Court of Appeal Confirms Fixed Costs Apply Where Part 36 Offer Accepted Late

The Court of Appeal has recently provided further clarification on the interaction between Part 36 offers and the fixed recoverable costs regime, confirming that a claimant who accepts a defendant’s Part 36 offer late will generally be restricted to the fixed costs applicable at the time the offer should have been accepted. 

The decision is a significant reminder of the strategic importance of Part 36 offers in civil litigation and highlights the limited circumstances in which the court will depart from the fixed costs framework.

The Background

Part 36 of the Civil Procedure Rules provides a structured mechanism for parties to make settlement offers with defined costs consequences. These offers are designed to encourage early resolution of disputes and to penalise parties who unreasonably fail to accept reasonable settlement proposals. 

Ordinarily:

• A Part 36 offer must remain open for at least 21 days, known as the relevant period.
• If the offer is accepted within that period, the claimant will usually recover their costs up to the date of acceptance.
• If the offer is accepted after the relevant period, the costs consequences are determined by the court unless the parties agree.  

The recent appeal concerned what happens where a claim falls within the fixed recoverable costs regime but a Part 36 offer is accepted late.

The Issue Before the Court

The central question was whether a claimant who accepts a defendant’s Part 36 offer after the expiry of the relevant period should be able to recover costs assessed in the ordinary way, or whether the fixed recoverable costs rules continue to apply.

The claimant argued that late acceptance justified a departure from the fixed costs regime.

The defendant contended that fixed costs should still apply because the claim fell within the procedural scheme designed to limit recoverable costs.

The Court of Appeal’s Decision

The Court of Appeal concluded that the claimant’s recovery of costs remained restricted to the fixed recoverable costs regime. 

In essence, the court emphasised that:

• The fixed costs regime is intended to provide certainty and predictability for litigants.
• Late acceptance of a Part 36 offer does not automatically justify moving outside that regime.
• Departure from fixed costs will only occur in exceptional circumstances.

This reflects earlier authority confirming that the fixed costs framework takes precedence unless the rules expressly provide otherwise or exceptional circumstances justify disapplication. 

Why the Decision Matters

The ruling reinforces several practical points for litigators:

1. Timing of Acceptance Matters

A party who delays accepting a reasonable Part 36 offer risks losing the opportunity to recover greater costs.

2. Fixed Costs Regime Remains Robust

The courts continue to emphasise the importance of the fixed recoverable costs scheme as a mechanism for controlling litigation costs.

3. Tactical Use of Part 36

Part 36 remains one of the most powerful settlement tools in civil litigation. A carefully pitched offer can significantly influence costs exposure.

Practical Lessons for Litigants

For parties engaged in litigation, the decision highlights the importance of:

• Early evaluation of settlement offers
• Prompt advice on Part 36 implications
• Strategic deployment of offers to protect costs positions

Delaying acceptance may ultimately reduce the costs recoverable even where the claim settles on favourable terms.

Conclusion

The Court of Appeal’s decision provides welcome clarity on the relationship between Part 36 and fixed recoverable costs.

For practitioners, the message is clear: the fixed costs regime will usually prevail, and parties should carefully consider the risks of delaying acceptance of settlement offers.

Part 36 continues to play a central role in shaping litigation strategy and costs outcomes.