PART 36: SUCCESSFUL CLAIMANTS RECOVER ADDITIONAL SUMS: PART 36 CONSEQUENCES ARE THERE TO INCENTIVISE OFFERRES TO ACCEPT REASONABLE OFFERS

In Thomas Barry & Anor v Denis Barry  [2025] EWHC 819 (KB) Mr Justice Dexter Dias rejected the defendant’s argument that the claimants should not receive an additional amount in circumstances where they had beaten their own Part 36 offers.  The judgment considers the rationale for the award of the additional amount to a claimant who beats their own Part 36 offer. The additional sum is not compensatory, it is there to penalise the defendant and to provide incentives to both parties to make (and accept) reasonable offers.

“The submission made by Mr Laville is that the claimants have “got their justice” by succeeding in the claim and should not be doubly or over-rewarded through an additional amount. Such payments are not, it is submitted, “penalties”. I cannot accept this submission. It is clear to me that these additional amounts were deliberately added to the new costs regime to strongly incentivise offerees to accept adequate (reasonable) offers and if necessary to penalise.”

KEY PRACTICE POINTS

The central lesson here is that Part 36 offers have consequences. It is extremely difficult for a party who has failed to beat an offer to avoid those consequences. The additional sums paid to a claimant who makes a successful offer are not compensatory.   A defendant who wishes to avoid the normal Part 36 consequences bears the burden of showing it is “unjust” for them to apply.  This is a difficult test.

THE CASE

The claimants had succeeded in recovering sums of money they had loaned to the defendant (their son).  After attempts to mediate failed they made Part 36 offers which the defendant failed to beat at trial.  The defendant argued that, given the claimants had been successful, the award of the additional sum due under Part 36 would mean that they were “doubly rewarded”.  The judge rejected the defendant’s argument.  The Part 36 consequences were not meant to be compensatory. They were punitive and deliberately designed to encourage settlement. Further the test was whether it was “unjust” for the defendant to face the Part 36 consequences.   The burden was on the defendant and there was nothing to persuade the court that it was unjust for the normal Part 36 consequences to follow.

THE JUDGMENT ON PART 36

“III. Issue 3 – Part 36

28. The gateway question is whether the claimants have beaten their Part 36 offer. Part 36 is entitled “Offers to settle” and forms a self-contained code directed at providing structure and clarity to assist parties settle their disputes without the need for further legal proceedings, thus saving time, costs and valuable court resources.

29. Part 36 provides both the conditions for a valid offer under its head and certain consequences. The conditions are set out at CPR 36.5, which provides as relevant:

“Making offers

Form and content of a Part 36 offer

36.5
(1) A Part 36 offer must—

(a)be in writing;

(b)make clear that it is made pursuant to Part 36;

(c) specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs in accordance with rule 36.13 or 36.23 if the offer is accepted;

(d) state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue; and

(e) state whether it takes into account any counterclaim.

(2)Paragraph (1)(c) does not apply if the offer is made less than 21 days before the start of a trial.

(3) In appropriate cases, a Part 36 offer must contain such further information as is required by rule 36.18 (personal injury claims for future pecuniary loss), rule 36.19 (offer to settle a claim for provisional damages), and rule 36.20 (deduction of benefits).

(4) A Part 36 offer which offers to pay or offers to accept a sum of money will be treated as inclusive of all interest until—

(a) the date on which the period specified under rule 36.5(1)(c) expires; or

(b) if rule 36.5(2) applies, a date 21 days after the date the offer was made.

(5) A Part 36 offer to accept a sum of money may make provision for accrual of interest on such sum after the date specified in paragraph (4). If such an offer does not make any such provision, it shall be treated as inclusive of all interest up to the date of acceptance if it is later accepted.”

30. The claimants’ offers can be summarised as follows:

(1) On 17 September 2021, the claimants made a written offer under Part 36 to settle the Salmon Street loan of £350,000 by accepting a reduced sum of £305,550. The defendant was given until 14 October 2021 to accept.

