Effective Settlement – Calderbank & Part 36 Offers

Settlement offers can be great ways to commercially resolve a dispute, they often offer a faster and quicker resolution to both claimants and defendants than partaking in court litigation.

There are two common forms of settlement offer used in civil proceedings. These are Calderbank and Part 36 Offers. These exist under the Civil Procedural Rules (CPR) Part 44 and 36, in which the court sets out key rules regarding costs and settlement.

• Under CPR Part 44.2 the court has discretion as to whether costs are payable by one party to another, when they are to be paid and the amount of costs that may be paid.
• Under CPR Part 36 the court sets out the specific way a settlement offer should be set out if it is to have cost implications on proceedings.

A Part 36 offer is a form of settlement offer in which if a party fails to obtain a more advantageous outcome than the Part 36 offer (presuming it was created validly), the court will impose the costs consequences prescribed by the rules unless it would be unjust to do so. 

However, the terms set out in a Part 36 offer must be made in a very specific way and must be seen as a “genuine attempt to settle”.

A Calderbank offer, by contrast, is not governed by a specific procedural code. Also known as a WPSATC offer, at its pith, a Calderbank offer is a contractual offer made on a "without prejudice save as to costs" basis. The court, therefore, may take such offers into account when exercising its general costs discretion under CPR 44.2.

However, while this flexibility can make a Calderbank offer more attractive than a Part 36 offer, any costs consequences remain entirely within the court's discretion. Unlike Part 36, there is no imposed costs regime that the court is required to apply.

Overall, both forms of offer are designed to encourage settlement and discourage unnecessary litigation. A well-pitched settlement offer can place commercial pressure on an opponent and significantly improve a party's position on costs if the matter proceeds to trial.

It must be noted that for each offer there may be a penalty:

For Part 36 offers, where a claimant obtains a judgment at least as advantageous as its own Part 36 offer, then the court will ordinarily award (1) indemnity costs from the expiry of the relevant period; (2) interest on damages; (3) interest on costs; and (4) can award an additional amount of up to £75,000. 

Where a claimant rejects a defendant’s Part 36 offer and later is awarded / recovers less than the offer at trial, the court will generally order the claimant to pay (1) the defendant’s costs; (2) with interest. 

A party who unreasonably rejects a sensible Part 36 offer therefore risks turning a successful claim into a financial defeat.

For a Calderbank offer, their flexibility is their weakness. If the court uses its discretion to deem that the offer was unreasonable or that an offer was reasonable and not accepted, then the court may adjust its cost award accordingly.

Furthermore, even where a party ultimately succeeds at trial, prolonged proceedings and escalating legal costs may result in a less favourable financial outcome than would have been achieved by accepting a reasonable settlement offer at an earlier stage.

If you would like advice on the strategic use of Part 36 or Calderbank offers, assistance with settlement negotiations, or guidance on managing litigation risk and costs exposure, contact our Dispute Resolution team at drnbe@deanwilson.co.uk. Our team regularly advises individuals, businesses, landlords and property professionals on resolving disputes effectively and achieving commercially sensible outcomes both before and during court proceedings.