Offers to settle: Part 36 and Calderbank Offers
The recent case of DB UK Bank Ltd (t/a DB Mortgages) v Jacobs Solicitors  EWHC 1614 (Ch) highlights the importance in litigation of understanding the different rules relating to common law settlement offers and Part 36 offers made under the Civil Procedure Rules.
A ‘Calderbank’ offer is a settlement offer made on a ‘without prejudice save as to costs’ basis. This means that, if the other side rejects the offer, it will not be made known to the judge during proceedings but can be revealed after the trial and taken into account by the judge when it comes to the matter of determining costs.
A ‘Part 36’ offer is also an offer to settle. It can be made at any stage in legal proceedings and must be made in a particular way in accordance with Part 36 of the Civil Procedure Rules. If complied with, the offer will again be ‘without prejudice save as to costs’. For more information about Part 36 offers read our previous blog on the subject.
It is an established principle in law that when an offer has been made, a counter-offer has the implied effect of rejecting the original offer. This means that the original offer can no longer be accepted.
In contrast, when a Part 36 offer is made, it remains open until withdrawn regardless whether it has been rejected or a counter-offer made.
In the above case, one party made a Calderbank offer. The other party responded with a Part 36 offer, believing that the original offer would remain open for acceptance at a later date because Part 36 is a separate code that sits outside usual contractual principles.
In fact, the judge held that the Part 36 offer was a counter-offer which was an implied rejection of the original offer, under normal contractual principles. The original offer could not, therefore, be accepted later.
Contrast this with the situation if the first offer had been a Part 36 offer. A subsequent offer, whether under Part 36 or not, would have no effect. The Part 36 offer would stay on the table until withdrawn in writing.
The decision is being appealed but, in the meantime, it is a useful reminder of the different settlement strategies open to parties during litigation and the importance of distinguishing which one is being used.