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Taking advantage of Part 36 to get Indemnity Costs

When you ask yourself whether it is in your client’s best interests to make a Part 36 offer bear in mind what happens if you beat it. The Claimant lawyer in the case of Jockey Club Racecourse v Willmott Dixon Construction [2016] EWHC 167 (TCC) clearly did.

Although this case related to a property dispute it can be applied to any area of Law where you can make a Part 36 offer. The background facts are not overly important however if you want a full picture you can read the case report at http://www.bailii.org/ew/cases/EWHC/TCC/2016/167.html. What is important is that the Claimant made a Part 36 offer on liability of 95% in a case where the Defendant was fully at fault or not at all.

So why make the offer? The offer did not reflect a possible outcome therefore it was purely commercial and/or it was made in order to achieve an early resolution to the claim.

Ultimately the Claimant was fully successful on liability (by consent). In the circumstances the Claimant contended that it was entitled to the benefits that Part 36 confers on a Claimant who has bettered its own Part 36 offer, namely indemnity costs.

The Defendant’s argument was that it was not a valid offer because (mainly) the discount offered was only 5% and that this was an all or nothing case and that therefore the Court could not have made an order for 95% liability. The Court disagreed and awarded indemnity costs on the basis that the offer was a genuine attempt to settle (the 5% discount in monetary terms was not insignificant) which made it a valid Part 36 offer.

Choosing to make a creative/commercial offer (ideally as early as possible) that may well be outside what a Court could order does not mean the Court cannot take it into account. In fact if the Court does take it into account the successful party will receive the rare reward of indemnity costs as well as (potentially) enhanced interest.