April 5, 2024
A settlement is essentially an agreement reached between disputing parties to resolve their issues without going to full-blown legal proceedings. This can happen before any legal action is taken or at any stage during the proceedings. It’s crucial to understand that the courts actively encourage settlements, as reflected in the Civil Procedure Rules (CPR). There's a strong emphasis on parties attempting to resolve disputes outside of court, with potential cost penalties for those who refuse to engage in settlement discussions. This encouragement from the courts underscores the value placed on finding mutual ground to avoid the need for a trial.
A Part 36 offer is essentially a strategic play under the Civil Procedure Rules (CPR) that outlines a formal way to propose a settlement in legal disputes. It's a key move, particularly for the claimant, in the chess game of legal proceedings, and it's not something to take lightly. Although delving into the nitty-gritty of Part 36 offers could fill pages, let's break down the essentials for a clearer understanding.
Once a settlement is agreed upon, it effectively puts a full stop to the dispute. This holds true whether legal proceedings have already started or not. Generally, this means the dispute cannot be reopened or taken to court again, except under specific conditions if both parties have explicitly agreed to such a possibility.
Deciding whether to make or accept a settlement offer can be tricky, but there are undeniable advantages to settling a dispute out of court. Here’s why it might be a smart move:
To make an offer that sticks to Part 36, it needs to tick several boxes. It must be a genuine attempt to settle, kept under wraps (without prejudice save as to costs) until the court has to decide on the costs, and it must meet the strict criteria laid out in Part 36.
If you're the one initiating the claim, your Part 36 offer needs to:
Defendants making a Part 36 offer should:
Pondering whether to accept a Part 36 offer? Here’s why it might be worth your while:
You can negotiate a Part 36 offer by proposing a counter-offer, but this doesn't invalidate the original offer. Accepting one? It must be done in writing, and if court proceedings are underway, the court needs a heads-up too.
Accepting a Part 36 offer has clear cost implications. For claimants, defendants cover costs until the acceptance period ends. Late acceptance means you might foot the bill for subsequent costs—a deterrent against dragging your feet.
If a claimant snubs a Part 36 offer and later fails to secure a better judgment, they could end up paying the defendant's costs from the expiry date of the offer. For defendants, not accepting a claimant's Part 36 offer and then losing on terms equal to or worse than the offer means paying up on costs, potentially including interest and additional amounts.
You can retract or tweak a Part 36 offer post-acceptance period without needing court permission, provided it's done in writing. This flexibility allows for strategic adjustments as cases evolve.
While Part 36 offers are a key tool, other settlement types like Calderbank offers and 'without prejudice' offers provide alternative paths to resolution. These options give you flexibility in terms and conditions, offering strategic advantages in certain scenarios.
A Calderbank offer, often styled as 'without prejudice save as to costs', is essentially a strategic proposal to settle disputes out of court, penned in a letter. This type of offer gives you more flexibility to set your own terms, including how long the offer stands and the specifics of payment. Unlike a Part 36 offer, which sets out the cost consequences after acceptance, a Calderbank offer wraps up the costs within the offer itself, offering a more straightforward approach to resolving disputes financially.
Should your Calderbank offer be turned down and the case goes to court, the judge will take this offer into account when deciding who pays the legal fees. However, how much this influences the judge's decision is completely up to their discretion.
This kind of offer is a bit like playing your cards close to your chest. It means you can make a settlement offer that won't be shown to the court as part of the main dispute or used in the debate over who should pay the court costs, unless both parties agree to it or the offer explicitly states it's 'without prejudice save as to costs'.
Then there's the open offer, which is less common. It's out in the open, not protected by the usual 'without prejudice' confidentiality. This tactic is typically employed when you think the other side is being too hopeful about what they can win in court, and you're pretty confident your offer is as good as it gets. There are also specific scenarios, like during an unfair prejudice claim, where making an early open offer to buy out the other party's shares at a fair price can be a strategic move.
Our subject expert: Fayola-Maria Jack
Fayola-Maria Jack is a multi-award winning deal shaping and dispute resolution expert. She has shaped successful resolutions and out of court settlements for governments, multinationals, military, banks, and venture backed startups.
