Don't (Calder) bank on an analogy to the Part 36 regime

10 October 2014. Published by Laura Stocks, Senior Associate

When a party makes a Part 36 Offer, the consequences are clear. The rules and sanctions for failure to beat a Part 36 Offer are set out in the Civil Procedure Rules.

But what happens when a party makes a Calderbank offer, under the provisions of CPR Part 44? Do the provisions of Part 36 apply by analogy?

The general rule in litigation is that the loser pays the winner's costs. However, a well-pitched settlement offer can displace that rule. A claimant who fails to beat a Part 36 offer, by any margin at all, will be liable for a defendant's costs from the date of expiry of the relevant period (which is a minimum of 21 days from the date of the offer). Conversely, if a claimant beats a Part 36 Offer, even by one penny, it will receive all the additional benefits bestowed by the rules.

However, does the same principle apply when a claimant beats a Calderbank offer only by a small margin? The Court of Appeal has rejected that suggestion in Coward v Phaestos Ltd [2014] EWCA Civ 1256.

CPR Part 36 is highly prescriptive in its terms and severely restricts the court's ability to exercise its discretion in any particular case. Part 44 is not. The provisions of Part 44 confer upon the court a "discretion in almost the widest possible terms". Further, it does not contain an equivalent rule to CPR 36.14(1A) which affords a party who beats a Part 36 offer by any amount, however small, the benefits of the Part 36 regime. Accordingly the Court of Appeal found that there was "... no warrant in the terms of Part 44 for applying, by analogy or otherwise, a similarly rigid test …".   So what is the court required to do when determining liability for costs? CPR 44.2 requires the court to take into account all the circumstances of the case, including the conduct of the parties, whether a party has succeeded on part of his case (even if he has not been wholly successful) and any admissible offer to settle (which does not fall under Part 36). This includes assessing the reasonableness of any offer which was not accepted and whether it ought to have been in the context of the case.

Part 36 is a blunt tool and does not include within it provisions which defendants like (such as express undertakings of confidentiality or non-admissions of liability). A Calderbank offer is a good alternative to the Part 36 regime in circumstances where additional whistles and bells are required. Further, there is scope to argue for more a favourable costs award in circumstances where an offer is only narrowly beaten by a claimant. Such a luxury is not afforded by the Part 36 regime.