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Cutting through the legalese: “Settlement offers – Part 36 v Calderbank”

Part 36 v Calderbank

The majority of disputes end in settlement rather than being decided by the court. A settlement can arise before legal proceedings are commenced as well as after the issue of legal proceedings.

Two of the main settlement strategies are Part 36 Offers and Calderbank Offers. Both offers will be made “with-out prejudice save as to costs”, this means that if an offer was not accepted and legal proceedings went ahead, the offer cannot be referred to during the course of proceedings, but can be referred to when the court decides the issue of costs.

The table below sets out the differences between Part 36 offers and Calderbank offers.

 

Part 36

Calderbank

Content requirements

  • Must be in writing;
  • Must be made clear that the offer is made pursuant to Part 36 of the Civil Procedure Rules;
  • Specify a relevant period (not less than 21 days) for which the paying party will be liable for the receiving party’s costs if the offer is accepted;
  • State whether it relates to part or whole of the claim;
  • State whether it takes into account a counterclaim.

 

  • Must be in writing
  • An offer can be made to include any terms.

 

Accepting an offer

  • Acceptance must be in writing;
  • If an offer is accepted once trial has started, it must be done with the permission of the court; 
  • Full payment must be made within 14 days (or such offer period as had been agreed) of acceptance of the offer.
  • Acceptance must be in writing

Withdrawing an offer

  • Before the expiry of the relevant period the offer can be withdrawn or its terms changed only with the court’s permission;
  • The court’s permission is not required if the offer is withdrawn outside of the relevant period or if the offer is amended and is more advantageous to the offeror;
  • Once withdrawn, a Part 36 offer will not attract its costs and interest consequences.
  • Parties may specify a period of time for which the offer is open and include an expiry date after which the offer is withdrawn.

Cost consequences of accepting offer.

  • If an offer is accepted within the relevant period, the claimant is entitled to costs of their proceedings up to the date of acceptance on the standard basis;
  • If an offer is accepted outside the relevant period, the parties must agree the liability for costs or, failing an agreement, the court decides.
  • There are no set cost consequences when accepting a Calderbank offer, generally, the parties will agree on costs.

Cost consequences of not accepting an offer

  • If a claimant does not accept a defendant’s offer and wins but fails to beat it at trial, the court will likely order the claimant to pay any costs (on the standard basis) incurred by the defendant from the date of which the relevant period expired plus interest;
  • If a defendant does not accept a claimant’s offer to settle, and the claimant gets judgment that is equal to or better than its offer, the court will usually order the defendant to pay the following from when the relevant period expired up to judgment:
  • the claimant’s costs on the indemnity basis;
  • interest on those costs at a rate not exceeding 10% above base rate;
  • Enhanced interest on the whole or part of the sum awarded, not exceeding 10% above base rate;
  • An additional amount to be decided on the amount awarded, usually between 5% - 10% to a maximum of £75,000.
  • None of the following situations affects the usual presumption under CPR 44.2, i.e. the losing party should be ordered to pay the winning party’s costs on the standard basis:
  • If the claimant wins but fails to beat its own offer;
  • If a claimant does not accept a defendant’s offer and loses at trial;
  • If the claimant beats a defendant’s offer at trial,
  • Because Part 36 is silent concerning them, and therefore does not affect this presumption where they occur.

 

  • The court can decide what weight to give the offer when deciding on costs, there are no strict costs consequences.

 

  • Generally, if a successful party is awarded more by the court than it is offered, the court’s discretion regarding costs is exercise in its favour.

 

  • If the successful party fails to beat the offer at trial, the court should take this into account and disallow a portion of the successful party’s costs.

 

 

The court can decide what weight to give the offer when deciding on costs, there are no strict costs consequences.

Generally, if a successful party is awarded more by the court than it is offered, the court’s discretion regarding costs is exercised in its favour.

If the successful party fails to beat the offer at trial, the court should take this into account and disallow a portion of the successful party’s costs.

Because of the strict rules and consequences when making a Part 36 offer, parties may favour the use of a Calderbank offer for the following reasons:
• You are the defendant and you would like to offer a settlement by way of instalments and cannot meet the 14 day payment term of the Part 36;
• You would prefer to make a time limited offer which is only open for acceptance for a specified period;
• You do not want to be governed by the strict court rules imposed by Part 36 offers because, for example, you wish to make an offer the sum of which is inclusive of legal costs;
• Your case is allocated to the small claims track or you are taking part in arbitration proceedings;
• You want to make a ‘drop hands’ offer, in which each party agrees to withdraw its claims.

Although an unaccepted Calderbank offer may be an important consideration for the court when considering costs, it does not have the same cost consequences as a Part 36 offer. It is the cost consequences of non-acceptance of a Part 36 offer which makes it a very useful tool and can put the offeree under real pressure to settle a dispute without the need for proceedings.

Emilie Sclater has taken a more detailed look at Part 36 offers.

 

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.

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