In navigating small debt claims before the English Courts, it is always important to consider whether and when to make settlement offers. While the advantages of settling can be substantial, the timing of such offers must be carefully managed to maintain the perceived strength of the claimant's position.

Strategic Timing of Settlement Offers

It is generally advisable for a claimant to refrain from making a settlement offer before formally advancing a claim, i.e. before sending a letter chasing the debt or a formal letter before action. Presenting an offer too early, especially before establishing the claim in legal terms, can inadvertently signal uncertainty or doubt about the merits of the case. This might give the debtor the wrong impression, potentially viewing the offer as a sign of weakness or a lack of confidence in the claim’s validity or enforceability.

Instead, claimants should ideally advance their claim first, clearly outlining the basis of the debt, the amount due, and the intention to pursue it through legal channels if necessary. Once the claim is established, and the debtor is aware of the claimant's resolve and the seriousness of their intent, making a settlement offer can then be seen as a gesture of practicality and efficiency, rather than one of desperation or insecurity.

Usually, in a small debt claim, good times to make settlement offers are pre-action, shortly after the Claim Form has been issued or before trial.

Advantages of Settlement

Settling a dispute outside of Court presents several significant advantages:

• Certainty: Settlement guarantees a resolution, which collecting on a judgment might not. Even a favourable Court decision can lead to further challenges, including the difficulties of enforcement against a debtor who is unwilling or unable to pay. Settlement also removes the risk of an unfavourable Court decision.
• Saving Time and Effort: Court proceedings can be time-consuming and mentally taxing. Settlement can markedly reduce the duration and emotional toll of legal disputes.
• Earlier payment. If a claim is settled, it is likely the debtor will pay fairly soon after the settlement (the date of payment is normally a term agreed as part of a settlement). This will result in the claimant collecting money much sooner than if the Court process continues.

Considerations Specific to the Small Claims Track

The Court encourages parties to engage in negotiation and to look to settle claims wherever possible. The judiciary's supportive stance towards alternative dispute resolution reflects a broader legal context that favours settlements as efficient and pragmatic solutions.

Making a Settlement Offer

When deciding to make a settlement offer, consider the following:

• Amount and Terms: The offer should realistically reflect such factors as: (a) the amount that can be feasibly recovered, considering the debtor's financial circumstances; and (b) the merits of the claim. It may include payment plans or lump-sum payments at a discount.
• Written Communication: All settlement offers should be clearly stated in writing, specifying any conditions and the full terms of the agreement. This documentation can be crucial if disputes arise later.
• Use of ‘Without Prejudice’ Label: Communications labeled ‘without prejudice’ allow parties to make offers freely, knowing that these offers cannot be used as evidence against them in court proceedings if settlement talks fail and litigation ensues.

Garfield can prepare settlement offers for you and prepare replies to the debtor’s responses.

Conclusion

Making a settlement offer during a small debt claim is generally a strategic choice that can lead to a quicker, more certain resolution, saving both time and legal expenses. However, such offers should be timed and structured carefully to maintain the strength of the claimant's position and to avoid giving an impression of vulnerability. With careful consideration to the timing and nature of the offer, settlement can be an effective tool in resolving disputes efficiently and beneficially for both parties.