It goes without saying that it’s best if you can avoid a Court hearing. Obviously, there are times when they are a necessity, but more often they are time-consuming, expensive, and quite frankly, boring. Where possible, you should try and explore settlement with the other party at appropriate junctures throughout the litigation process. Below, we look at exploring settlement by making a Calderbank offer to the other party by way of a Calderbank Letter.
What is a Calderbank Letter?
A Calderbank letter assists by providing a cost deterrent to a party who unreasonably fails to accept an offer of settlement.
The term Calderbank is derived from the case of Calderbank v Calderbank, decided in 1975. It essentially refers to an offer of settlement made by one party in proceedings to the other party, or from one party to another before proceedings are commenced. The offer is expressed as ‘without prejudice save as to costs’. That is, the contents of the letter cannot be used in Court except in relation to the question of costs.
Calderbank offers provide some flexibility for both the offeror when making the offer to settle, and to the Court when assessing the offer as follows:
- The Calderbank may only be in relation to interlocutory proceedings rather than the entire matter;
- The offer may be inclusive of costs;
- You may select different times for the offer to be open depending on what stage of the proceedings the matter is up to.
When Will Courts Consider a Calderbank Offer?
Courts will likely consider Calderbank offers when the question of costs arises. The typical scenario is that ‘costs follow the event’ – the successful party usually gets costs awarded on a party/party basis. A Calderbank letter puts into play the possibility of the successful party seeking an order for costs on an indemnity basis (that is, a higher percentage of their legal costs) from the date the offer was made to the end of the litigation. The Court when exercising their discretion in relation to costs considers the following:
- What were the terms of the offer? Were they clear, precise and able to be accepted? The Court won’t allow a penalty to the other side (additional costs to be paid) if it is unclear what offer was actually made.
- Did the offer represent a genuine compromise of the case? If your claim is for $100,000 and you make an offer to settle the proceedings for $99,990, this will NOT be considered a genuine compromise.
- The offer should note that you intend to bring the offer to the Court’s attention on the question of costs and also confirm that the offer is made in accordance with the principles expressed in the matter of Calderbank v Calderbank.
- Was the rejection of the offer by the offerree unreasonable in the circumstances? If the offer was made too early in the proceedings without allowing the party a reasonable opportunity to weigh up the facts and consider their position, then this may not be considered unreasonable. The Court will use their discretion when considering Calderbank offers.
Calderbank offers can prove a useful tool in negotiating a settlement. If you have any questions as to how to proceed with making a Calderbank offer, let our disputes lawyers know.