Offer to Settle Part 36:
Part 36 Offers under the Civil Procedure Rules: Strategy and Consequences
Part 36 of the Civil Procedure Rules provides a self‑contained settlement code with powerful cost consequences, designed to encourage reasonable settlement and penalise recalcitrance. A valid Part 36 offer signals a bona fide willingness to settle, “without prejudice save as to costs”, and automatically shifts litigation risk. For example, if a claimant makes a Part 36 offer and the defendant fails to obtain judgment at least as advantageous as that offer, the defendant normally must pay the claimant’s costs (often on an indemnity basis) from the end of the “relevant period” . Conversely, a defendant’s unaccepted Part 36 offer that a claimant fails to beat on trial entitles the defendant to the claimant’s costs from that point . These striking cost shifts make Part 36 a fundamental tactical tool in litigation. Experienced lawyers must therefore handle Part 36 offers with care: ensuring formal compliance, choosing timing strategically, and understanding the strict acceptance and cost rules that follow.
Formal Requirements for a Valid Part 36 Offer
To have effect, a Part 36 offer must meet the precise requirements of CPR 36.5. In summary, every Part 36 offer must – in writing – state expressly that it is made under Part 36, and must specify a “relevant period” of at least 21 days (unless made within 21 days of trial) . It must also indicate whether the offer relates to the whole claim or only part of it, and whether any counterclaim is included . In practice it is usual (though not formally required) to state that if accepted within the period, costs will be paid by the offeree under CPR 36.13(1). A Part 36 offer must be served on all other parties (and usually placed on court file if proceedings have begun) to take effect . For a defendant’s offer to pay a sum, CPR 36.6 requires that the offer be for a single lump sum and that any staged payments be no more than 14 days after acceptance . Importantly, a Part 36 offer should not improperly treat costs as part of the substantive sum – it should not, for example, purport to be a “global” inclusive payment of damages and costs. Indeed, Knight & Knight v Knight confirmed that an offer phrased as including payment of costs was inconsistent with Part 36 and thus ineffective . In short, a valid Part 36 offer must be clear in form and substance, complying with CPR 36.5(a)–(e) and – in a defendant’s case – CPR 36.6.
Timing and Tactical Deployment of Part 36 Offers
Part 36 offers may be made at any time, even before proceedings are issued. The offer is treated as made when properly served on the other side. A key rule is the 21‑day “relevant period”: ordinarily, an offer must give the offeree at least 21 days to consider before trial (CPR 36.5(1)(c)). If the offer is made less than 21 days before trial, the 21-day requirement relaxes (CPR 36.5(2)). In any event the period must be clearly stated in the offer.
Tactically, timing a Part 36 offer is a nuanced decision. A claimant may serve an early offer to signal reasonableness and cap the litigation risk (knowing that a better-than-offer judgment yields indemnity costs and up to a 10% uplift ). Alternatively, a last-minute offer (under 21 days before trial) may force the defendant to decide whether to settle or face an adverse costs order (note CPR 36.13(4)(a)). A defendant similarly uses Part 36 to exert pressure: a strong offer can incentivise settlement or leave a claimant facing a high cost penalty under CPR 36.17 if judgment falls short of the offer. Offers can be global or partial (for example, offering to settle only certain issues or parts of a claim) but must state their scope . Any ambiguity or failure to allow proper response time risks losing the intended benefits. Care should be taken, for instance, when withdrawing or changing a Part 36 offer; CPR 36.9–36.10 impose strict rules and often require court permission if the relevant period has not expired.
In summary, an effective Part 36 strategy involves careful choice of timing (pre‑issue, during proceedings, or even continuing a valid pre‑issue offer into litigation), and of the offer terms (whole-claim vs part-claim, with or without costs?), always remembering that the CPR costs regime will apply automatically once the offer’s fate is decided.
Acceptance of Part 36 Offers
A Part 36 offer is accepted by serving written notice of acceptance on the offeror (CPR 36.11(1) ). Subject to certain exceptions, either party may accept at any time (CPR 36.11(2) ). Exceptions include split trials (CPR 36.12), multiple defendants (CPR 36.15), pending trial (CPR 36.11(3)(d)), and certain personal injury situations (CPR 36.11(3)(b)). Notably, if multiple defendants are involved and only some have offered to settle, special rules govern acceptance by the claimant (CPR 36.15). In most cases however, acceptance is straightforward: once notice is served and filed with the court, the claim (or the relevant part of it) is stayed on the terms of the offer (CPR 36.14) and becomes contractually binding.
