Calderbank Letter Template

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21 February 2012

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. When considering the offer, there are three important considerations to keep in mind. A sample Calderbank offer is attached to this Guidance Note as Appendix 1. STRATEGY IN MAKING THE CALDERBANK OFFER. When To Make The Offer? A party looking to settle a claim should make a Calderbank offer as early as possible so that it can obtain maximum costs protection in the arbitration. How Much To Offer? A Calderbank offer provides greater flexibility than a Part 36 offer because it is not governed by strict court rules. This is a great advantage because it allows the party making the offer (the 'offeror') to be creative when making their offer, especially when putting forward terms about the length of time the offer remains open for acceptance. A Calderbank letter (Calderbank v Calderbank 1975 3 All ER 333) leaves costs in the discretion of the court, subject to principles which have been developed in relation to the instrument. By contrast, an offer of compromise made under UCPR Pt 42 Div 3 provides a more certain consequence as to costs. Calderbank 1975 3 ER 333 and remains open for a period of fourteen (14) days from the date of this letter”. The Plaintiff, who was unrepresented at the time, did not respond to the letter. The matter had already been set down for hearing to commence on 5 May 2014.

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.

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.

Calderbank letter template free

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.

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Settlement offers take the form of either Calderbank letters or Offers of compromise under the UCPR.

  • Offers of compromise under the UCPR
    • To qualify as offer of compromise under the UCPR, offer must:
      • Explicitly state that they comply with the UCPR: r 20.26 (3)
      • Be exclusive of costs: r 20.26 (2).
      • Cannot be withdrawn before the time specified: r 20.26 (11).
    • Result: unless in the case of 'exceptional circumstances' (r 42.14), if a plaintiff offers a compromise which is rejected and then is awarded a higher amount than he offered by the court, he will receive costs on an indemnity basis from the day of the offer.
      • Offeree has the onus of proving exceptional circumstances.
  • Calderbank letters:
    • Rejected Calderbank letters do not necessarily result in indemnity costs orders - indemnity costs will be awarded only if (:SMEC v Campbelltown City Council):
      1. The offer contained a genuine compromise.
        • 'Walk away' or 'trivial' offers are usually not considered genuine Offers: Kain v Mobbs'; Miwa v Siantan Properties.
        • A waiver of interest can constitute a compromise: Manly Council v Byrne (No 2).
      2. The rejection was so unreasonable to the degree that it 'warrants departure from the ordinary rule as to costs'. In determining this, relevant considerations include (:Miwa v Siantan Properties):
        • Promptness of the application.
        • Whether there was sufficient time to consider?
        • The extent to which the compromise was fair.
        • Whether there was adequate information given to consider the offer?
        • At what stage was the offer made? Have there been any developments since the offer was made?
        • What were the prospects of success?
        • Whether any conditions were attached to the offer and whether they were unreasonable?
    • Failed Offers of Compromise will still serve as Calderbank letters: Kain v Mobbs.

This topic is within Resolving Civil Disputes.

Contents

Required Reading

Dorne Boniface, Miiko Kumar and Michael Legg, Principles of Civil Procedure in NSW (2d ed 2012) Thomson Reuters, [14.210]-[14.265].

Template

Introduction

[1] Litigants are generally encouraged to reach a settlement as opposed to pursue their claims in court. A party who unreasonably rejects a genuine settlement offer might be liable to cost consequences (usually having to pay costs on an indemnity basis. The two methods to offer a settlement are the UCPR offer of compromise and its common law relative, Calderbank letters.

  • Offers of compromise are strictly governed by the UCPR, which means that the court has less discretion in issuing costs orders etc.
  • Calderbank letters are offers to compromise which are marked 'without prejudice save as to costs'. They lack the certainty and formal structure of the UCPR offers of compromise, and involve a larger degree of judicial discretion as to costs.

s 73 of the CPA allows the court to determine whether a settlement has already been reached by the parties, and to enforce it.

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Offers of Compromise

[2] Offers of compromise are governed by the UCPR r 20.26, which can be summarised as follows:

  • A party may make an offer to another to compromise on any claim in the proceedings through a written notice: (1).
  • However, a plaintiff may not make an offer unless the defendant has been given necessary documentation to fully consider the offer: (4).
    • An order against the plaintiff that he failed to comply with this requirement can only be made if the defendant has informed the plaintiff in writing within 14 days that he has not been given the information, or if the court orders otherwise: (5).
  • The notice should contain a statement to the effect that the offer complies with these rules. If there was any other interim payments or offers, it should state whether the offer is in addition to that interim payment: (3) .
  • The offer doesn't need to relate to all the claims in the proceedings or be restricted to a money sum.
  • More than one offer can be made: (10).
  • The offer must be exclusive of costs, except where it states that it is a verdict for the defendant and that the parties are to bear their own costs: (2).
  • An offer can have a time limit: (6). If it does, the following rules apply (:(7)):
    • If there is still 2 months or more before the trial stars, the offer has to be available for at least 28 days.
    • If there is less than 2 months until the trial, the offer must be left open for for a 'reasonable time in the circumstances'.
  • Unless otherwise provided, the consideration included in the offer needs to be provided within 28 days after the acceptance of the offer: (8).
  • An offer is without prejudice, unless the notice of offer otherwise provides: (9).
  • Unless the court orders otherwise, an offer may not be withdrawn during the period of acceptance for the offer: (11).

