New rule on ‘offers to settle’

The Civil Procedure Rules have been clarified in respect of the amount of damages a claimant must be awarded to gain a ‘more advantageous’ outcome than a previous settlement offer.  The new rule, which came into force in October, is good news for litigants.

Civil Procedure Rule 36.14 adopted a practical approach. Where a settlement was proposed and rejected, if the claimant subsequently won damages higher than that offer, he was right to have refused it. He should not, therefore, be liable for legal costs run up after the point he rejected the offer.

This approach, however, was thrown into disarray by the 2008 ruling in Carver v BAA plc.  In this case, the court awarded costs against the claimant, Miss Carver, even though her damages award was higher than BAA’s offer to settle. The court considered that the amount by which she had beaten the offer was too small.

The position is now crystal clear. When deciding who has to pay for legal costs after an offer to settle is rejected, the key question will be ‘did the claimant obtain more damages than were initially offered to settle the claim?’. This means more damages in money terms by any amount, however small – no fudge, no grey area, no argument: just look at the figures.

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