Part 36 offers: what still catches people out

What counts as “genuine”

CPR 36.17(5) lets a court disregard the automatic consequences if applying them would be unjust, and the ground that keeps recurring is a token offer: pitched to secure costs protection rather than to reflect what the case was actually worth. The factors a court weighs are:

• the information available to the offeree at the time it was made;
• whether the offeror gave proper disclosure before making it;
• how the offer compares to the eventual award, not just whether it happened to beat it on paper.

An offer made before disclosure, or before a key expert report has landed, is more exposed to this challenge than one made once both sides can actually value the claim. The timing of an offer is part of its substance, not a separate question from its amount.

In a fixed costs claim there are no indemnity costs

This is the change that has not fully landed in practice. Section II of Part 36 applies where the claim falls within the fixed recoverable costs regime, which since October 2023 means most fast track and intermediate track claims up to £100,000. In those cases the familiar consequence of a claimant beating its own offer, costs on the indemnity basis, is not available at all.

What replaces it is arithmetic rather than discretion. Under CPR 36.24 the claimant receives an additional amount equivalent to 35% of the difference between the fixed costs for the stage applicable when the relevant period expired and the fixed costs for the stage applicable at judgment. That figure is calculable in advance, and it is very often a great deal less than indemnity costs would have been.

The strategic consequence runs in both directions. A claimant in a fixed costs case has materially less leverage from a well-pitched offer than it would have in a budgeted multi-track claim, because the worst outcome it can inflict on the defendant is bounded and known. A defendant can price the downside of refusing precisely, which makes a marginal offer easier to ignore. Advising a client that an offer “puts them at risk of indemnity costs” without first checking the track and the band is the error to avoid, and where the band is genuinely arguable, that argument is worth more than the offer. The routes out of a complexity band are a separate question with three separate tests.

In a budgeted case, costs budgeting doesn’t pause for it

Where the claim is costs managed rather than fixed, a Part 36 offer does not suspend the regime. Parties still have to revise budgets under CPR 3.15A where there has been a significant development, and a Part 36 offer sitting unaccepted is not, by itself, that development. What changes the analysis is what the offer does to the remaining scope of the case: if it removes an entire head of claim from contention, that can justify a budget revision even while the offer itself remains open.

Treating the offer and the budget as two separate tracks is the mistake. A costs judge assessing indemnity costs after judgment, which here is a real possibility rather than a theoretical one, will look at whether the receiving party’s spend after the relevant period was proportionate to a case that, in substance, had narrowed. The budget is also narrower protection than it looks, for reasons set out in the guide to what CPR 3.18 actually protects.

Late acceptance is not a clean exit

Accepting outside the relevant period ends the dispute but not the costs argument. The default under CPR 36.13(5) puts the costs of the period between expiry and acceptance on the accepting party, but the court can order otherwise, and this is where conduct in the intervening period gets scrutinised: whether the accepting party had what it needed to evaluate the offer earlier, and whether the other side’s conduct delayed that.

Fixed costs claims work differently again, and the discretion largely disappears. Under CPR 36.23 a claimant accepting in time takes the fixed costs for the stage applicable at acceptance; accepting a defendant’s offer late, it takes the fixed costs for the stage applicable when the relevant period expired and becomes liable for the defendant’s costs thereafter. There is far less room to argue about conduct, so the work has to go into the decision to accept rather than into justifying its timing afterwards.

In either regime, an offer that looks accepted for tactical reasons, timed to just after a costly procedural step both sides knew was coming, tends to draw exactly that scrutiny.