Navigating Part 36: an offer must reflect a genuine attempt to settle
22 March 2024
This article explores the decision in Yieldpoint Stable Value Fund, LP v Kimura Commodity Trade Finance Fund Ltd [2023], where the High Court underscored the requirements in respect of a Claimant’s Part 36 offer. The court held that, as per CPR 36.17(4), a claimant’s offer must constitute a genuine attempt to settle. Failing this, it would be unjust to award Part 36 enhancements when an offer is later accepted. This decision serves as a stark reminder that a Part 36 offer must genuinely reflect an earnest attempt to settle, or claimants risk forfeiting the opportunity for relevant enhancements.
The law
Part 36 of the Civil Procedure Rules governs offers to settle outside of Court proceedings, with Part 36.17 specifically addressing the cost consequences of unaccepted offers. According to CPR Part 36.17(4), claimants are entitled to enhancements such as indemnity costs, enhanced interest on both damages and costs, and an additional amount, up to £75,000 calculated as a percentage of damages awarded by the Court.
The Court exercises discretion in determining whether it is just to award these enhancements on an individual case basis. To guide this process, the Court looks to CPR 36.17(5), particularly focusing on subsection (e), which was added from 1 April 2015. Notably, Part 36.17(5)(e) stipulates that the court must consider ‘whether the offer was a genuine attempt to settle the proceedings.’
Drawing from previous case law, such as Jockey Club Racecourse Limited v Willmot Dixon Construction Limited [2016], the court reiterated that when a claimant obtains a judgment more advantageous than its Part 36 offer, cost consequences outlined by Part 36.17(4) must follow. These enhancements are awarded either through interest calculated from the date the Part 36 offer period expired on a rate not exceeding 10% above base rate, or costs on the indemnity basis. According to Part 36.5, the defendant has 21 days to consider the offer before the period expires.
The Yieldpoint v. Kimura judgment underscores the critical importance of authenticity in Part 36 offers. The court’s emphasis on whether the offer represents a genuine attempt to settle reinforces the need for sincerity in the negotiation process. Claimants are urged to carefully consider the substance and context of their offers, especially in cases of high adversarial intensity.
The Birketts view
In navigating the complex landscape of Part 36 offers, lawyers must remain mindful of the judgment in Yieldpoint v. Kimura. A theme that arose from this case was that a claimant’s offer, particularly when very high, could only be justified if at the time of the offer the claim appeared strong. A disparity between the sum of the offer and the offeror’s perception of their case’s strength may indicate that the offer was not a genuine attempt to settle.
This case serves as a reminder to claimants that offers must reflect a genuine attempt to settle which is proportionate to the perceived strength of the case. Failing which, Claimants risk forfeiting the valuable enhancements associated with the Part 36 regime. This is a particularly important consideration in disrepair claims where presenting a strong initial offer subject to Part 36 provisions can be a strategic move to limit costs exposure for our clients. It is therefore important to be mindful of the sincerity of such offers.
How can Birketts help?
Birketts has a specialist Housing Management Team to assist our clients to stay ahead. Our expert lawyers can advise on all aspects of housing and asset management from complex ASB claims, Equality Act defences, building safety issues, defending disrepair claims/EPA prosecutions, subletting/housing fraud cases, service charge disputes, s.20 consultation issues, applications to vary defective leases, to name but a few of the issues we can assist with. Our experts have decades of experience acting for Registered Providers and local authorities and offer a truly ‘one stop shop’ for the issues facing the sector.
If you have any queries regarding the content of this article or wish to discuss any issue regarding the management of your tenants or stock, please contact Clive Adams, Jonathan Hulley or any member of the Social Housing Team, to see how Birketts can help you.
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The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at March 2024.