Here at KDL Law, we pride ourselves in trying to secure a positive outcome for our clients at the earliest stage possible, at the least cost and hidden time to you. In the majority of cases, that will be the outcome. But, in some cases, that does not prove possible, despite our best efforts. Whilst the Court expects formal litigation to be a last resort, not a first, there will be cases where proceedings are necessary, to ask a Court or Tribunal to rule on the issues, and where settlement has not proved possible (whether by negotiation or mediation, or some other form of Dispute Resolution).

Where appropriate, we will be advising our clients to consider making some form of offer to settle, both before and after proceedings are commenced. Of course the other side will also be advised to consider that, given that the relevant Court Rules place an expectation on the parties to explore settlement wherever possible.

Making an offer to settle is a way of both attempting to settle the case, and also to give our clients the best possible costs protection at the conclusion of a case in most cases. Any genuine ‘Without Prejudice’ offer to settle cannot be referred to during the course of a case, so such an offer can be made without a party fearing it would undermine their position in the claim.

When considering making an offer to settle, there are a number of options in our armoury. There is no hard and fast rule. In theory, in any case, offers could be made in all or any of 4 ways. But, in practice, it is more likely to be one or two options that would be appropriate, primarily because of the costs implications that each type of offer has.

This Legal Update looks at the different ways a settlement offer can be made. It is not intended to cover the formal alternative dispute resolution (ADR) methods, but offers a broad look at the options available when considering how to frame an offer of settlement.

1. An ‘open’ offer to settle

Although rare, this type of offer is usually made where a party is clear that its position is strong, and really wants a Court to see that it tried everything available to try and settle. An open offer can be put before the Court at any stage of the litigation, therefore a party needs to think carefully before making this sort of offer as it does not have the protection of a ‘Without Prejudice’ offer. A Court will take an open offer into account when deciding what sort of order to make on costs (who pays and how much), but it is discretional.

2. A ‘without prejudice’ offer to settle

Such an offer has limited weight. A Court will not be able to consider it when addressing costs (if the offer is not accepted and the dispute proceeds to Trial), as it is protected with the ‘Without Prejudice’ veil. The benefit being that the parties can negotiate completely freely, in the knowledge that any concessions made in the offer will not come before the Judge at any stage.

3. A ‘without prejudice save as to costs’ offer to settle

This is also known as a Calderbank offer. It has more impact, potentially, when costs are being considered in principle. It is made deliberately “save as to costs”, to allow the party making the offer to have it considered by the Judge formally at the end of the matter when liability for costs is being considered, from behind the ‘Without Prejudice’ veil. It is useful, for example, where non-monetary offers are made, as a Part 36 offer may well not be appropriate. A Court will be much more likely to take such offers into account at the end of a case and view reasonable attempts to settle favourably when deciding costs (who pays and how much). However, any such costs award is at the discretion of the Court.

4. A ‘Part 36’ offer to settle

This is a form of ‘Without Prejudice Save as to Costs’ offer, but one allowed specifically by Part 36 of The Civil Procedure Rules 1998. Both sides can make one. It is used primarily for money offers to settle. Any Part 36 offer requires the Defendant party to pay the Claimant party’s reasonable costs, if the offer is accepted within 21 days (or such lesser period, if the offer is made less than 21 days before the Trial). There are specific requirements prescribed by Part 36 and failure to comply with the requirements in full will mean that the Part 36 offer’s impact will be lost.

If the Part 36 offer is accepted within the prescribed 21 days, the Claimant party will be entitled to their reasonable costs (to be assessed by the Court, if the parties cannot agree the amount), and the case will be stopped there. If an offer was made for part of the case, then if accepted, that part of the case will be over, leaving the other part of that case to continue. The damages sum agreed must be paid within 14 days. If the offer is accepted outside the prescribed 21 days, the Court will decide what order to make on costs, if the parties cannot agree (assuming the offer is not withdrawn in the meantime). Where the Trial has already started, a Part 36 offer can only be accepted with the Court’s permission.

If the offer is not accepted, then it will remain ‘Without Prejudice’ until the case concludes at Trial, and then the Court will want to see it and any other offers, before making a costs ruling. If the party rejecting the offer receives a less advantageous outcome than offered at the Trial, i.e. they have not beaten the offer, then the Court will order that, beyond the 21 day expiry of the offer, the party making the offer will receive its reasonable costs from that point up to and including the Trial, notwithstanding that the other party may have recovered something at Trial (provided that the offer has not been withdrawn in the meantime). Penalty interest at 10% and indemnity costs must also be ordered, so it is a potentially powerful weapon to protect a party, best adopted as early in the litigation as possible. These consequences apply automatically, unless the Court considers it ‘unjust’ (which should be rare).

Conclusion

There will be times where any discount to the sums involved just cannot be justified or is simply not possible. But as a general rule, offers to settle should always be considered, and made as early as possible in the litigation process, when appropriate.

Disclaimer

This legal update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole.

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