Blog Detail

Resolving disputes with ‘Calderbank’ offers.

 

Generally, all disputes whether business, family, or consumer related are a consequence of a human factor. Then when disputes cannot be resolved amicably between the parties, lawyers are engaged to assist to bring an end to the disagreement. One of the important tools that lawyers may use, which have consequences for both disputing parties is the offer of compromise based on the principle of Calderbank v Calderbank [1975]. 

 

Public policy is aimed at encouraging disputing parties to settle their disputes early than bring them into full blown litigation. Then in aid of this public policy, lawyers will attempt to settle legitimate disputes early if there is credible evidence to support the claim or defence with the use of settlement offers ‘Without Prejudice Save As to Costs’ on the basis of the Calderbank principle. 

 

The case of Calderbank involved a matrimonial dispute where the wife offered the husband 12,000 pounds for him to leave the family home. The husband refused the monetary offer to leave the house. At the court hearing, the court awarded the husband 10,000 pounds, which was 2,000 pounds less than the wife offered. The wife then raised to the court the husband should pay the wife’s legal costs, because the husband did not accept the reasonable offer to settle put forward by the wife. The court held that as the offer was reasonable by the wife, the husband should pay the wife’s legal costs as it was wrong for the husband not to accept the offer that was reasonable on the circumstance. 

 

As another example, where a contract dispute occurs and the plaintiff raises a claim of $120,000 where the evidence is 70% factually supported, and the defendant offers $75,000 to settle the claim on the basis of ‘Without Prejudice Save As to Costs’ on the principle of Calderbank, and the plaintiff rejects the offer and the matter proceeds to a full hearing, where the plaintiff succeeds and is awarded damages of $68,000; the defendant may request a costs order on an indemnity basis from the date the offer was presented to the offeree. This means, the defendant is requesting the court to issue orders that the plaintiff is to pay the legal costs of the defendant from the time of the offer of $75,000 was made.

 

Where a Calderbank offer is made, this does not mean that a party will when a costs order against another party to pay their legal fees. All claims that are made for legal costs to be paid by the other party to the proceedings is subject to the discretion of the tribunal or court. In Grbavac v Hart [1997] the court said; It is open to a judge exercising the discretion about the disposition of the costs of a proceeding to have regard not only to formal offer that may have been made pursuant to Rules of Court but, in appropriate circumstances, to informal offers of compromise that may have been made. 

 

There are no formality requirements for a Calderbank offer except for the offer to be expressed ‘Without Prejudice Save As to Costs’ and an indication that the letter will be adduced into evidence at the tribunal or court on the question of costs. 

 

There are two possible consequences where the Calderbank offer is more generous than the judgement: (1) the court allows the offeree costs up to the date of the offer, with a possible allowance of time for consideration of the offer, and then ordering the offeree to pay the offeror’s costs after that date; (2) allowing the offeror costs quantified on an indemnity basis as apposed to the usual party and party basis. 

 

The main point about costs under a Calderbank offer is that costs are entirely at the discretion of the court. 

 

The drafting of the Calderbank offer requires careful consideration with the terminology used to avoid the court rejecting the offer on the admissibility of costs. 

 

Where a Calderbank offer is presented to a tribunal or court for a costs order against another party, some of the matters the court will take into consideration include: at what stage of the dispute the offer was presented to the offeree; the length of time the offeree had to consider the offer presented by the offeror; the type of compromise that was put forwarded by the offeror; what was the offeree’s chance of success of pursuing the claim at the date of receiving the offer; and did the offer have clarity in meaning for the offeree to consider. 

 

Where a dispute occurs and an offer is presented under the Calderbank principle to an offeree to settle the matter, the offer must be “a genuine offer of compromise”; and the offeree must be given appropriate time to consider and deal with the offer. In Herning v GWS Machinery Pty Ltd (No 2) [2005] the court held that an award for indemnity costs will not be made unless it was unreasonable for the offeree not to accept the offer. 

 

There are two ways an offer of settlement may be made to another party where a dispute has arisen. One is on the basis of  the Calderbank offer principle, and the other is by the Civil Procedure Rules. Where an offer is made under the Civil Procedure Rules there are various factors that need to be considered and some of these include: that an offer under the rules will generally have the same flexibility as is available under the Calderbank principle; the offeror will have virtually automatic favourable cost consequences if not accepted by the offeree if the offer was reasonable; and there is a burden on the offeree to establish exceptional circumstances as to why the offer was not accepted. 

 

There are differences between a Calderbank offer and an offer under the Civil Procedure Rules to settle a disputed matter and both options must be considered when an offer is to be presented to another party, and how it will impact on the outcome for achieving a resolution, or a costs order if the dispute continues to full litigation. 

 

The best outcome in all disputes is the amicable resolution, and the efficient way to resolve the dispute is to open communication with the other party with the assistance of a lawyer. So take that prudent step and get that legal advice to protect your legal rights and interests. 

 

The comments in the aforementioned do not constitute legal advice and are general in nature, and if legal advice is required please contact: John Melis at Legal AU Pty Ltd (03) 9999 7799 www.legalau.com 

 

Legal AU Pty Ltd Lawyers are “Liability limited by a Scheme approved under Professional Standards Legislation.”