Offers to Settle

Parties to litigation are encouraged by the Court to use alternative methods other than litigation resolve disputes at all stages of their case, and particularly so after the new Civil Procedure Rules (“CPR”) were introduced in April 2013. One such method of attempting to resolve a dispute is for a party to make an offer to their opponent which is phrased in a specific way so as to comply with Part 36 of the CPR.

Making a Part 36 offer is one of the most important tactical steps that parties can take because, if a claimant obtains a judgment which is more advantageous that the Part 36 offer they have made, the normal costs order is that the defendant pays the claimant’s costs from the date when that offer could have been accepted. Similarly, if a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer, the normal costs order is that the claimant pays the defendant’s costs from the expiry of the relevant period.

For a defendant, however, accepting a claimant’s Part 36 offer can be distinctly unappealing because one of the automatic consequences of acceptance is that the defendant must pay the claimant’s costs of the litigation up to the date the offer is accepted.

Rather than not making any offer at all, a defendant should consider making a “Calderbank” offer: the importance of doing so has been highlighted recently by the Supreme Court in Fairclough Homes Ltd v Summers [2012] UKSC 26. A Calderbank offer is one which does not comply with Part 36 of the CPR, but which is usually made without prejudice save as to costs: that means it cannot be referred to during the trial of the case itself, but can be taken into account by a judge when the issue of costs comes to be determined.

A well thought out Calderbank offer can offer protection to a defendant on costs: the usual costs order is that the “winner” of any litigation pays the “loser’s” costs: if a defendant loses at trial, but has made a sensible Calderbank offer which the claimant failed to beat, then the Court may use its discretion as regards costs and award the Defendant some, or all, of their costs of the action.

It is therefore tactically important for both claimants and defendants to litigation to regularly consider whether a Part 36 or Calderbank offer might be made.

Dispute Resolution Team