Request for "total capitulation" not a valid Part 36 offer to settle

A recent High Court decision has held that in order for a claimant's Part 36 offer to be valid, it must contain some genuine element of concession that is of significant value in the context of the litigation: AB v CD and others [2011] EWHC 602 (Ch).

The Part 36 regime is designed to encourage parties to make and accept reasonable offers to settle, by providing favourable costs consequences to a party whose offer is refused by its opponent but who then goes on to obtain a judgment at least as advantageous as the offer it had made. Although the concept of "offer to settle" is not defined in the Civil Procedure Rules, the judge said it is clear that a request that the defendant submit to judgment for the entirety of the relief sought by the claimant cannot be an offer to settle for these purposes. Otherwise any claimant could obtain the favourable costs consequences of Part 36 simply by making an "offer" demanding total capitulation by the defendant.

In this case the claimant's offer, which was made before a split trial on liability in a trademark infringement dispute, had required the defendants to undertake not to infringe certain trademarks and to pay "damages or an account of profits" to be assessed by the court if not agreed. The judge held that this was not a valid Part 36 offer, as it had not made any real concession of significant value. The requirement that the defendant pay damages or an account of profits had merely replicated the standard order that would be made if liability was established. Although the undertaking required in the offer was limited to one of three relevant trademarks and so, on its face, was more limited in scope than the injunction sought in the action, in fact the difference was illusory since in practice the defendants could not use the other trademarks without infringing the first.