Personal injury Clients will often be advised by their Solicitors about making sensible offers to their opponents’ solicitors or insurers. These offers are made under Part 36 of the Civil Procedure Rules which regulates how litigation is to be conducted between parties.
So, what is a Part 36 offer?
Part 36 is very complicated but, essentially, it is all about negotiating and avoiding the need for long-running and (very) expensive litigation.
A Claimant who makes a sensible part 36 offer is putting their opponent under pressure to negotiate. Parties who ignores a part 36 offer do so at their peril.
You can make an offer at any stage in the personal injury process.
If you win at Court, and the Court values your claim at less than an offer you ignored, then the Court will punish you. You will be ordered to pay some of the opponents’ costs, which could seriously dent your compensation (or completely wipe it out)!
The Court will normally also order the losing party to pay higher legal costs to the opponent as a further sanction for not having accepted what the Court deems to have been be a sensible offer.
If you win at Court, and the Court values your claim at more than the offer you have received (and ignored) then you will receive the full amount you have been awarded by the Judge. It is as if the offer you ignored is of no consequence.
This can work both ways. An injured person could make an offer to an opponent which could (as is often the case) be ignored. If you make an offer which, following a successful Trial, you ‘beat’, then the Court will increase your compensation by as much as 10% The Court will also punish the other side by ordering they pay increased costs.
A worked example
An injured person goes to Court and the Judge decides they have won their claim. The injured person made a part 36 offer of £10,000.00 a year before their final Court hearing (known as a Trial). The Judge (who has no idea about the part 36 offer at this stage) awards the injured person £10,500.00.
At this stage, the injured person’s Barrister would tell the Judge about the part 36 offer of £10,000.00. The Judge is then obliged, under the rules, to award the injured person up to 10% on top of amount they have been awarded.
£10,500.00 + 10% = £11,550.00.
So, by making a sensibly judged part 36 offer the injured person has increased their damages by 10%, in this example, a huge £1050.00 increase.
Put yourself in the shoes of the insurance company or Solicitor who is advising the Defendant who receives a well-judged part 36 offer. Are you going to risk going to Trial, or are you more likely to try to negotiate a settlement?
Sometimes, however, events are not so straightforward. Either side may make Part 36 offers at any time, even before medical evidence has been obtained and the true value of the claim is known.
An example of difficulties faced by injured people.
A case settled by our team demonstrates the pitfalls of trying to assess the risk of a Part 36 offer when medical evidence has not been finalised.
Our client suffered a serious hip injury when she slipped in a sports hall. She had suffered psychologically as a result of her disability and the devastating effect it had on her life. Our opponent made an early offer of settlement of £10,000.00 before any medical evidence was obtained. It was very difficult to advise the client whether to accept the offer of £10,000.00 as, at that stage, we had no idea what the client’s medical experts would say in their reports. We arranged a report from an orthopaedic surgeon which was supportive. The surgeon also recommended that a report should be obtained from a psychologist.
The clock was running against our client. Usually a report from a psychologist takes somewhere between 1-3 months to complete.
When a Part 36 offer is made, the party who receives the offer has just 21 days to accept it. If you accept it after the 21 days have expired, any costs incurred by the party making the offer after that date are normally payable by the other side. There was no way that we had time to arrange a report from a psychologist within the 21 period so, after explaining the risks of not accepting the £10,000.00 offer to her, our client instructed us to continue to obtain the further medical report.
The hip injury and associated special damages were worth approximately £9,500.00 (crucially less than the £10,000.00 offered) so, if the psychological report was unsupportive, the Claimant was in real danger of having to pay the opponent’s costs from the end of the 21 day period.
The psychological report took much longer than anticipated and, when it finally arrived, was unsupportive. The psychologist’s opinion was that other factors in our client’s life were responsible for her psychological distress, rather than the effects of her accident in the sports hall.
The Claimant was now left with choice of gambling that a Judge would assess her physical injury and special losses at more than £10,000.00. (£10,000.01 would have been enough) or to cut her losses and to accept the £10,000.00 out of time (months later than the 21-day period). She, sensibly, instructed us to try to negotiate a settlement. We approached the Defendant’s Solicitors and managed to negotiate a settlement where the Claimant ended up paying £1500.00 of their costs (the costs that had been incurred since the 21-day period had expired) whilst accepting their £10,000.00. Our client therefore ended up with damages of £8500.00.
The phrase ‘a bird in the hand is worth two in the bush’ was never more appropriate. The Claimant could have settled the claim months earlier and received £10,000.00. In the end she suffered further worry and months of uncertainty before ending up with £8,500.00. In the end, this was a reasonable result. Had the Claimant elected to take her chances with the Judge at a Trial, the opponent’s costs would have been higher still, perhaps as much as the £10,000.00 offered. If that had happened, our client might have been in a situation where she had been through the stress of a trial and ended up with nothing!
The thinking behind offers under Part 36 is to encourage parties to settle claims early and before further costs are incurred. This case was a lesson in the risks associated with not accepting an offer when you have no way of knowing whether the total value of the claim was worth more than the offer made. Litigation is an uncertain and risky game and it is often better to take a safety-first approach.
At Taylor&Emmet our experienced litigators will always advise you on any aspect of personal injury claim. Please do not hesitate to contact our team on 0114 218 4000 or email email@example.com