Settlement is when the parties reach a resolution and decide not to take the matter to litigation. A party can make an offer to settle a dispute through a Calderbank offer, which can reduce costs and help resolve a dispute early.
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 idea and name of Calderbank offer comes from the English case Calderbank v Calderbank [1975] 3 All ER 333.
A Calderbank offer must be genuine and be open for a reasonable time period. It is made ‘without prejudice save as to costs’ which means 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 in writing through a Calderbank letter. If the offer is rejected and the dispute goes to court, the Court may take the Calderbank offer into account when the issue of costs arises.
Costs are usually paid by the unsuccessful party. However, if one party unreasonably rejected a Calderbank offer, the Court may make an indemnity cost order enabling the party that made the offer to recover part 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 an offer was genuine and whether rejecting it was unreasonable.
What should be included in a Calderbank Letter?
A Calderbank 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 an indemnity cost application;
- be a genuine compromise;
- give the reasons why the other party should accept the offer;
- be clear, precise and certain; and
- state the period within which the offer must be accepted by and give sufficient time for such acceptance.
Why make a Calderbank Offer?
A Calderbank offer can:
- help potentially reduce the costs by creating an incentive to settle and therefore, avoiding the costs of litigation, and
- if rejected, allow the party that made the offer recover part of the costs. However, while a Calderbank offer permits you to present the offer to the Court, it does not guarantee that the Court will make an indemnity cost order.
The take away
You should seriously consider making or accepting a Calderbank offer. If you have received a Calderbank offer, contact us.