(2) Also on 17 September 2021, the claimants made a written offer under Part 36 to settle the Reeves Avenue loan of £304,555.90 by accepting a reduced sum of £262,589.31. The specified period for acceptance was the same.

31. It is accepted by the defendant that they are valid Part 36 offers and that in consequence, the CPR 36.17 entitlements as a starting-point take effect subject to any disapplication or adjustment. These consequences are provided for under the rule as follows:

“36.17
Costs consequences following judgment

(1) Subject to rule 36.24, this rule applies where upon judgment being entered—

…

(b)judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer.

(2)For the purposes of paragraph (1), in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly.

…

(4)Subject to paragraph (7), where paragraph (1)(b) applies, the court must, unless it considers it unjust to do so, order that the claimant is entitled to—

(a)interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;

(b)costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;

(c)interest on those costs at a rate not exceeding 10% above base rate; and

(d)provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is—

(i) the sum awarded to the claimant by the court; or

(ii) where there is no monetary award, the sum awarded to the claimant by the court in respect of costs—

Amount awarded by the court Prescribed percentage

Up to £500,000 10% of the amount awarded

Above £500,000 10% of the first £500,000 and (subject to the limit of £75,000) 5% of any amount above that figure.

(5) In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including—

(a) the terms of any Part 36 offer;

(b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;

(c) the information available to the parties at the time when the Part 36 offer was made;

(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and

(e) whether the offer was a genuine attempt to settle the proceedings.

(6) Where the court awards interest under this rule and also awards interest on the same sum and for the same period under any other power, the total rate of interest must not exceed 10% above base rate.”

32. The parties agreed that the claimants have “beaten” their Part 36 offers. Therefore, the provisions under CPR 36.17 apply.

A.
Approach to entitlements under CPR 36.17

33.
First, and having reviewed the authorities, I set down my analysis of the proper approach to the entitlements arising under CPR 36.17:

(1) The CPR 36.17(4) cost entitlements apply if the claimant obtains a judgment at least as advantageous as the proposals in the Part 36 offer;

(2) The court must order the four CPR 36.17(4) entitlements unless it is unjust to do so;

(3) The burden shifts to the defendant to establish that it is unjust to order any of the four entitlements;

(4) Entitlement (d) “additional amount” is an “all or nothing” entitlement (JLE (by her mother and litigation friend ELH) v Warrington & Halton Hospitals NHS Trust Foundation [2019] EWHC 1582 (QB) per Stewart J at para 78);

(5) Therefore, the court must order the tiered “prescribed amount” unless the defendant establishes that it unjust;

(6) In determining whether it is unjust, the court should have regard to the fact that the additional amount is not compensatory (OOO Abbott (A company incorporated in the Russian Federation) v Design Display Ltd [2014[ EWHC 3234 (IPEC)); is a key ingredient of the Part 36 code to provide additional incentive to accept reasonable offers and avoid or end unnecessary litigation (Thai Airways International Public Co Ltd v KI Holdings Co Ltd (formerly known as Koito Industries Ltd) [2015] EWHC 1476 (Comm)); and is intended to penalise the unreasonable refusal to accept an adequate offer (Cashman v Mid Essex Hospital Services NHS Trust [2015] EWHC 1312 (QB) per Slade J at para 7 (cf. Lord Justice Jackson final report, Review of Civil Litigation Costs (2009) at para 3.9: noting that previously, “the claimant was insufficiently rewarded and the defendant insufficiently penalised when the claimant has made an adequate offer”).

