lawyers settling calderbank offer

Calderbank Offers – The Art of a Reasonable Compromise

By Lyle Slaney

Everybody likes to win, especially from a hard-fought trial that ended up in Court. However, the legal fees involved in preparing and conducting a trial are breathtakingly expensive. One has to also consider the risk involved when placing one’s future in the hands of a decision maker, whose ruling is uncertain. These factors encourage the parties to explore the possibility of compromise and avoid an expensive outcome.

In most cases, litigants see the benefit of a mutual concession and proceed to an early settlement. But other disputants may feel confident in their case and force the matter to trial, in the process rejecting their opponent’s considerable offer. But what happens when the outcome of the trial turns out to be less favourable than the considerable offer that had been provided at an earlier date?

This can leave the other party thinking, “Why did you reject my reasonable offer and unnecessarily subject me to expensive legal fees – perhaps you should pay it!”

This is where the earlier offer comes in useful, provided it was presented as a Calderbank Offer.

What is a Calderbank Offer?

Generally, a Calderbank Offeris an informal and confidential offer by one party to settle the dispute, where the offered terms are not to be disclosed to the Court except on the question of costs.

Such a question of costs would arise where an eventual settlement or judgment is not more favourable than the Calderbank Offer, or that it was unreasonable for the other party to not have accepted it. In that case, the Calderbank Offer could be relied upon by the offering party to support an application for indemnity costs, which – if successful – would recover expenses, disbursements and charges related to the litigation. To be awarded indemnity costs, the Court would have to consider that the litigation expenses were unreasonably incurred due to the other party not accepting the Calderbank Offer.

The origin of the Calderbank Offer comes from the English case of Calderbank v Calderbank [1975] 3 All ER 333. After being granted a divorce, Mr and Mrs Calderbank had a dispute over the division of matrimonial assets. Prior to trial, Mrs Calderbank offered Mr Calderbank the ownership of one of their houses which was valued at £12,000. It should be noted that Mrs Calderbank made this offer in the form of an affidavit stating that, “I am willing, and have always been willing, to make over to the [husband] the house at Alderley Edge.” Mr Calderbank declined this offer and eventually the Court awarded the lower amount of £10,000.

In response, Mrs Calderbank appealed the Court’s award to Mr Calderbank to the English Court of Appeal. Whilst the English Court of Appeal upheld the original Court’s award, it was persuaded by Mrs Calderbank’s second argument that she should have the costs of the Court proceedings, as her offer was without prejudice (WP), valuated more than what Mr Calderbank recovered. The English Court of Appeal found that Mr Calderbank ought to have accepted Mrs Calderbank’s offer instead of persisting with the proceedings and awarded costs from the date the offer was made.

In outlining the principles of a Calderbank Offer, Lord Justice Cairns stated that protection will be afforded to a party who made a compromise in the form of a without prejudice offer, and that offer was as or more favourable than the Court’s apportionment. Then costs will be awarded to the offering party just on the same basis as if the compromise had been accepted.

Constructing a Calderbank Letter

The principles for a Calderbank Offer outlined by Lord Justice Cairns are frequently applied today by litigants seeking to assert the reasonableness of their offer, and if need be, use it for cost proceedings.

When making a Calderbank Offer, it should be written and contain the expression as “without prejudice save as to costs.” Furthermore, the other party should be put on notice that should the matter proceed any further, the offering party would seek costs on a full indemnity basis if the eventual settlement or judgement was not more favourable than the Calderbank Offer, or that it was unreasonable to not have accepted it.

Furthermore, the Calderbank Offer is to outline the duration in which the offer is open. Generally, an offer for the period of 10 days is sufficient. In McKay v Commissioner of Main Roads [No. 7] [2011] WASC 223 (“McKay”), Justice Beech observed from previous cases that offers open for less than a week are “borderline,” with some Courts deciding that four days was acceptable and other Courts deciding four days was not acceptable.

Overall, the party being offered needs sufficient time to accept the Calderbank Letter and the longer the offer duration, the more the Court will consider it reasonable. 

