OFFERS TO SETTLE AND PAYMENTS INTO COURT

PART 36 CIVIL PROCEEDURE RULES 1998

It is possible for either a Claimant or a Defendant to place their opponent at risk of incurring costs and other financial penalties by making a formal offer to settle a claim, 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 they think 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 pressurize 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 DEFENDANTS 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 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 commenced, 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.

JUDGE AWARDS YOU MORE

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:
  1. The higher award
  2. 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
  • 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

JUDGE AWARDS YOU LESS

If the trial judge awards you less or no more than the sum paid into court, then you will only be entitled to:
  1. the lower award
  2. 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 earlier).
However, the Court will, unless it thinks it is unjust to do so, order you to pay the Defendant's costs thereafter. In a lengthy or complicated case, these could equal or even exceed the value of your award.

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.
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. We will advise you if we think this is necessary.

A CLAIMANTS 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 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, you 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 Claimants Part 36 offers are similar to those that apply 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.

JUDGE AWARDS YOU MORE

If the trial judge awards you more than the sum which you were prepared to accept in settlement, then you will be entitled as of right to:
  1. the higher award
  2. 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 you could have accepted the offer or payment within the 21 day period
  • A more generous rate of interest on your legal costs

JUDGE AWARDS YOU LESS

If the trial judge awards you less [or no more than] the amount of your Part 36 offer, then you will only be entitled to:
  • your award
  • payment of your costs on the standard basis, at the discretion of the Court, but possibly only up to the date that the Defendant could have served notice of acceptance of your Part 36 offer

LEGAL EXPENSES INSURANCE

If you have the benefit of a legal expenses insurance policy or are funded by a union it is also necessary to report the fact that a Part 36 offer or payment has been made, and again, they will then review the merits of continuing to financially support your claim.

CONDITIONAL FEE AGREEMENT

If we are 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 terms of 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 then 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 only 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.

GENERALLY

We will tell you if and when your opponent makes a Part 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 or payment must be made by you since the consequences of misjudging the offer or payment is likely to have a direct impact on you personally.

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