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From Calderbank v Calderbank 1976 and originally confined mainly to family property disputes, an offer of settlement made before the trial of an action and contained in a letter written ‘without prejudice’, but expressly reserving the right to bring the letter to the notice of the judge on the issue of costs after judgment in the action. An offer of settlement can be made at any time by either of the parties. The offer of settlement should be in writing and clearly set out the proposal that a party wants and the reasons for the offer as an offer of settlement that cannot be understood is unlikely to be accepted by the other party.
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21 February 2012
Introduction
Calderbank letters
Relevant case law
Comment
Introduction
While the award of costs is at the discretion of the courts in Ireland, as a general principle, costs follow the event.(1) Therefore, although there are exceptions (eg, complex litigation where a multitude of issues arise, in which case discrete cost awards might be made), a party that is overall successful in litigation can expect to be awarded its costs.
Where a party believes that it may have liability in respect of proceedings, it can take steps to protect itself against a costs award that might be made against it. For example, it can lodge money in court or – as is increasingly often the case – make a Calderbank offer to settle, which the court can take into account when considering costs. Statutory Instrument 12/2008 (which amends Order 99 of the Rules of the Superior Courts) specifically provides that a court may have regard, when awarding costs, to the terms of any offer in writing sent by a party to any other party to satisfy the claims being advanced. A recent case has again demonstrated how offers to settle – or Calderbank letters – can have cost implications where they are unreasonably refused.
Calderbank letters
A Calderbank letter is a letter which is marked 'without prejudice save as to costs' and sent by one party offering to settle a claim for a specified sum. The court is not made aware of the offer until it comes to determine the question of costs. Generally speaking, if a successful party is awarded more by the court than it is offered in the Calderbank letter, it is said to have beaten the offer and the court's discretion regarding costs is exercised in its favour. However, if the successful party fails to beat the offer, the court should take that into account and disallow a portion of the successful party's costs. The rationale behind this is that if the offer had been accepted, the litigation could have been compromised earlier. The Calderbank offer effectively operates as a penalty or disincentive to an offeree for rejecting a reasonable offer. If pitched at an appropriate level, the Calderbank offer will be sufficiently attractive to the recipient to accept, bearing in mind the risk of the costs consequences if it fails to beat the offer at trial.
Relevant case law
Such offers were recently considered in Geraghty v Galway County Council,(2) where the court clarified that:
'The purpose of such a Calderbank letter or offer, as it is commonly known, is to promote the settlement because of the party's consciousness of a potential costs penalty if a reasonable offer is refused. The Calderbank letter also brings to the court's attention any unreasonable behaviour of parties and recognises the offerer's willingness to reach a settlement. The rule does not require any necessary formality nor, indeed, separate Calderbank letters to be sent to the parties.'
The court noted that the leading Irish authority is the decision in Murnaghan v Markland Holdings Ltd,(3) in which a 'without prejudice save as to costs' letter offered the sum of €300,000 in full and final settlement of all claims in the proceedings, without admission of liability. The offer further stated that if the plaintiff did not recover more than the €300,000 offered, the letter would be brought to the attention of the court and appropriate orders would be sought in light of the offer. The plaintiff was ultimately awarded only about 80% of the amount offered and the defendants submitted that the court should have regard to that in exercising its discretion regarding costs.
Calderbank Letter Templates
The judge in Murnaghan noted that no Irish jurisprudence regarding Calderbank offers as they related to costs had been cited, although she did accept that the principle had previously been recognised in Ireland.(4) She also cited Foskett in The Law and Practice of Compromise concerning the Calderbank jurisprudence, noting that:
'This is an offer expressed to be 'without prejudice except [or save] as to costs'. In other words, it is intended to have all the features of a pure 'without prejudice' offer, but enables reference to it to be made on the issue of costs if it is not accepted. An offer of settlement of this nature first gained more widespread recognition following a Family Division case [Calderbank v. Calderbank [1976] Fam. Law 93], although it had been used fairly widely in other Divisions and its use had been commended and encouraged.'(5)
The judge held that the Calderbank offer should have no bearing on the issue of costs. The first reason was that the offer had been made on the first day of the hearing, which she felt was too late: 'While it came literally at the eleventh hour, metaphorically it came way beyond 'the eleventh hour'.' More importantly, the judge noted that the offer as made in this case left liability for costs, including the costs which had accrued to the date of the offer, at large. Since the offer lacked certainty as to the totality of the outcome flowing from either acceptance or non-acceptance, it was impossible to determine whether the offer had properly been beaten. Rather, the judge held that such certainty was a 'pre-requisite to penalising the offeree for non-acceptance'.
In the more recent Geraghty decision, which dealt with the costs arising from the substantive hearing, the court was referred to a 'without prejudice save as to costs' letter. In considering the principles arising from such a letter, the court cited the Murnaghan decision at length. The court noted in particular that, while the genesis for Calderbank offers derived from a family law case, their use is more extensive than family law, and this broadened use was both commended and encouraged. The court also noted that since the Murnaghan decision, Statutory Instrument 12/2008 had come into effect, which gave further legitimacy to the court's consideration of the impact of settlement offers on costs.
The defendants in Geraghty offered, by way of a 'without prejudice save as to costs' letter, specific sums to both Mr Geraghty and fellow plaintiff Mr Gilmore in respect of their consequential loss claims. The letter was stated to be open for acceptance for a period of 14 days, and if accepted, the plaintiffs' costs would also be met by the defendants. The offer was not accepted.
