Litigators should be well acquainted with the fundamentals of Part 36. Nowadays, it is quite rare for a Part 36 offer to be deemed invalid, especially when using standard templates or N242A. Within law firms, the organisation of teams often separates the management of costs into different departments. This can result in litigation fee earners being unaware of the processes involved beyond just making and accepting Part 36 offers.
I used to be one of those fee earners. When a case was settled, I would send the file to the costs department. The cost schedules were prepared by third-party cost draftsmen. It was only after becoming a consultant that I began to truly consider the aspects I should have known and thought about during litigation but didn’t.
As an advocate, I strive to ensure that my clients fully understand and utilise the benefits of Part 36. I aim to ensure that when it is applied, it is done in a manner that maximises the intended advantages.
Part 36 stays proceedings automatically
Although it may seem obvious, I noticed during my litigation days that parties often engaged in informal negotiations before opting to formalise their settlements with a Tomlin Order.
I found it very strange that the agreement typically required the Defendant to pay the Claimant damages, as well as their costs, which would be assessed or determined if not agreed upon, as per the relevant cost provision. Why would you choose the option that costs more money? All Part 36 settlements come with the same provision:-
“If a Part 36 offer is accepted, the claim will be stayed.”
One then informs the Court, providing reassurance that the matter is stayed and no additional steps need to be undertaken by the parties. However, a Tomlin Order must first be endorsed by the Court. There is always going to be concern until confirmation has been received from the Court.
However, there may be offers/settlements that are not suitable for a settlement by part 36. However, if it can, it should be done by Part 36. This would be suitable even if the parties have agreed provisionally for the formality, one makes the offer part 36, and the other accepts it.
Prepare indemnity costs for summary assessment
PLEASE NOTE the Part 36 regime for Fast Track after 1st October 2023 no longer has indemnity costs, but a 35% uplift on the difference between the fixed costs of the stage of settlement/trial and the relevant period expiring.
It is important that if you have made Part 36 offers on a case that is subject to indemnity costs (because not all Part 36 offers from now on are) the fee earner ensures that appropriate cost schedules are filed, not just of the main action, but for the possibility that the court must determine costs after the expiration of the relevant period.
For the avoidance of doubt, where Part 36 consequences are subject to standard costs, the following provisions apply:-
(b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;
(c) interest on those costs at a rate not exceeding 10% above base rate;
The Court cannot possibly work out the post-relevant period costs on an indemnity basis and apply interest if it cannot know what costs were incurred before and after the relevant period.
The most straightforward option is to two prepare two N260s. One detailing all costs and disbursements up to the expiration of the relevant, and one from after and up to trial. The Court can still use this for assessing costs of the main action if part 36 consequences don’t kick in.
It is quite important to do this because having costs on the indemnity basis means any doubt is in favour of the receiving party, where as standard costs is in favour of the paying party.
“The Court must, unless it is unjust to do so”
I must confess but the concept of ‘unless it is unjust to do so’ did not really occur to me until I started undertaking advocacy myself.
The starting point is that Part 36 will apply. It creates a rebuttable presumption, meaning that it falls to paying party to challenge the application of the Part 36 consequences (Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch)). If the Claimant beats its Part 36 offer, it is the Defendant’s responsibility to demonstrate that applying the Part 36 consequences would be unjust. Conversely, if the Claimant fails to beat the Defendant’s Part 36 offer, the Claimant must prove that it would be unjust for the Part 36 consequences to apply.
The Court must take into account all of the circumstances of claim including the following factors found in CPR 36.17(5):-
(5) In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including—
(a) the terms of any Part 36 offer;
(b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;
(c) the information available to the parties at the time when the Part 36 offer was made;
(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and
(e) whether the offer was a genuine attempt to settle the proceedings.
In the case of Downing v Peterborough & Stamford Hospitals NHS Foundation Trust [2014] EWHC 4216 (QB), it was said that it is fundamental that a Judge, when asked to deviate from the standard procedure on the basis that it would be ‘unjust’ not to do so, should resist the temptation to make an exception simply because they perceive the existing regime as harsh or unfair. There needs to be specific circumstances in the case that warrant departing from the norm.
