Part 36 Offers: An update on Part 36 Offers following recent cases

For an introduction to Part 36 offers, please read our Cutting through the Legalese article.

With everyone focussed on ‘Brexit’ and political chaos at the moment, it may have escaped your notice that there have been a string of judicial decisions recently relating to Part 36 offers – not quite as headline-grabbing I know, but important nonetheless.

Without further ado, the decisions were:

Broadhurst v Tan
In this case, the Claimant beat its own Part 36 offer in a dispute where it would normally have been entitled to only fixed costs. However, the Court of Appeal held that because the Claimant had beaten its Part 36 offer, it should be entitled to indemnity costs. This will be of interest to anyone considering a Part 36 offer in a case where fixed costs apply – and if Jackson LJ has his way, this will become much more widespread with a fixed costs regime applicable to all claims (including multi-track claims) up to a value of £250,000. Unfortunately, fixed costs often are not sufficient to cover the legal costs incurred in getting a case to trial and therefore this decision will be of great interest to both lawyers and their clients.

Bolt Burdon v Tariq 
In this case a Claimant who bettered his Part 36 offer and obtained the 10% ‘additional amount’ under CPR 36.17(4)(d) on the sum awarded, was deemed to also be entitled to a 10% uplift on his contractual interest as well. The judge decided that an earlier decision to the contrary , was sufficiently different to this one that he did not feel at all bound by it, and also felt that the wording of the relevant rule was clear. The judge said that: " The "additional amount" is clearly designed as a penal sanction to mark a defendant's failure to accept a Part 36 offer when he should have done…” – and rejected the argument that it was unjust to award that as well as enhanced interest.

Pawar v JSD Haulage Ltd
This case concerned the impact of two Part 36 offers made during litigation which were rejected and not beaten by the Claimant at trial. However, the Claimant appealed and was successful in beating one of the offers on appeal. The judge decided that the unbeaten offer should not be taken into account in assessing who won the appeal: the Claimant had already been penalised in costs for failing to accept the second offer (which remained unbeaten in the appeal) and had had to pursue an appeal to improve his position as the second offer had no longer been open for acceptance.

These cases highlight the increasing importance of giving proper consideration to Part 36 offers as the Courts’ interpretation of the changes to Part 36 in 2013 becomes clearer. Making the right Part 36 offer at the right time and knowing which offers should be rejected and which should be accepted can make a significant difference to the financial outcome of Court proceedings. As always, there will be winners and losers as a result of these decisions, but encouraging parties to give serious consideration to Part 36 offers can only be a good thing.
Parties to litigation can make tactical decisions about Part 36 offers which may result in them obtaining more than the fixed or capped costs they would normally be allowed or avoiding payment of such excess costs. Further, litigants may be entitled to an ‘additional amount’ up to £75,000 and an uplift on interest which could be of significant value. Finally, parties should be aware that judges will take a common-sense approach on appeal and parties will not be penalised twice in respect of the same offer. 

Litigants and those contemplating litigation need to consider their position carefully and ensure that appropriate Part 36 offers are made in order to protect their position on costs. They should also give careful consideration to any Part 36 offers received to ensure that any rejection of these does not result in significant liabilities later on due to the application of uplifts and/or indemnity costs.

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