Key takeaways
Part 36 Offers
These have advantageous costs consequences that are intended to encourage the early settlement of disputes.
Requirements of Part 36 Offer
An offeror should ensure they fulfil the requirements for a compliant Part 36 Offer.
Calderbank letter
This is a 'without prejudice save as to costs' offer that may in some cases be more appropriate than, but does not have the same costs advantages as, a Part 36 Offer.
CPR Part 36 is a self-contained procedural code governing offers to settle. Part 36 imposes strict formal requirements for compliant offers and is not subject to the usual contractual rules governing offer and acceptance.
When used properly, Part 36 can be very effective. When it goes wrong, the parties may find themselves facing unintended and potentially adverse costs outcomes.
Over the years, the cases have thrown up a number of potential issues to watch out for. Below we provide an overview of Part 36 and highlight some key considerations.
Part 36 Offers
Offers to settle a claim that are made under CPR Part 36 (Part 36 Offers) can provide significant protection against litigation costs to the party making the offer. The rules are intended to incentivise early settlement of claims and to encourage an opponent to accept a reasonable offer of settlement rather than risk losing at trial and being faced with a significant costs liability.
As to requirements, a Part 36 Offer should:
be in writing
state that it is made under Part 36
specify the period during which it may be accepted (the relevant period, which must be at least 21 days)
state whether it relates to the whole or only part of the claim;
state whether it takes into account any counterclaim
be a genuine offer to settle
contain sufficiently clear terms that can be accepted without further negotiation
The Part 36 Offer is a form of 'without prejudice save as to costs' offer and the Court will remain unaware of it until after judgment has been handed down and the Court is addressing costs.
CPR 36.17 deals with costs consequences following judgment. Specifically, where the claimant makes a Part 36 Offer, but the defendant rejects it, then if the claimant recovers the same as, or more than, the Part 36 Offer at trial, it will be entitled to the following enhancements in addition to its standard costs and base rate interest:
indemnity costs from the end of the relevant period
enhanced interest on its costs of up to 10% above base rate
enhanced interest on the sum awarded of up to 10% above base rate from expiry of the relevant period
an additional 10% of the amount awarded by the Court, capped at £75,000
Where the defendant makes a Part 36 Offer and the claimant does not accept it but recovers less than the Part 36 Offer at trial, then the claimant pays the defendant’s costs from the date of expiry of the relevant period, as well as interest on costs. If the claimant accepts the Part 36 Offer after the 21-day relevant period has expired, the claimant must pay the defendant’s costs from the date of the expiry of the relevant period.
The Court must order the costs consequences of CPR 36.17 if the requirements are met unless it considers that it would be unjust to do so. In deciding whether there is any injustice in ordering any of these costs consequences, the Court takes into account:
the terms of the offer
when the offer was made (i.e. how early in the proceedings)
what the parties knew at the time the offer was made that could have influenced the decision whether or not to accept it
the parties’ conduct with regard to sharing information in order that the offer could be evaluated
whether it was a genuine attempt to settle the claim
Part 36 considerations
Non-compliant offer
An offer that is intended to be a Part 36 Offer but is in some way non-compliant will be taken into consideration under CPR 44 (general rules about costs) as a 'without prejudice save as to costs' offer but will not attract the special advantages available to a compliant Part 36 Offer.
Genuine attempt to settle
Whether the Court decides an offer is genuinely intended to settle the proceedings or merely a tactical ploy can be very dependent on the circumstances of the case.
There are examples of the Court refusing to award a claimant the Part 36 enhancements because it believed the level of the offer was not justified by the strength of the claim as it appeared at the time the offer was made: Yieldpoint Stable Fund LP -v- Kimura Commodity Trade Finance Fund [2023] EWHC 1512.
By contrast, in some cases even a very modest discount on the claim may not be considered derisory. Part 36 Offers to settle at 90% or 95% of the claim have been held to be genuine: Huck -v- Robson [2002] EWCA Civ 398; Jockey Club Racecourse Limited -v- Willmott Dixon Construction Limited [2016] EWHC 167 (TCC); JMX -v- Norfolk & Norwich Hospitals NHS Foundation Trust [2018] EWHC 185 (QB).
Margin of success
That a claimant has beaten its own Part 36 Offer by only a very small margin relative to the size of the claim is not relevant when the Court is considering whether it would be unjust to award the claimant the Part 36 costs consequences in full: JLE -v- Warrington & Halton Hospitals NHS Trust [2019] EWHC 1582 (Ch).
It is sufficient if the amount recovered in money terms is better than what was offered, no matter how small the difference in the amounts. Otherwise, there could be uncertainty as to whether an offer was equivalent to or better than what the claimant obtained on judgment.
Clarification of offer
An offeree may, within seven days of a Part 36 Offer being made, ask the offeror to clarify the offer. If they choose not to do so, they may be prevented from subsequently arguing that the offer was invalid because it did not contain sufficient information: AB -v- CD [2011] EWHC 602 (QB).
No terms as to costs
A Part 36 Offer must not contain any terms as to costs that are inconsistent with CPR 36.13 which requires the claimant to pay the defendants' costs only up to the date of acceptance within the relevant period: James -v- James [2018] EWHC 242 (Ch).
