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Court hearings can last weeks and costs can quickly add up to hundreds of thousands of dollars. Many businesses cannot fund ongoing litigation and often it does not make commercial sense to litigate a dispute in court. As a result, the vast majority of commercial litigation matters settle outside of court. One way parties achieve this is by using Calderbank offers. This article explains what a Calderbank offer is and what you should take into account if you have received an offer.

Calderbank Offers 101

What is a Calderbank Offer?

A Calderbank offer is an offer of settlement made by one party to another in an attempt to resolve the dispute. It encourages parties to negotiate instead of going to trial. It must be a genuine compromise open for a reasonable period of time. An important feature of a Calderbank offer is that it is made ‘without prejudice save as to costs’. This means that neither party can present the offer as evidence in court, except when determining which party must pay indemnity costs and the amount of those costs.

Indemnity costs refers to the reasonable legal costs that you incur throughout the court proceedings, including:

  • fees;
  • charges;
  • expenses; and
  • remuneration.

This means that Calderbank offers play a role in informing the judge’s decision when it is a question of costs. While legal costs are generally paid by the losing party in a court case, this burden can be reversed in the event of a rejected settlement offer.

For example, an employee might sue you for wrongful termination. You can try to offer them a reasonable out of court settlement, but they may refuse it. If they win the case in court and are awarded a similar remedy, then you can raise the original offer as evidence that the former employee should bear the burden of paying their own costs as well as your legal costs. This is because they have unnecessarily extended the legal proceedings by refusing to accept your reasonable offer.

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 legal costs of the case.

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.

Considering the Calderbank Offer

You should fairly consider all Calderbank offers you receive. When considering the offer, there are three important considerations to keep in mind.

1. Prospects of Success at a Final Hearing

Your lawyer can provide you with legal advice on your prospects of success. They can also help you decide whether to accept a Calderbank offer or, alternatively, draft a reasonable counter-offer.

2. The Value of Your Case

Make sure you are realistic about the value of your claim and modest in your estimates. It may be useful to think about how your claim value compares to the costs you will incur to carry the case forward. 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’

Imagine succeeding at a final hearing, only to find out the opposing party has empty pockets – not exactly a favourable result. Think about whether the other party will be able to pay if you ‘win’, or whether preparing for the hearing may chew up their funds.

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Not Accepting the Calderbank Offer

Each party should seriously and genuinely consider any offer of settlement they receive. If a court feels that 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 for;
  • whether the offer is a reasonable compromise;
  • the prospects of success for the offeree; and
  • if the terms were expressed clearly and precisely.

However, 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 accept the offer, you should consider making a reasonable counter-offer. In the process of dispute resolution, it is always better to try to negotiate, rather than put up a brick wall.

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. Parties must reasonably consider all Calderbank offers made, or risk an unfavourable costs order even if they do ‘win’. If you have questions about whether to make or accept a Calderbank offer, or how to do so, contact LegalVision’s litigation lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions

What is a Calderbank offer?

It is an offer of settlement made by one party to another in an attempt to resolve the dispute. The offer must be a genuine compromise that is open for a reasonable amount of time. Additionally, the offer is made ‘without prejudice save as to costs’.

What are indemnity costs?

This refers to the reasonable legal costs that you incur throughout the court proceedings, including fees, charges, expenses and remuneration.

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