity basis with enhanced interest even though the offer was not beaten at trial.
Lord Woolf stated that
"If a defendant involves a claimant in proceedings after an offer has been made,
and in the event the result is no more favourable to the defendant that that which
would have been achieved if the claimant's offer had been accepted without the need
for those proceedings, the message of Part 36.21 is that, prima facie, it is just
to make an indemnity order for costs and for interest at an enhanced rate to be awarded".
The emphasis in this case was for claimants to make reasonable offers to settle.
A great benefit to the claimant was that if the he had failed to meet or beat his
own offer there would be no adverse costs consequences.
Unclear Waters: What happened if the Claimant equaled his offer?
A common scenario is where a claimant makes a Part 36 offer to settle and three months
later the defendant indicates that he wishes to accept the offer after. Where does
this leave the claimant? Certainly under CPR Part 36.21 there are no provisions that
would entitle the claimant to enhanced interest and indemnity costs. Under CPR Part
36.20(2) the court, unless it is considered unjust to do so, would order that the
offeree (the claimant) pay the offeror's (defendant's) costs from the latest date
on which the offer could have been accepted. In Gaynor -v- Blackpool Football Club,
NLJ July 5, 2002, p.1028 the claimant had made a Part 36 offer of 100% on liability.
It was therefore impossible for the claimant to better the offer. The court was consequently
unable to award indemnity costs. The case of Huck -v- Robson  3 All ER 263,
CA was relevant in this regard.
From a tactical point of view, a claimant could put pressure on a defendant by making
a Part 36 offer at an early stage. Clearly the spirit of the Overriding Objective
should have been considered. Placing such pressure upon the defendant could save
expense, assist a more expeditious conclusion and above all protect the client's
interests on the question of costs. However, the quantification of the damages had
to be accurate and the timing of the offer correct. Many practitioners took the view
that an even better tactic was to put pressure on the defendant to make the Part
36 offer. Indeed, it could well be that the defendant's valuation of the claim might
be greater and one would always want to act in the client's best interests. If the
defendant's offer was not accepted and there was a reasonable prospect of the claimant
recovering more, a Part 36 offer would often be put forward by the claimant. Without
such a tool the claimant could almost be bullied into accepting an offer by defendants
threatening costs consequences. The possible benefits to a claimant, if a matter
went to trial, were indemnity costs, interest at up to 10% above base rate on costs
and interest at up to 10% above base rate on damages. It would have been a foolhardy
approach to ignore the benefits of making a claimant's Part 36 offer, or considering
there to may be little point in making such an offer. Such an approach indeed would
not uphold the Overriding Objective of CPR Part 1, and could give cause to greater
costs being incurred, therefore hardly heeding the principle of proportionality,
and in fact could place the claimant client at risk.
“New” Part 36: Changes to Part 36
Part 36 was re-written in 2007. As from April 2007 Defendants no longer needed to
make payments into court in support of Part 36 offer to settle.
Part 36 offers and Costs in Small Claims Cases
CPR Rule 27.14 (Costs on the small claims track) was (2005 no. 3) amended to provide
that when a claim is allocated to the small claims track by consent, the small claims
costs provisions will apply unless the parties agree otherwise.
(Rule 36.2(5) allows the court to order Part 36 costs consequences in a small claim).";
(b) in sub-paragraph (3)(c), after "loss of earnings", insert "or loss of leave";
and section (c) (5) is substituted with-"Where
(a) the financial value of a claim exceeds the limit for the small claims track;
(b) the claim has been allocated to the small claims track In accordance with rule
(3), the small claims track costs provisions will apply unless the parties agree
that the fast track costs provisions are to apply
(6) Where the parties agree that the fast track costs provisions are to apply, the
claim will be treated for the purposes of costs as if it were proceeding on the fast
track except that trial costs will be in the discretion of the court and will not
exceed the amount set out for the value of claim in rule 46.2 (amount of fast track
Also note that at the same time a new rule 27.14(2A) was also inserted, which provided
that the rejection of an offer to settle in cases on the small claims track does
not itself constitute unreasonable behaviour, but may be taken into account when
the court considers the reasonableness of the parties' conduct generally.
The Trustees of Stokes Pension Fund -V- Western Power Distribution (South West) PLC
 EWCA Civ 854 Court of Appeal 11th July 2005
The Defendants made offer of £27 000 but did not make a Part 36 payment into court.
The Claimants rejected the offer seeking damages of £780 000. The Defendants later
withdrew the offer. Appeal allowed against an order for the Defendants to pay half
the Claimants’ costs - the Defendants should have been ‘good for the money’
Alli v Luton & Dunstable NHS Trust  Court of Appeal (Civil Division) Auld LJ,
Latham LJ, and Jacob LJ, 27th April 2005
Part 36 offers, material changes to the case and when costs orders on the indemnity