Back
We continue to provide our legal services through the COVID-19 lockdown. Please visit our COVID-19 Hub for legal insights, or contact us directly.
Get in Touch Menu

Should you settle a claim early to restrict costs?

14 April 2015

Litigation is a very expensive way of resolving disputes and it is not uncommon for the cost of issuing, or defending, a claim to exceed the damages. One way of trying to limit your exposure to costs is to use Part 36 of the Civil Procedure Rules.

Under this rule one party makes a formal without prejudice offer to the other party to settle the dispute. It can be made at any time, whether or not proceedings have been issued. If the offer is accepted, the defendant is required to pay the claimant’s costs up to the date of acceptance. However if an offer is not accepted you should consider the cost consequences bulleted below.

Note that costs are awarded on either a standard or an indemnity basis. In the case of the former, the party receiving their costs must prove the reasonableness and proportionality of the amount claimed. In the case of the latter, there is no requirement for the costs to be proportionate, which means that it is for the paying party to show that the costs claimed are unreasonable.

  • The claimant succeeds but fails to beat his own offer – the claimant is awarded costs on the standard basis
  • The claimant equals or beats his own offer – from the expiry of the relevant period the claimant is likely to be awarded interest on the whole or part of the sum awarded to him; costs on the indemnity basis; interest on those costs and (as a penalty) an additional percentage of the amount awarded
  • The claimant loses – the claimant pays the defendant’s costs on the standard basis plus interest from expiry of the relevant period until judgement
  • The claimant beats the defendant’s offer – the claimant is awarded costs on the standard basis
  • The claimant fails to beat the defendant’s offer – the defendant pays the claimant’s costs on the standard basis up to the expiry of the offer; thereafter the claimant pays the defendant’s costs on the standard basis plus interest
  • The claimant loses at trial – the defendant is awarded costs on the standard basis plus interest from the expiry of the relevant period until judgement

For the defendant in particular, where there is a concern over liability, and in order to protect their position on costs, it is important to put forward a reasonable offer to settle the claim in accordance with Part 36 as soon as possible.

We're here to help
Contact
Paul Gordon LLB
Partner
View profile
Paul Gordon
Related services
Share this article
Resources to help

Related articles

The classic car market & the law - Q&A

Classic car disputes

The classic car market is a multi-billion pound industry, not surprisingly with many legal complications, but that shouldn’t impair the joy these four-wheeled icons can bring… What kind of businesses…

Paul Gordon LLB
Partner

Turning a blind eye: the concept of 'dishonest assistance'

Litigation & dispute resolution

The court has shed light on the legal concept of ‘dishonest assistance’, in the recent case of Group Seven Limited & Others v Notable Services LLP & Others [2019]. By…

Paul Gordon LLB
Partner

Legal brain Q&A: A guide to intellectual property rights

Intellectual property disputes

They say that imitation is the highest form of flattery. But when it comes to intellectual property, a competitor copying your ideas can put your business’s whole operation and finances at…

Paul Gordon LLB
Partner
Contact us