Tactical CPR Part 36 Offers: Litigation Rewards

Part 36 remains one of the most powerful tactical tools in the Civil Procedure Rules, with a reward regime that can radically alter the financial outcome of litigation when deployed correctly. A well‑judged, compliant offer can unlock enhanced interest, indemnity costs and damages uplift that far outweigh the nominal difference between offer and judgment, particularly in high‑value commercial claims.

Our specialist litigation solicitors and barristers are experts in using CPR Part 36 to secure optimal settlements or to minimise adverse costs risks where a Part 36 offer has been made against you. Recent High Court decisions show that small errors in drafting, timing or compliance can be very expensive, even where a party has otherwise succeeded on liability.

The Continuing Power of CPR Part 36

Part 36 is a self‑contained code within the CPR designed to encourage early settlement by prescribing clear and often draconian costs consequences where a realistic offer is not accepted. If a party fails to accept a realistic Part 36 offer made by the other side, it is at real risk of being penalised in costs and interest at the end of the case.

Part 36 offers are generally made on a “without prejudice save as to costs” basis, so the trial judge is not told about them until after judgment on liability and quantum. For claimants, a properly constructed Part 36 offer that is later beaten at trial can transform the risk profile of litigation by shifting costs, adding enhanced interest and securing an additional percentage of the award. For defendants, a strategic offer can cap exposure, protect against adverse costs and exert significant pressure on the claimant to reassess its position at an early stage.

When can a Part 36 Offer be made?

A Part 36 Offer can be made at any time, including before court proceedings are issued, which allows parties to explore settlement options at a very early stage. Part 36 does not apply to claims allocated to the small claims track (generally claims under £10,000), but in multi‑track or fast‑track litigation it is often the key settlement lever.

To be valid, a Part 36 offer must strictly comply with CPR 36.5:

• It must be in writing and explicitly state that it is made pursuant to CPR Part 36.
• It must specify a “relevant period” of at least 21 days during which the offeree can accept and become liable for the offeror’s costs.
• It must state whether it relates to the whole claim or part of it and whether it takes into account any counterclaim.

Failure to adhere to these requirements means the judge is not bound to apply the automatic Part 36 costs consequences, even if the monetary outcome appears favourable to the offeror.

Genuine Attempt to Settle: High Offers Can Still Work

Courts will not apply the Part 36 rewards regime if an offer is merely a tactical trap rather than a genuine effort to settle. However, recent decisions confirm that a very high claimant offer can still be a genuine attempt to settle where the claimant’s prospects are overwhelming and quantum is effectively fixed.

• In Omya UK Ltd v Andrews Excavations Ltd, a claimant Part 36 offer that discounted only about 1.15% of the principal sum was held to be a genuine attempt to settle, given the early timing, limited quantum dispute and the defendant’s unreasonable conduct.
• In Rawbank S.A v Travelex Banknotes Ltd EWHC 1619 (Ch), a bank’s Part 36 offer to accept only 0.3% less than the full sum claimed (around £158,000 on a £48m claim) was also found to be a genuine offer to settle under CPR 36.17(5)(e), because there was effectively no defence and only a binary outcome: full success or complete failure.

These authorities show that the magnitude of the discount is relevant but not decisive: the court looks at the overall context, including timing, prospects, quantum issues and party conduct.

What happens if a Part 36 Offer is Accepted?

If a defendant accepts a claimant’s Part 36 offer within the relevant period, it must pay the settlement sum (typically within 14 days) and the claimant’s costs up to the date of acceptance, usually on the standard basis. The court will resolve any doubt as to whether such costs are reasonable and proportionate, and the proceedings are then concluded on those terms.

If the defendant accepts after the relevant period has expired and costs cannot be agreed, the court will make a costs order, which usually still requires the defendant to pay the claimant’s costs to the date of acceptance, subject to any argument as to late acceptance.

What happens if a Part 36 Offer is Rejected?

If a Part 36 offer is rejected and the case proceeds to trial, the offer is only revealed to the judge after judgment, at the costs stage. The costs consequences then depend on whether the judgment is more or less advantageous than the earlier Part 36 offer, as assessed under CPR 36.17.

Where a claimant equals or beats its own compliant Part 36 offer, the court must, unless it considers it unjust, order that the defendant pay:

• Interest on damages at up to 10% above base rate from the end of the relevant period.
• Costs on the indemnity basis from the end of the relevant period.
• Interest on those costs at up to 10% above base rate.
• An additional “Jackson uplift” calculated as 10% of the first £500,000 of damages and 5% of any amount above that, capped at £75,000.

In Rawbank v Travelex, the court held that the Part 36 offer was genuine and ordered indemnity costs from expiry of the relevant period, but moderated interest given the defendant’s serious financial difficulties, illustrating the court’s discretion to grant only part of the usual package where full application would be unjust.

Enhanced Interest and the Jackson Uplift

Where a claimant obtains a judgment at least as advantageous as its Part 36 offer, the court may award interest on both damages and costs at a rate of up to 10% above base rate from the end of the relevant period. The upper end of that scale is more likely where the defendant’s refusal to accept the offer is found to be unreasonable in light of the risks, the clarity of the offer and the stage of proceedings at which it was made.

The Jackson “additional amount” is a separate, formula‑based uplift intended to incentivise sensible early offers and compensate successful claimants for the time, cost and risk of going to trial. In substantial commercial and financial services litigation, careful numerical analysis is essential to ensure the uplift is correctly calculated, the statutory cap respected and any interest arguments properly advanced.

Indemnity Costs and Budgeting Advantages

One of the most significant tactical rewards of Part 36 is the potential entitlement to costs on the indemnity basis from expiry of the relevant period where a claimant beats its own compliant offer. Indemnity basis orders reverse the usual presumption of proportionality and often result in a materially higher recovery than would be achieved on the standard basis.

In the context of costs budgeting, indemnity costs can allow recovery beyond agreed or approved budgets and blunt the effectiveness of proportionality challenges from paying parties. This can influence case strategy, including decisions about expert evidence, disclosure, interim applications and trial preparation where a party regards its Part 36 position as strong.

Ensuring your Part 36 offer Counts

To secure the full litigation rewards, parties must ensure that their offers are both procedurally valid and commercially realistic. Practical points include:

• Form and Content: Ensure the offer is in writing, expressly states it is made under CPR Part 36, specifies a relevant period of at least 21 days, clearly defines its scope and confirms whether it includes any counterclaim.
• Clarity of Terms: Address all heads of claim and any interest components in a way that enables the court to conduct a clean like‑for‑like comparison when judgment is entered.
• Ongoing Review: Revisit offers in light of new evidence, procedural developments and updated risk assessments so that they remain realistic and defensible when the court considers whether it is just to apply Part 36 consequences.

Strategic timing, careful drafting and rigorous numerical analysis are therefore essential if a Part 36 offer is to deliver the substantial litigation rewards that the regime is designed to provide. For sophisticated litigants, deploying Part 36 as part of a wider settlement and reputational strategy can significantly enhance outcomes in complex, high‑stakes disputes.

Need Advice on a CPR Part 36 Offer?

If you are involved in litigation and need advice on making, accepting or challenging a Part 36 offer, our partner‑led litigation team can help. We advise claimants and defendants nationwide on settlement strategy, costs risk and the tactical use of Part 36 in commercial, banking and financial services disputes.​

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