Settlement and ADR

What is a Part 36 offer?

A formal settlement offer governed by CPR Part 36, which provides specific costs consequences and incentives to encourage settlement.

When can a Part 36 offer be made, and by whom?

At any stage, including before proceedings are issued, and by either party.

Do ordinary contract rules govern Part 36 offers?

No. Part 36 is a self-contained code containing its own rules.

Can parties make settlement offers outside Part 36?

Yes, but they only receive Part 36's costs consequences and protections if the offer complies with Part 36.

What is a Calderbank offer?

A written offer made 'without prejudice save as to costs'. It does not need to comply with Part 36, but the court can consider it when exercising its discretion on costs.

When can a Calderbank offer be referred to the judge?

Only when costs are being considered.

Why might parties prefer a Part 36 offer to an ordinary settlement offer?

Part 36 provides more certain financial incentives and costs consequences than the court's general discretion.

What are the two main situations addressed by Part 36?

The consequences of making and accepting an offer, and the consequences where an offer is not accepted and the matter proceeds to trial.

What are the requirements for a valid Part 36 offer under CPR 36.5?

It must be in writing; make clear it is made pursuant to Part 36; specify a relevant period of at least 21 days; state whether it relates to the whole or part of the claim; and state whether it takes account of any counterclaim.

How can an offer indicate that it is made pursuant to Part 36?

It must expressly state this, unless prescribed form N242A is used, in which case this is implied.

What is the relevant period for a Part 36 offer?

A period of at least 21 days during which the defendant will be liable for the claimant's costs if the offer is accepted.

What additional requirement applies to a defendant's Part 36 offer to pay money?

It must offer to pay a single sum of money.

What happens if a defendant's Part 36 offer proposes payment more than 14 days after acceptance?

It will not be treated as a Part 36 offer unless the offeree accepts it.

When is a Part 36 offer treated as made under CPR 36.7?

When it is served on the offeree, following the normal service rules under CPR Part 6.

What can an offeree do if they require clarification of a Part 36 offer?

Seek clarification of its terms within seven days under CPR 36.8.

Do the normal consequences of accepting a Part 36 offer apply where it is accepted before proceedings are commenced?

No. Those consequences depend on proceedings having been issued.

When can an accepted Part 36 offer be withdrawn or its terms changed?

It cannot be withdrawn or changed once accepted.

When is court permission required to withdraw a Part 36 offer?

Once the trial has started.

When can a Part 36 offer be withdrawn or changed without court permission?

After the relevant period has expired.

Can a Part 36 offer provide for automatic withdrawal?

Yes. It can state that it will be automatically withdrawn on specified terms.

What happens if an offeror gives notice of withdrawal or a change of terms during the relevant period, before the offeree has accepted?

The notice takes effect at the end of the relevant period.

What happens if the offeree accepts after receiving notice of withdrawal or a change of terms during the relevant period?

The offeror can allow acceptance or apply to the court for permission to withdraw or change the terms.

Within what period must the offeror apply to court for permission following acceptance after notice of withdrawal or change?

Within seven days of acceptance, or before the first day of trial if earlier.

When may the court permit withdrawal or a change to a Part 36 offer?

Where satisfied that there has been a change of circumstances and that permitting the withdrawal or change is in the interests of justice.

How is a Part 36 offer accepted under CPR 36.11?

By serving written notice of acceptance on the offeror.

Does a Part 36 offer remain open after the relevant period?

Yes. It remains open for acceptance beyond the relevant period unless it has been withdrawn.

What additional step is required when accepting a Part 36 offer after proceedings have been issued?

The notice of acceptance must also be filed at court.

What happens to proceedings when a Part 36 offer is accepted?

The claim is stayed and there is no trial under CPR 36.14(1).

When must a defendant pay a settlement sum following acceptance of a Part 36 offer?

Within 14 days of acceptance, unless otherwise agreed in writing.

What can a claimant do if the defendant fails to pay a settlement sum within 14 days of accepting a Part 36 offer?

Enter judgment against the defendant.

How can a party enforce an accepted Part 36 agreement that does not involve payment of a single sum?

If a party fails to comply, the other party can apply to court to enforce the agreement without issuing separate proceedings.

What are the costs consequences where a Part 36 offer is accepted within the relevant period?

The claimant is entitled to the costs of the proceedings up to the date on which notice of acceptance is served.

What happens to costs where a Part 36 offer is accepted after the relevant period?

The court determines liability for costs unless the parties agree.

What costs order must the court make where a Part 36 offer is accepted late, if it considers it just?

The claimant receives costs up to expiry of the relevant period, and the offeree pays the offeror's costs from expiry of the relevant period until acceptance.

