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. Under PD 40B paragraph 3.5, directions for payment of money out of court and payment and assessment of costs belong in the body, not the schedule. That rule does not require an ordinary settlement payment between the parties to appear in the public body.

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 Can be accepted at any time (even after the relevant period) unless withdrawn.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 delivers machinery to a manufacturer under a simple contract, not a deed. On 3 March 2024, its defective machinery causes a fire that seriously burns an adult factory worker and damages the factory. That day the worker knows the burns are serious, that they resulted from the supplier's defective machinery and who the supplier is. He proposes a negligence claim against the supplier for his injuries. The manufacturer proposes a contract claim against the supplier for the factory damage; the contractual breach also occurred on 3 March 2024. Neither claimant is under a disability, and there is no later date of knowledge or concealed fact to consider. Which best states the applicable primary limitation periods, leaving aside any discretionary extension?

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