Don’t Overplay Your Hand – The Civil Procedure Rules

The Civil Procedure Rules (“CPR”) govern the conduct of litigation in England and Wales. The Overriding Objective of the CPR seeks to ensure that parties to litigation are dealt with fairly, that cases proceed swiftly in the most cost-efficient way possible, and that the system can be easily understood by those that use it. 

The CPR contain a provision which aims to encourage parties to try to settle their disputes by setting out the costs consequences of offers to settle if they are made in accordance with Part 36. These are colloquially called Part 36 offers. It should be noted that Part 36 offers do not apply to claims that are small claims track (claims that are less than £10,000). 

In essence, a party is at risk of being penalised in costs and interest at the end of the case if it fails to accept a Part 36 offer made by the other side. Making such an offer is therefore an acceptable means of putting the other side under pressure to settle. It should not be seen as a sign of weakness, but rather as a strategic tool. 

The Mechanics 

Part 36 offers can be made before court proceedings are issued. The court is made aware of a rejected offer after it has reached a judgement, but before it has made an order in relation to the cost of proceedings. If one party obtains a judgement which is more substantial than, or equal to, the offer made at the trial, then the other party will have to pay whatever the amount the court awards, unless the court considers it unjust. 

The offers are made on a “without prejudice save as to costs” basis, in writing, stating that the offer that is made to settle the whole claim or a part of it, and taking account of any counterclaim. It has to specify a “relevant period” of at least 21 days, within which time the other party will be liable for costs if the offer is accepted. CPR 36.17(4) provides that: 

“ (4) Subject to paragraph (7), where paragraph 1(b) applies, the court must, unless it considers it unjust to do so, order that the defendant is entitled to — 

  1. interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired; 
  2. costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired; 
  3. interest on those costs at a rate not exceeding 10% above base rate; and 
  4. […]  an additional amount, which shall not exceed £75,000 […] ”

If a Part 36 offer is not time limited, then it can be withdrawn or amended so that it is less advantageous to the other side. Where the other side has not already accepted the offer, then it may be withdrawn or varied at any time after the relevant period has expired, and this will not need the court’s permission. 

Recent Case Law 

In Yieldpoint Stable Value Fund, LP v Kimura Commodity Trade Finance Fund Ltd [2023] EWHC 1512, the High Court decided that it would be unjust to allow Yieldpoint certain post-judgment monetary enhancements pursuant to CPR 36.17(4) because its “very high offer” of 99% of the principal claim was not a genuine attempt to settle the proceedings. 

The claimant’s Part 36 Offer sought a sum of US$4,950,000 – the total claim value being $5 million – stating, inter alia: “Our client is confident that it has a strong case against your client, and is entitled to substantial damages, as set out in the Particulars of Claim”. After Yieldpoint won its claim, it invoked the Part 36 Offer and served its statement of costs. Kimura’s solicitors objected on the basis that such enhancements would be unjust. The court agreed, suggesting that whilst “all Part 36 offers are made for tactical purposes … an offer which is a cynical attempt to manipulate the Part 36 regime and apply pressure on an adversary is unlikely to be effective for such purposes”. 

The Judge further suggested that offers involving a negligible discount against the gross value of the claim and/or waiver of accrued interest may only be justifiable where the claim could be characterised as “obviously very strong” at the time of the relevant offer, which was not so in this case. 

*This article is not legal advice but provides a general overview. The specific details of your case will determine the best course of action.