Part 36 v Calderbank : Rise of the Reforms
Author: David Nessim and Jonathan Smart
There has been a lot of buzz about the Jackson reforms. We highlight afew considerations which demonstrate that when trying to settle a dispute, the battle still rages about which settlement mechanism (Part 36 or Calderbank) is more advantageous.
Part 36 offers
The reforms have caused, what is expected to be, a boom in claimant Part 36 offers as opposed to Calderbank offers.
For claimant offers made on or after 1 April 2013 the claimant will also receive an extra 'bonus' to the damages they are awarded at court (unless the court considers it 'unjust') if they make a Part 36 offer that is rejected by the defendant and go on to beat that offer at trial.
For money claims the additional damages will be an added 10% of the first £500,000 of any judgment awarded. If the claimant is awarded more than £500,000 it will receive an added 5% of the next £500,000 awarded in addition to the above. Whilst this 'bonus' is capped at a maximum of £75,000, the additional award can amount to a useful incentive for defendant's to settle a claim at an early stage.
For claimants making a non-monetary claim, the court has the power to award the claimant a bonus of 10% of their legal costs provided that they beat their own offer at trial.
The changes to the court rules are designed to encourage claimants to make early and realistic Part 36 offers of settlement. Claimants should consider using them to pressurise a defendant into settling a matter at an early stage.
On the other hand defendants now need to consider this new risk of paying additional 'bonus' damages to the claimant on top of the other costs and interest should they reject a Part 36 offer and be less successful at trial than the offer that was put forward.
Notwithstanding the above, Calderbank offers will always have their place because they offer flexibility that a Part 36 offer simply cannot provide.
A Calderbank offer is written 'without prejudice save as to costs'. The offer is not referred to during the course of proceedings dealing with the claim but can be shown to the court when looking at the question of costs. The court will then decide the appropriate weight to give to the offer. You might wish to use a Calderbank offer in certain circumstances including if:
- you would prefer to make a time limited offer which is only open for acceptance for a specified period
- you would like to include a term about costs which is different from the terms as to costs under Part 36
- you are a defendant and you would like to offer to pay an amount of money by instalments or you are uncertain as to whether you can pay the money within 14 days
- you are a claimant who has received a defendant's Part 36 offer but do not wish to incur Part 36 costs consequences
- you are engaged in arbitration proceedings where the Part 36 regime does not apply
A Calderbank offer remains a useful part of a party's arsenal.
Part 36 offers are a very useful tactical tool, but they remain a very technical area of law.
If you receive a Part 36 Offer or you are considering making one it is crucial you seek legal advice to ensure that you either receive the full benefits of Part 36 or, just as importantly, do not fall foul of the potential pitfalls.
The need for Calderbank offers is always going to be pertinent and as the above demonstrates, in some cases, is vital to ensure a party protects itself further down the line.
Whichever side you are on, if you are in any doubt about what to do, seek legal advice.