Parties litigating regularly in England & Wales will be very familiar with the ability of both claimants and defendants to seek to protect their respective positions by use of a Part 36 offer. A change in the Scottish rules of court will introduce “pursuers’ offers” from 3 April. What will that mean for defenders and insurers in Scottish claims?
The current position
In Scotland, a defender is already able to lodge a formal offer, known as a tender, at any stage in a court action. The tender offers to settle the claim for a given sum of money together with expenses. If the offer is not accepted and the pursuer gets an award from the court equal to or lower than the sum offered then the defender is entitled to seek an award of expenses (costs) against the pursuer from the date the offer was made. Until now no similar system has existed allowing pursuers to make this kind of formal offer.
Introduction of pursuers’ offers
The position will change on 3 April 2017. From which pursuers in court proceedings both in the Court of Session and in higher value proceedings in the sheriff court (where the sum sued for is over £5,000) will be able to make a “pursuer’s offer”. As a result, both pursuers and defenders will be able to make formal judicial offers in the court proceedings in an attempt to protect their respective positions and encourage settlement.
A pursuer’s offer will be lodged with the court in a formal document. It will offer to accept a definite sum inclusive of interest, plus expenses, to settle the claim. A defender must then choose whether or not to accept the offer, similar to a claimant Part 36 offer in England & Wales.
Pursuers are likely to try to take advantage of the new rules following their introduction at the beginning of April, so it is worth considering the detail.
Where an offer is accepted within a reasonable period
If the offer is accepted by the defender within a “reasonable period” then decree (judgement) will pass against the defender in the sum offered together with a finding of expenses (costs). The pursuer’s offer will have no additional financial consequences for the defender in this situation.
A defender’s acceptance must be unqualified except as regards contribution, relief or indemnity between defenders.
If there is more than one defender the offer is not treated as accepted until all the defenders have lodged an acceptance. However, any individual defender is entitled to consent to decree passing against them once they have accepted the offer to protect their position on expenses.
What is a “reasonable period”? This is not defined in the rules, and in general we anticipate a broad brush 21 days being applied. It will however depend on the stage of proceedings at which such an offer is made. For example, it is perfectly competent to make such an offer in the week before proof (trial) and the reasonable period in that instance may even run to the doors of court.
Where an offer is not accepted at all
A defender may choose not to accept a pursuer’s offer. If the pursuer is subsequently successful at proof (trial) and the court awards the pursuer a sum of money equal to or more than the sum in the offer then the defender will become liable to pay an additional amount to the pursuer on top of expenses awarded by the court:
- The amount that a defender will have to pay will be a sum equivalent to 50% of the pursuer’s expenses attributable to the period from the date on which the offer could reasonably have been accepted until decree.
Clearly, the earlier the offer is made after court proceedings are raised, the greater the sum payable is likely to be.
Where an offer is accepted late
As above, there is no set time within which an offer may be for accepted (although it will not be possible to accept an offer once the court or jury has retired to consider its decision) but the new rules do provide that a defender who accepts an offer after the reasonable period for consideration of the offer has passed will be liable to make additional payments to the pursuer. The later the offer is accepted the greater the penalty is likely to be.
- The defender will have to pay interest on the principal sum which has accrued since the date the offer was made.
The original offer will have included interest to the date the offer was made. The court will effectively update the offer so that interest from that date to the date of acceptance will be added on.
- In addition, the defender will have to pay a further sum equivalent to 50% of the pursuer’s expenses attributable to the period from the date on which the offer could reasonably have been accepted until it was actually accepted.
In most cases of late acceptance the relevant period is of course likely to be considerably shorter and involve a lower level of expenses than in those cases where an offer has not been accepted at all.
In all cases it will be open to a defender to seek to persuade the court on “cause shown” that the pursuer should not be entitled to receive either or both of the additional payments outlined above. The rules do not provide any guidance as to the kind of situations which might merit a departure from the general rule. Issues concerning premature/unnecessary litigation or the behaviour of a party during the court proceedings may influence the court. Making a pursuer offer and disclosing long-held medical evidence four weeks later may be an example of such behaviour.
In any event, it is important to note that the rules do not seek to prevent defenders seeking to modify the scale or extent of their liability in expenses at the conclusion of an action.
Over the last few years courts have shown that they are very willing to consider modification of awards of expenses in appropriate cases. Any restriction on an award of expenses imposed by the court will also impact on the extent of a defender’s liability under the new rules.
It is clear that pursuer’s offers will need to be considered swiftly and carefully, with defenders and insurers treating them exactly as they would an English claimant Part 36 offer. This is made all the more crucial by the current hiatus in Scotland over impending discount rate changes which may serve to increase both the risk and attractiveness of many pursuer offers.