Latest Information

Think Before Rejecting an Offer of Settlement

01/05/2009

Think Before Rejecting an Offer of Settlement

Parties to Litigation Need to Think Carefully Before Rejecting an Offer of Settlement

Making an offer to settle a dispute can have far reaching cost implications. On one hand, the negotiations can result in the parties reaching a settlement. If not accepted and the parties do not settle, the offers remain an important background to the Litigation Itself.

Offers of settlement are usually made pursuant to Part 36 of the civil procedure rules . If a Defendant makes an offer of settlement pursuant to Part 36, the Claimant doesn’t accept it and fails to beat it at trial, the court can make an adverse costs order against the Claimant. The order should follow that because the Claimant failed to accept the offer and was awarded less at trial, that it should pay its own legal costs and the Defendant’s legal costs in each case from the last date. If the Claimant is successful and is awarded more than the offer made at trial, it should be awarded its costs as well.

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. However, the Claimant was criticised by the court for not making a reasonable offer itself or entertaining negotiation.

The approach in Carver has been reaffirmed in more recent case law. The case of Multiplex Constructions (UK) Limited v Cleveland Bridge UK Limited and another which, involved a dispute regarding construction work on the new Wembley Stadium. The litigation was a dispute over a final account rendered for works carried out. Cleveland successfully defended the main proceedings but was criticised by the court for failing to make an offer in respect of all the claims against it. As such, the court ordered that Cleveland pay a proportion of Multiplex’s costs, despite the fact that Cleveland had successfully defended the main proceedings.

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