The facts

In this case, liability was in dispute and the matter went to trial. Prior to the hearing the claimant had made a Part 36 offer to accept 90 per cent of the value of the claim. The relevant period (21 days) had expired one working day before the trial started and the defendant had not accepted the offer.

At trial, the claimant was awarded a higher percentage of damages than their Part 36 offer. As a result, the claimant sought increased costs in accordance with the provisions of CPR, r. 36.17 on the basis that they had achieved an outcome that was more advantageous than their Part 36 offer.

The defendant argued that the Part 36 offer was not a genuine attempt to settle the proceedings because an assessment of the risks of the litigation at being only ten per cent was a significant under-evaluation and could not have been a genuine attempt to settle.

Decision

The High Court held that the claimant’s Part 36 offer was a genuine attempt to settle the claim. It was specifically concluded that how one side perceives the risks in a case would nearly always be different to how their opponent perceived the risks. It was stated that settlement did not require a meeting of the minds on the nature of the litigation risks on each side and a judge should not have to carry out the exercise of determining how the case should have looked to the offeror when making the Part 36 offer.

It was held that there was no reason to doubt that the claimant’s solicitor regarded the claim as being very strong but was prepared to offer a modest discount to secure absolute certainty of obtaining substantial compensation. As a result, it was held that the claimant was entitled to receive additional costs in accordance with CPR, r. 36.17.

The High Court stated that the content of privileged discussions did not need to be disclosed in cases such as this as in most cases it would not assist with determining whether a Part 36 offer was a genuine offer of settlement. Also, it was concluded that it would not normally be necessary for the offeror to explain in their Part 36 offer why a small discount was being offered and this information may not necessarily help with the settlement process.

Impact

There are cases where it is questionable whether a claimant has made a genuine Part 36 offer to settle or whether the offer has been made in order for them to have a prospect of obtaining indemnity costs under CPR, r. 36.17.

Each matter will be assessed on its own specific facts but in the majority of cases the courts will not carry out a detailed assessment as to what the offeror should have taken into account at the time when making a Part 36 offer. Also, it is unlikely that claimants will be required to set out in their Part 36 offer the reasons for why only a small discount has been made.

The courts will look at whether there was any “give” and “take” in the Part 36 offer for it to be seen as an offer in the ordinary sense. In most cases, it will be seen that there is some level of “give” and “take” as an offer to make a small discount will still be seen as a discount nonetheless and an attempt to resolve proceedings.

It is common for Part 36 offers to be made on a commercial basis but any offer must contain some genuine element of concession. Even if it is unlikely that the claim would be apportioned in the way set out in the Part 36 offer, the courts will likely conclude that the offer had still been made to prevent further litigation and to achieve a quick and certain outcome.

There still remains some uncertainty as to what it will take for an offer to not be seen as a genuine attempt to settle. There is no specific criteria applied by the courts and each case is considered on its individual merits. However in this case, the High Court took into account that the claim was for a substantial amount of money and a 10 per cent discount offered by the claimant could not be seen as a token gesture as it amounted to a large sum of money.