Laurence Cobb, partner with law firm Taylor Joynson Garrett, explains how a new rule could help settle claims more successfully for claimants taken by 2004
Court proceedings seem to be less common in the land of construction and engineering disputes since the advent of adjudication. However, one school of thought proposes that if the contract allows it, the court route is preferable to the arbitration route. The purpose of this article is not to fuel a debate over method but to examine a new piece of weaponry in a claimant's armoury arising from the introduction of the Civil Procedure Rules. The Part 36 Offer can, when used with skill, make a successful settlement for a claimant almost inevitable sooner or later.

Civil Procedural Rules
The "Part 36" reference is due to the fact that the provisions governing the procedure are set out within Part 36 of the Civil Procedure Rules. The novelty compared to previous rules is that this mechanism provides a way for either party (not just the defendant) to make an offer to settle a dispute before litigation starts or, generally, throughout the litigation.

Provided it complies with the rule, that offer will be taken into account when costs are considered. While the procedure equally applies to a defendant's position, I am concentrating on the position of a claimant who is seeking to recover monies and not attempting to resist a claim against it for payment.

Basic elements
Some basic elements relating to a Part 36 Offer are as follow:

  • The offer can be made at any stage either prior to or during the proceedings
  • It must be expressly open for at least 21 days after the date it was made. If the offer is made fewer than 21 days before the commencement of trial, or if acceptance is not made by a defendant within a 21-day period and the parties do not agree liability for costs, the defendant may accept the offer only with the permission of the court
  • The offer must state the amount of the payment, whether the payment relates to the whole claim or part of it, whether it takes into account any counterclaim and whether it excludes interest
  • Defendants have seven days after receipt to ask for any point in the offer notice to be clarified
  • The offer is kept secret from the court until the end of the court proceedings. The issue of the costs of the action is to be considered by the court.

The real edge to a Part 36 Offer relates to its consequences where the claimant does better than the offer made at trial – assuming, of course, that the offer was not accepted. In those circumstances, the court may order interest on the principal sum recovered, awarded to the claimant at a rate not exceeding 10% of the base rate, together with costs on the indemnity basis from the latest date when the defendant could have accepted the offer. Court permission is not required for interest on those costs at a rate not exceeding 10% above base rate.

The availability of the Part 36 Offer to a party seeking recovery of monies is yet a further reason why it is important at the outset of any claim to endeavour to make a realistic assessment of its true value. Clearly, the earlier a party is in a position to make such an offer the sooner pressures are brought to bear on a potential defendant to take the claim seriously. The consequences of not doing so can be perhaps more serious than a potential defendant had envisaged.

Risk assessment
In construction disputes there are often multiple areas of claim, and it may not be possible to assess the value of the claim accurately until detailed forensic analysis has taken place and/or expert input has been obtained. But in my view, the possibility of making a Part 36 offer must be considered very early in the overall risk assessment necessary at the outset of any dispute resolution procedure.

It is possible to make Part 36 Offers in relation to some, but not all, of the issues in dispute. For example, if a claimant is seeking to recover monies both for variations and loss and expense, it is often easier to ascertain the true value of a variations claim at an early stage and thus make a Part 36 Offer purely in relation to the sum claimed for variations.

Each case has its own tactical nuances, whether legal, contractual, evidential or even psychological. A well-placed Part 36 Offer can, sometimes sooner and sometimes later, lead to the satisfactory resolution of a dispute.