Settlement offers: new Part 36 changes from 6th April 2015
If you're involved in a dispute then making a Part 36 offer is an important tactical step for either Claimant or Defendant.
It focuses the opponent's mind on settlement and, if settlement is not achieved, protects, to some extent, the offeror's position on costs. If a Part 36 offer has been made, both offeror and offeree should keep under constant review whether it should be accepted, withdrawn or increased.
New Part 36
If your business is involved in a dispute then 6 April 2015 saw a significant change to Part 36 come into force. Some of the key changes are set out below:
The old Part 36 regime has given rise to difficulties where a claimant makes a Part 36 offer for nearly all the relief claimed. On the face of the rules, the costs consequences apply where a claimant obtains a judgment that is “at least as advantageous” as its offer, i.e. it doesn't need to better its offer. In theory, the costs consequences could apply where a claimant makes an offer to settle for the full amount claimed and then succeeds in full.
Under the new Part 36.17(5)(e), the court must take into account all circumstances of the case. Including whether the offer was a “genuine attempt to settle the proceedings”.
The idea is that a very high claimant offer is unlikely to be a genuine attempt to settle the claim and that this should lead the Court to decline to award the costs consequences of Part 36 where a claimant’s offer contains little in the way of concession. However, the court still retains a high discretion in this regard and will no doubt deal with cases on a case by case basis.
Improving a Part 36 offer
The new Part 36.9(5)(a) states that an improved Part 36 offer shall be treated not as a withdrawal of the original offer, but as the making of a new Part 36 offer on improved terms.
This means that an improved Part 36 offer doesn't revoke the original offer. Instead, the improved offer is capable of relying on the date of the relevant period of the original Part 36 offer in calculating enhanced interest and costs.
This will have consequences should the offeror beat their Part 36 offer for settlement and allow the offeror to calculate interest from the date the original relevant period expired.
Under the old regime, the Judge could not be told about the existence of Part 36 offers until the whole case had been decided. That meant that, following a trial of preliminary issues, the winning party could not disclose the existence of a Part 36 offer until the whole case had concluded.
Under the new Part 36.16, the Judge can be told of the existence, but not the terms, of a Part 36 offer after judgment has been given on preliminary issues.
Under the old Part 36 regime, the court had a broad discretion on whether to make the usual order in relation to late acceptance. (That is, that the delaying party pays the costs for the period of delay.)
Under the new Part 36.14(4), where a Part 36 offer is accepted late, the court now must make the usual order unless it would be unjust to do so.
Withdrawing a Part 36 offer
Under the old regime, a properly constituted Part 36 offer must be open for acceptance for a period of 21 days or as is often termed “the relevant period”. At this time, should the offeror wish to rescind the offer, a notice must be brought to the attention of the offeree informing them that the offer is revoked.
Under the new regime, pursuant to CPR 36.9 (4)(b), the Part 36 offer may be automatically withdrawn after the end of the relevant period without need to serve notice.
While this revision places an onus on the offeree to be aware of any Part 36 offer which is automatically revoked after expiry of the relevant period, it may not necessarily be of benefit to the offeror as cost consequences are not applicable on a withdrawn Part 36 offer (CPR 36.17(a)).
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Seeking legal advice before making or accepting any settlement offers will ensure the correct Part 36 settlement procedures are followed and enable you to resolve disputes to your best cost advantage.
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