Understanding Offers of Compromise Under the Uniform Civil Procedure Rules (UCPR)

May 14, 2024 | Publication

The Uniform Civil Procedure Rules (UCPR) provide a structured framework for managing Offers of Compromise in legal proceedings. These rules are designed to encourage early settlement and efficient resolution of disputes, benefiting both plaintiffs and defendants by potentially reducing the time and cost associated with litigation.

Offers of Compromise in the Supreme and District Courts

Part 20, Division 4 of the UCPR outlines the form and manner in which Offers of Compromise are to be made, accepted, withdrawn, and disclosed. This section provides the procedural guidelines to ensure that offers are clear, formalized, and properly communicated between parties. Key points include:

  1. Making an Offer: An offer must be made in writing and clearly state the terms of the settlement.
  2. Acceptance: Acceptance of an offer must also be in writing, and once accepted, the offer becomes binding.
  3. Withdrawal: An offer can be withdrawn before acceptance by notifying the other party in writing.
  4. Disclosure: Offers and their terms should remain confidential and not be disclosed to the court until the case is decided, ensuring that the decision is not influenced by the offers made.

Part 42, Division 3 of the UCPR details how the Supreme and District Courts will handle situations where an offer is either accepted or rejected. The ramifications for the unsuccessful party, particularly in terms of cost implications, are significant:

  1. Acceptance of the Offer: If an offer is accepted, the case is resolved according to the terms of the offer, potentially saving both parties further legal costs.
  2. Rejection of the Offer: If an offer is rejected and the party that made the offer achieves a judgment that is ‘no less favourable’ than the offer, the court is likely to award indemnity costs from the date the offer was made. This means:
  1. Ordinary Costs: Up to the date of the offer, the party that made the offer is entitled to ordinary costs.
  2. Indemnity Costs: From the date of the offer, indemnity costs are awarded, which are generally higher and cover a broader range of expenses, reflecting the court’s view that the offer should have been accepted.

Offers of Compromise in the Court of Appeal

Part 51, Division 8, Subdivision 1 of the UCPR governs how the Court of Appeal deals with Offers of Compromise. The rules in this section mirror the intent of those in the lower courts, emphasising the encouragement of settlement and the efficient resolution of disputes. The Court of Appeal follows similar principles in awarding costs, ensuring that parties are motivated to make reasonable and timely offers.

Strategic Considerations

The rules surrounding Offers of Compromise are designed to promote thoughtful and strategic decision-making by both plaintiffs and defendants. By making a well-considered offer early in the proceedings, a party not only demonstrates a willingness to settle but also positions itself advantageously in terms of potential cost recovery.

If the opposing party fails to accept a reasonable offer and does not achieve a more favourable judgment, the consequences can be financially significant due to the imposition of indemnity costs. Therefore, both sides are encouraged to carefully evaluate any offers received and consider the potential cost implications of proceeding to trial versus settling early.

Conclusion

Offers of Compromise, as outlined in the UCPR, play a critical role in the landscape of legal proceedings. These rules foster an environment where early and reasonable settlement offers are encouraged, benefiting the judicial system by potentially reducing the caseload and conserving resources. For litigants, understanding and effectively utilising Offers of Compromise can lead to more favourable financial outcomes and a quicker resolution of disputes.

The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this publication is accurate at the date it is received or that it will continue to be accurate in the future. We are not responsible for the information of any source to which a link is provided or reference is made and exclude all liability in connection with use of these sources. If you do not wish to receive newsletters from us, please let us know.

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