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The Intellectual Property Enterprise Court (IPEC) is a specialist list of the Intellectual Property List (Chancery Division) which is meant for small and medium-sized enterprises (SMEs). The idea is to provide quick affordable access to justice for SMEs. The Intellectual Property List includes three sub-lists: Intellectual Property, Patents Court and the IPEC, and is part of the Business and Property Courts of the High Court. A Part 36 offer is the same whether used in intellectual property or any other type of commercial litigation except that there are different costs rules in IPEC. HM Courts & Tribunals Service provide a detailed guide for businesses, and legal practitioners online on how to take a case to IPEC.
2. What is a Part 36 offer?
2.1 A Part 36 offer of Settlement is a procedure by which a claimant or a defendant can effectively put pressure on a defendant or a claimant to settle a law suit under English law. A Part 36 offer has no effect on the result of the law suit at trial except that it can change the responsibility of who is to pay the other part’s costs or the basis on which the amount of costs to be awarded are decided.
2.1.1 It is called Part 36 because that is the number where you can find the rules for this type of settlement offer in the White Book Civil Procedure Rules, the bible for UK litigation practitioners. The White Book is updated every year. You can also find the Civil Procedure Rules online.
2.1.2 Part 36 offers can be used before or after the law suit commences. After the law suit commences a Part 36 offer can be made anytime up to 21 days before the trial starts, after that it needs the court’s permission before the offer can be accepted (see (CPR 36.11(3)(d) and CPR 36.3(d)).
2.1.3 A Part 36 offer is confidential and cannot be shown to the trial judge until all the substantive issues in the case have been decided. This can be tricky if there is a dispute as to validity of a Part 36 Offer for example where there is an argument as to whether the Part 36 Offer is still open for acceptance (in such situations the hearing as to the validity or lack thereof of a Part 36 Offer should not be heard by the trial judge).
3. Who can make a Part 36 Offer?
As stated above a Part 36 offer can be made by either claimant or defendant in respect of the whole or part of, or any issue that arises in a claim, counterclaim or other additional claim, or an appeal or cross-appeal from a trial. A Part 36 offer can also be made by a Part 20 defendant where a defendant makes a counterclaim. This includes an appellant or a respondent in appeal proceedings on an appeal from a trial (see CPR 36.2(3)). You may also make a Part 36 offer in detailed assessment proceedings (CPR 47.20).
4. Timing of Part 36 Offers
4.1 Whether claimant or defendant, a Part 36 offer must specify a period of not less than 21 days within which the other party can accept the offer and that the other party will be liable for costs (CPR 36.13). This 21-day period is known as the ‘Relevant Period’.
4.2 The Relevant Period has consequences both as to how and when you can vary or withdraw your Part 36 offer and in terms of potential costs consequences.
Acceptance of the Offer Within the Relevant Period
4.3 The Relevant Period does not mean that the offer is only open for acceptance for a period of 21 days. It is about what costs consequences will apply if the offer is accepted within that Relevant Period (CPR 36.13). Therefore, where a Part 36 offer (whether c or d offer) is made not less than 21 days before the start of the trial, relates to the whole of the claim and is accepted within the relevant period), the defendant is required to pay the claimant’s costs on the standard basis (recovery of approximately 60-75%) up to the date of notice of acceptance (CPR 36.13(1)).
Acceptance of the Offer After the Relevant Period
4.4 If the offer is not accepted within the Relevant Period, and the Part 36 Offer is made within the 21 days before the trial starts, the offer will remain open for the defendant to accept at any time before trial without needing the court’s permission, unless the offer is formally withdrawn. If the Part 36 offer is made less than 21 days before the start of trial, it must remain open until the end of the trial or such other period as the court determines. The ‘Relevant Period’ will not expire until then. If the trial has already started court’s permission is needed to accept it.
5. Having an Automatic Withdrawal Clause in the Part 36 Offer
5.1 You may wish to put additional pressure by having an automatic withdrawal clause in the Part 36 offer. You could say for example: The Offer will remain open for acceptance until such date when it will be automatically withdrawn without further notice. If you did this, you need to ensure that the expiry clause does not compromise the requirement for a minimum 21-day Relevant Period.
5.1.1 If you have an automatic withdrawal clause that conflicts with the Relevant Period the expiry clause will control, and the Part 36 Offer will not be capable of acceptance after the expiry date (CPR 36.9(4)(b). Part 36 Offers do not require a separate letter of withdrawal if they have an automatic withdrawal clause (see C v D  EWCA Civ 646). Be particularly aware of this where you receive a clarification request and the Relevant Period is extended until clarification is received. You need to respond to a clarification request within 7 days of the request. If you do not extend the automatic withdrawal clause with the extension of the Relevant Period, then technically your Part 36 Offer will not be open for acceptance if it is automatically withdrawn before the end of the extended Relevant Period.
5.1.2 Note also that a Part 36 offer is not withdrawn unless there is either a clause of automatic withdrawal in the Part 36 Offer or it is withdrawn by separate letter. A Part 36 Offer does not expire by counter offer. You can continually review a Part 36 Offer, expressly withdrawing or varying as the case develops
6. Reasons for making a Part 36 offer
6.1 As stated above a Part 36 offer puts pressure on the party receiving the offer to settle because of the costs consequences of not doing so. Using a Part 36 offer is a good way of putting pressure on the opponent to settle the proceedings.
6.1.1 If not accepted by the party receiving the offer, the impact of the Part 36 offer will be felt after trial if the party making the offer is successful at trial with judgment which is ‘at least as advantageous’ as the Part 36 offer, i.e. which is the same or beats the offer. In these circumstances there will be adverse costs consequences for the losing party including facing the assessment of costs on an indemnity (approx. 70–85%) as opposed to standard basis. The risk of an adverse costs puts pressure on the opponent receiving the offer to settle the case before trial.
7. Intellectual Property Enterprise Court Capped Costs
7.1 In multi-track claims in the IPEC you can recover no more than £50,000.00 on costs if you win, except if you can show abuse of process, or unreasonable conduct. If you lose you are liable for up to £50,000.00 of your opponent’s costs.
7.2 On quantum, the cap is £25,000. In both trial of liability and quantum, the cap is broken down by stages of the litigation, the recoverable costs for which are also capped.
7.3 The capped totals do not include VAT and any interest and are applied after any set off (CPR 44.12).
7.4 You may also recover court fees, costs relating to enforcement of any court order, and any wasted costs on top of the capped costs.
By Peter Adediran
17 09 2018
This article details the important elements of Part 36 offers but is by no means exhaustive. If you are seeking advice on settling an intellectual property dispute and have read this article, you must take the opportunity to go and seek professional legal advice from a solicitor or barrister. The information and any commentary on the law contained on this web site is provided free of charge for information purposes only. Every reasonable effort is made to make the information and commentary accurate and up to date, but no responsibility for its accuracy and correctness, or for any consequences of relying on it, is assumed by PAIL Solicitors. The information and commentary does not, and is not intended to, amount to legal advice to any person on a specific case or matter. You are strongly advised to obtain specific, personal advice from a lawyer about your case or matter and not to rely on the information or comments on this site. No responsibility is accepted for the content or accuracy of linked sites.
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