What happens to costs where a Part 36 offer is made less than 21 days before trial and accepted?

Special rules apply. If the parties cannot agree liability for costs, the court must determine it.

What happens when a claimant accepts a Part 36 offer relating to only part of the claim and abandons the remainder?

The claimant is entitled only to costs relating to the part covered by the offer, unless the court orders otherwise.

What happens when a claimant accepts a Part 36 offer relating to only part of the claim but does not abandon the remainder?

Costs liability is determined by the court unless the parties agree.

What is the rationale behind the costs consequences of unaccepted Part 36 offers?

Parties who make realistic settlement proposals should receive a benefit where the other party fails to accept an offer that should have been accepted.

What is the trigger for costs consequences where a defendant's Part 36 offer is not accepted?

The claimant fails to obtain a judgment more advantageous than the defendant's offer.

How is whether a judgment is more advantageous than a defendant's Part 36 offer assessed?

In monetary terms, by comparing the offer with the combined amount of the judgment.

How is interest treated when comparing a defendant's Part 36 offer with the judgment?

The Part 36 offer is deemed to include interest up to the end of the relevant period.

What costs consequences follow where the claimant fails to beat the defendant's Part 36 offer?

Unless unjust, the court must order the claimant to pay the defendant's costs from expiry of the relevant period, together with interest on those costs.

How are costs incurred before expiry of the relevant period treated where a claimant fails to beat a defendant's Part 36 offer?

Part 36 does not specify their treatment, so the normal costs rules apply. If the claimant won something at trial, the defendant will normally pay; if the defendant won, the claimant will normally pay, subject to the court's discretion.

What is the trigger for costs consequences where a claimant's Part 36 offer is not accepted?

The judgment against the defendant is at least as advantageous to the claimant as the proposals in the claimant's offer.

How is whether a claimant has beaten their own Part 36 offer assessed?

In monetary terms, including interest, as with a defendant's offer.

What additional interest can the claimant receive if the defendant fails to beat the claimant's Part 36 offer?

Interest on the award at a rate not exceeding 10% above base rate, for some or all of the period from expiry of the relevant period.

What costs basis applies where a defendant fails to beat a claimant's Part 36 offer?

The claimant's costs from expiry of the relevant period are assessed on the indemnity basis rather than the usual standard basis.

What interest can be awarded on costs following a defendant's failure to beat a claimant's Part 36 offer?

Interest on indemnity basis costs at a rate not exceeding 10% above base rate.

What additional amount can a claimant receive where the defendant fails to beat the claimant's Part 36 offer?

An additional amount calculated at 10% of the award up to £500,000 and 5% of any amount above £500,000, subject to a total cap of £75,000.

How is the additional amount calculated where the claim contains no monetary claim?

It is calculated by reference to the total amount of costs awarded to the claimant.

What additional costs consequence applies where a claim is subject to fixed recoverable costs and the claimant's Part 36 offer is not beaten?

Instead of indemnity costs, the claimant receives additional costs equivalent to 35% of the difference between the fixed costs applicable before expiry of the relevant period and those applicable at the date of judgment.

What factors must the court consider when deciding whether Part 36 consequences would be unjust?

The terms of the offer; the stage of proceedings when it was made; the information available to the parties; the parties' conduct in giving or refusing information relevant to making or evaluating the offer; and whether the offer was a genuine attempt to settle.

How does the court's discretion to disapply Part 36 consequences compare with its general costs discretion?

It is more limited.

When do Part 36 consequences generally not apply because an offer was made close to trial?

Where the offer was made within 21 days of trial, unless the court abridges the relevant period.

When else may Part 36 consequences not apply to an unaccepted offer?

Where the offer has been withdrawn, or where it has been changed to terms less advantageous to the offeree and the offeree has beaten the less advantageous offer.

What happens if both claimant and defendant have made Part 36 offers that remain open at trial?

The court considers each offer in turn; one will likely extinguish the consequences of the other.

What is a consent order?

An order recording terms agreed by the parties, meaning the court does not need to hear from both sides about the agreed terms.

What is a consent order based on contract?

An order that provides evidence of the contract between the parties and will rarely be interfered with by the court.

What is a consent order not based on contract?

An order recording terms of settlement agreed by the parties, which may be altered or varied by the court.

What potential effect can a consent order have on later proceedings?

Estoppel may be available as a defence if fresh proceedings are brought concerning matters covered by the agreement.

What is a Tomlin order?

A type of consent order consisting of a public court order and a confidential schedule containing the detailed settlement agreement.

What does Part 1 of a Tomlin order contain?

