Courts Now Accept Written Offers of Payment

Previously, it had been thought that the only way for a defendant to obtain costs protection was to make a payment into court.  On 11th July 2005, the Court of Appeal handed down a very important decision which has the effect, in certain circumstances, of allowing clients to submit a written offer to settle instead of making a payment into court.

The Facts

Western Power Distribution, the defendant, is a substantial power distribution company.  The claimants are trustees of a pension fund.

In October 2000, the contractors employed by Western Power Distribution trespassed on Western Power Distribution’s land and felled approximately 400 trees which were growing under their power lines.  Before proceedings were commenced, Western Power Distribution had made a written offer of £35,000 in full and final settlement. The letter was marked "without prejudice save as to costs” and stated that the offer was open for 21 days. Trustees of Stoke Pension Fund rejected the offer and 10 months later sued the defendant for £780,000. 

The trial judge ordered the defendants pay the claimants £25,600 in damages and 50% of the claimant’s costs.

Western Power Distribution appealed the costs order.

Issue

The Court of Appeal was asked to rule on whether the trial judge was right to take no account of the defendant's written offer.

Court of Appeal’s Ruling

In allowing the appeal, Lord Justice Dyson stated that the trial judge should have held th

1. The trustees of Stoke Pension Fund were liable for the defendant’s costs incurred after the expiry date of the offer on the indemnity basis (the claim clearly having been grossly exaggerated); and

2. Western Power Distribution was liable for the claimant’s costs incurred before then (if any) on the standard basis.

Lord Justice Dyson set out four conditions which must be satisfied for a written offer to give a defendant the same costs protection as a payment into court:

1. The offer must be expressed in clear terms so that there is no doubt as to what is being offered;

2. The offer should be open for acceptance for a minimum of 21 days and in accordance with the substance of a Calderbank offer;

3. The offer should be genuine; and

4. The defendant should have the money at the time when the offer was made.

Loble Solicitors considers the decision will have a significant impact on litigation in England because of the commercial advantage it gives defendants. Until this decision, a defendant would only be protected against paying the claimant’s costs if it made a payment into court. This ties up client’s funds in court.

Now, where possible, a defendant should make a written offer to settle which complies with these four conditions. If the matter goes to trial, the defendant will gain the same costs protection as paying the amount offered into court. Claimants will need very carefully to consider the commerciality of accepting written offers of settlement.

Click here to go to the Court of Appeal’s judgment.