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Emma Lowe

Associate, Russell-Cooke

Part 36 Offers: navigating the fine line between a ‘tactical’ offer and abuse of the regime

Practice Notes
Part 36 Offers: navigating the fine line between a ‘tactical’ offer and abuse of the regime


Part 36 offers encourage settlements with cost pressures, but courts ensure these offers are sincere attempts to resolve disputes

Part 36 offers are designed to encourage parties to settle disputes by the making and acceptance of constructive offers. They are inherently tactical, enabling the offeror ie the offering party to place pressure on their opponent by triggering onerous cost consequences should the offeror achieve an outcome at trial that is at least as advantageous as their offer.

However, it is important to bear in mind that Part 36 offers must meet a minimum threshold. They must genuinely aim to settle the dispute, as opposed to being an abuse of the Part 36 regime, ie solely designed to engage the onerous costs consequences.

Indeed, case law has repeatedly highlighted instances where the spirit of compromise is arguably absent from such offers. Such cases typically involve claimants making large settlement offers, often as high as 95 per cent of the value of the claim. Yet often, this is not a genuine attempt to settle the claim but rather to place the defendant at risk of indemnity costs pursuant to CPR 36.17(4).

It is for this reason, as is explained in the White Book commentary, that CPR 36.17(5)(e) was added with effect from 6 April 2015. Paragraph (5)(e) expressly requires the court to consider “whether the offer was a genuine attempt to settle the proceedings” as a factor in determining whether it would be unjust to make the usual order on a failure to beat a Part 36 offer. In other words, if the court finds that the offer was not a genuine attempt to settle the claim, it may exercise its discretion and not apply the usual Part 36 cost consequences.

To get a flavour of the different decisions reached by the court when considering CPR 36.17(5)(e):

  • In Jockey Club Racecourse Ltd v Willmott Dixon Construction Ltd [2016] EWHC 167 (TCC); [2016] 4 W.L.R. 43; [2016] 1 Costs L.R. 123, a 95 per cent offer made by the claimant was effective in an open-and-shut construction dispute. In this case, the liability was all or nothing and the defendant had conceded liability. The court accepted that the claimant’s offer was a genuine attempt to settle (even though it was not a possible outcome at trial, given that the defendant was either liable in full or not at all) and while the 5 per cent discount was very modest, it was not derisory.
  • In JMX v Norfolk & Norwich Hospitals NHS Foundation Trust [2018] EWHC 185 (QB); [2018] 1 Costs L.R. 81, the court accepted that a 90 per cent offer was sufficient, holding that 10 per cent was not “a token discount” in a clinical negligence case likely to be worth several million pounds. In this case, the judge made it clear that it was not possible or desirable to attempt “to determine how the case should have looked to the offeror before the offer was made”. In other words, it is unrealistic for the court to embark on an assessment of how a party should have regarded its prospects of success when pitching the level of an offer to settle; a broad-brush assessment of the specific facts of the case (as suggested in the White Book commentary) is preferable.
  • In Rawbank SA v Travelex Banknotes Ltd [2020] EWHC 1619 (Ch), the court accepted that a 99.7 per cent offer was a genuine attempt to settle a very strong breach of contract claim where there was “clearly no defence” and success was a “near-certainty”. In this case, there were only two possible outcomes: (i) success, in which case the full sum would be payable, or (ii) failing, in which case nothing would be payable. Here, the judge commented that a discount of any amount would involve the claimant giving up something which it had near-certainty of obtaining and, accordingly, characterised it as a genuine offer of settlement.

In a series of more recent judgments:

  • In Sleaford Building Services Ltd v Isoplus Piping Systems Ltd [2023] EWHC 1643 (TCC), the court held that a claimant's offer to accept 99.9 per cent of its claim, with the balance being interest, was not a genuine attempt to settle the proceedings. The judge highlighted that the offer made did not involve a significant concession (i.e. it was a negligible waiver of interest) and was not considered a genuine attempt to settle the proceedings.
  • In Yieldpoint Stable Value Fund, LP v Kimura Commodity Trade Finance Fund Ltd [2023] EWHC 1512 (Comm), the court held that a claimant’s Part 36 offer (which was beaten at trial) was not a genuine attempt to settle the proceedings, and that it would be unjust to allow the normal Part 36 costs consequences where a claimant matches or beats its own offer. In this case, the judge noted the “starkly binary nature of this dispute”, and that unlike a few previous cases "this was not a case where a very high claimant offer reflected a very strong prospect of the claimant succeeding at trial”. Rather, “the parties were diametrically and evangelically opposed in terms of their characterisation - and, [he] sensed, subjective understanding - of the deal they had concluded.” He concluded that “a discount of 1 per cent is meaningless in such context."
  • In Colicci & Ors v Grinberg & Anor (Re Costs) [2023] EWHC 2075 (Ch), a Part 36 offer that was only a 9.4 per cent discount on the value of the claim was a genuine attempt to settle a case where the claimants had a strong chance of success. Here, the judge commented that “the stronger a claimant’s case, the less likely it is that an offer to settle at a small discount will be stigmatised as non-genuine.”

The above cases signal a growing judicial awareness of potential abuse of the Part 36 regime and willingness to scrutinise offers, to ensure they align with the underlying purpose of facilitating genuine settlement. They are also helpful in clarifying the factors the court will consider when vindicating high offers (unsurprisingly, and as is pointed out in a few of the judgments, previous cases only provide “illustrative guidance”; each case is of course entirely fact-specific).

Recurring factors include: (i) whether the claim itself was obviously and objectively very strong at the time of the relevant offer, (ii) whether there are issues relating to liability and/or quantum, and (iii) whether there is an element of concession. Ultimately, however, the court seeks to undertake an objective and broad-brush assessment of the specific facts of the case, without the benefit of hindsight of the trial outcome. It is not simply a case that high offers are automatically not a genuine attempt to settle the proceedings.

Legal practitioners representing claimants should exercise particular caution when preparing Part 36 offers. There is not necessarily anything wrong with high claimant offers in objectively strong cases where, for example, there is a total lack of an arguable defence, or there are no issues regarding quantum.

Yet it may be prudent in such cases for claimants to explain in their offer letters why such a small discount is being offered for settlement. By the same token, it remains risky for defendants to assume that there will be no Part 36 costs consequences if they choose to ignore a claimant’s Part 36 offer even if it does not appear to be particularly generous.

As is clear from the fact that there have been at least three judgments on this issue in the last year alone, this is likely to be an issue that will continue to be the source of satellite litigation and will be an interesting area to watch.

Emma Lowe is an associate at Russell-Cooke 

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