Part 36 offers play an important part in litigation. A well-placed Part 36 offer can put pressure on an opponent to settle a case early: a party that fails to accept a good Part 36 offer can suffer severe costs consequences.
Most Part 36 offers are for a sum of money. Yet that is not the only option. A Part 36 offer can be made for anything the offeror seeks in settlement. In this article, we are going to look at these non-money Part 36 offers and one problem with making them: how to assess when a judgment obtained at trial is better than the offer. We will focus on Part 36 offers made by a claimant, although the same principles may also apply to a defendant’s Part 36 offer.
What Is A Part 36 Offer
A Part 36 offer is simply an offer made ‘without prejudice save as to costs’ that meets certain formal requirements. These requirements are laid out in Part 36 of the Civil Procedure Rules. The offer must:
- Be made in writing;
- Make it clear it is made pursuant to Part 36;
- Specify a ‘relevant period’ of no less than 21 days;
- State the scope and extent of the offer, e.g. whether it applies only to one particular head of claim or to the whole claim;
- State whether it takes any counterclaim into account.
Cost Consequences of a Claimants Offer – In General
If an offer meets the Part 36 requirements, particular costs consequences follow that would not ordinarily follow from a ‘without prejudice save as to costs’ offer. The costs consequences are different depending on whether:
- it is accepted or not accepted;
- whether the acceptance comes during or after the relevant period.
Cost Consequences – If the Offer is Accepted
If the offer is accepted within the ‘relevant period’, then the Defendant pays the Claimant’s costs on the ‘standard basis’ – this means that any dispute about the bill of costs will be settled in the paying party’s favour. If the offer is accepted outside of the relevant period, the Court will determine liability for costs if the parties cannot agree.
Cost Consequences – If the Offer is Not Accepted
If the offer is not accepted, and the Claimant gets a better outcome at trial than they would have got if the offer had been accepted, then the most severe costs consequences apply:
- Interest on any sum given in judgment at a rate not exceeding 10% above base rate for the period since the expiry of the relevant period, or a part of that period at the Court’s discretion.
- Costs will be on the indemnity basis – that is, disputes about the bill of costs will be resolved in favour of the receiving party.
- The Claimant will be entitled to interest on those costs at a rate not exceeding 10% above base rate for the period since the relevant period expired, or a part of that period at the Court’s discretion.
- An additional sum not exceeding £75,000, which is calculated either as:
– 10% of any sum awarded up to £500,000;
– If more than £500,000 has been awarded, 10% of the first £500,000 and then 5% of the remainder subject to the £75,000 cap;
– If no money has been awarded, then the sum will be calculated based on costs awarded as though that was the monetary award.
We should note this specific provision for a non-money award.
What Can you Offer
There is no limit on what can be offered. The Claimant can offer anything they would accept in settlement.
The offer is not limited to what the court can order either. For example, in Jockey Club Racecourse Ltd v Willmott Dixon Construction Ltd, the court accepted as valid a Part 36 offer which asked the Defendant to accept that they bore 95% liability for a defective roof.[1] The court could not have ordered this in the circumstances. The Defendant was either liable for the defects or they were not. Yet that did not affect the validity of the offer.
There is only one limit on what a claimant can offer. The claimant cannot duplicate what they are seeking in judgment: otherwise, they could make the Defendant suffer the costs consequences of Part 36 just by repeating the remedy sought in their statement of case. The claimant has to concede something of significant value for the offer to be valid.[2]
[1] [2016] EWHC 167 (TCC)
[2] See for example Gibbon v Manchester City Council [2010] EWCA Civ 726
What Are the Benefits of a Non Money Offer
Because there is no restriction on what can be offered, a non-money Part 36 offer gives the benefit of flexibility. It may be that a Claimant would be most satisfied with the fulfilment of a contract the Claimant has breached, with the right to do something the Defendant is preventing, or even with an apology.
However, the court may be reluctant to grant an injunction or an order for specific performance instead of damages. A non-money Part 36 offer is chance for the Claimant to put pressure on the Defendant to give them what would best satisfy them, rather than what the court may be minded to order.
The Problem: Bettering a Non-Money Offer
Where the Part 36 is a non-money offer, it is difficult to know when a judgment has bettered the offer.
This is not a problem when the offer is a money offer. Where the offer is for £1000 and the Claimant gets judgement in the sum of £1001, then a ‘bright line’ has been crossed: even this small improvement on the Part 36 offer proves the Defendant should have accepted it.
