FLK1 · Dispute Resolution

Settlement & Part 36 offers

SQE1 revision notes — the key rules, leading cases and common traps for this topic, in plain English and current to 2026.

DR.09 — Settlement & Part 36 Offers

Why settle. Most claims settle. Settlement saves costs and risk; courts actively encourage it (CPR 1.4 — active case management includes helping parties settle). Failure to engage with ADR can be penalised in costs (Halsey v Milton Keynes (2004); the court may now also order parties into ADR — Churchill v Merthyr Tydfil (2023), reflected in the revised CPR overriding objective from 1 Oct 2024).

Recording settlement

Consent order — needed if court is to enforce terms or stay proceedings.
Tomlin order — a stay on agreed terms set out in a schedule; the schedule can include obligations beyond what the court could order, and stays confidential. Payment/costs provisions go in the public body of the order, not the schedule.

Part 36 — the costs-incentive regime (CPR Part 36)

A self-contained, technical code. To be valid a Part 36 offer must (CPR 36.5):

be in writing, state it is made under Part 36;
specify a relevant period of not less than 21 days for the costs consequences to bite;
state whether it covers the whole claim, part, or an issue, and whether it takes counterclaims into account.

Acceptance. Can be accepted at any time (even after the relevant period) unless withdrawn. On accepting within the relevant period, claimant gets costs on the standard basis to the date of acceptance (CPR 36.13).

Costs consequences if the case goes to trial (CPR 36.17)

Claimant fails to beat a defendant's offer (judgment ≤ the offer): claimant pays the defendant's costs from expiry of the relevant period, plus interest on those costs.
Claimant equals or beats its OWN offer ("at least as advantageous"): claimant gets indemnity-basis costs from expiry, enhanced interest up to 10% above base on damages and costs, AND an additional amount — 10% of damages up to £500,000, then 5% of the excess, capped at £75,000.

Common traps

"More advantageous" means better even by a penny (Carver reversed by the rule — money offers judged strictly).
A Calderbank offer is "without prejudice save as to costs" but is not Part 36 — no automatic consequences; costs are discretionary.
Part 36 offers are not disclosed to the trial judge until costs are decided.
Late acceptance still triggers the costs split at relevant-period expiry.
A Part 36 offer does not lapse at the end of the relevant period — it must be formally withdrawn.

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A supplier delivered industrial machinery to a manufacturer under a commercial sale contract. The machinery was defective and caused a fire that injured a factory worker employed by the manufacturer. The worker suffered burns and knew at once that the defective machine had caused his injuries. He wishes to bring a personal injury claim. Separately, the manufacturer wishes to sue the supplier under their contract for the financial loss it suffered when the fire damaged its factory premises. The breach and the fire both occurred on 3 March 2024. Which statement best describes the relevant primary limitation periods?

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