COURT OF APPEAL: REFUSAL TO ENGAGE WITH AN OPEN OFFER OF SETTLEMENT IS AN ABUSE OF PROCESS

In Balk -v- Otkrite International Investment [2017] EWCA the Court of Appeal was highly critical of a litigant’s failure to respond to an open offer of settlement of appeal. The failure to engage  with an open offer of settlement amounted to an abuse of process.

“Not only would hearing the appeal on its merits have been an exercise in futility, but it would also have run counter to all the modern principles of case management which include encouraging the settlement of disputes, concentrating on the real issues between the parties, and making the best use of scarce judicial resources.”

“Put bluntly, therefore, I consider that Ms Balk was abusing the process of the court by her refusal to engage with the open offer made by Otkritie, and her insistence in bringing her appeal before us.”

THE CASE

The appellant was appealing an issue as to how much she should be given credit for against a judgment against her.  However the respondent to the appeal had made an open offer of settlement which gave her everything she was seeking.

  1. At the hearing before us on 13 December, it soon became clear that Ms Balk was still seeking to argue that she should be given credit for the value of the Avenue Road property in a sum substantially exceeding $21,425,000, notwithstanding the limited scope of her permission to appeal, and the refusal to extend it at the hearing on 4 February 2016. Furthermore, she still wished to prosecute her appeal even though Otkritie had made an offer in open correspondence on 9 March 2016 to give her credit for all three of the sums referred to in her revised grounds of appeal (i.e. the three sums which I have mentioned), together with certain other recoveries as set out in the letter. No substantive response to the offer had been received from Ms Balk, apart from an email on 21 March 2016 saying that she had not yet been able to decide whether to accept the offer. The offer was not withdrawn by Otkritie, and remained on the table down to, and including, the hearing before us.

THE COURT OF APPEAL’S COMMENTS ON THE FAILURE TO RESPOND TO THE OPEN OFFER

Lord Justice Henderson considered the relevance of the open offer.  The appeal was about a relatively small set off in relation to a large judgment debt (over $19 million). The fact that there had been no response to the respondent’s open letter of settlement was a highly relevant factor.

“Otkritie’s open offer
    1. I have already referred to the open offer made by Otkritie in the letter of 9 March 2016, sent to her by Otkritie’s present solicitors Steptoe & Johnson. The stated purpose of the letter was to set out Otkritie’s position in relation to the allocation of recoveries, “in an attempt to narrow the issues and to dispose of the appeal, and in so doing, to save costs and avoid a waste of the Court’s time“. It was then pointed out that, following the hearing on 4 February 2016, Ms Balk had no permission to reopen issues of valuation. The letter continued:
“The position of the Claimants remains that they are prepared to consent to giving due credit for all those amounts that may be attributable to you as set out in paragraph 3 of the Order [i.e. Gloster LJ’s order of 4 February 2016]. In that regard we enclose a spreadsheet showing the calculation of recoveries and interest accrued since the date of Judgment.
You will see from the attached spreadsheet that the Claimants are prepared to give you full credit for all amounts referred to in paragraph 3 of the Order and your revised grounds of appeal, namely US $21,425,000 (recovered from Avenue Road) and US $1,856,981 plus US $439,494 (both recovered from Dunant’s accounts at Bordier).”
    1. The letter went on to list a number of further substantial credits that Otkritie were also prepared to give Ms Balk “in the interests of simplifying matters and saving costs and Court time”. The letter concluded:
“In summary, were your appeal to succeed in full (on the basis permitted by the order), you would still be liable for approximately US $19 million based on recoveries to date, as set out in the attached spreadsheet.
Please confirm that you agree with these figures so we can write jointly to the Court of Appeal with a request that your appeal be disposed of by consent.
If you do not agree, please set out brief reasons why so we can write to Lady Justice Gloster explaining the position, as our clients have no desire to incur further costs in this matter.
We look forward to hearing from you.”
  1. As I have already recorded, no answer to this offer was received from Ms Balk, apart from a holding email which she sent on 21 March 2016 saying she had not yet been able to make a decision. At the hearing before us, Mr Pillow confirmed that the offer remained open for acceptance by Ms Balk. He told us that Otkritie had been prepared to make the offer on pragmatic grounds and to save costs. The issues of law thrown up by the appeal were not straightforward, and Otkritie did not wish to have them resolved if no practical benefit would be achieved by doing so. Even on the most favourable basis to Ms Balk, the spreadsheet of recoveries showed that she still owed Otkritie a sum in excess of $16.5 million. Since there was no realistic prospect of recovering such a sum from Ms Balk, nothing would be gained by arguing the points of law raised by her appeal.
  2. In my view, Otkritie were fully entitled to adopt this stance, and the only reasonable course for Ms Balk would have been to accept the offer. Furthermore, it would have been a waste of this court’s time and resources to hear the appeal on the questions of law which Ms Balk had permission to pursue, when Otkritie was ready to concede all that she asked and more. Not only would hearing the appeal on its merits have been an exercise in futility, but it would also have run counter to all the modern principles of case management which include encouraging the settlement of disputes, concentrating on the real issues between the parties, and making the best use of scarce judicial resources.
  3. Put bluntly, therefore, I consider that Ms Balk was abusing the process of the court by her refusal to engage with the open offer made by Otkritie, and her insistence in bringing her appeal before us. For this reason too, I was satisfied that her appeal should be dismissed.
  4. For the avoidance of doubt, I should make it clear that I express no view whatever about the merits of the issues relating to credit for recoveries and appropriation which were dealt with by Eder J in the March Judgment. It is still possible that these issues may arise and require resolution in relation to other defendants. Our dismissal of this appeal, in the circumstances which I have set out, has nothing to do with the merits (or otherwise) of Ms Balk’s case on those issues, and we heard no argument on them.”