In order for the party to have “won” the case and thus be entitled to full compensation for its legal costs, the party must as a minimum have been “substantially” successful. The threshold for being substantially successful is high and there is rarely room for major deviations from being “fully successful”.
Practically important exceptions have been made to these principles. Perhaps the most important exception is that a party who has not won, but has been “substantially successful” may be awarded legal costs in whole or in part from the opposing party if there are “compelling reasons to do so”. In this connection, “particular emphasis” is to be placed on whether the other party has “refused a reasonable settlement offer”.
What is “significant success”?
The entry requirement for a party to be awarded legal costs under section 20-3 of the Dispute Act is that the party has been “significantly successful”. In Rt-2011-1294, paragraph 19, the Supreme Court has found that the criterion of “significant success” means that “the party has at least achieved so much that it would not be reasonable to expect him to have accepted the other party’s position”. In other words, the threshold is significantly lower than the threshold for winning the case.
In cases with many points of dispute or discretionary assessment topics, it may happen that both parties are “significantly successful”.
- Example 1: The plaintiff wins on 7 out of 10 points of dispute.
- Example 2: The plaintiff succeeds in claiming that the defendant is liable for damages, but the defendant succeeds in claiming that the amount of damages should be significantly lower than what the plaintiff has claimed.
In both of these cases, both parties will often have achieved so much that it would not be reasonable to require them to accept the other party’s position. It will then be up to the court to assess whether “compelling reasons” indicate that one of the parties should be awarded legal costs from the other party.
What is important for a settlement offer to constitute a “compelling reason”?
When assessing whether “compelling reasons” indicate that a party should be exempt from liability for legal costs pursuant to Section 20-2 of the Dispute Act or awarded legal costs pursuant to Section 20-3 of the Dispute Act, Section 20-2, third paragraph of the Dispute Act states that “particular emphasis” shall be placed on whether the opposing party has “rejected a reasonable settlement offer”.
Although the “reasonableness” of the settlement offer must be assessed on a case-by-case basis, two factors in particular are key.
1. The size and content of the settlement offer
What constitutes a “reasonable settlement offer” depends in particular on the size and content of the offer. Experience shows that the settlement offer must be very close to what the other party achieved in the case.
Example: A party’s settlement offer of payment of NOK 500,000 is not “reasonable” if the party is later ordered to pay NOK 1,000,000. On the other hand, the other party would not have had “reasonable” grounds to reject a settlement offer of NOK 1,000,000 or more.
Prior to submitting a settlement offer, it is therefore important to be aware of the litigation risk associated with the various parts of the case, and to try to have some idea of what a realistic judgement outcome might be.
2. The time of the settlement offer
In addition, when assessing “reasonable”, emphasis shall be placed on when the settlement offer was made.
The legislative history, Ot.prp. nr. 52 (2004-2005) page 445, states that the settlement offer must have “been made before the case was filed, or at least at such an early stage in the case that most of the legal costs could have been avoided”. Although in practice, settlement offers made at a later stage are often considered to be “reasonable”, in light of the preparatory statement, settlement offers should be made at an early stage in the preparation of the case. Making a settlement offer at an early stage will in any case be an advantage for the party because the court will often only award legal costs that have been incurred after the settlement offer was made. The idea is that it is only the subsequent legal costs that could have been avoided by the other party accepting the settlement offer.
Hjort lawyers have extensive experience in dispute resolution
Dispute resolution is a central part of Advokatfirmaet Hjort’s work area and history.
Hjort has specialised teams in most areas of law, and Hjort lawyers always assist the public sector, businesses and private individuals in ongoing disputes.
