Realism Essential in Damages Claims

When an offer to settle a legal dispute is made (called a ‘Part 36 offer’ by lawyers) and the court subsequently orders payment of a higher figure (in which case the award is said to have ‘beaten the offer’), the general rule is that the claimant’s legal fees will be met by the party that made the offer. However, a recent case shows the limits to this principle.



It involved a claim that arose when commercial premises were damaged. The claimants sought damages of £600,000, which was clearly excessive, and their behaviour in conducting the negotiations had been obstructive. The defendants made a Part 36 offer of £139,000, which they later increased to more than £267,000, plus £85,000 in respect of the claimants’ costs.



This second offer was open for acceptance until 30 May 2012. The case came to trial in June 2012 and the court awarded the claimants £173,871.



The payment of the related legal costs was then the subject of dispute. The award to the claimants beat the offer originally made. However, it did not beat the second offer, so the court ruled that the claimants were liable to pay the defendants’ legal costs after 30 May 2012, which means they have to pay the defendants’ legal costs for the trial.



The fact that the claimants made an exaggerated claim was in point, but the court held that their claim was not so exaggerated as to have an effect on the costs issue.



However, the claimants would have been much better off had they taken a more realistic view and accepted the second offer. Had they done so, they would have received nearly £100,000 more than they were awarded by the court and would not have had to pay the defendants’ legal costs for the trial.



Taking a realistic attitude in dealing with any legal dispute is always important: failing to do so can prove expensive.