Uncertainty Increases Over Offers to Settle Claims

You might think that ‘more advantageous than’ means the same as ‘better’, but this change in wording has led the Court of Appeal to conclude that offers to settle claims in litigation should be interpreted in a new way.

Under the ‘old regime’, an offer to settle a claim (called a Part 36 offer in legal parlance) could be made by a defendant by the payment into court of a sum of money. If the case then went to court and the claimant ‘failed to better’ the payment, the court normally ordered the claimant to pay any costs incurred by the defendant after the latest date on which the payment could be accepted by the claimant. In 2007, the wording of the rules was changed slightly. They now state that costs will be payable if the claimant ‘fails to obtain a judgment more advantageous than a defendant’s Part 36 offer’. There may seem to be no difference, but the Court of Appeal thinks otherwise. In its view, a broader approach must be taken.

In the case in point, a woman who used BAA plc was awarded damages by the court that were £51 more than the Part 36 offer. She therefore sought payment of all of her legal costs by BAA. BA A disputed her claim, arguing that she had failed to obtain a judgment more advantageous than its offer. The judge sitting in the Central London County Court agreed with BAA, awarding it costs from the time that the period for acceptance of the offer had expired.

The woman appealed and her appeal was rejected by the Court of Appeal, Ward LJ stating that, “the judge was thus entitled to look at the case broadly and to find on the facts: (i) that the extra £51 gained was more than offset by the irrecoverable costs incurred by the claimant in continuing to contest the case for as long as she did; and (ii) that it was appropriate to make no order for costs for the prior period in light of the manner in which the litigation had been conducted.”

Says Stewart Hinds, “As a result of this decision, although the claimant ‘won’, she was left to cover part of BAA’s costs. In practical terms the effect of this judgment may well be that defendants make lower offers in settlement of claims than they would have done. Furthermore, it creates an area of uncertainty in the law – no longer can a defendant who ‘beats the offer’ be guaranteed more than a Pyrrhic victory and the question of ‘where the line lies’ is likely to take years to make clear.”

If you are making or defending a claim, we can advise you to help achieve a speedy and advantageous result.