Part 36 – the Civil Procedure Rule (“CPR”) that keeps on giving!

Posted 16 March 2026

Written by Colin Campbell.

The implementation of Civil Procedure Rule 36 in 1998 provided the replacement for the earlier “Payments into Court” system under the Rules of the Supreme Court (“RSC”) whereby defendants who wished to settle their case, were obliged to put their money where their mouth was : the amount that the defendant in question was willing to pay in settlement of a claim would be deposited at the court funds office. If the claimant failed to beat it at trial, that is to say, to obtain judgment for a greater sum, the order for costs would be varied so that the defendants would receive their costs from the date that the offer should have been accepted.

The result was to tie up millions of pounds in court, most notably public funds, where the National Health Service was involved. In addition, only defendants could make offers to settle by bringing money into court. There was nothing under the RSC which permitted claimants (then called plaintiffs) to do so.

Following recommendations made in the Woolf Report in 1996, the implementation of the CPR on 26 April 1999 swept away the entire system of payments into court. Instead, not only defendants, but also claimants were now permitted under CPR 36 to make offers to settle without having to put up any cash in advance.

 The creation of Part 36 offers, as offers to settle are now customarily known, was inspired and probably the most far reaching of the Woolf recommendations. However, as so often is the case with a new set of rules, Part 36 has given rise to a multitude of judgments about such matters as to whether an offer has complied with the rule, whether it is genuine and whether it is just (or unjust) for the costs consequences of beating an offer to apply.

The Costs Law Reports have published over 2000 costs cases since the Woolf Report in 1996. Of these, by far its best customer has been Part 36, with almost 250 judgments having been reported since 1999 . The reason? As Sir Rupert Jackson put it following the implementation of his own Report into the costs of civil litigation in 2009:-

 “Lawyers leave no stone unturned when it comes to arguing about costs“

A recent case is testament to how right Sir Rupert was. The rule provides as follows :-

“Form and content of a Part 36 offer

Where a defendant fails to beat a Part 36 offer because judgment is given against the defendant which is at least as advantageous to the claimant as the proposals contained in the claimant’s offer, penal costs consequences follow.

CPR 36.17 (4) provides that:-

“……the court must, unless it considers it unjust to do so, order that the claimant is entitled to—

(a)interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;

(b)costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;

(c)interest on those costs at a rate not exceeding 10% above base rate; and

(d)provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000”

In Gagliardi v Evolution Capital Management LLC [2025] EWHC 3488 (Comm) Mr Gagliardi, through his solicitors, made a part 36 offer to settle the claim and counterclaim on 12 September 2025 in the sum of $3 million. The defendant did not accept it. The judgment was for $5.38 million which the defendant accepted was at least as advantageous to Mr Gagliardi as the proposals in his Part 36 offer.  It followed that the CPR 36.17(4) benefits were all payable.

Or were they? The defendant argued that less than 21 days had elapsed between the date that the offer was made and the start of the trial, so that the costs consequences under CPR 36.17(4) were defeated by CPR 36.5((2). That was because upon the listing of the trial, there had been a judicial reading day on Thursday 2 October 2025, with the trial to commence on Monday 6 October 2025 (as indeed it did). Subsequently a further reading day, 1 October 2025, had been added on 12 September 2025.

That raised what the Judge, Mr Justice Calver, described as “a short but nice point”, namely whether, for the purposes of CPR Part 36, the phrase “less than 21 days before trial” included judicial reading days or whether it referred to the first day of the trial where the parties were in actual attendance. It was the defendant’s case, relying on paragraph J.3.2 of the Commercial Court Guide, that the first day of trial was the first judicial reading day, in which case the offer had been made 18 days before trial and not the 21 days required for the penal costs consequences of CPR 36.17(4) to apply. On that point, it was said, approximately $200,000 turned.

Calver J rejected the defendant’s argument. He put to the parties a theoretical proposition. What if the judicial reading time was fitted into the sitting days of the trial? Suppose that the trial started on 6 September and the judge chose to read on 7 September: on the defendant’s case the trial would start on 6 September. But if the judge took his reading day a day before the trial started, on 5 September, then the trial could no longer be said to start on 6 September, but on 5 September for the purposes of Part 36. Such an outcome was illogical and would lead  to uncertainty.

On the facts of the case before him, the start of the trial, 6 October, had been known to the parties and fixed. That provided certainty. Judicial reading days, on the other hand, could change. If asked “when did the trial begin”, a reasonable onlooker would no doubt say “6 October”, being the first day when all the parties turned up at court with their legal teams ready to begin the trial. It followed that that was how the rule should objectively be construed, so the defendant’s “short but nice point” failed.

What are the takeaways from Calver J’s decision? The first point to make is that Part 36 offers can be made at any time (see Part 36.7(1)) including before proceedings have started. It follows that a claimant (or indeed a defendant) who delays making an offer until the last minute as Mr Gagliardi had done, may find that the costs consequences are forfeited: where that is a claimant’s offer, the CPR 36.17(4) benefits will be lost, including the additional sum up to £75,000.

That leads to the second point. Loss of an indemnity basis costs order. Where costs are awarded on that basis, the burden of proof is reversed : it is for the paying party to show that the costs were unreasonably incurred and the costs do not have to be proportionate (see CPR 44.3(3). In addition, where the costs have been budgeted, the last approved or agreed costs budget becomes irrelevant, so if the receiving party has exceeded it, the indemnity basis costs order is a good reason to depart from it (see  Malhotra Leisure Ltd v Aviva Insurance Ltd [2025] EWHC 2901 (Comm).

That leads to the third point: the additional sum up to £75,000. To whom does it belong? The answer is to the claimant and not to the solicitor (see Cobbett v Wood [1908]1 KB 590). It follows that unless the firm’s terms and conditions provide to the contrary, it is the client who receives the bonus, which might be a very welcome outcome for the injured party in a clinical negligence or catastrophic personal injury case.