In the recently reported case of Udogaranya v Nwagw1, it was held that a pre-action Part 36 offer must refer specifically to pre-action costs if those costs are to be determined under the Part 36 Rules if and when the offer is accepted.

This is because Part 36 refers to the recovery of costs of the “proceedings”. If a claim is settled before the commencement of proceedings, in the absence of any reference to the pre-action costs, no costs are recoverable. This interpretation of the rule was anticipated by practitioners, but the clarification is welcome.

AB v CD and others2 involved a claimant’s offer to settle on terms that the defendant give an undertaking: (1) to no longer infringe the claimant’s intellectual property rights; (2) to settle the claim on an amount to be assessed; and (3) to pay the claimant’s costs. The High Court held that this was not a valid Part 36 offer in either the liability or quantum stages of the claim.

The offer did not meet the requirements of Part 36 in the quantum stage as it did not state a specific sum that the claimant would accept by way of settlement. It also did not comply with Part 36 in the liability stage as it did not contain a concession of significant value by the claimant. The court’s rationale for this conclusion was that otherwise a claimant could guarantee favourable costs consequences under the mechanism of Part 36 by presenting the defendant with an offer to settle which, in effect required the defendant’s total capitulation.  

Finally, in the very recent decision in C v D3, the Court of Appeal overturned the High Court decision that a time-limited offer to settle could not constitute a valid offer under Part 36. It ruled that although Part 36 does not permit an offer to settle which purports to be timelimited, where such an offer otherwise complies with Part 36 the courts will endeavour to interpret it as a valid Part 36 offer.

In this case, the offer stated that it was “open for 21 days”. Part 36 provides only for offers to be withdrawn, not for time limited offers. The Court of Appeal held that this statement could properly be interpreted as meaning that the offer would not be withdrawn within the 21 days following it being made, but that it was likely that it would be withdrawn soon afterwards. Until it was so withdrawn, however, it remained a valid Part 36 offer.