When involved in a legal dispute, parties are often encouraged to explore settlement before incurring the time and expense of court proceedings. One commonly used settlement mechanism is a Calderbank offer.
What is a Calderbank Offer?
A Calderbank offer is a without prejudice save as to costs settlement offer. This means the offer cannot generally be shown to the court until the issue of costs is considered after judgment. The purpose of a Calderbank offer is to encourage settlement by creating potential costs consequences for a party who unreasonably rejects a reasonable offer.
Advantages of a Calderbank Offer
- Flexibility - Unlike formal Part 36 offers, Calderbank offers are not subject to strict procedural rules. This allows parties to tailor the terms of settlement to suit the specific circumstances of the dispute.
- Potential Costs Protection - If a party rejects a reasonable Calderbank offer and then fails to achieve a better outcome at trial, the court may take that refusal into account when deciding who should pay the legal costs.
- Useful in a Wide Range of Disputes - Calderbank offers can be particularly valuable in cases where Part 36 is unavailable or less appropriate, such as certain commercial disputes, LLP disputes and claims involving non-monetary remedies.
Disadvantages of a Calderbank Offer
- Less Certainty - Unlike Part 36 offers, Calderbank offers do not carry automatic costs consequences. The court retains discretion when deciding what costs order to make.
- Potential for Dispute - Parties may disagree about whether an offer was reasonable or whether it should affect costs. This can lead to additional arguments at the conclusion of the proceedings.
- Requires Careful Drafting - A poorly drafted Calderbank offer may carry less weight with the court. It is important that the offer clearly sets out the proposed settlement terms and the potential costs consequences of non-acceptance.
Calderbank Offers vs Part 36 Offers
Whilst both Calderbank offers and Part 36 offers are designed to encourage settlement, they operate quite differently and each has its own advantages. A Part 36 offer is a formal offer made under the Civil Procedure Rules. It carries prescribed costs consequences if the offer is not accepted and the rejecting party fails to achieve a better outcome at trial.
In many commercial disputes, a Part 36 offer is generally stronger because of the certainty of its cost consequences. The risk of adverse costs can place significant pressure on the other side to settle. However, a Calderbank offer is often preferable where flexibility is required. For example, in shareholder disputes, LLP disputes, partnership disputes or claims seeking injunctive relief, the parties may need a settlement package that goes beyond simply paying a sum of money.
A Calderbank offer can be an effective strategic tool for parties seeking to resolve disputes efficiently while protecting their position on costs. However, because the costs consequences are discretionary rather than automatic, careful consideration should be given to both the terms of the offer and the timing of making it.
If you are involved in a dispute and are considering making or responding to a Calderbank offer, seeking legal advice at an early stage can help ensure you make informed decisions and maximise your prospects of achieving a favourable outcome.