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Deal or no Deal

01/01/2010

Making an offer to settle a dispute can have far reaching cost implications if the parties cannot reach settlement terms before trial.

Offers of settlement in civil disputes are usually made pursuant to Part 36 of the civil procedure rules. Part 36 was revised this year, providing the courts with greater flexibility on what effect the offer should have when assessing costs at trial. Under the old regime, if a Claimant rejected a Defendant’s Part 36 offer and was awarded a sum greater at trial, it would follow that the Defendant would have to pay the Claimant’s reasonable legal costs.

In the case of Carver v BAA Plc, which was determined in 2008, the court departed from the usual cost consequences of Part 36. In that case, the Claimant had rejected the Defendant’s Part 36 offer and was awarded only marginally more at trial. The Claimant was criticised by the court for not making a reasonable offer itself or entertaining negotiation and suffered a costs sanction as a result.

The recent revision to Part 36, updates the test of whether a Part 36 offer has been beaten as to whether the Claimant has obtained a judgment “more advantageous” than a Defendant’s Part 36 offer or “at least as advantageous” as the Claimant’s Part 36 offer.

Commercial Litigation solicitor Paul Hatton said “this broad phrasing allows the court to take into account factors other than the sum awarded, including costs, time and other commercial considerations. This puts the parties, especially the Claimant, at greater risk as to how a trial judge will interpret the offers and what costs award the court will make.”

“Parties need to take offers and negotiation seriously in litigation. The consequences of not doing so can be far reaching and expensive.”

Aside from the protection a well pitched offer can provide, making offers generally can often encourage negotiations between the parties and result in a settlement. If not accepted and the parties do not settle, the offers remain an important background to the litigation itself.

If you require advice or assistance in respect of the above or any other Litigation matter, please contact our Litigation team on 01204 527777.