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Settlement and ADR for SQE1

Part of our SQE1 Dispute Resolution guide → View the full SQE1 Dispute Resolution guide

10 May 2026

B. The developer may not accept the Part 36 offer after the relevant period has expired without the subcontractor's written consent....

Settlement and ADR

Dispute Resolution > Settlement and ADR

A subcontractor makes a Part 36 offer to settle a construction dispute for £200,000. The developer ignores it for four weeks (well beyond the 21-day relevant period for acceptance). After judgment is handed down awarding the subcontractor £180,000, the developer applies to accept the Part 36 offer. The subcontractor argues that acceptance is not permitted without its written consent because the relevant period has expired. The court must decide whether late acceptance can be made without the offeror's consent. This scenario tests SQE1 candidates on Part 36 offers, the relevant period for acceptance, and the costs consequences of late acceptance.

What Is Settlement and ADR in SQE1?

Settlement and ADR are not mere alternatives to litigation—they are now core components of civil procedure. The Civil Procedure Rules actively encourage parties to consider ADR before, during, and after proceedings. Part 36 offers (written offers to settle) are a procedural mechanism that carries significant costs consequences if not accepted. Alternative Dispute Resolution (ADR) encompasses mediation, arbitration, expert determination, and negotiation. Understanding settlement and ADR is essential for SQE1 because examiners test Part 36 consequences extensively and frequently test the costs sanctions for unreasonably refusing mediation or ADR.

Candidates must understand how settlement and ADR interact with pre-action conduct, costs and funding, and interim applications. The distinction between without-prejudice communications (which cannot be used as evidence of admissions) and Part 36 offers (which have automatic costs consequences) is also heavily tested.

Key Principles for SQE1

  • Part 36 Offers: Written offers to settle that carry automatic costs consequences. The relevant period for acceptance is normally 21 days. After the relevant period expires, acceptance still requires the offeror's consent unless permission is obtained from the court, except in specified circumstances.

  • Relevant Period: The period during which an offer can be accepted without the offeror's consent. This is normally 21 days from when the offer is served (CPR r.36.14).

  • Enhanced Costs Consequences: If a claimant's Part 36 offer is not beaten at trial, the defendant is liable for indemnity costs from the expiry of the relevant period, plus interest at an enhanced rate (up to 10% above base rate), and an additional amount (up to £75,000).

  • Mediation: The most common form of ADR, where a neutral third party helps parties reach settlement. The court may stay proceedings or order mediation. Unreasonably refusing mediation can result in costs sanctions even if the refusing party wins.

  • Arbitration: A private dispute resolution mechanism where parties agree to submit their dispute to an arbitrator or panel of arbitrators. Arbitration awards are generally final and binding and can be enforced through the courts.

  • Without-Prejudice Communications: Settlement discussions between parties are protected from disclosure and cannot be used as evidence of admissions, except in limited circumstances (e.g., admissions of fact; questions of law). This protection applies even if settlement is not reached.

Exam tip

Part 36 costs consequences are a goldmine for examiners. The key is whether judgment is 'at least as advantageous' as the offer. If yes, enhanced costs (indemnity basis, enhanced interest, additional amount up to £75,000) run from expiry of the relevant period. Late acceptance incurs costs against the accepting party. If judgment is less favourable than the offer, the offeror is liable for the offeree's costs from expiry of relevant period. Master this framework—it appears constantly on SQE1.

How This Appears in SQE1 Questions

SQE1 questions frequently test Part 36 consequences—particularly whether a judgment is 'at least as advantageous' as the offer and what costs follow. A common trap is forgetting that the enhanced consequences under CPR 36.17 run from the expiry of the relevant period, not from the date the offer was made. Questions also test mediation refusal and whether unreasonable rejection of ADR can justify costs sanctions. You might see questions about whether an offer made outside the 21-day relevant period can still be accepted, or whether costs are recoverable if a defendant makes a Part 36 offer and it is not accepted but the defendant receives judgment on similar terms. This is a classic SQE1 trap.

Common Mistakes Students Make

  • Forgetting that the relevant period for accepting a Part 36 offer without consent is normally 21 days—late acceptance requires the offeror's consent or court permission.
  • Confusing without-prejudice communications with Part 36 offers—they have different legal consequences.
  • Overlooking that unreasonably refusing mediation or ADR can result in costs sanctions even if the refusing party wins the case.
  • Misunderstanding "at least as advantageous"—the judgment must be assessed as a whole against the offer; it is not just about quantum.

Quick Summary

  • Part 36 offers carry automatic costs consequences if judgment differs from the offer.
  • Relevant period for acceptance is normally 21 days.
  • If claimant's offer is beaten at trial, defendant pays indemnity costs plus enhanced interest plus up to £75,000 additional amount.
  • If offer is not beaten, offeror is entitled to indemnity costs plus enhanced interest plus additional amount from expiry of relevant period.
  • Unreasonably refusing mediation or ADR can result in costs sanctions.

Want to test this now? Try a few SQE1-style questions below before moving on.

Test Yourself

Test yourself

Quick check questions based on this article.

Question 1

Scenario

A claimant brings a claim for £150,000 in damages for professional negligence against an accountancy firm. Liability is disputed. Six weeks before trial, the defendant makes a Part 36 offer to settle the claim for £90,000. The claimant's solicitor considers the offer but does not respond within the relevant period. The case proceeds to trial. The judge awards the claimant damages of £80,000. The defendant's solicitor argues that the Part 36 costs consequences should apply. The claimant's solicitor notes that the defendant's offer was expressed to be open for acceptance for 21 days. The claimant had previously rejected an informal offer of £70,000 made during a without prejudice meeting. The claimant's solicitor had at the time advised the client that the claim was worth at least £120,000. The trial lasted three days and both parties incurred substantial costs.

What are the likely costs consequences of the judgment being less than the defendant's Part 36 offer?

Question 2

Scenario

A claimant commenced proceedings against a building contractor for defective renovation work to commercial premises. The claim was valued at £180,000. Proceedings were issued in the High Court and the matter was allocated to the multi-track. The claimant's solicitor wrote a letter before action in accordance with the Pre-Action Protocol for Construction and Engineering Disputes, but the contractor denied liability throughout the pre-action phase. Twenty-one days after service of the claim form, the claimant made a Part 36 offer to settle for £150,000. The contractor's solicitor acknowledged receipt but did not respond substantively. The contractor had recently appointed a new project manager, though this appointment had no bearing on the dispute. The relevant period expired without any acceptance. At trial, the claimant was awarded £165,000 in damages.

What costs consequences are most likely to follow from the judgment?

Question 3

Scenario

A claimant brought a clinical negligence claim against an NHS Trust, claiming £350,000 for personal injuries. The claim was allocated to the multi-track. The claimant's solicitor served a Part 36 offer to settle for £280,000 ninety days before trial. The defendant Trust neither accepted nor rejected the offer. Two weeks before trial, the claimant's solicitor served an updated medical report showing that the claimant's injuries were more severe than originally assessed. The claimant's solicitor then served a notice improving the Part 36 offer to £320,000. The defendant's solicitor argued that the improved offer replaced the original offer entirely and a new relevant period began to run. The claimant had previously instructed a different firm of solicitors who withdrew from the case due to a conflict of interest.

Is the defendant's solicitor's argument about the improved offer correct?

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