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We acted for a homeowner pursuing a claim exceeding £14,000 for defective drainage and septic tank works carried out by a contractor. While liability was strongly in our client’s favour, the case presented a significant commercial risk due to the defendant’s perceived financial position.
Despite strong prospects of success at trial, legal costs were becoming disproportionate to the value of the claim. The defendant indicated that a judgment of £60,000–£70,000 (damages plus costs) would likely result in insolvency. This created a critical risk: our client could succeed at trial but recover nothing.
Although our client had the benefit of Before-the-Event insurance, protecting them from adverse costs exposure, this did not guarantee recovery of damages and/or the legal costs incurred, which the court can always decide should not be payable, based on proportionality and/or other grounds. In other words, a tactical offer needed to be made at the most opportune time taking everything into account to pressurise the opponent into accepting, whilst mitigating risk to our client and their insurer.
We adopted a commercially focused approach designed to secure a real, enforceable outcome.
A £1 Part 36 offer was made with the agreement of our client’s insurers. As is common in these cases, part of our job was to make the case for the suggested strategy to insurers. We convinced the insurer that the offer would likely be the best option for the defendant to get out of the matter, thus reducing as far as possible the potential that they would liquidate the company.
We also agreed with the insurer that they would pay our mutual client £10,000 for damages, conditional upon acceptance by the defendant of the part 36 offer, and that this would be their only outlay in the matter as the remainder of the costs would be paid by the defendant. This negated therefore, as far as possible, the litigation risk of losing, but more importantly the risk to the insurer that they would have to pay the full costs of the matter as awarded by the court (if the defendant liquidated)
In summary, this structure ensured a guaranteed recovery for the client, allowed costs to be pursued separately, and avoided the risk of triggering the defendant’s insolvency.
The defendant accepted the offer outside but outside the relevant period for acceptance. They argued that the claim had effectively been abandoned, that the client had “lost” by accepting nominal damages, and that the offer was not a genuine attempt to settle. Their reason for adopting this approach was almost certainly an attempt to avoid paying our client’s costs
The District Judge rejected the defendant’s arguments on the part 36 offer, finding that the case must be assessed holistically, including both damages and costs. The court accepted that our approach was proportionate, commercially justified, and properly advised, and awarded our client their costs.
This decision was appealed, with the initial court decision upheld, confirming that a nominal Part 36 offer can be a genuine and valid mechanism for settlement where it reflects commercial reality.
A further appeal has been sought, and we expect permission to be refused.
This case delivered a practical and financially secure result, rather than a purely technical legal victory.
The client received £10,000 as a guaranteed recovery, avoiding the real risk of receiving nothing if the defendant became insolvent. Our client, pending any further appeal, will recover their legal costs, without the need for a full trial, saving time, stress, and further cost.
Litigation risk was actively managed and reduced. A complex situation was resolved through a legally robust and commercially intelligent strategy. That strategy was then tested and upheld at multiple levels of the court system.
This case illustrates an important principle: the best outcome is not necessarily the highest judgment, but the result the client can actually realise.
By combining technical expertise with commercial awareness, we converted a high-risk claim into a certain financial outcome, and successfully defended that approach through the courts.
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