CPR Part 36 Costs Consequences: Paying Party Strategy and Indemnity Risk

Updated March 2026

What Is CPR Part 36?

CPR Part 36 remains one of the most powerful costs mechanisms in civil litigation. While often viewed as a settlement tool, its true impact lies in the costs consequences that flow from acceptance, rejection or late acceptance of an offer.

For paying parties, Part 36 can dramatically alter exposure, particularly where indemnity costs and enhanced interest become engaged.

Indemnity Costs Risk After Expiry

Where a claimant equals or beats their own Part 36 offer, the court will usually award indemnity costs from the expiry of the relevant period, removing proportionality protection and significantly increasing recoverable costs. A detailed understanding of when indemnity costs arise is therefore essential to effective Part 36 strategy.

On indemnity basis:

• Proportionality does not apply

• Doubts are resolved in favour of the receiving party

• Hourly rate and time challenges become harder

This creates a substantial risk for defendants who fail to evaluate offers early and realistically.

Late Acceptance and Costs Exposure

Late acceptance of a claimant Part 36 offer usually results in:

• Standard basis costs up to expiry

• Indemnity costs thereafter

• Interest uplifts

However, the court retains discretion. Robust paying party arguments can still limit exposure where:

• The offer was unrealistic when made

• Key evidence emerged later

• Conduct issues justify a different order

Paying Party Strategy

For defendants and compensators, Part 36 is not simply a settlement tool but a core element of paying party costs strategy, allowing early cost control, pressure on inflated schedules and protection against detailed assessment risk.

Key tactical steps include:

• Early valuation of claimant costs

• Realistic counter-offers

• Using budgeting assumptions to challenge recoverability

• Timing offers to maximise costs protection

When deployed correctly, Part 36 can reduce both damages outlay and costs liability.

Interaction With Proportionality

Even where indemnity costs are avoided, Part 36 interacts directly with proportionality in costs, particularly where claimant schedules are driven by:

• Heavy counsel involvement

• Excessive documents time

• Grade A fee earners performing routine work

absence of detailed breakdowns can justify substantial reductions on assessment.

Practical Outcomes for Paying Parties

In practice, effective Part 36 strategy can:

• Cap costs exposure

• Shift risk to the claimant

• Strengthen negotiation leverage

• Avoid detailed assessment altogether

This is particularly important in multi-track personal injury and public liability claims where costs frequently approach or exceed damages.

How SPH Costs Can Assist

We advise defendants, insurers and local authorities on:

• Part 36 strategy and timing

• Costs risk analysis

• Negotiation of schedules and bills

• Detailed assessment defence

This analysis forms part of our wider work on paying party matters.