For example, the Court of Appeal in Yentob v MGN Ltd [2015] EWCA Civ 1292, the Court of Appeal upheld Mann J’s decision to deviate from the usual order in a phone-hacking case. The Claimant failed to secure a judgment better than the Defendant’s Part 36 offer, primarily due to limited admissions and the unlikelihood of the Defendant making an open court statement. Mann J made it clear that in typical cases, seeking a trial for a public judgment is not a valid reason for a Claimant to refuse a Part 36 offer.
In Walsh v Singh [2010] EWHC 1167 (Ch), HHJ Purle QC determined that the Defendant’s conduct during the trial was so unattractive that it justified making no order for costs, despite the successful Part 36 offer.
It is common for parties to argue that they were unable to properly assess the value of their claim without the disclosure of material facts or evidence, as illustrated in the case of Ford v GKR Construction Ltd (Practice Note) [2000] 1 W.L.R. 1397, CA. Situations often arise where a balance needs to be struck, particularly when the Claimant is a child who may not fully understand the value of their claim and is unable to settle without finalizing the evidence. This situation does not automatically undermine the usual consequences of Part 36, but it is something that the Court may consider.
It might be possible that a Judgment that beats the Part 36 offer minimally may be a situation where it is not appropriate for the Part 36 consequences. In the case of Novus Aviation Ltd v Alubaf Arab International Bank [2016] EWHC 1937 (Comm), the value of a US-dollar judgment in sterling was only higher than the Claimant’s Part 36 offer because of significant currency changes after the Brexit vote. Leggatt J decided that it would be unjust to impose Part 36 consequences.
Therefore parties should consider their conduct throughout the claim, as it really can make a material difference as to how the Court deals with any Part 36 consequences that are triggrered.
This rule, however, does not apply to Part 36 consequences in respect of Stage 3 hearings under the Low Value Pre-Action Protocol for Personal Injury claims (RTA & EL/PL). In those circumstances, the Court ‘must order’ the Part 36 consequences. There is no discretion.
When are Part 36 consequences an uplift, rather than indemnity costs?
There are two broad circumstances where Part 36 will not award costs incurred after the relevant period has expired on an indemnity basis;
- Where the new 1st October 2023 fixed costs regime applies.
- Stage 3 hearings under the Low Value Pre-Action Protocol for Personal Injury claims (RTA & EL/PL).
First, looking at what Part 36 says about the new 1st October 2023 regime:-
Costs consequences following judgment
36.24.—(1) Rule 36.17 applies with the following modifications.
(2) Subject to paragraphs (3), (4) and (5), where an order for costs is made pursuant to rule 36.17(3)—
(a)the claimant is entitled to—
(i)the fixed costs in Table 12, Table 14 or Table 15 in Practice Direction 45 for the stage applicable at the date on which the relevant period expired; and
(ii)any applicable additional fixed costs allowed under Section I, Section VI, Section VII or Section VIII incurred in any period for which costs are payable to them; and
(b)the claimant is liable for the defendant’s costs in accordance with paragraph (9).
(3) Where rule 36.17(1)(b) applies, the claimant is entitled to—
(a)the fixed costs in Table 12, Table 14 or Table 15 in Practice Direction 45 for the stage applicable at the date of judgment; and
(b)any applicable additional fixed costs allowed under Section I, Section VI, Section VII or Section VIII incurred in any period for which costs are payable to them.
(4) Where the court makes an order pursuant to rule 36.17(4), instead of costs awarded on the indemnity basis under rule 36.17(4)(b), the claimant is entitled to additional costs in accordance with paragraph (5).
(5) The additional costs are an amount equivalent to 35% of the difference between the fixed costs for—
(a)the stage applicable when the relevant period expires; and
(b)the stage applicable at the date of judgment,
to which the claimant is entitled under paragraph (3)(a) and (b).
Table 12 is Fast Track where standard costs no longer apply, Table 14 is the Intermediate Track and Table 15 is for noise induced hearing loss claims which are allocated to the Fast Track where standard costs no longer apply.