Acceptance within the relevant period:
If the offeree accepts within the stated period, CPR 36.13(1) provides that the claimant is entitled to its costs of the proceedings up to the date of acceptance . These costs are assessed on the standard basis unless fixed costs apply. For example, if a defendant’s offer of £X is accepted within 21 days, the claimant will recover costs incurred until that acceptance date. The case then stays, settlement sums are paid (typically within 14 days of acceptance ), and the matter ends on the agreed terms. Importantly, the acceptance must be unconditional and correspond to the terms of the offer. As the High Court emphasised in Pallett v MGN Ltd [2021], an offeree cannot attach unilateral conditions to acceptance. In Pallett, the defendant accepted a claimant’s Part 36 offer on day 22 (one day late) but “accepted” only on the basis that the court should decide the costs. Mann J held that this was not a valid acceptance, because it proposed a different term – Part 36 is a self‑contained regime and does not allow offerees to rewrite the offer’s terms.
Acceptance outside the relevant period:
If an offeree waits until after the 21-day period, or makes a late acceptance, the consequences change. CPR 36.13(4)(b) provides that if a Part 36 offer (relating to the whole claim) is accepted after expiry of the period, the liability for costs “must be determined by the court” unless agreed . In practice this means CPR 36.13(5) normally applies: unless unjust to do so, the court must order that the claimant recovers costs up to the end of the relevant period, and the offeree must pay the offeror’s costs from that date until the date of acceptance . In other words, as a default the late acceptor bears the risk of the second period’s costs. However, CPR 36.13(6) expressly allows the court to refuse that “prescribed” order if it would be unjust, taking into account all circumstances of the case (including the factors listed in CPR 36.17(5)).
CPR 36.17(5) sets out the classic “unjust” factors:
- the terms of the offer;
- the stage of proceedings (especially how long before trial the offer was made);
- the information known to the parties when the offer was made;
- the conduct of the parties in giving or withholding information needed to make or evaluate the offer;
- whether the offer was a genuine attempt to settle.
An offeree seeking to avoid the default split must persuade the court that one of these factors (or other unusual circumstance) makes it unfair to punish them. This is a heavy burden: courts will not lightly waive the normal Part 36 costs penalties, because doing so would undermine the very purpose of Part 36. In practice, most late acceptances still result in the “prescribed” costs orders .
For example, in Briggs v CEF Holdings Ltd [2017] EWCA Civ 1175 the claimant accepted a defendant’s offer nearly three years late, having initially been unable to assess his prognosis. The first‑instance judge had thought it “unjust” to penalise the claimant, but on appeal the Court of Appeal emphatically rejected that view. It held that mere uncertainty about one’s case is part of litigation risk and does not of itself justify abandoning the CPR 36 rule . The “default” order was restored: the claimant recovered costs only up to the offer period, and bore the defendant’s costs thereafter. Similarly, in Pallett v MGN Ltd the court confirmed that a defendant’s late acceptance does not automatically bind it to pay the claimant’s costs; the defendant can (as happened in Pallett) invite the court to disapply the usual costs order. Mann J cautioned, however, that it would require a “formidable” case of injustice to depart from CPR 36.13(5) .
By contrast, in Optical Express Ltd v Associated Newspapers Ltd [2017] EWHC 2707 (QB) the court did allow modification of the default costs allocation. There, the claimant’s delay in particularising its losses meant that the defendant’s Part 36 offer had in effect been belated. Warby J found it reasonable to treat costs from the date the claimant should have complied with discovery, rather than the offer expiry . The High Court there effectively reduced the period during which the defendant was penalised by finding the claimant had “unjustly” delayed. (This case was singled out in Pallett as one of the rare instances where the court modified the normal rule .) And in Dutton v Minards [2012] (an earlier case), a claimant even made an intermediate Part 36 acceptance (offering slightly less money) and the court excused him from adverse costs – a discretionary outcome that the appellate court did not disturb . These exceptions notwithstanding, offerors and offerees should assume the statutory rule applies unless truly exceptional justice demands otherwise.
