It is easy to feel on the edge of an abyss when a claim form listing your company as a 'defendant' arrives on your doorstep or if you believe an existing dispute has to go through the courts in order to reach a conclusion.
Happily there are alternatives to achieve resolution rather than engaging in a lengthy court process. Settling a matter should always be at the forefront of any discussion, regardless of whether proceedings have been issued.
Although resolving a dispute without the aid of the court is not always appropriate, it often is the cleanest, simplest and, most importantly, cheapest way out. There are two key escape routes to settle cases, each with their own important distinctive features namely Part 36 offers and 'Calderbank' offers.
What does this mean?
A Calderbank offer is written 'without prejudice save as to costs'. Its effect is that the court is unable to refer to the offer except when dealing with the question of costs at the end of the proceedings. The court has complete discretion to decide what weight should be given to the offer when considering costs.
A Calderbank offer provides greater flexibility than a Part 36 offer because it is not governed by strict court rules. This is a great advantage because it allows the party making the offer (the 'offeror') to be creative when making their offer, especially when putting forward terms about the length of time the offer remains open for acceptance, costs and payment issues e.g. pay within 14 days. The price for flexibility is that Calderbank offers, if accepted, create a binding contract between the parties.
A Calderbank offer can be a useful tool to settle disputes where Part 36 does not apply, for example in cases allocated to the small claims track and arbitration proceedings.
Part 36 offers
A Part 36 offer can be made at any stage in a dispute up to the beginning of trial, including when proceedings have yet to be issued.
A Part 36 offer must:
- be in writing;
- state on its face that it is intended to have the consequences of Section I of Part 36;
- specify a period of not less than 21 days within which the defendant will be liable for the claimant's costs in accordance with rule 36.10 if the offer is accepted;
- state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue; and
- state whether it takes into account any counterclaim.
Part 36 offers are always open for acceptance by the opposing party up to the start of the trial unless they are actively and expressly withdrawn in writing. This means that, even if an offer was previously rejected, it can still be accepted months later. It is important to keep a watching brief on all Part 36 offers that may have been put forward but not withdrawn. There may be a multitude of historic offers that have been forgotten about, especially in lengthy, complex disputes. The facts of a case may change making a forgotten offer commercially irresistible. Unless that offer has been expressly withdrawn, it can be snapped up! If you intend to withdraw multiple offers, it is advisable to write to your opponent itemising each offer and specify that each offer is withdrawn.
Despite the rigidity of the rules, the main attraction of Part 36 offers is that the set regime in Part 36 provides far more certainty as to how litigation costs will be treated. A court does not have the same degree of discretion about the weight they attach to the offer in determining the appropriate award of costs.
Finally, recent decisions have clarified what amounts to an offer under Part 36. Case law has shown that a time limited offer is not a valid Part 36 offer.
To fall within the regime, not only must the exact sum be made clear to the opposition, but also what you are offering or are prepared to accept. More importantly, in terms of liability, the offeror must be making some kind of concession in the offer.
Be warned, an offer to accept the full amount of a claim cannot be a Part 36 offer.
What should you do?
Although Part 36 offers appear to be a more attractive route, there are still vital considerations to make in terms of the content and implications of the offer. Calderbank offers still have their place in certain circumstances because of the level of manoeuvrability not found in the Part 36 regime.
Tactically, a claimant who receives a Calderbank offer from a defendant could make a Part 36 offer for the same amount. The advantage to a claimant is that if their Part 36 offer was then accepted, they could be far more certain of receiving costs on the standard basis instead of relying upon the court's discretion.
The type of offer made, if any, will depend on the circumstances of the dispute, however, it is reassuring to know that there are different options to enable that much desired 'happily ever after'.
If you are unsure about any aspect of Part 36 or Calderbank offers, you should seek specialist legal advice.