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Failure to advise on settlement – the bark that can bite solicitors

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Posted by Jennifer Rhind on 30 June 2020

People often associate solicitor negligence with purchasing the wrong piece of land or incorrectly drafting wills, but solicitors that fail to protect their clients from costs orders in court proceedings or make a mess of settlement opportunities may also be liable to their clients for any losses suffered.

More than ever before, the courts are sending a loud and clear message to potential litigants to make all attempts to settle disputes away from the court room and there are many benefits to doing so such as time and cost savings and certainty.

One way in which solicitors sometimes fall foul of their duty to clients, however, is by failing to properly advise on settlement opportunities during litigation. This exposes their clients to 2 serious potential problems:

  • Greater expenditure because the matter is not resolved when it otherwise could have been; and/or
  • Significant costs exposure if the matter proceeds to Trial

The general costs rule in court is that the loser pays a contribution towards the winner’s costs.  This general rule can, however, be turned on its head when one party can show that a reasonable and commercial offer has been made that, if accepted would have resulted in a similar or better position for the other party at trial, or that the conduct of the other party increased the costs because they failed to respond to offers made or to engage in settlement discussions. 

The most common solicitor errors encountered are:

  • Failure to advise on an offer that has been received
  • Failure to provide a realistic assessment of the value of the claim;
  • Failure to advise of the consequences of not accepting an offer;
  • Failure to advise on the consequences of not making an offer of settlement (if it is appropriate to make one);
  • Forgetting about an offer that has been made but which remains open for acceptance;
  • Failure to advise on the importance of engaging in alternative dispute resolution such as mediation or without prejudice discussions;
  • Failure to settle all elements of the dispute;
  • Failing to settle with all the relevant parties to the dispute;
  • Incorrect drafting of offers of settlement which adversely affects costs protection; and
  • Incorrect drafting of settlement terms which do not achieve the intentions of the parties and/or meet the client’s instructions

Offers of settlement

Some offers of settlement attract significant costs consequences if they are not beaten by the recipient at trial.  These offers, called Part 36 Offers, must be drafted in accordance with the court rules, otherwise they may be deemed ineffective. It can be easy for solicitors to fall foul of the technical requirements of Part 36 when drafting an offer, or alternatively they may fail to fully advise their clients of the risks and potential consequences of non-acceptance if the offer is not beaten at trial.

The earlier offers are made, the higher the level of potential costs protection and therefore litigants should be receiving advice from their solicitors about the importance of settlement opportunities at an early stage.

Settlement meetings

Sometimes settlement meetings can last for a long time and into the small hours of the morning.   Whilst a common-sense approach needs to be applied as to what is reasonable in all the circumstances, solicitors still need to advise competently and in accordance with the standard of care that can be reasonably expected in those circumstances to act in the best interests of their client.

About the author

Jennifer is a solicitor in the commercial litigation department.

Jennifer Rhind

Jennifer is a solicitor in the commercial litigation department.

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