Part 36 Civil Procedure Rules 1998 (as amended)
It is possible for either a claimant or a defendant to place their opponent at a risk of incurring costs and other financial penalties by making a formal offer to settle a claim. This is called a "Part 36 offer". A Part 36 offer to settle can be made at any time: before or after proceedings have commenced.A Part 36 offer or payment will be calculated to take into account any reduction that your opponent thinks should be made on account of your contributory negligence.
Under the Social Security (Recovery Of Benefits) Act 1997, an insurer has a legal obligation to deduct from any compensation payment any state benefits received by a claimant as a result of the injury. Any money deducted in this way is accounted to a government department called the Compensation Recovery Unit. You will be informed of any sums deducted in this way.
A Part 36 offer or payment into court is a tactical step. It is used as a means to pressurise a claimant into settling a claim early, rather than proceeding to a hearing. Accordingly it is necessary for you to decide whether or not the Part 36 offer or payment is sufficient to compensate you for your injury and losses.
A defendant's Part 36 offer or payment into court
it is open to the defendant or the defendant's compensating insurers to write a formal letter of offer to settle your entire claim, or part of it. The Part 36 offer of settlement is intended to place you at a risk concerning your legal costs.The letter must clearly state what money is being offered in respect of your claims and what sums, if any, have been deducted or discounted. You will be given 21 days to accept or reject the offer. If proceedings have started then the offer will only have effect if it is backed up by a payment into court of the amount offered. If proceedings have not started, then the defendant must pay the amount offered into court within 14 days of being served with your claim. The court will take any pre-action Part 36 offer into account when making a costs order.
If you decide that a Part 36 offer or payment into court is sufficient to compensate you and you accept the offer within the 21 days, then you will be entitled to recover the majority of your costs (on the "standard basis") from the defendant up to the date of your notice accepting the offer.
If you think that the Part 36 offer or payment is insufficient and you do not accept it, then you can proceed with your claim to trial, if necessary. At the final hearing, the judge will not be told of the Part 36 offer and payment into court, until after he or she has given judgment.
If the trial judge awards you more than the sum paid into court, then the Part 36 payment into court (and the earlier offer to settle, if made) will have no effect.
You will then be entitled as of right to:
- the higher award, as made by the judge
- payment of your legal costs and fees from the defendant up to the time of the judgment or award
- a more generous method of assessing the amount of legal costs you are entitled to recover
- a more generous rate of interest on your damages, commencing from the last date that you could have accepted the offer or payment within the 21 day period
- a more generous rate of interest on your legal costs
- the lower award (i.e. the amount awarded by the judge)
- payment of your costs on the standard basis, at the discretion of the court, up to the date that you could have served notice of acceptance of the letter of offer or payment into court (whichever is the earlier)
It is important that you should be aware that it is often the case that a significant proportion of your legal costs are incurred in the final preparations for trial and in attending the trial itself.
It will be necessary to review the extent and terms of any after the event legal expense insurance policy, and to confer with that insurer. Most policies insist that any offer in settlement should be reported to them so as to enable them to review their exposure.
Where a payment into court has not been accepted within the 21 day period, it is possible (although unusual) for a defendant to apply to withdraw the payment into court.
In difficult cases, it is sometimes helpful to seek the advice of a barrister with experience of presenting personal injury claims at court for an advice on quantum (ie the likely value of your claim at trial). We will advise you if we think this is necessary.
If you have the benefit of a legal expenses insurance policy then you will still be at risk as to your own costs following a Part 36 offer or payment by your opponent. If you fail to beat the offer or payment then the court can still order you to pay your opponent's legal costs and disbursements from your damages. If you do not accept a Part 36 offer or payment then it is necessary to report this fact to your legal expenses insurer, and they will review the merits of continuing to financially support your claim.
If this firm is acting for you under a conditional fee agreement, and you reject a Part 36 offer or payment on our advice and if the case proceeds to a hearing where you recover damages that are no more than the payment into court, then the Law Society's recommended terms are that no success fee will be charged. This firm's costs will be limited to its basic costs, for work carried out after receipt of the Part 36 notice.
If you decide to reject a Part 36 offer or payment against our advice, we have the right to end the conditional fee agreement. You will then be responsible to pay this firm's basic costs and disbursements. You will also be responsible to pay this firm's success fee if you go on to win your case, unless your damages or settlement are at least 20% more than the offer that we advised you to accept. Where litigation insurance has been taken out in conjunction with your conditional fee agreement, it is usually necessary to report a Part 36 offer or payment to your legal costs insurer.
Generally.
We will tell you if and when your opponent makes a Part of 36 offer or payment and we will give you our advice in order to help you decide whether to accept or to reject it. However, litigation is an uncertain business. It is rarely possible to predict the exact amount of an award. Accordingly, the decision to accept or reject a Part 36 offer of payment must be made by you since the consequences of misjudging the offer or payment are likely to have a direct impact on you personally.A Claimant's Part 36 offer
The normal costs rule is that the losing party pays the winning party's costs, assessed on the standard basis. Accordingly, provided you are likely to recover some damages (above the small claims track limit) and you have not been put at risk as to your costs by means of a Part of 36 offer or payment by your opponent, you may have little to gain by making a formal offer to settle.However, if, after your claim has been fully investigated, we think that the defendant is unreasonably delaying settlement of your claim and/or has failed to make an adequate offer or payment, you may wish to make your own Part 36 offer to settle. In doing so you will put the defendant at risk of paying a higher level of costs and possibly a higher rate of interest on your claim and/or your costs. This could focus your opponent's mind on settling your claim promptly.
The rules relating to claimant's Part 36 offers are similar to those that applying to a defendant, save that it is unlikely that a claimant would need to make a payment into court.
If the defendant accepts your Part 36 offer to settle your claim within the 21 day period, then you should be entitled to recover the majority of your costs (on the "standard basis") from the defendant up to the date of acceptance.
If the defendant does not accept your Part 36 offer, then you can proceed with your claim to trial, if necessary. The trial judge will not know about your Part 36 offer, until after he or she has made the award.
If the trial judge awards you more than the sum that you were prepared to accept in settlement, then you will be entitled as of right to:
- the higher award
- payment of your legal costs and fees from the defendant up to the time of the judgment or award
In addition, the trial judge will probably award you:
- a more generous method of assessing the amount of legal costs you are entitled to recover (called "indemnity basis" costs)
- a more generous rate of interest on your damages, commencing from the last date that your opponent could have accepted the offer of payment within the 21 day period
- a more generous rate of interest on your legal costs
- your award
- payment of your costs on the standard basis, at the discretion of the court.
