In legal negotiations and settlements, there are different ways to help disputing parties reach fair resolutions without going to court, like alternative dispute resolution. One of these tools, commonly used in cases like commercial disputes is the Calderbank offer.
Calderbank offers can be a good way to encourage another party to accept a settlement while managing the possible risks and costs of making an offer.
During disputes, both parties need to understand what it means to make or receive a Calderbank offer, and the consequences of rejecting one, which we'll cover in this article.
Table of Contents
- What is a Calderbank offer?
- The case of Calderbank v Calderbank
- What are the advantages of Calderbank offer?
- What is the difference between a Part 36 Offer and a Calderbank Offer?
- How to draft a Calderbank offer
- When would you use a Calderbank Offer?
- Can a Calderbank Offer be withdrawn?
- Can you counter a Calderbank offer?
- What happens if I reject a Calderbank Offer?
- How can I reject a Calderbank Offer?
- How can Lawhive help?
What is a Calderbank offer?
A Calderbank offer is a settlement offer marked as “without prejudice, save as to costs.” This means the offer can’t be used in court to decide who’s at fault, but it can be shown to the judge when considering who should pay more in legal costs.
The upshot of a Calderbank offer is that if a party rejects a reasonable settlement offer and goes on to receive a worse outcome in court, they might have to pay more in costs.
The case of Calderbank v Calderbank
The Calderbank offer originated from the landmark case of Calderbank v Calderbank [1975] 3 All ER 333 (EWCA).
The main issue in the case was the division of assets during the divorce of Mr. Calderbank and Mrs. Calderbank. Before the court hearing, Mrs. Calderbank offered to give Mr. Calderbank a property, which he declined. However, he only went on to be awarded £10,000 by the court.
Subsequently, Mrs Calderbank argued that her ex-husband shouldn’t be able to claim legal costs because he had previously declined what was a reasonable pre-trial settlement.
In short, the court decided that if the winning side in a dispute (Mr. Calderbank) turns down a fair settlement offer from the losing side(Mrs. Calderbank), the losing side can use the offer to argue about how much they should pay in costs.
What are the advantages of Calderbank offer?
Calderbank offers provide flexibility in resolving disputes. When you make one, you can decide how long the other side has to accept it, retract it if needed, and set the payment terms.
Plus, because it's marked "without prejudice save as to costs," a Calderbank offer can't be used against you in court for determining liability. This means you can negotiate freely without worrying about your words being used against you later.
What is the difference between a Part 36 Offer and a Calderbank Offer?
A Calderbank offer and a Part 36 offer differ mainly in what they cover and what happens if they're not accepted.
As explained, a Calderbank offer is a flexible proposal marked “without prejudice save as to costs.” This means the court can only consider it for costs at the end of the case. If accepted, a Calderbank offer creates a legally binding contract.
On the other hand, a Part 36 offer is an offer to settle a claim under the much stricter Civil Procedure Rules.
Part 36 offers have specific cost consequences and can be made before court proceedings start. Further, if the other party doesn’t accept and fails to do better in court, they might have to pay extra on top of costs and interests.
Calderbank offers are sometimes used when Part 36 doesn’t apply, for example in small claims or during arbitration.
How to draft a Calderbank offer
To be valid, a Calderbank offer should:
Be marked as “without prejudice save as to costs.”
Refer to the principles from the Calderbank v Calderbank case
Be clear and specific in its terms
Be acceptable to the other party
Explain why the offer should be accepted
Set a clear deadline for responding, usually within a reasonable time
State that if the offer is rejected, it can be used in court to ask for extra costs to be paid.
When would you use a Calderbank Offer?
Calderbank offers are often used when one party wants to propose a settlement but also protect its position on costs.
They are most commonly encountered in commercial dispute resolution, but may sometimes come about in family law cases that fall outside the definition of financial remedy proceedings.
That being said, not every settlement is suitable for a Calderbank offer and the timing of such an offer can affect your case. Therefore, if you’re considering making a Calderbank offer, it is wise to get advice from a litigation solicitor to understand your options and position.
Can a Calderbank Offer be withdrawn?
A Calderbank offer can typically be withdrawn before the court decides on costs. However, the timing and context of the withdrawal can influence a judge's decision on costs, too.
If not withdrawn, a Calderbank offer stays valid until the court decides on costs. Therefore, it’s a good idea to get legal advice before making or withdrawing a Calderbank offer.
Can you counter a Calderbank offer?
You can reply to a Calderbank Offer with a counteroffer of your own. Doing so would cancel out the original offer.
Counteroffers are a common response over outright rejections, as they can serve to progress negotiations and secure a good outcome before ending up in court.
What happens if I reject a Calderbank Offer?
If you reject a Calderbank offer and the court’s decision ends up being worse than that offer, you might have to pay the other side's legal bills from when you said no.
How can I reject a Calderbank Offer?
To reject a Calderbank offer, you must send a formal reply to the person making the offer, clearly saying that you’re rejecting it.
The wording of this rejection is very important. Should it contain any statement that acknowledges or discusses aspects of a case in a way that could be seen as admissions or concessions, it could weaken your legal position.
Additionally, if the rejection is not marked as "without prejudice" and inadvertently reveals information that could be used against you in court, it might waive legal privilege.
A solicitor can help with drafting an effective Calderbank offer rejection to minimise these risks.
How can Lawhive help?
At Lawhive, our network of expert litigation solicitors is on hand to help you negotiate a settlement with the help of a Calderbank offer, or provide advice if you’ve received one.
To get started, contact our Legal Assessment Specialists for a free case evaluation today.