A Calderbank offer is a written offer, made by one party to another, on a without prejudice basis, in accordance with the principles enunciated in Calderbank v Calderbank [1975] 3 AII ER 333.
A Calderbank offer is an effective way in trying to resolve a matter amicably, by consent, without the need for a determination by the court. It encourages the parties to seriously consider settlement offers as costs orders may follow in circumstances a reasonable offer was rejected.
Giles JA in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37] held that:
The making of an offer of compromise in the form of a Calderbank Letter… where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree‘s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure.
If one party rejects a reasonable Calderbank offer and later the court delivers a less favourable judgment, the court may take the rejected offer into consideration when determining costs.
The onus is on the applicant for indemnity costs, to satisfy the court that the rejection of a Calderbank offer, was unreasonable.
Warren C.J, Maxwell P& Harper A.J.A in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2—5] VSCA 298 at [25] held that:
A court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
- The stage of the proceeding at which the offer was received;
- The time allowed to the offeree to consider the offer;
- The extent of the compromise offered;
- The offeree’s prospects of success, assessed as at the date of the offer;
- The clarity with which the terms of the offer were expressed;
- Whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.
In view of the above principles, whilst preparing a Calderbank offer, it is of essence to note, that such an offer should be marked ‘without prejudice save as to costs’, and state that the offer is made in accordance with the principles enunciated in Calderbank v Calderbank. The terms of the offer must be set out clearly, specify the time within which the offer must be accepted and provide reasons why the offer should be accepted. The offer must also foreshadow that if the offer is not accepted and the offeror obtains a better result following a determination by the court, the offeror will rely on the contents of the Calderbank letter to apply for an indemnity costs order against the offeree.
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Disclaimer: This is intended as general information only and not to be construed as legal advice. The above information is subject to change. You should seek independent legal advice before embarking upon any course of action.
