Losing Defendant Ordered To Pay Further £65,000 due to Rejection of Settlement Offer
Your business is embroiled in litigation proceedings as a result of a commercial dispute. The other party makes an offer to settle. Do you consider it seriously or reject it, determined to get your day in court?
Think carefully – rejecting offers to settle is a gamble that is increasingly risky following the recent High Court decision of Hochtief v Atkins, in which the losing Defendant (Atkins) was ordered to pay an additional £65,000 on top of the damages and costs already ordered, because it had declined the Claimant’s (Hochtief’s) “Part 36” offer to settle at an earlier stage in the proceedings. The decision has turned heads as the Defendant was ordered to pay this hefty amount despite a difference of less than £5,000 between the rejected offer and what the Claimant were awarded at trial.
A “Part 36” offer is an attempt by either party under the Civil Procedure Rules to negotiate a settlement in a dispute, without going to trial. Whilst the offer will always be of a lower monetary value than the amount that the Claimant is attempting to recover, acceptance means the matter is resolved, time and costs are saved, and there is potentially room for the parties to rekindle business relationships before too much damage is done.
The court will impose financial consequences on either party for not accepting a Part 36 offer where, had they accepted it, they would have been ‘better off’ (having won more or lost less) than if the matter had gone to trial. The rationale is that a more favourable outcome could have been reached without using up court time or spending unnecessary legal costs.
The court has discretion when dishing out these pecuniary punishments but in this case, the judge, Mrs Justice O’Farrell, applied a strict interpretation of Part 36. The difference between the final award and the rejected offer was minimal and so the Defendant had only lost a little less than they would have if they had accepted the offer when it was made. But the judge held that awarding the prescribed benefits under the relevant provisions of Part 36 was not unjust. The Claimant had made the offer at a very early stage in the proceedings and had demonstrated a clear and genuine intention to settle, which the Defendant had refused.
Our tips for clients in light of this decision:
- Be flexible and willing to negotiate wherever possible – it may save you a lot of money!
- A Part 36 offer is often appropriate (and encouraged) if you wish to avoid a full trial and save time and costs. Seek legal advice before making such an offer as the rules are complex and there are consequences which you will need to weigh up. A defendant making such an offer may find themselves faced with the claimant party’s costs if their offer is accepted.
- Acknowledge and consider any offers to settle made by your opponent carefully, particularly if they are made in the format of a “Part 36” offer – do not simply discard or ignore them, no matter how acrimonious the dispute may be! Weigh up the likelihood of winning at a trial and being awarded more than your opponent has offered against the risk of winning less (or even losing) and incurring financial consequences.
- Always seek legal advice before making or rejecting a Part 36 offer: as you now know, the consequences can be severe!
Hochtief (UK) Construction Ltd & Anor v Atkins Ltd  EWHC 2109 (TCC)
If you would like to discuss any of the issues raised in this article, or need any advice, please contact Olivia Morton or give us a call on 0345 070 6000.
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This article was prepared by Tom Revitt.