At the hearing, Geraghty was awarded significantly less than the amount offered and Gilmore was awarded more than the sum offered. The court felt that the Calderbank offer had no relevance on the facts before it with regard to Gilmore, as he had beaten the offer, and ruled that he was entitled to his costs. However, since Geraghty had been awarded substantially less than the amount offered in the Calderbank letter, the court refused to allow him his costs in respect of the claim he had made for consequential losses. Accordingly, it was a relevant factor in making the costs award in this case.
Comment
Calderbank letters can be effective in bringing about the resolution of disputes when cast appropriately. If pitched at an appropriate level, they can mean that the refusal of a reasonable offer could have potentially significant cost consequences. If a Calderbank offer is received by a plaintiff, consideration must be given as to whether its non-acceptance puts that plaintiff at risk of not being awarded its costs if it succeeds at trial. For defendants, Calderbank offers can help to bring about early and cost-effective settlement. However, it is important that any such offer be made as early as possible in the litigation process, and that it make express provision for both the substantive matter in dispute and the costs. It should also, of course, be marked 'without prejudice as to costs'.
For further information please contact Gearoid Carey at Matheson Ormsby Prentice by telephone (+353 1 232 2000), fax (+353 1 232 3333) or email (gearoid.carey@mop.ie).
Endnotes
(1) Order 99, Rule 1, Rules of the Superior Courts.
(2) [2011] IEHC 447.
(3) [2004] IEHC 406.
(4) For example, by the Supreme Court in O'Neill v Ryanair (No 3) [1992] 1 IR 166.
(5) Fifth Edition (2002) at para 26-05.
Calderbank Letter Example
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Court hearings can last weeks and costs can quickly add up to hundreds of thousands of dollars. Many businesses cannot fund ongoing litigation and often it does not make commercial sense to litigate a dispute in court. As a result, the vast majority of commercial litigation matters settle outside of court. One way parties achieve this is by using Calderbank offers. This article explains what a Calderbank offer is and what you should take into account if you have received an offer.
Calderbank Offers 101
What is a Calderbank Offer?
A Calderbank offer is an offer of settlement made by one party to another in an attempt to resolve the dispute. It must be a genuine compromise open for a reasonable period of time. An important feature of a Calderbank offer is that it is made ‘without prejudice save as to costs’. This means that neither party can present the offer as evidence in court, except when determining which party must pay indemnity costs and the amount of those costs.
Watch sherlock bbc. Indemnity costs refers to the reasonable legal costs that you incur throughout the court proceedings, including:
- fees;
- charges;
- expenses; and
- remuneration.
This means that Calderbank offers play a role in informing the judge’s decision when it is a question of costs. While legal costs are generally paid by the losing party in a court case, this burden can be reversed in the event of a rejected settlement offer.
For example, an employee might sue you for wrongful termination. You can try to offer them a reasonable out of court settlement, but they may refuse it. If they win the case in court and are awarded a similar remedy, then you can raise the original offer as evidence that the former employee should bear the burden of paying their own costs as well as your legal costs. This is because they have unnecessarily extended the legal proceedings by refusing to accept your reasonable offer.
Why is it Called a Calderbank Offer?
The terminology of a “Calderbank offer” comes from the landmark case of Calderbank v Calderbank. This important decision established the idea that when a successful party in a case refuses to accept an earlier settlement offer from the unsuccessful party, this rejection of the offer can be used as evidence when deciding who is responsible for financing the legal costs of the case.
For this to be the case, the terms of the offer outlined in the Calderbank letter must be reasonable and comparable to the sum awarded by the court.
Considering the Calderbank Offer
You should fairly consider all Calderbank offers you receive. Miroslav philharmonik free download. When considering the offer, there are three important considerations to keep in mind.
1. Prospects of Success at a Final Hearing
Your lawyer can provide you with legal advice on your prospects of success. They can also help you decide whether to accept a Calderbank offer or, alternatively, draft a reasonable counter-offer.
2. The Value of Your Case
Make sure you are realistic about the value of your claim and modest in your estimates. It may be useful to think about how your claim value compares to the costs you will incur to carry the case forward. Balance these considerations against the Calderbank offer you have received. Remember that it can often be 9-12 months before you find yourself at a hearing.
3. The Cost of ‘Winning’
Imagine succeeding at a final hearing, only to find out the opposing party has empty pockets – not exactly a favourable result. Think about whether the other party will be able to pay if you ‘win’, or whether their funds may be chewed up preparing for the hearing.
Not Accepting the Calderbank Offer
Each party should seriously and genuinely consider any offer of settlement they receive. A court may feel your rejection is unreasonable if an offer is a reasonable compromise, expressed clearly and precisely. If this is the case, the court may order you to pay the other party’s court costs.
However, you do not have to accept a Calderbank offer. If you are not given sufficient time to consider the offer, or it is too early to determine the full extent of each party’s position, acceptance may not be the right course of action. If you do not accept the offer, consider making a reasonable counter-offer. In the process of dispute resolution, it is always better to try to negotiate, rather than put up a brick wall.
Key Takeaways
A Calderbank offer can be a powerful tool in settlement negotiations. It can encourage parties to negotiate candidly and make a genuine effort to reach a compromise. Parties must reasonably consider all Calderbank offers made, or risk an unfavourable costs order even if they do ‘win’.
Calderbank Letter Template Free
If you have questions about whether to make or accept a Calderbank offer, or how to do so, get in touch with LegalVision’s litigation lawyers on 1300 544 755 or fill out the form on this page.
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