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Why are part 36 offers useful?
Time equals money, especially when it comes to legal issues. And if you can remove or reduce time from the equation, costs tend to reduce too. This is why Part 36 offers can be so powerful.
Let’s look at an example: Sue owns a lucrative hair salon. She lent John £100,000 as a downpayment 5 years ago on a property, and they drew up a contract that said John would re-pay his debt in 3 years’ time. She wants to open a second salon, but needs the money back from John to do so. John decides he doesn’t want to pay Sue back, which leaves Sue with no option but to raise a claim against John for the money owed. Sue’s solicitor files a claim on her behalf, which John disputes. As the claim is disputed, the court will then intervene with a slew of instructions and paperwork, including:
- Filling out a directions questionnaire
- Waiting for allocation to a track
- Exchange of witness accounts and statements
- If necessary, exchanging reports compiled by experts
- Filling out and returning pre-trial listing questionnaires
In total, this entire process can take up to 2 years or longer depending on where the case is heard and when a trial date at that venue becomes available. This is significant because Sue will not only be facing a deficit of £100,000 in her bank account, but she (and John) will be facing mounting legal costs from their solicitors, and if any other opportunities come up, such as the new salon, Sue may need to pass up on an investment opportunity because of the length of time large claims like this take to proceed to trial.
By putting across an attractive Part 36 offer, Sue may not get the entire sum owed to her, but she stands to reduce her legal bill, and recover a portion of the money owed to her without wasting the time it would take to go to trial. This might mean she can open the other salon and make more in the long term than had she pursued action against John. Simply put, it might just be common sense to not pursue a personal vendetta.
In short, settling early can be beneficial depending on what you want to achieve. And these cases can be expensive incurring tens of thousands in legal and court fees. If Sue’s solicitor estimated it would cost £20,000 in professional fees to recover her money, settling for £80,000 upfront would secure her the same net result in a much shorter space of time. This is why Part 36 offers can be so helpful in settling disputes.
The other reason Part 36 offers are made is because they force the other side to reveal how strong their case is. While disputes are often serious, they can be likened to a game of chance. Rarely do both sides know of or have all of the evidence possessed by the other. If you make a Part 36 offer and the other side refuses, they have either been poorly advised or they believe they have an extremely strong case that the Part 36 offer undervalues. If they’re using a solicitor, it’s unlikely the former will be true, so you can expect to have a fight on your hands.