Common Law Offers of Settlement, the Knife That Cuts Both Ways

With various changes to Court processes as a result of the COVID19 pandemic, the use of common law offers of settlement in attempts to reduce costly and protracted litigation is more compelling now than ever.

Common law offers of settlement are under utilised in South Africa. These offers can be very advantageous for the plaintiff. It not only places pressure on your opponent to obtain instructions from his/her client but can set your opponent up for an adverse cost order. They have the effect of reducing costs associated with litigation and protracted trial hearings.

Common law offers of settlement are best suited for indefensible or uncontested litigation. In essence:

  1. Where a defendant has not briefed experts or secured lay witnesses to counter the plaintiff’s evidence. This is specifically relevant in instances of factual disputes and quantum assessments.
  2. In instances where the defendant refuses to make concessions to limit the issues in dispute between the parties. Specifically, those concessions that are linked to the common cause facts.
  3. Where a defendant has no defence to the allegations raised against it.

In order for an offer of settlement to be regarded as a common law offer of settlement, the requirements as set out in the locus classicus of Calderbank v Calderabnk [1975] 3 All ER 333 (EWCA) and confirmed in Van Reenen v Lewis and Another (2302/2014) [2019] ZAFSHC 55 must be met. The offer must specifically state that it is made without prejudice, except in relation to costs.

The wording is not prescriptive but when interpreting the offer, it must be clear that the costs are excluded from the without prejudice content. This is imperative as without prejudice content is not admissible as evidence in Court. By excluding costs from the without prejudice content, it allows the plaintiff to lead argument on appropriate cost scales as it will be regarded as admissible evidence.

A common law offer of settlement cannot be filed on the court file. The plaintiff’s legal counsel will be required to draw the presiding Judge’s attention to the common law offer of settlement and lead argument for an adverse cost order to be granted against the defendant in circumstances where:

  • the plaintiff has served such an offer on the defendant; and
  • the defendant failed or refused to respond to offer; and
  • the action accordingly proceeded to trial; and
  • the presiding Judge ordered an equivalent or higher award in favour of the plaintiff.

In considering whether an adverse cost order is appropriate, the Judge must consider the following, as set out in Calderbank and Van Reenen, supra:

  1. Did the defendant reasonably engaged in settlement with the plaintiff?;
  2. Was the plaintiff’s offer a fair and realistic discount of the case?;
  3. Did the defendant have a reasonable amount of time to consider the offer?;
  4. What was the difference between the tender contained in the common law offer and that which the Judge awarded?;
  5. The nature of the resources and proceedings of the litigation;
  6. Was the defendant’s conduct vexatious? Did it result in the plaintiff incurring unnecessary expenditure in proceeding to trial?

It is evident that common law offers of settlement can be used as an advantageous tool for the plaintiff and similarly can be detrimental to the defendant, should it fail to consider the offer.

Given the current circumstance, it would be beneficial for plaintiffs to utilise this litigious tool and place the defendant under pressure to reduce costs, protracted litigation and waiting times for court hearing dates.

Jessica-Jade Faint
Associate | Litigation Attorney
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