Indemnity costs
Non-acceptance or late acceptance of a Part 36 Offer does not automatically lead to indemnity costs as opposed to an order for costs on a standard basis. It is necessary to show that the parties’ conduct takes the case out of the norm and justifies indemnity costs: see, for example, Power Projects Sanayi -v- Star Assurance Ltd [2026] EWHC 343 (Comm).
In that case, the defendant’s persistence in defending the claim when there was a clear finding that it had no arguable defence, its behaviour during the pre-hearing period and its commencement of proceedings in a foreign jurisdiction in clear breach of a jurisdiction agreement led the Court to conclude that indemnity costs were warranted.
Terms as to interest
A Part 36 Offer must include all interest up to the end of the relevant period. An offer that excludes interest is not a valid Part 36 Offer: King -v- City of London Corp [2019] EWCA Civ 2266. Interest should be calculated and added to the principal amount. Where a Part 36 Offer is silent as to interest, the recipient should check whether the amount offered includes an interest element.
Late offers
A Part 36 Offer should be made at least 21 days before the start of a trial. If it is made closer to trial, there is no automatic costs order upon acceptance of a late offer. Rather, the Court must decide the appropriate costs order if the parties cannot agree liability for costs. Furthermore, late offers do not attract the usual Part 36 consequences upon judgment unless the Court abridges time.
Adjournment of the trial will not change the status of the offer: Reader -v- SPIE Ltd [2021] EWHC 1221 (QB). It may, therefore, be worth making a new offer to ensure the 21-day period is applicable to the new trial date.
Late acceptance
Unless it considers it unjust to do so, the Court will award the claimant its costs up until the point of expiry of the relevant period, and then the offeror will pay the offeree's costs from the expiry of the relevant period up to the date of acceptance.
An offeree who delays accepting the offer until just after the relevant period has expired, in order to avoid the normal costs consequences, may find that the Court decides to impose the Part 36 costs consequences nonetheless: Pallett -v- MGN Ltd [2021] EWHC 76 (Ch).
Withdrawal of offer
A Part 36 Offer cannot be withdrawn or revised during the relevant period without the Court’s permission. After the relevant period has expired, the offer remains on the table until such time as it is expressly withdrawn. It is possible to include a 'sunset clause' in the offer, which states that the offer will automatically expire by a particular date if not accepted.
A withdrawn offer no longer attracts the usual Part 36 costs consequences. However, the Court can still take it into account when making its costs order.
Importantly, a rejection of the offer or a counteroffer will not invalidate or supersede the offer. Nor will a subsequent offer by the offeror. There can be more than one Part 36 Offer on the table at the same time, and all remain available for acceptance until such time as they are expressly withdrawn or automatically expire according to their terms.
Mistake
Where the Part 36 Offer contains an obvious mistake and is accepted before the mistake is corrected, the Court may permit the offer to be withdrawn: O’Grady -v- B15 Group Ltd [2022] EWHC 67 (QB), where the claimant intended to offer to split liability 80/20 in their favour but mistakenly got it the other way around.
Start of the trial
Some issues have arisen around the date constituting the start of the trial for the purposes of the 21-day relevant period. In Mate -v- Mate & Ors [2023] EWHC 806 (Ch), 5 September 2022 was allocated for judicial pre-reading, with the hearing to start on 6 September with a time estimate of seven days. The Court held that the trial started on 6 September, not 5 September.
This issue was revisited in Gagliardi -v- Evolution Capital Management LLC [2025] EWHC 3488 (Comm). The Court confirmed that the start of trial for the purposes of CPR 36 was when the parties were required to attend court with their lawyers and the trial actually commenced. Judicial reading days prior to commencement of the actual hearing did not count.
Functus officio
In Power Projects -v- Star Assurance (see above), when dealing with various consequential matters arising out of its earlier judgment, the Court was asked among other things to award enhanced interest on the principal sum awarded for the period after the making of the Part 36 Offer.
An issue arose as to whether the Court had jurisdiction to do so because it had already dealt with interest in the earlier judgment and was now potentially functus officio.
The Court concluded that the contractual interest awarded in the earlier judgment was a matter of entitlement under the contract, whereas enhanced interest under Part 36 was a statutory, discretionary jurisdiction. The further interest claimed was, therefore, claimed under a different jurisdiction.
Furthermore, given that a Part 36 Offer would not be disclosed to the Court until such time as it had already handed down judgment on the substantive claims and contractual interest, then the Court could not deal with the entitlements where a party had beaten a Part 36 Offer until it came to deal with costs and other consequences.
The Court proceeded to award the enhanced interest claimed.
Admiralty collision settlement offers
CPR 61 is the rule that deals with offers in Admiralty collision actions. Even where an offer is expressly stated to be made pursuant to Part 36, it will not attract the costs consequences of Part 36. Such an offer should, therefore, be compliant with CPR 61. If it is not, then the Court can still take it into account when determining costs under CPR 44: Melissa K [2011] EWHC 2715 (Admty).
Comment
A Calderbank ('without prejudice save as to costs') offer is more flexible than a Part 36 Offer because it is not subject to the same strict formalities. However, it does not attract the same favourable costs consequences, although the Calderbank offer will be taken into account when the Court is exercising its discretion on costs under CPR 44.
A Calderbank offer may also be more practical when the offer includes non-monetary provisions, or the parties wish to address issues of confidentiality or express undertakings.
Whichever form of settlement offer is chosen, it is important to word it carefully and to consider whether it will in fact achieve the intended outcome.
