When it comes to resolving disputes, there are various ways in which parties can attempt to reach a solution without the dispute proceeding to trial. One way to resolve a dispute is for a party to offer to settle the dispute. A Calderbank offer is one type of settlement offer and in this article, we’ll discuss how they work in practice and also cover some of the most common questions our business disputes solicitors come across in relation to them.
Contents:
- What is a Calderbank offer?
- What’s the difference between a Part 36 offer and a Calderbank offer?
- What are the advantages of making a Calderbank offer?
- What are the costs consequences of a Calderbank offer?
- When is a Calderbank offer used?
- What should a Calderbank offer include and how do you make one?
- Are Calderbank offers time limited?
- Is a Calderbank offer legally binding?
- Can you withdraw or modify a Calderbank offer?
- Can you negotiate a Calderbank offer?
- What happens if a Calderbank offer is rejected or ignored?
- Alternatives to Calderbank offers
- Summary
What is a Calderbank offer?
A Calderbank offer is a settlement offer written as 'without prejudice save as to costs.' Put simply, this means that if you make a Calderbank offer and it’s not accepted by the other party, it can’t be referred to during the course of the legal proceedings relating to the claim itself, but it can be referred to the court on the question of costs at the end of the proceedings.
As an aside, the name ‘Calderbank offer’ comes from a Court of Appeal case in 1975 in which this type of offer featured.
What’s the difference between a Part 36 offer and a Calderbank offer?
Calderbank offers are not governed by the same strict set of rules as Part 36 offers. This means there is greater flexibility in terms of making the offer itself in the form of time limits for acceptance, payment and payment terms, for example. Also, unlike a Part 36 offer, a Calderbank offer is usually made as inclusive of costs.
Another important thing to note is that the usual rules of contract law apply to Calderbank offers, whereas they don’t when it comes to Part 36 offers.
What are the advantages of making a Calderbank offer?
As mentioned above, Calderbank offers as a way of settling a dispute provide some flexibility: you can set a time limit of your choosing for acceptance of the offer, you can withdraw it at any stage and you’re free to decide what payment terms you wish to stipulate. This is useful for a party who wants to settle a claim but doesn’t want to incur the more onerous cost consequences attached to making a Part 36 offer.
Another positive feature of Calderbank offers is that they can be used in litigation on the small claims track and in arbitration proceedings – both circumstances in which Part 36 is not directly applicable.
What are the costs consequences of a Calderbank offer?
Unlike in situations where a Part 36 offer has been made, there are no automatic costs consequences or sanctions that the court will apply if the losing party has failed to accept the offer at an earlier stage in the proceedings. Although a Calderbank offer that hasn’t been accepted may be an important consideration for the court when considering costs in accordance with the Civil Procedure Rules (CPR), the court can ultimately decide what weight to give it by applying its discretion.
When is a Calderbank offer used?
A Calderbank offer can potentially be made by either party to a dispute as an intended means of reaching a settlement before a matter reaches trial, potentially saving both parties considerable time and money. As we’ve touched upon, it can be a very useful mechanism for flexibility and is also appropriate for certain circumstances where a Part 36 offer cannot be made and in other circumstances, it might indeed be more appropriate, for example, if you want to include terms as to costs in the offer which are different from the terms as to costs under Part 36.
Also, it might be a good tactical step to make a Calderbank offer if you consider that the claim or counterclaim against you is fairly weak and you want to make a low settlement offer without risking liability for the Part 36 cost consequences if it isn’t accepted.
What should a Calderbank offer include and how do you make one?
It’s highly recommended that you seek the advice and support of an experienced business disputes solicitor in deciding what exactly is written in a Calderbank offer before it’s sent to the other party or their legal representative, if they have one. This is important because careful consideration needs to be given to the terms of the offer to ensure that they are both attractive and reasonably capable of acceptance – this minimises the likelihood of the offer being rejected outright as frivolous or derisory and creating further problems down the line if a judge becomes aware of this post a trial. A business dispute solicitor can help with drafting the letter and ensuring that the correct terminology is used and the correct procedures are followed in relation to where and whom it is sent to.
