For instance, suppose T sends L a ‘without prejudice save as to costs’ settlement offer, which is headed ‘Pt 36 offer’. In that situation it would be unwise for L to make a counter-offer under CPR 36, because if that was accepted it would automatically make L liable for T’s costs.

The problem, of course, is that CPR 36.10 makes the party accepting an offer liable to pay the costs of the proceedings on the standard basis up to the date on which the offer is accepted. That principle goes against the usual settlement terms in unopposed lease renewals, whereby each side pays its own costs once agreement is reached. That being so, it is unlikely that a CPR Pt 36 offer will be attractive to an L. The same difficulty will arise if L makes a counter-offer under Pt 36, since L will then be liable for T’s costs in the proceedings if T serves notice of acceptance within the relevant time for doing so.

What should L do? The answer is to make a traditional Calderbank offer on a ‘without prejudice save as to costs’ basis. The costs consequences of a CPR 36 offer, acceptance or counter-offer do not apply if it is a non-CPR 36 offer. Accordingly, the sensible advice, in an article from Charles Russell, is to avoid CPR 36. Instead, L should make any settlement offer ‘without prejudice save as to costs’ and remind T that the letter can be drawn to the court’s attention on the issue of costs if there is a full hearing and T fails to beat the offer at trial. That will give the court a discretion to award indemnity costs against an unreasonable T, whilst in practice the usual result will be that both sides end up bearing their own costs. The key point, however, for both sides to a lease renewal is not to fall into the trap of using Pt 36 and then finding there is an unintended costs liability. See [2008] EG 18 April 167. © Practical Lawyer