Whether you are a litigator or an advocate in civil proceedings, Part 36 plays a pivotal role and, if utilised correctly, can bring a matter to a reasonably amicable conclusion. The difficulty is that if not used in an appropriate manner, it will quite often lose its bite (such as making an unrealistic offer or making it far too late).
Quantum offers are often utilised more than liability offers, with the latter being the subject of Mundy v TUI UK Limited [2023] EWHC 385 (Ch), casting doubt on whether liability offers are even worth making. However, the Court of Appeal in Smithstone v Tranmoor Primary School [2026] EWCA Civ 13 has overturned the controversial High Court decision of Colins Rice J.
Under CPR 36.2(3), a Part 36 offer can relate to the whole claim, part of the claim, or any issue within the claim. A liability-only offer is usually an agreement to settle the liability aspect at a certain percentage, such as 90% in favour of the claimant, with quantum to be decided later. The probative value of making such an offer is evident: acceptance resolves liability, narrows the issues and dispute, and saves time and costs. Strategically, rejecting such an offer can also lead to increased costs under CPR 36.17 if the offeror later achieves a better result. Punitive, but also proactive in encouraging settlement.
So how could an offer that would reduce the issues, costs and court resources be deemed not to trigger the Part 36 consequences?
Mundy v TUI UK Limited
Mundy was an appeal against a first instance decision where the Claimant successfully established his cyclospora infection was contracted from the food at his hotel, which was provided for under an all-inclusive contract from his tour operator. The Claimant had made a £20,000 Part 36 offer to settle but also a liability-only Part 36 in the sum of 90/10% in his favour. He ended up being awarded around £200 less than the Defendant’s Part 36 offer of £4,000.
The Claimant appealed to the High Court on the basis that he should not be ordered to pay the Defendant’s costs from the expiration of the £4,000 to trial because he had beaten his 90/10% Part 36.
Upon dismissing the appeal, Collins Rice J expressed concern towards 90/10% liability offers and their role. She concluded that such an offer did not constitute an offer to settle the claim or a measurable part of it, and its value could not be meaningfully separated from the eventual damages award.
The court explained that CPR 36.17 primarily deals with comparing offers and judgments “in money terms,” but in cases where liability is binary, an offer based solely on liability does not lend itself well to such comparisons. Relying on having “beaten” a liability-only offer could undermine the structured and predictable framework of Part 36. Consequently, she found that the Claimant could not rely on CPR 36.17(4) solely because liability was established at trial. While the 90/10 offer might influence the Court’s discretion on costs, it should not automatically trigger Part 36 benefits.
For some time, litigators contemplated whether liability only trial had any merit. Until the Court of Appeal considered the same issue in Smithstone.
Smithstone v Tranmoor Primary School
In Smithstone, a ten-year-old injured his fingers when they got caught in a door at the Defendant’s School. He filed a personal injury claim for negligence and breach of the Occupiers’ Liability Act 1957.
The claim proceeded under the low-value fixed costs regime. Before any medical evidence was provided, the Claimant made a Part 36 offer to settle for 90/10% liability in his favour. The school rejected this offer and denied liability. However, the parties settled for a sum of money and went to an approval hearing. The Court approved the settlement and ordered the Defendant to pay the Claimant’s fixed costs. The Claimant appealed, arguing that the liability-only offer displaced the fixed-cost regime (because Part 36 costs in the pre-1st October 2023 regime were assessed on an indemnity basis).
The Court of Appeal dismissed the appeal because liability had not been determined and therefore the Claimant could not demonstrate that the settlement was at least advantageous as the 90/10% liability Part 36 offer.
What was important, however, was the consideration of Mundy:-
34 …… But insofar as Collins-Rice J may have suggested (obiter) that a 90:10 liability offer is ineffective as a matter of principle to engage CPR 36.17, I disagree. Whether litigation is complex and of high value, or straightforward and of relatively modest value, the Courts should, and the Civil Procedure Rules do, encourage settlement of specific issues where the case as a whole cannot be settled. In a case where liability is to be tried before quantum the benefits of a liability-only offer in saving costs and court time are obvious.
But even in a fast-track case where all contested issues will be resolved by a district judge or deputy district judge in the course of a single hearing, liability-only or quantum-only offers are still to be encouraged. The policy considerations identified in Huck v Robson and Broadhurst v Tan remain to this day. The 90/10% offer was, in my view, to be treated as a genuine offer to compromise, just as the 95/5% offer was treated in Huck v Robson.
35 Accordingly, while Judge Baddeley understandably regarded Mundy v Tui as binding on him, I would overrule it on the issue of principle. That is not, however, enough to get the Claimant home, since the next issue is whether on the facts of this case the outcome was at least as advantageous to the Claimant as the proposals contained in his offer.
Broadhurst v Tan [2016] EWCA Civ 94, which was significant for pre-1st October 2023 cases because it established that the cost consequences of Part 36 should consider the actual costs incurred and be assessed on an indemnity basis. It also looked at Huck v Robson [2002] EWCA Civ 398, where a 95/5% split was found effective when 100% liability was proven, demonstrating that Part 36 was not limited solely to global monetary offers.
Concluding thoughts
Overall, liability-only Part 36 offers are valid and do not automatically exclude Part 36 consequences. In my view, Smithstone was unlikely to succeed because there must be a judgment that beats a Part 36, and court approval of a settlement is not the same as the court making a ruling after hearing all evidence at trial. Additionally, the Court retains the discretion not to award cost consequences if it believes doing so would be unjust. Litigators should keep this in mind when proposing Part 36 offers. If you cannot demonstrate that realistically how the agreement to liability would have likely led to a settlement of quantum as well, then there would be grounds for the other party to argue that it would be unjust to do so.
Information
Alec Hancock is a practising Barrister at Magdalen Chambers in Exeter. For instructions on matters, please contact Magdalen Chambers via clerks@magdalenchambers.co.uk or by telephone on 01392 285 200.
