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Part 36 offers - Role Reversal

04/01/2010

The second instalment of analysis of recent case law regarding Part 36 offers.

Litigation solicitor Stephen McArdle looks at how a recent Court of Appeal decision will encourage settlement of disputes under the Part 36 regime.

If a Claimant makes a Part 36 offer and that offer is accepted, then the Claimant will be entitled to make a cost recovery from the Defendant as well. The Defendant would bear its own costs. CPR 36.3(4) states that “A Part 36 offer shall have the consequences …. in relation to the costs of the proceedings in respect of which it is made...”.

In the recent case of AF v BG [2009] EWCA Civ 757, the Court of Appeal held that a valid Part 36 offer made by a Defendant in respect of a counterclaim can be treated as a ‘Claimant’s Part 36 offer’. This was a case where the Defendant’s offer comprised of the Defendant accepting a net sum of money from the Claimant in settlement of the entire case. This decision has significant implications on the Defendant’s ability to recover costs should such an offer be accepted.

The court found that the Part 36 offer made in this particular case was clear and it related to both the Defendant’s counterclaim and the Claimant’s claim. This meant that if the Claimant had accepted the offer, all the litigation would have settled and that the Defendant would have been entitled to recover its reasonable costs of both the counterclaim as well as the claim.

Stephen McArdle of KBL comments that “This is a significant decision. The significance lies in the benefit to a Defendant who is counterclaiming now being able to take advantage of the more favourable cost consequences which can follow from a Claimant’s Part 36 offer”.

“Widening the scope of cost consequences of Part 36 in this way will incentivise Defendants who are bringing counterclaims to make valid Part 36 offers. It will also encourage Claimants to think twice about rejecting such offers. The likely result will be an increase in the number of cases settling”.

For further information please see Part 36 Settlements or Accepting a Part 36 Offer following rejection.

If you require advice or assistance in respect of the above or any other Litigation matter, please contact our Litigation team on 01204 527777.