Costs Consequences
On Acceptance
If a Part 36 offer is accepted, the court’s first task is to stay the proceedings on the offer’s terms (CPR 36.14) and make any necessary orders for judgment or transfer of property. The next task is to determine costs. If accepted within the relevant period, the claimant recovers its costs of the proceedings up to acceptance , on the standard basis (unless fixed costs apply). If accepted late, the default costs order is as above (claimant gets costs to period end; offeree pays costs from period end to acceptance) unless injustice is shown .
The rules also address practical details of payment. For instance, CPR 36.14(6) requires that if the offer is to pay money, that sum must be paid within 14 days of acceptance (or such other period as agreed) . Failing that, the claimant may enter judgment for the unpaid sum. If an offer to do something else (e.g. transfer shares or assets) is accepted, any breach can be enforced by court without a new claim .
At Trial (Unaccepted Offers)
If an offer is not accepted and the case goes to judgment, Part 36 still governs costs. Where a defendant’s unaccepted offer is beaten by the claimant’s judgment (CPR 36.17(1)(a)), the defendant by default is entitled to costs from the end of the offer period, plus interest on those costs . In contrast, if a claimant’s unaccepted offer is beaten by judgment (CPR 36.17(1)(b)) – that is, the court awards at least what the claimant had offered – then the claimant by default is entitled to indemnity costs from the offer expiry, interest on those costs, and an “uplift” of up to 10% on the judgment sum (capped at £75,000) . (Any judgment amount, however small, that exceeds the offer by even £1 triggers these consequences .) These “prescribed orders” are mandatory unless it is unjust to make them, judged by the same factors in CPR 36.17(5) . In practice, beating a defendant’s offer thus brings a very substantial cost reward, while failing to beat it means very limited (or no) recovery of costs.
In fixed recoverable costs (FRC) cases, the same principles apply but in terms of fixed scales. The amended CPR now extend FRC up to £100,000 (see below) and impose modified Part 36 rules (Sections II of Part 36). For example, CPR 36.23(1) provides that if a Part 36 offer in an FRC case is accepted in time, the claimant recovers the fixed costs set out in PD45 for the relevant stage . If the offer is accepted late, CPR 36.23(3)–(4) adjusts entitlement: the claimant recovers fixed costs to the end of the period , and the defendant recovers fixed costs from acceptance (minus the claimant’s fixed amount) . The effect is to mirror the above rules in fixed‑cost terms. Parties in fixed-cost regimes must therefore consult PD45 and CPR 36.22–36.24 (as amended) for precise tables, but can assume the broad Part 36 consequences (shifted costs, interest, etc.) are preserved in scale form.
It is also worth noting the interaction with qualified one-way costs shifting (QOCS) in personal injury claims. Historically, QOCS protected losing PI claimants from paying the defendant’s costs. However, the Part 36 “beat” rules trump QOCS: if a claimant rejects a defendant’s offer and ultimately loses (or recovers less than the offer), the claimant must pay the defendant’s costs from expiry, and QOCS will not save them beyond the amount of their own offer. Recent reforms (see below) have also refined how certain offers and payments interact with QOCS, particularly in light of the Supreme Court’s decision in Ho v Adelekun. In short, claimant-offerees must beware: rejecting a Part 36 offer in a PI case can expose them to significant costs risk, notwithstanding QOCS.
Late Acceptance: Default Rule and “Unjust” Exceptions
As noted, the “default” position on late acceptance is set out in CPR 36.13(5): the claimant recovers costs to period end, and the offeree pays the offeror’s costs from then to acceptance, unless that outcome is unjust . The key word is “unless unjust”, which invokes the factors in CPR 36.17(5) . In practice, courts require strong justification to depart from the rule. The policy rationale is clear: parties must be encouraged to accept within the period or face the known cost consequences of delay. Allowing an easy escape would undermine certainty and the incentive to settle.
In Briggs v CEF Holdings , for example, the claimant’s insistence that uncertainty over medical prognosis justified late acceptance was firmly rejected. The Court of Appeal held that a party who delays acceptance must show something beyond mere litigation risk. The usual costs order was reinstated. Similarly, Mann J in Pallett v MGN treated the usual outcome as the presumption: the offeree (defendant) had to “discharge the heavy burden” of proving injustice . MGN could point only to minor case management delays, which Mann J found insufficient. The judge expressly noted that Part 36 “is its own self‑contained regime” , meaning parties cannot rely on contractual arguments or sympathy to override it easily. By contrast, in Optical Express Ltd v Associated Newspapers the court did find the claimant’s delayed quantum information justified curtailing the relevant period, on the facts a very unusual case.
