Everything You Wanted to Know about Calderbank Offers

Every lawyer has heard of them.  Most lawyers have delivered at least one.  Few lawyers understand what they are drafting and the consequences of getting it wrong.

There are two central reasons why a party to litigation would deliver a Calderbank offer (or, as the author has endearingly heard them called, a “call to bank” offer) – either (1) they want to avoid the ever increasing legal costs that well run litigation incurs, or (2) they reckon they’re on a good run and want to set things up for a shot at indemnity costs when the judgment inevitably comes down in their favour.

However, a properly crafted Calderbank offer, unless it involves simply the payment of a sum and a reciprocal release of liability (and even then), can be incredibly difficult to draft.

Calderbank itself was an unusual case.  In Calderbank v Calderbank [1975] 3 All ER 333, a family law property case, following trial the husband was awarded £10,000 of an £80,000 pool, along with his costs of the action.  Complicating matters was that the wife had made an offer earlier in the action to give the husband one of the properties forming part of the matrimonial pool, a property which the trial judge valued at £12,000.  The wife appealed.

On appeal, the Court found for the wife on the ground of appeal that the husband had unnecessarily prolonged the proceeding by refusing the offer.  The costs order was reversed in favour of the wife.

However Calderbank itself does not stand for that proposition (namely, that the refusal of an offer that is not beaten at trial warrants a departure from the general rule of costs – that they follow the event); Calderbank stands for the proposition that a party can rely on an appropriately marked without prejudice communication (which ordinarily is inadmissible) for the purposes stated therein (for the purposes of bringing it to the Court’s attention on an application for a special costs order, either reversing the general rule, or improving the basis upon which such an order is assessed).

So it must be seen that to class an offer as being a “Calderbank” offer merely means that it has been marked as “without prejudice save as to costs”.

Calderbank v Chapter 9 Part 5

A distinction must also be drawn between a Calderbank offer and a formal offer under the Rules of Court; in Queensland, a formal offer is made under Chapter 9 Part 5 of the Uniform Civil Procedure Rules 1999 (Qld).

A Calderbank offer can be made at any time and include anything that a party desires – so long as it meets the minimum requirements (discussed below).  Whereas, a formal offer can only be made in a “proceeding” as that is defined in r.352 of the Rules (in effect, only matters where pleadings are to be drawn – whether started by claim, ordered to proceed as if started by claim, or where the Court has ordered pleadings or other documents defining the issues).

Minimum Requirements

Formal offers under Chapter 9 Part 5 of the Rules are not the subject of this article – readers should carefully read Chapter 9 Part 5 and the key cases flowing from it – in particular, John Goss Properties Pty Ltd v Thiess Watkins White Constructions Ltd (in liq) [1995] 2 Qd R 591.

Calderbank offers otherwise don’t need to do too much to pass muster – so long as they are clear and unambiguous, capable of easy comparison with the result of the litigation and everyone is on the same page that the offer will be used for the purposes of costs, the Court’s discretion will be enlivened.  An offer must also be left open for a reasonable period of time to allow the recipient to carefully consider the terms.

Capable of Easy Comparison with the End Result

As can be seen from Calderbank itself, the offer is only useful if the Court can easily compare the offer with the end result.  This point is also tied closely to the clear and unambiguous requirement – if an offer is ambiguous, then it’s certainly not capable of being easily compared with the judgment.

A good example of this is Kemp v Ryan & Anor [2012] ACTCA 12.

There, the offer contained a provision that interest would be paid at “20% in accordance with clause 21 of the contract until that money is paid”.

The Court was unclear as to when the interest was to accrue from (clause 21 of the contract provided for interest to be paid on each progress payment, and there were several progress payments outstanding), and ultimately held that the offer did not meet the requirements of being a valid Calderbank offer.

Yes, there is a difference between “Without Prejudice” and “Without Prejudice save as to Costs”…

You were in a rush.  You had to get the email urgently to the other party.  You only marked the email “without prejudice”.  It’ll be right, won’t it?

The Common Law has long recognised a distinction between something marked “without prejudice” and something marked “without prejudice save as to costs” – see Computer Machinery Co Ltd v Drescher [1983] 1 WLR 1379 per McGarry VC.

There, the Vice Chancellor noted that the key point of difference was that the inclusion of “save as to costs” prevented the communication from otherwise becoming inadmissible on the question of costs – and, as we all know, a Court does not have any discretion to admit otherwise inadmissible evidence.

That principle has even found a new home in some of the Evidence Acts – see s.131 of the Evidence Act 1995 (Cth).

As was noted in Calderbank itself, the evidentiary rule established in that case will not apply if the other party is not on notice as to the intentions behind the offer – it isn’t a form over substance point, but the rules of procedural fairness apply such that the other party needs to clearly understand that the offer will find its way to a judge for the purposes of a costs application.  Expectations as to competence on the part of the other party are not enough: experience and case law tell us as much.  The intention that the offer will be used must be spelt out, either by expressing the communication as being “without prejudice save as to costs”, or by expressly stating that the communication will be brought to the attention of the Court on the question of costs (see, for instance, Naomi Marble & Granite Pty Ltd v FAI General Insurance Company Ltd [1999] 1 Qd R 518).  Best practice would dictate that both approaches be adopted.

Effect of a Valid Offer

Unlike a formal offer under the Rules, a Calderbank offer merely provides a basis for the Court’s discretion to depart from the general rule that costs follow the event on the standard basis.  The obvious extension of that is that it is near impossible to appeal a Court’s decision to make a special costs order off the back of a Calderbank offer (an error of the type discussed in House v The King (1936) 55 CLR 499 being required).

It must also be considered who made the offer in what effect it has – a successful plaintiff who made the offer could expect indemnity costs to flow from the date of the offer (or, arguably, the date of rejection of the offer).  On the other hand, a defendant may not need to succeed entirely to get the benefit of an exercise of discretion – even if the plaintiff obtains judgment against a defendant, if the plaintiff should have accepted an offer from the defendant, then costs could be ordered to lay where they fell, or in exceptional cases, flow to the defendant.