A "Part 36" offer is an important tactic that parties can use in litigation. It is an offer of settlement made in accordance with the provisions of Part 36 of the Civil Procedure Rules. It is important as a tactic because it places pressure on the other side by affording the offeror a degree of protection, should the offer not be accepted, in relation to legal costs.

A Part 36 offer may be made at any time, including before legal proceedings have commenced. However, Part 36 of the Civil Procedure Rules is drafted on the presumption that proceedings are under way at the time that such an offer is made or accepted. There has therefore been a degree of uncertainty over whether the costs consequences set out in Part 36 would apply to an offer accepted before formal proceedings have been commenced.

The Senior Courts Costs Office has held, in this recently published case, that a Part 36 offer made before formal legal proceedings have been commenced should refer specifically to liability for pre-action costs if the offeror intends liability for pre-action costs to be determined under Part 36, should the offer be accepted.

Parties to litigation should therefore be careful to ensure that a Part 36 offer made before formal legal proceedings are commenced makes specific reference to pre-action costs. Otherwise, the automatic cost consequences following acceptance of the offer may not apply.

Case: Udogaranya v Nwagw [2010] EWHC 90816 (Costs)