Part 36 – Make your offers early

A recent judgment has highlighted the importance of early timing in the making of Part 36 offers.

In Titan Europe 2006-3 Plc v Colliers International UK Plc (in Liquidation) [2014] EWHC 3106 (Comm) (unreported), Blair J did not make a Part 36 costs order, despite the Claimant having beaten its Part 36 offer, on account of the late stage of the proceedings at which it was made. The decision serves to remind us of the discretion that the courts have under Part 36 when deciding whether such an order would be unjust, and hints at a possible rise in departure from the usual rule.

CPR Part 36 provides that, should a claimant beat its offer, it will be entitled to:

1. Interest on the whole or part of any sum excluding interest ordered at a rate not exceeding ten percent above base rate for some or all of the period starting with the date on which the relevant period expired;
2. Costs on the indemnity basis from the date on which the relevant period expired;
3. Interest on those costs at a rate not exceeding ten per cent above base rate; and
4. An additional uplift on damages to a figure not exceeding £75,000.

The Claimant made an offer to settle the claim in June 2014, which offer the Defendant rejected. The claim came to trial in July 2014 and the Claimant was successful in beating its offer.  It therefore sought an order that the costs consequences of Part 36 should apply.  The Defendant argued that the offer was made far too late in the proceedings for the Claimant to be able to justly reap the costs consequences. In doing so, it directed the Judge towards CPR 36.14(4)(b) which sets out that, when considering whether it would be unjust to make a Part 36 costs order, the Court should take into account the stage in the proceedings when the offer was made, including how long before the trial started the offer was made.

The Defendant cited Lorraine Feltham v Freer Bouskell [2013] EWHC 3086 (Ch), a case in which a very late Part 36 offer was made by the Claimant. In that case, the Claimant made the offer about a month before the trial began, and then went on to beat it. Mr Charles Hollander QC declined to order interest at 10%, on the basis that, given current interest rates, this would be unjustly punitive, although he did order that the Defendant should pay interest at the lesser rate of 3.5% from the date on which the Part 36 offer was received. Further, he declined to make an order for the penalty payment £75,000 on account of the lateness of the offer.

In Titan, the Blair J agreed that the offer was made a matter of weeks before the trial – in his words, "on the eve of the trial" - and he consequently found that the order should not be made. In reaching this conclusion, the Judge focused on several specific factors, namely that this had been a "very complex case" which had involved a "vast amount of preparation", ruling that it would be unjust in the circumstances to make such an order.

Those considering making a Part 36 offer should heed this Judgment's warning not to leave it to the last minute, or they may miss out on the penalty payments following trial, even if they do beat their offer. Conversely, those parties that find themselves in the position of having a potential Part 36 costs penalty ordered against them should consider whether it is possible to argue under CPR 36.14(4)(b) that the timing of the offer would make it unjust to punish the party with additional Part 36 costs.