A Part 36 offer is a special type of offer which is designed to encourage parties to try and settle their disputes. There can be severe adverse costs consequences for a party that does not accept a Part 36 offer and then later fails to secure a better result at the trial. The recent case of Hochtief (UK) Construction Ltd & Anor v Atkins Ltd illustrates the potential pitfalls of rejecting a Part 36 offer without careful consideration.

In this case, the parties were involved in a contractual dispute. During the early stages of litigation, the claimants made a Part 36 offer to settle for £875,000. The Defendant did not accept this offer.

The trial took place nearly two years after the Part 36 offer was made. At the trial, the Claimants were awarded £879,848. Despite the fact that the Claimants only marginally beat their Part 36 offer, the judge made it clear that the Part 36 consequences would still apply.

The judge awarded the Claimants the following:-

  • An enhanced rate of interest on their damages at 6% above base rate
  • Costs from the date of the expiry of the offer
  • Costs to be assessed on an indemnity basis, resulting in a higher costs recovery

This ruling resulted in the Claimants receiving an additional £65,123 on top of their awarded damages. Given that the difference between the awarded damages and the offer was only about £4,800, this was a great result for the Claimants.

In summary, any party that receives a Part 36 offer should carefully consider whether the offer should be accepted. As this case shows, there can be considerable risks associated with rejecting a Part 36 offer (or failing to respond to it). It is important to keep track of all “live” Part 36 offers and revisit them throughout the proceedings to ensure that you do not get stung later down the line.