There are general types of offers to settle a claim in litigation, including:
- An open offer: An offer made in ‘open’ correspondence. This can be brought to the attention of the judge not exclusively relating to costs.
- A without prejudice offer: Provides you with protection as the court will be exclusively privy to the issue of costs.
Without Prejudice Offers
There are three types of without prejudice offer options:
a) Without Prejudice Offer – Save as to Costs
This is the standard without prejudice offer. There is no set format on what the offer should contain and it may include or exclude costs and/or interest.
b) Part 36 Offer
This offer can be used to settle a claim before and/or during proceedings. However, unlike the remaining offers, the basis of this offer is set out in the Civil Procedure Rules (CPR).
A Part 36 offer includes specific conditions for compliance, but also has costs consequences with a part 36 offer should a party not accept the offer made.
As per CPR 36.13(4), should the part 36 offer be accepted after a 21-day period, the court must determine liability for the parties’ costs if the parties have been unable to agree.
In the recent case of Pallett v MGN Ltd [2021] EWHC 76 (Ch), the Claimant – actress Roxanne Pallett – made a Part 36 offer to settle the claim against the Defendant – a newspaper publisher – for infringement of her privacy.
If accepted within 21 days, the Defendant would be liable to pay the Claimant’s costs up to the day of acceptance.
They failed to do this, waiting until 22 days after the Part 36 offer being made to accept the offer.
The Defendant’s solicitor believed it was ‘unjust’ that their client had to pay the Claimant’s costs as the Claimant had waited several years to make an offer and did not properly engage in Alternative Dispute Resolution. CPR Part 36.13(5) explains that the court must award the Claimant costs unless the actions of the Claimant were unjust.
The judge held that the Claimant’s actions during the litigation did amount to “unjust” action so the normal liability to pay the Claimant’s costs on the standard basis would apply. Therefore, the Defendant had to pay the Claimant’s costs.
This case demonstrates the strict approach the court takes in respect of Part 36 offers and the serious cost implications of late acceptance.
c) Calderbank vs Calderbank Offer
This offer follows from the judgment held in Calderbank v Calderbank [1975] 3 All ER 333, where it was held that in proceedings, the losing party can bring an earlier settlement offer made by them to the winning party, to the attention of court as evidence in respect of costs.
This type of offer is made “without prejudice save as to costs”.
This offer has all the protection of a part 36 offer excluding the late acceptance liability to pay the offerors legal costs or liability to pay the offerors legal costs if not beaten.
Conclusion
The Court encourages parties to engage in Alternative Dispute Resolution outside of court where possible due to the costs and time incurred. As such, it may be sensible for parties to reach a settlement to avoid the matter proceeding to trial.
A part 36 offer will protect you in respect of costs however should you wish to avoid the costs consequences tied to a part 36 offer, it may be more sensible for you to make a Calderbank v Calderbank offer.