In his final report, Lord Woolf said of the formalised 'offer to settle' concept: "I believe they are capable of making an important contribution to the change of culture which is fundamental to the reform of civil justice."
This new procedure (a 'Part 36 offer') enables either party to make a formal offer to settle at any stage of the proceedings. A claimant may make an offer to settle in a way which was not possible under the old rules. A defendant to a non-money claim may make an offer on the same lines as the old 'Calderbank letter'. And a defendant to a money claim may make an offer before proceedings have commenced, but must convert it into a Part 36 payment within 14 days of service of the claim form.
Generally, the recipient of a Part 36 offer has 21 days to accept it. If this happens, the case is settled on that basis and the recipient is given costs to the date of acceptance.
The recipient must think long and hard before refusing a Part 36 offer. A recipient who does not accept the offer where a claimant makes an offer to settle, and at trial achieves a better result than the offer would have represented, may recover a bonus over and above usual damages, costs, etc.
The court may award interest at a rate of up to 10% on the amount recovered from the latest date on which the offer could have been accepted. The court may also order costs on an indemnity basis and additional interest (again limited to 10%) on those costs. This is to compensate the claimant for having had to pursue the litigation after making a reasonable offer.
If in the same circumstances a defendant makes a valid offer to settle and the claimant eventually obtains less than that offer would have given him, the offer will have the same costs consequences as a Calderbank letter: the claimant will have to pay the defendant's costs from the latest date on which the offer could have been accepted.
Where a claim can be quantified and proceedings have begun, a defendant must make a Part 36 payment rather than an offer to settle. Costs consequences are similar to a defendant's offer to settle (and to a payment into court under current rules).
A defendant may make a Part 36 payment in respect of the money element of a claim and a Part 36 offer in respect of the non-monetary element of a claim. A claimant accepting the Part 36 payment will be taken as having also accepted the Part 36 offer.
A payment or offer to settle made under this Part may only be withdrawn with a court order. If it has not been withdrawn, it may be accepted after the usual 21-day period, but only with the court's permission.
The fact that a Part 36 offer or payment has been made will not be communicated to the judge until after he has decided on liability and comes to award costs.
Payments in and offers already constitute crucial tactical weapons for defendants. The new concept of a claimant's offer is likely to become even more important. Because claimants should be able to assess the merits of their own cases from the start, there should be no reason why they cannot make offers to settle before issuing claim forms. Defendants will know they are exposing themselves to a significant extra liability if they refuse, so will be under pressure to accept at a stage when they may be unprepared to assess accurately the plaintiffs' claims. If defendants refuse, claimants stand to boost recovery significantly.
If a downside in litigating under the CPR is the diminution of the tactical armoury available to litigators, Part 36 may go a little way towards redressing the balance.
Mark Humphries is a partner and solicitor-advocate at Linklaters & Paines. Lucy Dillon is head of the litigation information unit and Eleni Pavlopoulos is a solicitor in the litigation department.