What is a Calderbank offer?

In legal negotiations and settlements, various tools can be employed to facilitate fair resolution via settlement while avoiding lengthy court proceedings. One such tool is the Calderbank offer, a mechanism that can be a significant litigation tool in the right hands and thereby impact the outcome of legal disputes.

The Calderbank offer principle originates from the landmark case of Calderbank v Calderbank [1975] 3 All ER 333 (EWCA), where it was established that a party may make an offer in a legal dispute that is without prejudice save as to costs. This means that while the offer cannot be disclosed in court proceedings related to liability, it can be considered when determining the costs of the case.

A Calderbank offer is a “without prejudice, save as to costs” settlement proposal made between litigants in England & Wales. The “without prejudice” element allows both parties to engage in confidential yet candid negotiations, protecting their discussions from being used against them in court. Whilst the “save as to costs” aspect means that the offer can be disclosed to the court when determining who should pay the legal costs. If the party receiving the offer refuses a reasonable settlement and later receives a less favourable judgment, they may be penalised on costs. Calderbank offers are a strategic tool which can encourage settlement and discourage unnecessary litigation.

What happened in the Calderbank v Calderbank case?

The Calderbank offer principle originates from the landmark case of Calderbank v Calderbank [1975] 3 All ER 333 (EWCA), where it was established that a party may make an offer in a legal dispute that is without prejudice save as to costs. This means that while the offer cannot be disclosed in court proceedings related to liability, it can be out to the Judge to be considered when determining the case costs.

In the Calderbank case itself, which is an ideal way to illustrate the principle, the Court ruled that when a winning party in a legal dispute declines a prior settlement proposal presented by the losing side, the losing party can present this settlement offer as a significant factor when determining the suitable amount of costs to be paid. In practical terms, if the damages awarded to the winning party are lower than the initial settlement offer, the losing party might be liable to pay reduced costs to the winning party compared to the standard scenario.

The case of Calderbank v Calderbank, the English Court of Appeal established the concept of a “Calderbank Offer.” This offer is often marked by the disclaimer “without prejudice, save as to costs.” The case involved Mr. and Mrs. Calderbank’s divorce; they had been married for 17 years. The key issues were the division of matrimonial assets, primarily an £80,000 inheritance received by Mrs. Calderbank from her parents during the marriage.

The matrimonial home was registered under Mr. Calderbank’s name, and he continued to live there after the divorce. The Family Court awarded Mr. Calderbank only £10,000 out of the total assets, and the case was complicated by Mrs. Calderbank’s earlier offer to give Mr. Calderbank another property. She appealed, arguing that Mr. Calderbank should not be entitled to legal costs because he had declined her reasonable pre-trial settlement offer.

The Court ruled that if the winning party in litigation refuses a reasonable settlement offer made by the losing party, the losing party can use that offer as evidence to determine the appropriate level of costs payable. In this case, Mr. Calderbank had declined Mrs. Calderbank’s settlement offer of around £12,000, and since his award was less than that amount, the burden of paying legal costs shifted from Mrs. Calderbank to Mr. Calderbank. However, Mrs. Calderbank remained liable for costs incurred up to 14 days after her offer. This decision highlights the significance of considering settlement offers in legal proceedings to determine cost liability.

Difference Between a Part 36 Offer and a Calderbank Offer?

A Calderbank offer differs from a Part 36 offer primarily in its scope and consequences. A Part 36 offer is a formal offer to settle a claim, often carrying significant cost consequences if not accepted. On the other hand, a Calderbank offer is more flexible, as it only affects costs and can be used to demonstrate that the offeror has acted reasonably in attempting settlement.

What are the key aspects of a Calderbank offer?

A Calderbank offer, distinct from a standard offer, possesses the following distinctive attributes:

• Marked as “without prejudice save as to costs.”
• Explicitly references adherence to the principles outlined in Calderbank v Calderbank.
• Demonstrates clarity and precision in its stipulated terms.
• Must be capable of being accepted by the receiving party.
• Clearly specifies the acceptable timeframe for responding, typically within a reasonable duration.
• Furnishes rationales justifying acceptance of the offer.
• Declares that, in case of rejection, the offer will be utilised in an application to the court for indemnity costs.

When can a Calderbank Offer be made?

A Calderbank offer is typically employed in situations where a party wishes to put forward a settlement proposal while safeguarding its position on costs.

It can be particularly useful when there is a desire to avoid the potential adverse costs consequences associated with a Part 36 offer.

How can I Reject a Calderbank Offer?

To reject a Calderbank offer, a formal response should be sent to the offeror stating the rejection. Although a Calderbank offer cannot be referred to in liability-related proceedings, parties must still be cautious in their communications to avoid inadvertently waiving legal privilege.

What happens if I reject a Calderbank offer?

Before declining the Calderbank offer, the party receiving it should carefully assess the potential expenses involved in pursuing a court judgment, consider the probability of achieving their desired outcome, and realise that they bear the responsibility of demonstrating why they consider the Calderbank offer to be unreasonable if they decide to reject it. Once the offer is declined and the parties proceed to court, the receiving party must provide substantial justifications for their belief that the Calderbank offer was not reasonable. Furthermore, if the court’s final decision yields less favourable terms than those outlined in the Calderbank offer, the receiving party may be obligated to cover the legal costs of the offering party from the point of offer rejection.

Can a Calderbank Offer be Withdrawn?

Unlike a Part 36 offer, a Calderbank offer can generally be withdrawn at any time prior to a court decision on costs. However, the timing and manner of withdrawal can have implications for costs assessment, so legal advice is advisable.

How Long is a Calderbank Offer Valid For?

There is no fixed timeframe for the validity of a Calderbank offer. It remains open until a court decision on costs is made or until it is withdrawn by the offeror.

How Do I Respond to a Calderbank Offer?

Upon receiving a Calderbank offer, careful consideration is essential. Legal advice should be sought to evaluate the potential costs implications of acceptance or rejection. Parties may engage in negotiations while being mindful of the without prejudice save as to costs principle.

What Does Without Prejudice Save as to Costs Mean?

The phrase without prejudice save as to costs indicates that communications, negotiations, or offers made under this label cannot be referred to during the main liability-related proceedings. However, they can be disclosed and considered when determining the costs of the case.

Can you counter a Calderbank offer?

The recipient of the Calderbank offer has the option to respond with a counteroffer, which, in effect, nullifies the original proposal put forth by the offering party. Engaging in a counteroffer to a Calderbank offer is advisable, provided it remains reasonable, particularly when deciding to decline the initial proposition.

Importance of Calderbank offers

In the intricate world of legal negotiations, Calderbank offers provide a strategic means to promote settlements while managing the potential costs consequences. Understanding the nuances of this principle, along with its distinctions from Part 36 offers, can empower parties to make informed decisions, navigate negotiations effectively, and potentially achieve more favourable outcomes in their legal disputes. As with any legal matter, seeking professional advice is crucial to ensure proper implementation and maximise the benefits of utilising Calderbank offers.

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