However, with non-money offers, there is no ‘bright line’:
“For money claims, with the words ‘however small’, CPR 36.17(2) specifies a bright line test to ascertain whether a defendant’s Part 36 offer was more advantageous than the judgment obtained. Where (as here), the claim in question is a non-money claim, a comparison between the offer and the judgment still has to be undertaken.”[1]
[1] Lamport and others v Jones [2023] EWHC 667 (Ch), para 78
An Example of the Problem: Lamport and Ors V Jones
In this case, the Claimants had an easement over a track which gave access to their farm. The Defendant would not permit vehicles over 2.15m width to access the track and would not permit the Claimants to improve the track surface or trim adjoining hedges. The Claimants claimed that the easement permitted such improvements and permitted vehicles up to 2.5m in width to use the track. During proceedings, the Claimant made a Part 36 offer to the Defendant. This offer essentially required the Defendant to agree that the Claimant had the rights they were claiming, and to permit them to carry out repair works and maintenance. It did not include a money offer.
The Claimants were broadly successful in their claim. They were granted a 3-year injunction to perform the work required to the track, as well as a favourable declaration of their rights of repair and maintenance. The trial judge decided they had beaten their Part 36 offer.
On appeal, the Defendant tried to argue that the Part 36 offer was not bettered. The court glossed the Defendant’s argument as disputing “the level of generality at which one should make the comparison required by CPR 36.17(1)(b) between the Part 36 Offer and the Judgment”. In other words, the Defendant sought to argue that the judgment would only be bettered if it was closely comparable to the Part 36 offer, with something more for the Claimant in addition. The Defendant argued inter alia:
- The judgment and the Part 36 offer were not comparable because:
a. the judgement did not go into as much detail as the Part 36 offer about the way in which certain repairs would be carried out; and
b. The terms of the offer, including the equipment the Claimant said they would use, were different from the terms of the (non-money) judgement; so
the Claimants had not got in judgment more than it had sought in the Part 36 offer. They had got either less, or something incomparably different.
- The Claimant had run arguments in its claim which were inconsistent with statements in its offer. These should be disregarded in deciding whether the Claimant had bettered its offer.
The court rejected all of these arguments. The test did not require such specific comparability between the Part 36 offer and the judgment. In relation to the third point, the court also noted that the Claimant is entitled to run different, even inconsistent, arguments in its Part 36 correspondence and at trial: that is how Part 36 is designed.[1]
The Court thought that the Defendant’s argument showed the danger that, “in non-money claims, it can be easy to descend into ever greater levels of detail to find some distinction which can be said to make the Judgment less (or more) advantageous than the Offer.”
[1] Ibid., para 98
The Test for Non-Money Offers
In his judgment, Mr Justice Mellor gave an overview of applicable case law on how this comparison should be undertaken in non-money cases. In short, the test was expressed as follows:
“’…the comparison required can reasonably be undertaken by identifying whether the relief obtained in the proceedings was in broad terms more advantageous to the claimant than its offer.’”[1] [emphasis added]
From Carver v BAA Plc [2008] EWCA Civ 412, a case referring to Part 36 of a now defunct version of the CPR, Mellor J took the principle that the test is “’open-textured’ and it ‘permits a more wide-ranging review of all the facts and circumstances of the case in deciding whether the judgment, which is the fruit of the litigation, was worth the fight’”. [emphasis added].
Mellor J took further explanation of the test from the judgment in the case of Webb v Liverpool Women’s NHS Foundation Trust [2016] EWCA Civ 365. This case was also decided under an older version of the CPR. That case was expounding principles from the yet earlier case of Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch). The following were the key principles taken by Mellor J from Webb:
[1] Ibid., para 78
- The court must assess whether, having regard to all the circumstances and looking at the matter as it affects both parties, an order that the unsuccessful party should pay the costs would be unjust. We should note this also applies to money offers.[1]
- There is no limit to the types of circumstances which may, in a particular case, make it unjust.
- In assessing all the circumstances of the case, the court must assess who in reality is the unsuccessful party and who has been responsible for the fact that costs have been incurred which should not have been.
- That gives the court discretion, but any circumstance affecting the ordinary consequences of CPR 36.17 must be out of the norm. It would not be sufficient for a judge to vary a costs order merely on the ground that the Part 36 regime itself is harsh or unjust.
[1] CPR r3.17(4)
The key points to take away here are:
(1) the court may consider anything and everything relevant to the case and the proceedings in deciding whether:
a. the offer has been bettered; or
b. whether allowing the ordinary consequences of Part 36 is unjust.
(2) However, the assessment of whether the offer has been bettered will be conducted on broad terms; and
(3) Any relief from the ordinary consequences of Part 36 will require unusual circumstances.
There is no sure way of knowing how the court will view a non-money offer as against a judgment. The court will consider all the circumstances of the case, but there is no limit to what might count as a relevant circumstance. They key question is whether the judgment obtained was in broad terms more advantageous to the Claimant than the Part 36 offer.
In light of this, the safest strategy in deciding whether to make a non-money Part 36 offer is to consider the essence of the dispute. If what is sought in the Part 36 offer really is the minimum that would satisfy the Claimant’s claim, the Claimant would be well advised to make it. The offer should be as specific as possible, but the court is unlikely to reject it from consideration because it does not neatly match what was given in judgment.
Claimants can also rest safe in the assurance that the court is unlikely to diverge from the ordinary consequences of the Part 36 regime.