What a Calderbank offer should include
A Calderbank offer should be and/or contain:
- Clearly expressed to be 'without prejudice save as to costs'
- Addressed to the other party or their solicitor
- Set out clearly and in precise, certain terms
- Capable of acceptance
- Stipulated as open for acceptance for a reasonable amount of time to allow the other party to consider whether to accept it if the offer is time-limited (see below)
- A genuine compromise that warrants consideration – providing reasons as to why the offer should be accepted is strongly recommended
- Clear confirmation that it is your intention to bring the offer to the court’s attention when deciding the issue of costs if it’s rejected
Are Calderbank offers time limited?
A Calderbank offer may be time-limited (that is, it may stipulate the date from which it is no longer open for acceptance) or it may be left as open-ended. If you decide that an open-ended offer is the best option, it’s important to keep it under review so that if circumstances change and your offer subsequently appears to be too generous to the other party, you are ready to withdraw it promptly.
Is a Calderbank offer legally binding?
Because Calderbank offers are subject to the common law contractual principles of offer and acceptance, once accepted, the Calderbank letter and offer create a legally binding contract between the parties. The offer must be deemed as sufficiently clear to create a binding contract.
Can you withdraw or modify a Calderbank offer?
Withdrawal of a Calderbank offer
You can withdraw a Calderbank offer at any time prior to it being accepted by the other party. Once it has been withdrawn or rejected, it is no longer valid.
Modification of a Calderbank offer
Due to the fact that the principles of contract law apply to Calderbank offers, it’s likely that any modification would be classed as a second offer and therefore have the effect of withdrawing the initial offer. It’s definitely worth obtaining legal advice in this situation to avoid any potential pitfalls of making any changes once the first offer has been sent to the other party.
Can you negotiate a Calderbank offer?
Whilst a Calderbank offer can certainly be used to encourage negotiation and it’s often used in this way, it’s worth highlighting that when it comes to the offer itself, The High Court has previously ruled that a valid Calderbank offer had to be acceptable on its stated terms and should not be one which contemplated further negotiation.
What happens if a Calderbank offer is rejected or ignored?
If you make a Calderbank offer and it’s rejected or ignored, it’s extremely likely the court will closely consider the other party’s conduct with either of these courses of action and it may ultimately have an effect on the costs order that the court makes if the matter proceeds to a full trial and the existence of the offer is disclosed at the end of the proceedings. Likewise, if you receive a Calderbank offer, it’s wise to give it due thought and respond with sufficient reasons as to why you believe it to be unreasonable or otherwise incapable of acceptance.
Alternatives to Calderbank offers
- Part 36 offer: This is a formal kind of offer governed by specific provisions in CPR 36, hence the name ‘Part 36 offer.’
- Without prejudice offer: This is distinct from a Calderbank offer in that it’s an offer that can’t be referred to the court on the question of costs at the end of the proceedings unless both parties consent to it or the words ‘save as to costs’ are added to the ‘without prejudice’ stipulation on the face of the written offer.
- Open offer: These types of offers are not particularly common. One example of when an open offer might be utilised is as a tactical step in an unfair prejudice petition scenario where an early open offer to purchase the petitioner’s shares at a fair value is potentially appropriate.
Summary
Calderbank offers have some considerable advantages if used tactically and carefully in the course of a dispute. As we’ve discussed, it may be that this type of settlement offer is preferable over the use of a Part 36 offer for a number of reasons or indeed it might be the only kind of settlement offer that can be realistically made in certain types of proceedings. Whether you are thinking of making a Calderbank offer or you’re in receipt of one, the most important thing is to obtain advice from a business dispute solicitor to maximise the potential to secure the best possible outcome for your business.
