A party can make an offer to settle a dispute through a Calderbank offer. Settlement is when the parties reach a resolution and decide not to take the matter to litigation. A Calderbank offer can help resolve a dispute early and potentially reduce costs.
What is a Calderbank Offer?
A Calderbank offer is a formal offer to settle a dispute made by one party to the other that clearly states the offer will be disclosed to the court for the issue of costs. The name and idea of Calderbank offer was taken from the English case Calderbank v Calderbank [1975] 3 All ER 333. The Calderbank offer must be a ’genuine’ offer and be open for a reasonable time period. Additionally, a Calderbank offer is made ‘without prejudice save as to costs’ meaning that it cannot be used as evidence in court against the other party. However, if it is unreasonably rejected it can be used by the court when assessing the question of indemnity costs.
How does a Calderbank Offer Work?
Either side of a dispute can make a Calderbank offer before the dispute goes to trial. A Calderbank offer is made through a written offer called a Calderbank letter. If the offer is rejected and the dispute goes to court, when the issue of costs arises the court may take into account the Calderbank offer.
Costs are usually paid by the unsuccessful party. However, if the Calderbank offer was unreasonably rejected by one party, the court may make an indemnity cost order instead. This means the party that made the offer may be able to recover a portion of the costs. The court issues indemnity cost orders because the rejecting party had the option to settle the matter for a reasonable sum of money but instead took the matter to trial incurring further legal costs. When assessing the costs the court will consider whether there was a genuine offer and whether it was unreasonable to reject the offer.
What is Included in a Calderbank Letter?
There are specific features that should be included in the Calderbank letter. The letter should:
- state the offer is ‘without prejudice save as to costs’;
- state the offer is made according to the principles derived from the Calderbank v Calderbank decision;
- state that if the other party rejects the offer, it can be used in court for a indemnity cost application;
- state the time the offer must be accepted by and give sufficient time to accept the offer;
- give the reasons why the other party should accept the offer;
- be clear, precise and certain; and
- be a genuine compromise.
Benefits of a Calderbank Offer
There are a few benefits to a Calderbank offer that encourage a party to use them. A Calderbank offer can help potentially reduce the costs. It does this by creating an incentive to settle and therefore, avoiding the costs of litigation. It also, if rejected, can allow the party that made the offer to recover part of the costs. However, it is important to note that while a Calderbank offer permits you to present the offer to the Court, it does not guarantee that an indemnity cost order will be made.
Conclusion
You should strongly consider making or accepting a Calderbank offer. If you receive a Calderabnk offer it is best to first speak to your lawyer. For more information please contact 1300 337 997 or fill out the form on this page.
Lauren is studying a Bachelor of Law and a Bachelor of Business at UTS. She is interested in commercial law, finance and banking law, and property law.
Phil is a director at OpenLegal. He has over 16 years experience working in private practice and in-house counsel in Sydney and London, giving him expertise in employment law, IP, finance, leases, dispute resolution, insurance and contracts.