(7) In assessing the sum to which the prescribed percentage applies, the court should consider the gross award it would have made but for the Part 36 provisions, including basic interest, which would otherwise constitute “the sum awarded to the claimant by the court” (CPR 36.17(4)(d)(i)), but not any additional interest ordered under Part 36 (Mohammed v The Home Office [2018] EWHC 3051 (QB) per Edward Pepperall QC (as he then was), sitting as a Deputy High Court Judge);

(8) In considering whether ordering the additional amount is unjust, the court must have regard to “all the circumstances” (CPR 36.17(5));

(9) The court should also have regard to the five matters set out at subparagraph (5): the terms of the offer; the stage of proceedings when offered; the information available to the parties; the conduct of the parties in giving or refusing of information relevant to the offer; whether the offer was genuinely intended to settle proceedings (one might add, as opposed to a mere tactical device).

B.
Additional amount

34.
I now apply these principles to the instant case. The following observations are pertinent:

(1) The Part 36 offers were made in writing validly under the Part 36 code and were explicitly stated to be.

(2) They were made (a) pre-issue (b) two years before the trial and (c) shortly after attempts by the claimants to mediate had failed.

(3) At the point of offer, there was broad informational parity between the parties. The nature of the claim was clear and simple: we loaned you the money and need it repaid. The disputed sums were readily identifiable (and no dispute about the amounts occurred at trial). The contest was the basis of the transfers (were they to the defendant or a company Bardon Limited; were they part of his inheritance) and, late in the day, whether there was ever an intention to create legal relations. There was nothing of significance that ultimately determined the issues in the case not known to either party. The mass of evidence adduced assisted the court to determine the truth of what happened and largely went to credibility – vital here – but each side of the litigation divide knew perfectly well what had happened. The court concluded that the defendant subsequently devised a series of misleading and false accounts to evade his obligations to his parents. He was at no informational disadvantage.

(4) The claimants’ offer was a significant reduction from the sums claimed (substantial “discount”, as Mr Sawtell put it). A reasonable period of 14 days was given to accept. It was on any view a genuine attempt on the part of the claimants to settle the proceedings, following on their immediately preceding offer of mediation. These were not derisorily discounted offers (cf. Jockey Club Racecourse Ltd v Willmott Dixon Construction Ltd [2016] EWHC 167 (TCC) per Coulson J: 95 per cent offer on liability was genuine attempt to settle and not derisory). The claimants offers were not tactical, nor made to gain a tactical advantage in the litigation. The claimants wished to avoid the dispute being aired in public at trial, something that became inevitable given the defendant’s stance, and something that caused the whole Barry family immense distress and continues to do so.

35. No other circumstances were put before the court by the defendant to meet its persuasive burden. The submission made by Mr Laville is that the claimants have “got their justice” by succeeding in the claim and should not be doubly or over-rewarded through an additional amount. Such payments are not, it is submitted, “penalties”. I cannot accept this submission. It is clear to me that these additional amounts were deliberately added to the new costs regime to strongly incentivise offerees to accept adequate (reasonable) offers and if necessary to penalise. Should the offeree refuse, and the offer is at least as advantageous (claimants) or more advantageous (defendants), there are consequences (entitlements) mandated by the rules. The factors identified in the rule, while not exhaustive, point clearly to how the court should approach the consideration of unjustness. One returns to the purpose and policy of the rule: it is to resolve cases without unnecessary litigation or further proceedings where an adequate offer has been made in good time and reasonably and with the right motivation, which is to genuinely settle the proceedings rather than instrumentally glean a tactical advantage. I have no hesitation in concluding that the claimants’ offers bear all these positive attributes. Mr and Mrs Barry did not want to litigate this matter against their son. They tried to mediate. They made reasonable offers to settle. Denis Barry was not interested. His case failed in virtually every particular at trial. His submission on this matter comes nowhere close to persuading me that it would be unjust not to order the mandated additional amount entitlement. Mr Sawtell submits that in fact it would be “just” to make the order. That is not the test. He does not have to establish that. The default of the scheme is clear. The rule mandates the additional amount unless displaced by the weight of circumstances that establish the award is unjust. It is not unjust. This is a paradigm case where the additional amount should be awarded.

36. I therefore conclude, consistent with the rule, that the additional amount “must” be awarded. It is capped in this case at £75,000. That is the additional amount awarded.”