Incentives to settle

Rules encouraging parties to settle early, or risk paying out more if they lose, are due to come into force next month as part of the Jackson roll-out.

The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) allows for an additional amount to be paid to a claimant by a defendant in cases where the defendant has refused the claimant’s offer to settle and the court has given judgment for the claimant which is at least as advantageous to the claimant as the claimant’s offer. Bringing this new regime into practice, The Offers to Settle in Civil Proceedings Order 2013 sets out the percentage of damages which a defendant may be ordered to pay out on top. In offers up to £500,000 this will be 10% of the amount of damages awarded; above £500,000 and up to £1m, it will be 10% of the first £500,000 and 5% of the damages awarded above £500,000; while, for amounts above £1m, the figures are 7.5% of the first £1m and 0.001% of the damages awarded above that figure.

Janna Purdie, of LexisPSL Dispute Resolution, said apparent discrepancies between the 2013 Order and Pt 36, CPR could be explained. “Pt 36 provides for 10% of the first £500,000 and 5% above, up to £1m, namely a composite rate of 7.5% for awards of £1m. The 0.001% required by the 2013 Order arose from a requirement to set a prescribed percentage in s 55(3) of LASPO. Following concern that a percentage of 0% or nil per cent would not comply with this requirement, 0.001% was set so that effectively no additional amount will be paid over £1m. The CPR Committee considered that, as, in practice, no percentage will apply to figures over £1m, it need not be addressed in Pt 36.”