The public order, including actions to be taken by the court and matters enforceable by the court. Any direction for payment of money or assessment of costs must be included here.

What does Part 2 of a Tomlin order contain?

The confidential schedule, setting out the detailed settlement terms, which are enforceable only through a further court order.

What type of terms can be included in the schedule of a Tomlin order?

Terms beyond those the court could ordinarily order, such as an agreement by the claimant to provide the defendant with reduced prices for goods for a year.

When is a Tomlin order particularly useful?

Where the parties want key settlement terms to remain confidential or the settlement includes non-standard terms beyond the court's usual powers.

Must a court approve a consent order or Tomlin order even where both parties agree?

Yes. The parties must apply to the court for the order to be made.

What happens if settlement is reached during a stay of proceedings and the parties seek a consent or Tomlin order?

The application for the order is treated as including an application to lift the stay.

How should parties record a settlement reached before proceedings are issued?

By a settlement agreement, which operates as a contract; no consent or Tomlin order is needed because there are no proceedings to dispose of.

What must a settlement agreement carefully define?

The scope of the dispute being settled, particularly where a party is giving up the right to bring proceedings concerning alleged wrongdoing.

When might a consent order be needed for an interim application?

Where court approval is required for an agreed application, such as an extension of time exceeding 28 days.

How should parties record an agreed interim extension of time?

By filing a consent order setting out the agreed extension and indicating both parties' agreement, ideally when the application notice is filed.

How is an agreed interim application usually put before the court?

The applicant usually invites the court to consider the application on the papers.

Must the court approve an agreed interim application?

No. The court is not obliged to approve it.

Who can discontinue a claim?

Only the claimant.

When can a claimant discontinue proceedings?

At any time.

Can a claimant discontinue only part of a claim?

Yes. A claimant can discontinue part of the claim or discontinue against one or more defendants.

When might court permission be required to discontinue a claim?

Rarely, for example where the claimant has already received a remedy such as an interim injunction or payment.

What are the main consequences of discontinuance?

It ends proceedings in relation to the discontinued claim or part of the claim, and the claimant is liable for the defendant's costs up to discontinuance unless the court orders otherwise.

What is the procedure for discontinuing a claim under CPR 38.3?

File a notice of discontinuance at court, specifying the part discontinued if relevant, and serve a copy on every party.

When does discontinuance take effect under CPR 38.5?

On the date the notice of discontinuance is served.

What costs order is deemed to follow discontinuance under CPR 38.6 and 44.9(1)(c)?

An order in favour of the defendant for costs assessed on the standard basis.

What are the main categories of alternative dispute resolution (ADR)?

Processes without third-party intervention; processes involving third-party intervention but no binding decision; and processes involving third-party intervention and a binding decision.

What is negotiation as a form of ADR?

A communication process intended to reach a compromise or agreement that satisfies both parties, without third-party intervention.

What is mediation?

A confidential process in which an impartial third party facilitates resolution but has no power to impose a binding decision.

How is mediation generally conducted?

The parties are usually in separate rooms and the mediator moves between them to facilitate agreement.

Does mediation remain confidential if the dispute later proceeds to court?

Yes. Mediation is confidential even if the matter subsequently goes to court.

What is early neutral evaluation or expert appraisal?

A process in which the parties appoint an independent person to provide an impartial, non-binding assessment to help resolve the dispute.

Who pays for early neutral evaluation?

The parties pay for the evaluator's time and costs.

What is conciliation?

A process in which an independent neutral third party helps resolve a dispute, combining elements of mediation with more evaluative input.

How does conciliation differ from mediation?

The conciliator takes a more evaluative approach, similar to early neutral evaluation.

Where is conciliation commonly used?

As part of statutory or regulatory schemes, which may specify who the conciliator should be.

What should parties understand before undertaking conciliation?

What the process involves.

What is arbitration?

A process in which an impartial adjudicator resolves a dispute by making a final and binding decision, effectively ousting the court's jurisdiction.

How can parties agree to arbitration?

They can include an arbitration clause in a contract for future disputes, or agree to arbitrate after a dispute has arisen even without an arbitration clause in the underlying contract.

Is arbitration confidential?

Generally yes, although confidentiality is not absolute.

What is expert determination?

A process in which an independent expert in the relevant subject matter is appointed to determine the dispute.

How is the procedure for expert determination established?

By the contract between the parties.

When might expert determination be unsuitable?

Where parties need to be fully heard or where there are issues of credibility.

Is expert determination binding?

Yes. It produces a binding decision.

What is med-arb?

A process in which the parties first attempt mediation and, if that does not resolve the dispute, proceed to arbitration.