In short, late acceptance remains a high-risk strategy. An offeree who fails to accept in time can still accept and then ask the court to vary the costs outcome, but must articulate compelling reasons – tied to the statutory factors – why the rigid CPR 36.13(5) scheme should not apply. Absent truly exceptional circumstances (e.g. deliberate withholding of information, or an obvious mistake in the offer itself), the Part 36 rules will operate as written.
Recent Developments: FRC Extension and QOCS Reforms
Fixed Recoverable Costs: As of 1 October 2023, the Fixed Recoverable Costs (FRC) regime has been greatly expanded. The Civil Procedure (Amendment) Rules 2023 and new Practice Direction 45 now apply fixed cost scales to most fast-track and certain intermediate cases (claims up to £100,000 in complexity bands) . Accordingly, Part 36’s application to fixed-cost cases has been updated. For example, CPR 36.22–36.24 (formerly applicable only to protocol-type claims) now cover all FRC cases . In practical terms, this means that in those cases the costs consequences of acceptance or defeat are dealt with by reference to the fixed costs tables (Tables 10–15 in PD45) rather than by traditional assessment . All the principles of Part 36 survive (offers must comply, default costs consequences flow from acceptance or trial), but actual recoverable costs are fixed by stage rather than argued in assessment.
QOCS Reforms: Changes to the Qualified One-Way Costs Shifting regime came into force in April 2023 (via CPR 44.14 amendments).
These were prompted by the Supreme Court’s judgment in Ho v Adelekun [2022] UKSC 25, which had exposed a loophole: offerers could undermine QOCS by making token offers or part payments. The government’s amendments now clarify that many typical Part 36 payments or costs offers do not automatically defeat QOCS in PI cases . For Part 36 strategy, this means that a claimant making or accepting an offer will not, by that fact alone, forfeit QOCS protection beyond what the rules allow. Conversely, claimants should note that (under the updated rules) insisting on payment of a defendant’s costs via a Part 36 acceptance will be treated carefully: the notion of set-off in CPR 44.14 has been narrowed. In short, the interplay between offers and QOCS has been refined, but the core calculus remains: a PI claimant who loses under Part 36 will still pay the defendant’s costs (from the relevant period) despite QOCS, unless the offer was beaten.
Strategic Advice.
Parties should approach Part 36 offers with a clear strategy:
For Offerors (makers of offers): Rigorously ensure compliance with all formalities. Use precise wording to make clear it is a Part 36 offer, identify the relevant period (at least 21 days), and specify scope and any counterclaims . Draft the terms so that the sum offered is a fixed payment or outcome (e.g. “£X inclusive of interest to [date]”) and do not muddy the waters by purporting to include the offeree’s costs (which is not allowed ). Consider whether the offer should cover the whole claim or part only. Ensure the decision-makers in your case support the offer and that the timing is calibrated – an offer too low, too late or too early may be ignored or attract counterattack. It is often prudent to place the offer formally on record (file with court) to ensure the judge can enforce its terms if accepted.
For Offerees (recipients of offers): Treat Part 36 offers seriously. Conduct an early assessment of whether the offer meets or exceeds the likely judgment after costs. If it does, it is usually wise to accept within the relevant period so as to obtain guaranteed costs recovery . If it falls short, recognize that rejecting it risks a steep costs price. If you miss the deadline, you may still accept late; but do so without conditions (see Pallett ) and be prepared to justify in court why the normal consequences should not apply – which will require a strong case on the injustice factors. Before offering a settlement yourself, consider the same rules: be clear, realistic, and seek to get the other side’s costs too. In multi-defendant cases, remember the special acceptance rules of CPR 36.15. And always consider the broader context – in a personal injury claim, for instance, remember that QOCS will no longer protect you if you do not beat a Part 36 offer, so you could end up paying the other side’s costs beyond your own case value.
In all cases, early legal advice is crucial. The procedural wrinkles and rich case law around Part 36 mean that a small drafting misstep or a miscalculation of timing can have large financial consequences. A specialist litigator can help structure offers, evaluate costs risks, and, if needed, argue for departure from default costs orders on the basis of CPR 36.17(5).
For professional assistance with Part 36 strategy – whether you need to draft, respond to, accept, or contest an offer – Carruthers Law’s litigation experts are on hand. Contact Carruthers Law to discuss your case and ensure that your Part 36 offers and responses are fully informed and effectively executed, with all costs implications in mind.