With respect to Stage 3 hearings. It is not a formal Part 36 offer, but the offers contained within the Part B Court Proceedings Pack which is sealed in an envelope until the conclusion of the Stage 3 determination of damages. Whilst the new Part 45 only applies to accidents after the 1st October 2023, the Part 36 consequences are the same:-
(2) Where paragraph (1)(a) applies, the court must order the claimant to pay—
(a) the fixed costs in rule 45.37; and
(b) interest on those fixed costs from the first business day after the deemed date of the Protocol offer under rule 36.27.
and
(4) Where paragraph (1)(c) applies, the court must order the defendant to pay—
(a) interest on the whole of the damages awarded at a rate not exceeding 10% above base rate for some or all of the period starting with the date specified in rule 36.27;
(b) the fixed costs in rule 45.30;
(c) interest on those fixed costs at a rate not exceeding 10% above base rate; and
(d) an additional amount calculated in accordance with rule 36.17(4)(d).
Use N242A, rather than template letters
I have encountered numerous cases where the drafting of a Part 36 offer has either omitted or included elements that invalidate it as a Part 36 offer. While the offer itself may still be valid, the protections provided by Part 36 may no longer apply. For instance, if one party expressly rejects an offer, it can no longer be accepted.
Using a N242A is most effective when the other party understands a Part 36 offer. If you are dealing with a litigant in person, it’s important to clearly explain the consequences of the offer. The case Barton v Wright Hassall [2018] UKSC 12 establishes that if the rules are available online or accessible to the public, a litigant in person cannot claim ignorance of their existence. However, because Part 36 can be quite complex, it is advisable to clearly articulate everything to minimise the risk of an ‘unjust to do so’ order.
In the alternative, using a N242A prevents any risk of the offer being invalid.
Most importantly, contract law does not apply to Part 36 (it’s ok to expressly reject an offer or make a counter offer)
One junior fee earner expressed hesitation about recommending a counter Part 36 offer when the other party’s offer was good. The reason they were concerned was because of the fundamental basis that a counter offer amounts to a rejection of the previous offer (Hyde v Wrench [1840] 3 Bev. 334).
I reassured the fee earner that Part 36 was a self-contained set of rules. I said it was akin to the purchase of land, i.e not subject to the usual provision of contract law. I referred them to the following subsections of Part 36:-
36.9
(1) A Part 36 offer can only be withdrawn, or its terms changed, if the offeree has not previously served notice of acceptance.
36.10
(1) Subject to rule 36.9(1), this rule applies where the offeror serves notice before expiry of the relevant period of withdrawal of the offer or change of its terms to be less advantageous to the offeree.
(2) Where this rule applies—
(a) if the offeree has not served notice of acceptance of the original offer by the expiry of the relevant period, the offeror’s notice has effect on the expiry of that period; and
(b) if the offeree serves notice of acceptance of the original offer before the expiry of the relevant period, that acceptance has effect unless the offeror applies to the court for permission to withdraw the offer or to change its terms—
(i) within 7 days of the offeree’s notice of acceptance; or (ii) if earlier, before the first day of trial.
(3) On an application under paragraph (2)(b), the court may give permission for the original offer to be withdrawn or its terms changed if satisfied that there has been a change of circumstances since the making of the original offer and that it is in the interests of justice to give permission.
36.11
(2) Subject to paragraphs (3) and (4) and to rule 36.12, a Part 36 offer may be accepted at any time (whether or not the offeree has subsequently made a different offer), unless it has already been withdrawn.
Obviously there are a few exceptions, but the point being is that it expressly states that a Part 36 offer, which is not withdrawn, is capable of being accepted at any time. The consequences that may follow from a late acceptance are, of course, a real risk.
It also applies when Part 36 and Calderbank offers are made in tandem. Of course, the principles of Part 36 do not transpose onto the Calderbank offer, and therefore, a counter offer (even if it is Part 36) is likely to be found to be a rejection under common law.
You can inform another party that you are rejecting their Part 36 offer. However, unless the relevant period expires and they withdraw the offer, it remains open for acceptance, subject to the previously mentioned caveat. While explicitly stating that you won’t accept the offer may make you seem foolish when you later accept it, it is still a legitimate course of action.
Information
AJH Advocacy Limited, a Limited Company which is regulated by the Bar Standards Boards (entity number 190758), ceases trading on the 12th January 2026.
From the 12th January 2026 and onwards, Alec Hancock will practice as a Barrister at Magdalen Chambers in Exeter. For instructions on matters on or after 12th January 2026, please contact Magdalen Chambers via clerks@magdalenchambers.co.uk or by telephone on 01392 285 200.