Understanding Part 36, from day one

Part 36 is a freestanding provision, described by the courts as a self-contained code, and to which ordinary common law principles such as mistake, estoppel and so on, do not apply.

A Part 36 offer can be made at any time in any case, although Part 36 has no application in the small claims track – see CPR 27.2(1)(g).

There are also special rules relating to personal injury matters in the portal process, but these do not prevent a day one liability offer.

The court must apply the costs consequences of Part 36 unless it would be unjust to do so and the court must take into account all of the circumstances of the case, including whether the offer was a genuine attempt to settle the proceedings (see CPR 36.17(5)(e)).

In some cases, such as debt collection, it is possible to put a value on the claim the moment that the client instructs you; in other matters that will not be the situation.

However, it is always possible to make a day one Part 36 offer on liability. That is well established, and the issue has been what percentage discount against full liability represents a “genuine attempt to settle the proceedings”.

In Jockey Club Racecourse Ltd v Willmott Dixon Construction Ltd [2016] EWHC 167 (TCC) the technology and construction court, part of
the High Court, held that where a claimant had made an offer to settle the matter
on the basis of 95 per cent
liability and then succeeded on a full liability basis by way of settlement, the claimant was entitled to indemnity costs in the usual way.

Quantum

In Rawbank SA v Travelex Banknotes Ltd [2020] EWHC 1619 (Ch) (23 June 2020) the Chancery Division of the High Court held that the claimant’s Part 36 offer to accept just 0.3 per cent less than the full sum claimed was a “genuine offer to settle” as required by CPR 36.17(5)(e). Here the claimant was able to make a quantum Part 36 offer.

Although each case will depend upon its facts, this is a very important decision and develops a long line of cases, in which I have been heavily involved, as to when a claimant making a Part 36 offer should get indemnity costs.

Here, the court said that the key issue was not mathematical, but rather whether it could be inferred that there was no genuine attempt to settle.

Here there was no issue over quantum, and clearly no defence, and therefore a discount of any amount involved the claimant giving up something it had a near certainty of obtaining.

This decision is particularly important to debt collection matters, and liability offers when liability cannot seriously be in dispute.

The law used to be that a claimant had to beat its own offer, but but now as claimant only a claimant only has to match its own offer, and was then changed again to add in the requirement that the court must consider whether the Part 36 offer was a genuine attempt to settle the proceedings.

Even before that addition to the Civil Procedure Rules the courts had considered effectively the same question.

In Huck v Robson [2002] EWCA Civ 398 the Court of Appeal held that an offer to settle at 95 per cent of the sum claimed on liability was a genuine offer to settle and left open the question of whether offering less than a 5 per cent discount would be.

In AB v CD & Ors [2011] EWHC 602 (Ch) the Chancery Division of the High Court  said that the offer must contain some genuine element of concession, so that an offer to accept the full amount claimed would not satisfy Part 36.

It is important to note that a claimant which matches its own offer not only gets indemnity costs but stands to have an enhancement of 10 per cent on the damages.

Thus a claimant which is prepared to give up 1 per cent of the value of the claim in order to achieve a swift settlement stands to get an additional 10 per cent if the matter goes to trial.

The courts have a very wide discretion in relation to costs, but when a claimant matches or beats its own offer the courts generally award indemnity costs for the whole case, and all of the work done, including the work done in relation to quantum when the Part 36 offer has been in relation to liability only.

The 0.3 per cent discount approved in Rawbank involved a quantum offer. If making a liability only offer you may feel safer sticking to 95 per cent / 5 per cent split.

It is hard to think of a single piece of civil litigation where a claimant should not make a day one Part 36 offer.  

Kerry Underwood is senior partner at Underwoods Solicitors underwoods-solicitors.co.uk