Settlement Offers - Radcliffe Chambers

Worked Example 2 – The 10% levyYou are in exactly the same position, only this time you are a Defendant receiving theClaimant’s offers, you made a pre-issue drop hands offer of £50,000 (as Claimant is guaranteedto recover at least that!) Let’s explore the impact of the levy with a Part 36 offer at £60,000:• If you accept it, your client pays around£67,000• If you go to trial working through thepossible outcomes:▫ 25% chance you beat the offer, pay£50,000 and recover costs on thestandard basis: £36,000 * 0.25 = £9,000▫ 50% chance you will pay £60,000, butthe offer bites, so you pay indemnitycosts of £20,000: 80.000 * 0.5 = £40,000▫ 25% chance you will pay £80,000 andindemnity costs of £20,000: £100,000 *▫0.25 = £25,000And you’ll spend an extra £10,000 onlawyers!• So on average going to trial will costyou £94,000 – This is probably well worthaccepting, trial is 40% more expensive• If the levy applies:• 25% chance to beat offer, pay£50,000 and recover costs onstandard basis: £36,000 *0.25 = £9,000• 50% chance you will pay £60,000, butthe offer bites, so you pay indemnitycosts of £20,000 and a levy of £6,000:£86.000 * 0.5 = £43,000• 25% chance you will pay £80,000 andindemnity costs of £20,000 and a levyof £8,000: £108,000 * 0.25 = £27,000• You incur £10,000 legal costs• So on average, going to trial will costyou £116,000 – that offer looks a lot moreappealing – it’s now 73% moreexpensive to go to trial – almostdoubling the exposure.15Natalie Brown – Settlement Offers – 26 th February 2013