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To settle or not to settle?

Posted on 11 May 2015 by Trevor Withane


When a defendant is faced with a claim, in practice, there are only three choices: (i) give in; (ii) fight all the way; or (iii) try to settle.  Litigation is a game of poker: great skill is needed to read your opponent's hand, whilst maintaining a poker face, to make the best moves in this stressful game. 

In this article, Trevor Withane highlights some of the factors that a defendant should consider when thinking about settling with an opponent.  It is important to distinguish 'settling' from 'giving in'.  Giving in means that one rolls over and accepts the claimant's claim and provides the remedy that the claimant seeks.  There are many reasons why a defendant might choose this option, even where it does not believe the claimant has a meritorious claim.  One such reason is where the value of the claim is relatively low and the defendant does not have the time or inclination to fight, it might just give in at the outset of proceedings.

Settling, on the other hand, is not about totally rolling over, but coming to a pragmatic and commercial decision to agree terms with your opponent to resolve the dispute.  When thinking about settling (that is, making an offer or accepting an offer), there are a few things that one should think about:

1. Cost protection

Generally, the losing party in a dispute heard in the English court system will pay the winner's costs, although there are some exceptions.  In such litigation, a party can make what is known as a "Part 36 offer".  Part 36 offers to settle in the prescribed form aim to encourage parties to try to settle a dispute sooner rather than later.  They set out the costs and other consequences that the receiving party will face if it refuses a reasonable offer to settle.

If the Part 36 offer is not accepted and the party to whom the offer is made does not beat the offer at trial, the court will usually hold that party liable for the offeror's costs from the last day on which the offer should have been accepted (21 days after the offer is made), even if the offeror loses on the merits of the claim.  These costs consequences are formalised in the Civil Procedure Rules.  There is a less formal offer route, without the cost consequences set out in the court rules, which allow the offeror to be more imaginative with the offer it makes.  Even this sort of attempt to settle can be taken into account by a court at the end of a case when it is deciding who should pay whose costs (unless the parties have agreed such matters as part of a settlement).

2. Timing

Timing is crucial – and will probably involve reading the proverbial tea leaves.  An offer made too early might seem like a sign of weakness and encourage the opponent to push harder for more.  An offer made too late might be rejected out of hand – the opponent might well think, the trial is just around the corner so I might as well roll the die and try my luck.  Moreover, timing is crucial when thinking about cost consequences – an earlier offer will better protect the recovery of costs in the event that offer is not beaten at trial – the earlier the offer is made, the greater proportion of costs which will be subject to protection.

There are many other considerations when thinking about the timing of a settlement, but one which should not be overlooked is deciding whether to make an offer before or after disclosure of documents with the opponent.  In English court litigation, it is 'cards on the table'.  This means, in broad terms, each party must exchange with the other parties any documents which could harm their own case or help the other's.  So, if there are any skeletons in the closet, trying to settle before disclosure takes place (which happens after the formal pleadings are all served) might be a strong factor in deciding to try to settle early. On the other hand if you think that your opponent might have some unhelpful skeletons in their closet, you might want to reject or resist making any offer until after disclosure.  However, an offer made shortly before disclosure may send signals that one's case will be weakened after the cards appear on the table.

3. Personal costs

A High Court claim can take a minimum of two years to resolve from start to finish. During this time, litigants have to pay lawyers and court fees, whilst investing time, energy and very often emotion.  For private individuals, litigation can take over their lives.  Irrespective of the principles at stake, many litigants are justified in wanting to settle because the financial cost of doing so does not outweigh the non-quantifiable costs.

There are, of course, many other considerations when thinking about settling, so it's always wise to seek the advice of a solicitor before making any moves in the board game called 'litigation'.

Trevor Withane
Solicitor, Fraud Defence

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