Tenders in Scotland and offers to settle in England provide formal mechanisms for attempting to conclude a case. They also provide potential protection against the expenses of the case. In both jurisdictions, parties are free to make any extra judicial settlement offers and arrangements they wish, in any way that suits. But parties only benefit from the specific protections regarding expenses if judicial settlement formalities are followed. This article reviews the different approaches and rules in Scotland and England and provides some suggested tips for deploying formal offers.
Scotland: Minutes of Tender
In Scotland, judicial settlements are advanced by way of minutes of tender by a defender, and are regulated by case law precedents rather than formal procedural rules. To be effective a tender must:
- Be in writing, be intimated to the other party and be lodged with the Court
- Contain the settlement offer and an unqualified offer of expenses to the date of the tender
A tender can be withdrawn at any time by way of a minute of withdrawal of tender. The judge does not consider the tender when deciding the case.
The treatment of tenders made by a defender is straightforward:
- If the court’s award in the case is higher than the tender, then expenses are awarded as normal (i.e. the tender has no effect).
- If the court’s award is lower than the tender, then expenses are only awarded as normal until the date of tender, after which the pursuer cannot recover expenses but the defender can. The rationale here is that the pursuer should have accepted the tender, as a reasonable settlement, and therefore bears the expenses burden for the continuation of the action.
The date of tender is not the date the tender is issued, but is the date when the tender ought reasonably to have been accepted. A pursuer is allowed a reasonable time to consider a tender. Whilst there is little case precedent or guidance as to how long this is, the courts have said that the lateness of a tender in the course of an action is likely to increase the time allowed for its consideration.
When comparing the judicial award against the tender, a straight monetary comparison is made. Inflation is not considered, but relevant interest is factored in.
Where there is more than one defender in a case, it is possible for one defender to tender a proposed settlement to another defender. The court’s award against each defender will then determine whether the tender has effect, such that one defender may bear the expenses from the date of the tender.
A tender continues to apply when a case is appealed. If the appeal changes the court’s earlier award and that in turn has an effect on the tender, then the expenses are reallocated.
Other points of interest
It is possible to issue more than one tender during a court action, but a later tender will only give potential protection against expenses from the date it is issued; also, tenders can be issued without admission of liability; and importantly, whilst a tender will be lodged with the court papers, the judge will not consider the tender when deciding the court action, and will normally be unaware of its existence.
Finally, formal judicial tenders can presently only be made by a defender. An equivalent mechanism for judicial offers by a pursuer was trialled for a short period in 2006 in the Court of Session, but was discontinued.
England – Offers to Settle
In England, the rules around judicial settlements are set out in Part 36 of the Civil Procedure Rules. The key rules are:
- an offer (called a ‘Part 36 offer’) can be made by a defendant or a claimant at any time but must be made in writing and served on a party.
- the offer must provide for a period of 21 days for acceptance, or a shorter period if there is an imminent trial.
- clarity of an offer to settle can be requested in the first 7 days and must be given with a further 7 days, otherwise the period for review may restart.
- a defendant’s offer must be for a single sum to be paid within 14 days of acceptance.
An offer can only be withdrawn or changed upon the expiry of the 21 day period for acceptance, unless the Court grants special permission. This is in contrast with the Scottish position where the period for consideration is uncertain and a tender can be withdrawn or replaced at any time. An offer is usually withdrawn by serving a written notice. Since April 2015 (when the Part 36 Rules were revised) an offer can be drafted so as to be automatically withdrawn at a specified point in time after the 21 day period for acceptance has elapsed. Whilst this approach can put more pressure on the offeree, if the offer is not accepted and thus is automatically withdrawn, the offerer will no longer enjoy the protection of a Part 36 offer.
The treatment of Part 36 offers to settle by defendants is identical to Scotland, but with the expenses protection commencing at the end of the 21 day period for consideration. The prescriptive English rules should be considered as a default position; in fact the Court does have discretion to decide whether protection is granted, and, if granted, the date when the protection commences.
The treatment of Part 36 offers to settle by claimants is especially designed to encourage such offers to be made:
- if the court’s award in the case is lower than the claimant’s tender, then expenses are awarded as normal (i.e. the tender has no effect)
- if the court’s award is higher than the tender, then expenses are only awarded as normal until the end of the 21 day period for consideration, after which expenses are awarded on a full indemnity basis along with an incentive additional sum. The additional sum is 10% for the first £500,000 claimed plus 5% for the next £500,000 claimed, thus limited to £75,000 in all cases. The rationale here is that the defendant should have accepted the Part 36 offer, as a reasonable settlement, and therefore bears an additional expenses burden and effectively pays a penalty for the continuation of the action.
As in Scotland, a Part 36 offer continues to apply if a case is appealed, and the effect of any appeal can have a direct bearing on the offer to settle and any expenses awarded.
In general, the English rules offer less flexibility than the Scottish system, except that formal offers by claimants are possible, with expenses incentives, unlike in Scotland.
Strategic use of Tenders and Offers
- The earlier a tender or Part 36 offer is made and the higher the sum offered, the more likely it is to be beneficial in protecting against expenses and pressurising the pursuer / claimant, or in England, the defendant.
- However, this needs to be balanced with the consideration that an offer may encourage the other party to have confidence in its position.
- It is sometimes sensible to make an early low tender or offer to guard against a nominal damages situation.
- Tenders or Part 36 offers should be reviewed regularly so they can be revised if it is considered a claim has become stronger or weaker, e.g. after an expert report is prepared.
- A defender in Scotland whose position is strengthened through a particular event can obtain a psychological advantage by withdrawing a previous tender or offer and issuing a reduced one.
- A defender / defendant who is increasingly concerned that they may end up being found liable should consider increasing their tender or Part 36 Offer, to tempt the pursuer/claimant to settle.
- In England, a Part 36 offer to settle should be made at least 21 days before any trial; otherwise the protection offered will be of very limited value.
- In Scottish cases, defender-to-defender tenders can result in agreement on defenders’ apportionment, even if the quantum and liability itself is subject to full judicial proceedings.
Formal Tenders and Part 36 offers to settle can be very effective tools, not only providing possible expenses protection, but also acting as a tactical tool which can assist with achieving a successful outcome. Deciding upon their timing and amount is often a complex strategic question, and getting this right will usually determine their effectiveness. Both defendants and claimants have the ability to use and take the benefit of this strategic tool in England. In Scotland the expenses protection conferred by Tenders is available to defenders. However, in both jurisdictions, less formal offers by either party can, have some influence on the expenses outcome.