INSURANCE ALERT: Case Note: Amaca v CSR Ltd and Bradford Insulation Industries

13 March 2018

Publications

Issue:

Can you obtain indemnity costs if you settle a claim on more favourable terms than you previously offered to accept in an Offer of Compromise?

Facts:

Amaca was seeking contribution from CSR towards settlement monies it paid to 204 claimants.

Amaca served two Offers of Compromise.

The proceedings were eventually settled on terms more favourable to Amaca than the Offers of Compromise previously served on Amaca’s behalf.

The proceedings were settled on a “plus costs” basis.

Amaca submitted CSR should pay its costs on an indemnity basis because it had ultimately agreed to settle the proceedings on terms more favourable to Amaca than Amaca had previously offered to accept.

Decision:

Macaulay J held Amaca was not entitled to recover its costs on an indemnity basis.

Macaulay J noted:

  1. Courts do not compel parties to settle their actions; parties bear the responsibility of reaching a compromise and the terms of that compromise, including terms relevant to the payment of costs.
  2. Settlements are confidential, and should not be disclosed to Courts in the context of a subsequent costs dispute.
  3. If costs have to be determined by the Courts, proceedings will be prolonged negating the favourable element of finality that comes with the settlement of the proceedings.
  4. Courts do not know the factors that led parties to the settlement of the proceedings, or the specifics of the parties’ bargaining over the years.
  5. However, it was apparent the proceedings were complex and the outcome unpredictable.
  6. Amaca served its Offers of Compromise before its pleadings were amended and a time when, on the state of Amaca’s pleadings, it may have lost the proceedings.
  7. It was an express term of the Offers of Compromise Amaca served the effect of those Offers of Compromise would be determined with reference to judgments, not settlements.
  8. When the proceedings were ultimately settled, Amaca did not put CSR on notice that one of the possible effects of the settlement was that Amaca would make an application for, and CSR may be liable to pay, indemnity costs.

Learnings:

If you settle a claim on more favourable terms than you previously offered to accept in an Offer of Compromise, you are unlikely to be able to obtain indemnity costs so you should make the payment of indemnity costs a term of the settlement.

If you settle a claim on more favourable terms than you previously offered to accept in an Offer of Compromise and the other party will not agree to make the payment of indemnity costs a term of the settlement, you should put the other party on notice of your intention to seek indemnity costs; however, you may still not obtain indemnity costs.