A Calderbank offer is an extremely useful settlement tool used by solicitors when attempting to resolve a dispute. Although it may seem simple, Calderbank offers can become quite complex and involve many factors when both drafting and considering whether to accept or reject the offer. Parties use Calderbank offers as it encourages the parties to negotiate instead of going to trial, and the process of proceeding to court then leaves the costs in the discretion of the court.To find out more about Calderbank offers, read on.
What is a Calderbank offer?
A Calderbank offer is an offer to settle a dispute, made by one party to another. It is a type of settlement offer, and encourages parties to negotiate as opposed to going to trial. A calderbank offer’s main feature is that it is made ‘without prejudice save as to costs’, meaning that neither party can use the offer as evidence in court, except in the case of determining which party must pay the costs of indemnity and the amount pertaining to these costs. Indemnity costs are all costs incurred by a party when undergoing litigation proceedings. Calderbank offers are generally written, and can be defined as an ‘all-in’ offer inclusive of all legal costs.
When is the offer used?
A Calderank offer is used by either party in an attempt to resolve the dispute. Calderbank offers create the opportunity to save both costs and time by not pursuing litigation. Calderbank offers are used to settle the dispute for a lower amount than what going to trial would cost both parties. Calderbank offers also ensure that if a more favourable outcome is reached, the offer can be presented to the court in support of a request for indemnity costs from the time the offer was made. Lastly, Calderbank offers are a great mechanism for flexibility, such as in the instance that the unsuccessful party wishes to accept an offer but does not wish to pay within the designated time frame. The Calderbank offer allows more flexibility than the court system, so long as the offer is set out clearly regarding the payment of the sum.
Why is it called a Calderbank offer? What is the case of Calderbank v Calderbank?
The Calderbank offer derives its name from the 1975 English Court of Appeal decision in Calderbank v Calderbank, between Mr and Mrs Calderbank. The case established the principle that if a successful party rejects an early settlement offer from the unsuccessful party, the rejection can influence how the court decides who is liable for indemnity costs. The unsuccessful party can leverage the settlement offer as evidence towards the costs payable. In Calderbank v Calderbank, despite Mr Calderbank being successful, the court reverted the burden of paying legal costs back onto him as they found that Mr Calderbank’s refusal to accept Mrs Calderbank’s offer had been unnecessarily prolonged.
What will the court consider with a Calderbank offer?
The court will consider:
- Whether There was a genuine attempt to settle litigation
- If the offer was clear in its terms
- If it was left open for a reasonable period of time for acceptance eg. 14 to 28 days
- When exactly the offer was made
- The offeree’s prospects of success
What is a Calderbank letter?
A Calderbank letter is a formal, written offer of settlement and is used to encourage negotiation with the other party. Often when drafting a letter, it will be framed as an offer of compromise exclusive of costs. A Calderbank letter is drafted prior to taking a matter to a hearing. A Calderbank letter is the acceptance of the offer, which the offeree must be capable of.
What should a Calderbank offer include?
A Calderbank offer, as opposed to a regular offer, will have the following defining characteristics:
- Marked as a “offer of compromise exclusive of costs”
- States that the offer is made within the principles set out in Calderbank v Calderbank
- Is clear and certain in its terms
- Must be capable of acceptance
- States clearly the time frame in which the offer must be accepted ie. A reasonable period of time
- Provides reasons as to why the offer should be accepted; and
- States that if rejected, the offer will be relied upon for an application to the court for indemnity costs
What should a party consider when deciding whether to accept the offer?
The offeree (the person deciding whether to accept or reject the offer) should consider:
- If rejecting the offer, the offeree has the onus of proving why the Calderbank offer was unreasonable
- The likelihood of a favourable outcome
- The costs of proceeding to judgement
- Whether there is a reasonable compromise
What does ‘offer of compromise exclusive of costs’ mean?
An ‘offer of compromise exclusive of costs’ refers to what would occur if the parties were to agree to compromise and accept a settlement offer, in addition to costs (ie. indemnity costs). Thus, exclusive of costs means that parties will agree to the settlement offer but this omits the costs associated with the offer.
Is a Calderbank offer legally binding? Can the offer be withdrawn?
Once accepted, the Calderbank letter and offer create a legally binding contract between the parties. The offer must be “sufficiently clear” to create a binding contract. A Calderbank offer can be withdrawn at any time by the offeror prior to acceptance by the offeree. Once it has been withdrawn or rejected, it is no longer valid. The offer can also not be withdrawn during the acceptance period unless the Court has ordered it. This will only occur if the Court believes there to be a genuine mistake or there has been a recent change in the nature of the case.
What happens if I reject a Calderbank offer?
Prior to rejecting the Calderbank offer, the offeree should carefully consider the costs of proceeding to judgement, the likelihood of receiving the outcome they desire and understand that they have the onus of proving why the Calderbank offer was unreasonable if they reject. Once rejected and the parties proceed to court, the offeree must provide sufficient reasons as to why they believed the Calderbank offer to be unreasonable. Additionally, once the judgement has been made and the outcome awarded by the Court is on less favourable terms than those described in the Calderbank offer, the offeree may have to pay the offeror’s legal costs from the time the offer was rejected.
Can you counter a Calderbank offer?
The offeree is able to counter the Calderbank offer, however, this cancels out the initial offer made by the offeror. Counter offering a Calderbank offer is recommended so long as it is reasonable, if you choose to reject the initial offer.
If you require further assistance with Calderbank offers, you should seek legal advice. Legal Kitz can direct you with your next step, whether you are considering offering a letter to settle a dispute, or have been offered a letter to settle a dispute. Our Legal Kitz business specialists can assist with ensuring that your concerns are addressed, and can provide you with advice that is tailored to your situation. You can book a free 30-minute consultation via our website now.