Summary
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A Calderbank offer is a written settlement proposal made “without prejudice save as to costs”, allowing courts to consider it when deciding legal costs after a dispute.
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It encourages early resolution and can shift cost liability if a reasonable offer is rejected and the final judgment is less favourable.
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To be effective, it must be clear, reasonable, and open for acceptance for a defined period.
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This guide explains Calderbank offers for business owners in Australia, outlining how they work and when to use them, prepared by LegalVision, a commercial law firm that specialises in advising clients on commercial disputes.
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It provides a practical explanation of risks, cost implications and key considerations when making or responding to such offers.
Tips for Businesses
Use Calderbank offers to encourage settlement and manage costs. Ensure offers are clear, reasonable and time-bound. Assess your prospects, claim value and the other party’s ability to pay before accepting or rejecting. Document all offers carefully and seek legal advice before responding.
A Calderbank offer is a formal settlement proposal made during a dispute that can later influence who pays legal costs if the matter proceeds to court. It encourages parties to resolve disputes early by attaching cost consequences to unreasonable refusals. This article explains what a Calderbank offer is and what you should consider if you have received an offer.
What is a Calderbank Offer?
A Calderbank offer, also known as a Calderbank letter or Calderbank proposal, is an offer of settlement made by one party to another to resolve a legal dispute. It encourages parties to negotiate instead of going to trial. It must be a genuine compromise open for a reasonable period. An essential feature of a Calderbank offer is that it is made ‘without prejudice save as to costs’.
What Does “Save as to Costs” Mean?
The phrase “save as to costs” is a key element of a Calderbank offer. It means that while the offer cannot be presented as evidence in court during the trial or hearing, the court may be informed of it after the proceedings have concluded, specifically when determining which party must pay indemnity costs and the amount of those costs.
What Are Indemnity Costs?
An indemnity cost refers to the reasonable legal costs that you incur throughout the court proceedings, including:
- fees;
- charges;
- expenses; and
- remuneration.
For example, suppose your employee sues you for wrongful termination. You can offer them a reasonable out-of-court settlement, which they subsequently refuse. If they win the case in court and are awarded a similar remedy, you can raise the original offer as evidence that the former employee should bear the burden of paying their own and your legal costs. This is because they have unnecessarily extended the legal proceedings by refusing to accept your reasonable offer.
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Why is it Called a Calderbank Offer?
The terminology of a ‘Calderbank offer’ comes from the landmark case of Calderbank v Calderbank. This important decision established the idea that when a successful party in a case refuses to accept an earlier settlement offer from the unsuccessful party, this rejection of the offer can be used as evidence when deciding who is responsible for financing the case’s legal costs.
For this to be the case, the terms of the offer outlined in the Calderbank letter must be reasonable and comparable to the sum awarded by the court.
What is Included in a Calderbank Offer?
The specific contents of a Calderbank offer will likely vary depending on the particular nature of the dispute and the parties involved.
A Calderbank offer typically includes specific terms and proposals for settlement made by one party to the other during the course of litigation. This may include a specific monetary amount to be paid by one party to the other, a list of actions to be taken, or any other conditions that would resolve the dispute.
Considering the Calderbank Offer
You should reasonably consider all Calderbank offers you receive. When considering the offer, there are three important considerations to remember.
1. Prospects of Success at a Final Hearing
Whether or not you should accept a Calderbank offer will largely depend on what result you will likely receive if the dispute proceeds to court. Your lawyer can provide legal advice on your prospects of success at a final hearing. They can also help you decide whether to accept the offer or draft a reasonable counteroffer.
2. The Value of Your Case
Make sure you are realistic about the value of your claim and modest in your estimates. Consider how your claim value compares to the costs you will incur to carry the case forward, such as the cost of legal representation and the time you will have to spend attending court. Balance these considerations against the Calderbank offer you have received. Remember that it can often be 9-12 months before you find yourself at a hearing.
3. The Cost of ‘Winning’
Unfortunately, parties may find that despite succeeding in their case, the opposing party does not have the funds to pay. This is not exactly a favourable result. Consider whether the other party can pay if you ‘win’ or whether preparing for the hearing may chew up their funds.
Not Accepting the Calderbank Offer
Each party should seriously and genuinely consider any offer of settlement they receive. If a court feels your rejection is unreasonable, they may order you to pay the other party’s court costs. When determining whether rejection of a Calderbank offer was unreasonable, the courts may consider, amongst other factors:
- the timing of when the offer was made (early or late in the proceedings);
- how long the offer was open;
- whether the offer is a reasonable compromise;
- the prospects of success for the offeree; and
- if the terms were expressed clearly and precisely.
Note that you do not have to accept a Calderbank offer. For instance, if the other party does not give you sufficient time to consider the offer, or it is too early to determine the full extent of each party’s position, acceptance may not be the right course of action. If you do not wish to accept the offer, consider making a reasonable counteroffer.
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Key Takeaways
A Calderbank offer can be a powerful tool in settlement negotiations. It can encourage parties to negotiate candidly and make a genuine effort to reach a compromise without incurring the expenses associated with litigation. Parties must reasonably consider all Calderbank offers or risk an unfavourable costs order even if they do ‘win’.
LegalVision provides ongoing legal support for businesses through our fixed-fee legal membership. Our experienced litigation lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 1300 544 755 or visit our membership page.
Frequently Asked Questions
It is an offer of settlement made by one party to another to resolve the dispute. The offer must be a genuine compromise open for a reasonable amount of time. Additionally, the offer is made ‘without prejudice save as to costs’.
This refers to the reasonable legal costs you incur throughout the court proceedings, including fees, charges, expenses and remuneration.
The term ‘Calderbank offer’ comes from the landmark case of Calderbank v Calderbank.
Can you withdraw or revise a Calderbank offer?
Yes, you can withdraw or revise a Calderbank offer at any time before acceptance. However, you should clearly communicate any changes in writing to avoid confusion and ensure the offer remains legally effective.
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