What the Court Considers

Generally, each case depends on its own state of affairs and litigation history. However, the Western Australian Court of Appeal has provided some guidance on what factors it will have to consider. Justice Buss outlined these factors in Ford Motor Co of Australia Ltd v Lo Presti [2009] WASCA 115, at [19] which include:

“(a) the stage of the proceeding at which the offer was received;

(b) the time allowed to the offeree to consider the offer;

(c) the extent of the compromise offered;

(d) the offeree’s prospects of success, assessed as at the date of the offer;

(e) the clarity with which the terms of the offer were expressed; and

(f) whether the offer foreshadowed an application for … indemnity costs in the event of the offeree’s rejecting it.”[p1] 

These factors are telling elements indicating the situation of the parties when the Calderbank Offer was made and whether it was reasonable for the other party to accept that offer.

Additionally, in McKay, Justice Beech stated that a Calderbank Offer can still be considered in awarding litigation costs to the winning party, commonly known as party-party costs, even if the Court was not satisfied that the rejection of a Calderbank Offer by the losing party was unreasonable. Therefore, Calderbank Offers are useful in multiple regards, ensuring that the Court recognises a party has been reasonable throughout the litigation and is rewarded for doing so.

However, there are situations where, in spite making a Calderbank Offer which ended up being more favourable than the trial decision, the Court does not necessarily award indemnity costs or even party-party costs to the offering party. The State Administrative Tribunal (“Tribunal”) case of Evans and Imperial Pools [2020] WASAT 113 (24 February 2021) (“Evans”) is an interesting case, where being a “successful” party does not automatically entitle it to indemnity costs.

In Evans, a homeowner alleged that the swimming pool construction company, trading as “Imperial Pools,” has not complied with the Tribunal’s previous consent orders to seal a leak in the eastern wall of his swimming pool. Imperial Pools maintained that their repair to the leak was effective and that it had repaired the tiling to the top of the pool (“Leak and Tiling Works”), but conceded that it had not complied with the consent orders to provide the requisite finish to the overflow wall and make good of the areas affected by the remedial works (“Conceded Works”).  

During the course of proceedings, Imperial Pools made a “without prejudice save as to costs” offer to pay the owner the amount of $10,000.00 for the finalisation of the matter. This offer included the cost of labour for further works conceded by Imperial Pools as of an unacceptable standard. Imperial Pools stated that the offer was made “as a gesture of goodwill” and that it “far exceed the cost of simply recoating the infinity wall consistent with how the wall was originally finished.”

The Tribunal determined that Imperial Pools had complied with the consent orders as to the Leak and Tiling Works. However, the Tribunal found that, as conceded by Imperial Pools, it had not completed the Conceded Works and awarded the owner the sum of $4,758.05. 

At the cost proceedings held by the Tribunal, both the owner and Imperial Pools sought costs – with the latter seeking costs and compensation under s 87(3) of the State Administrative Tribunal Act 2004 (WA). Whilst the owner’s submissions were dismissed, Imperial Pool’s submission were given particular attention.

In the end, the Tribunal found that Imperial Pool’s offer was made before the date of an expert engineer’s report, which first construed the term “leak.” And so before that report, the reasonable person may be still left open to the possibility there could still be a leak. Therefore, the owner was not unreasonable in not accepting Imperial Pools’ offer, and also, in the dismissal of Imperial Pool’s application. Furthermore, the Tribunal also considered that Imperial Pools provided a period of at least nine months in delays to complete the rectification works as another relevant factor in not reimbursing Imperial Pool’s costs. The Tribunal stated that being the “successful party does not give rise to a prima facie entitlement to costs.”

Important

Overall, Calderbank Offers must be timed well and be made at such a period where the issues, evidence and stakes are clear, so that the parties are aware of the risks and expenses involved if the matter proceeds to trial. Furthermore, as displayed by the Tribunal at Evans, successful parties are not necessarily entitled to costs and ideally come with clean hands when making an indemnity or party-party costs application with the support of a Calderbank Offer.

For example, seeking legal assistance from commercial conveyancing solicitors in Perth only to later encounter issues from the other party is a truly unfortunate occasion. If the need arises and the situation goes to trial, bear in mind that a Calderbank Offer exists – but be sure to comply with the requirements so that it is not found invalid.

Nonetheless, Calderbank Offers are essential during litigation in outlining a party’s seriousness in negotiating a compromise and their clear intention to not waste money unnecessarily at trial. Generally, the Courts provide importance to Calderbank Offers by way of public policy to promote mutually beneficial agreements rather than encouraging unreasonable litigious behaviour.

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