Offers of compromise were discussed in Kain v Mobbs:

  • An offer which fails to comply with subsection 3 will still qualify as a 'Calderbank letter' (but not as an offer of compromise), which is still relevant in an application for indemnity costs.
  • An offer which merely invites the plaintiff to capitulate is not a compromise offer. Refusing such an offer is not unreasonable (if there is any reasonable prospect of success), and the refusal will not trigger the award of costs on an indemnity basis.
  • The test is as follows: whether the offer contained a genuine element of compromise or whether it was a formally stated demand for payment or capitulation which was simply designed to trigger the payment of costs on an indemnity basis.
  • The fact that a plaintiff does not succeed in the case does not mean that it was unreasonable not to walk away (by accepting the offer to capitulate) - if there was originally a reasonable chance of success, refusing to capitulate is not unreasonable.

Calderbank Letters

[3] Calderbank letters developed from the case of Calderbank v Calderbank,[4] which determined that confidential settlement offers ('without prejudice') can be shown to the court for the purposes of determining a costs order. Whilst initially restricted to matrimonial cases only, the principle now applies to all disputes.

  • The policy behind the principle is to encourage people to accept settlements (by intimidating unreasonable refusals with big costs orders).
  • The first question regarding rejected Calderbank offers and costs order is whether the offer contained a genuine compromise - this is an evaluative judgment considering how fair the offer is.
    • 'Walk away' offers, as was discussed above in Kain v Mobbs, are usually not considered genuine, but may do in certain circumstances. Offers which are relatively so small that they can be considered 'trivial' or 'contemptuous' also don't constitute genuine offers.
    • A waiver of interest can constitute a compromise.[5]
  • The rejection of even a genuine Calderbank offer does not automatically mean that costs are awarded on an indemnity basis. Instead, the court determines whether the failure to accept the offer 'warrants departure from the ordinary rule as to costs': SMEC v Campbelltown City Council.[6] This can be more succinctly termed as to whether the rejection was ' unreasonable ' enough to warrant indemnity costs.
  • In determining whether rejection was unreasonable, relevant considerations include:[7]
    • Whether there was sufficient time to consider?
    • The extent to which the compromise was fair.
    • Whether there was adequate information given to consider the offer?
    • At what stage was the offer made? Have there been any developments since the offer was made?
    • What were the prospects of success?
    • Whether any conditions were attached to the offer and whether they were unreasonable?
  • Offer inclusive of costs still constitute Calderbank letters, but there is a danger that the court may not be able to determine whether or not it was unreasonable for the offeree to accept the offer.[8]

Calderbank offers may be 'in the alternative'.[9]

Calderbank letter template printable

Which One to Choose?

[10] The question arises, how do you decide whether to issue an offer of compromise under the rules or a Calderbank offer:

  • Offers of compromise have recently become more flexible, but they are still restricted in some ways (must state compliance with the rules, must be exclusive of costs, cannot be withdrawn before the time specified).
  • However, their advantage is that the procedure which follows them is fairly automatic: unless in the case of 'exceptional circumstances' (r 42.14. Offeree has the onus of proving exceptional circumstances), if a plaintiff offers a compromise which is rejected and then is awarded a higher amount than he offered by the court, he will receive costs on an indemnity basis from the day of the offer.
    • The refusal of a Calderbank offer does not result in 'automatic' triggering of indemnity clause but is merely a consideration.
  • Thus, and since the offers of compromise have become very flexible, it is usually much better to use them as opposed to Calderbank offers.

In Miwa v Siantan Properties (No 2), the appellant used a Calderbank offer because they wanted the offer to be inclusive of costs:

  • Facts: the appellant applied for indemnity costs on the basis that a Calderbank offer was unreasonably rejected.
  • Held: the amount actually offered here was nominal, the main compromise was as to the quite significant costs. This meant that the offer was pretty much an invite to capitulate. Refusing to capitulate is not unreasonable unless there were no reasonable prospects of success, which was not the case here. Application for indemnity costs refused.

End

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Calderbank Letter Template Word

References

BKL refers to Dorne Boniface, Miiko Kumar and Michael Legg, Principles of Civil Procedure in NSW (2d ed 2012) Thomson Reuters.

FDR refers to Michael Legg (ed), The Future of Dispute Resolution (2013) LexisNexis.

Calderbank Letter Template Pdf

  1. ↑ BKL, p. 869.
  2. ↑ BKL, p. 869-70.
  3. ↑ Justice Beazley, Calderbank Offers in BKL p. 879-85.
  4. ↑ [1975] 3 ALL ER 333.
  5. ↑Manly Council v Byrne (No 2) [2004] NSWCA 227.
  6. ↑ [2000] NSWCA 323, reaffirmed in Jones v Bradley (No 2) [2003] NSWCA258.
  7. ↑Miwa v Siantan Properties [2011] NSWCA 344.
  8. ↑Elite v Salmon [2007] NSWCA 322.
  9. ↑Vale v Eggins (No 2) [2007] NSWCA 12
  10. ↑ Justice Beazley, Calderbank Offers in BKL p. 885-6.

Calderbank Letter Templates

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Calderbank Letter Template Uk

A sample template Calderbank letter, for an offer to settle a matter of arbitration. Calderbank offers and offers made under Part 36 of the Civil Procedure Rules, are offers made to settle a dispute, usually the amount of the rent, on a without prejudice basis, except that the existence of the offer to settle may be brought to the attention of an arbitrator, an independent expert or a court if he or she has discretion when it comes to determining the matter of costs.
IMPORTANT: Calderbank offers are binding offers to settle. You should ensure you have the appropriate authorisations and/or consents from your client and any other appropriate parties before such offers are made.