There are many advantages to settling a dispute away from the courts. A well planned settlement can provide closure and certainty, avoid expensive legal costs and time spent preparing for trial. The courts have made it clear that a solicitor has an obligation to resolve disputes where possible without involving litigation. One of the most popular mechanisms open for use is the Part 36 offer.
From 1 October 2011 there are important changes to Part 36 offers, as reported by Penningtons on 3 October 2011. In addition to this, the courts continue to clarify its scope and application.
A Part 36 offer can be made at any time by any party, and is made 'without prejudice save as to costs'. This means that the offer cannot be used against the party making it, if the matter proceeds to trial, apart from in determining the payment of costs.
Although a Part 36 offer is labelled as such, it does not automatically follow that it will validly constitute a Part 36 proposal. To be valid it must be in writing, be declared to have Part 36 consequences, specify a relevant (acceptance) period of not less than 21 days, and, if limited to part of the claim only, specify which part of the claim it is to cover.
The relevant period relates to costs only, and the offer itself remains open until it is expressly withdrawn. A party accepting the offer within the relevant period will be entitled to their costs being paid by the other side. A defendant accepting out of time will be entitled to standard costs through to the date of belated acceptance. A claimant accepting out of time will be entitled to standard costs up until the end of the relevant period and from that point until the delayed acceptance they will pay the defendant’s costs.
The courts have recently added further clarity to the parameters of a Part 36 offer. In C v D a letter headed 'Offer under CPR Part 36' was stated to be 'open for 21 days'. On one reading this could mean the offer was withdrawn on the twenty-second day, on another it could mean the offeror retains the right to withdraw it after 21 days. The judge at first instance held that this offer meant the former, and therefore failed as a Part 36 offer. The judge rightly asserted that a Part 36 offer did not allow for a time-limited offer, since a Part 36 offer can only lapse on the service of a written notice of withdrawal. On appeal the interpretation of 'open for 21 days' was reversed. Any ambiguity in an offer purporting to be a Part 36 offer should be construed as one wherever possible. But the case stands to illustrate the definitive nature of the Part 36 offer during the relevant period. An offeror will find it very difficult to withdraw an offer during the relevant period, when permission of the court is needed. After this point an offeror is free to withdraw, for any reason or for no good reason whatsoever. The law is clear that there is no room for time limited offers from the outset and the 21 day period must nearly always be seen through.
There are many benefits to settling away from the courts, but proper care and thought should be given to the terms of any offer, as it may be difficult to withdraw if you get them wrong.