By Anica Cunanan, Solicitor at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group
Calderbank offers are based on the principles outlined in the English case of Calderbank v Calderbank [1975] 3 All ER 333. Whether you are the offeror or the offeree, it is important to understand the effect of these offers.
Calderbank Offer: What is it?
A Calderbank offer is designed to put the offeror in a position to apply to the court for an indemnity costs order, in circumstances when the offeror receives a better outcome than the amount that was offered. Should an indemnity costs order be granted, the unsuccessful party will pay a higher proportion of the successful party’s costs. Emphasis is placed on the word “higher”. In many civil jurisdictions (but by no means all), “costs follow the event,” and so the unsuccessful party might expect to have to pay some of the successful party’s costs. If ‘indemnity’ costs are awarded, the amount payable is higher. Somewhat counterintuitively however, the amount is almost never “all” the successful party’s costs, for various reasons. However, in many cases the difference between recovering some costs, and recovering a much higher proportion of those costs, can make an enormous difference. And by making a Calderbank offer, a party will improve the chances of recovering a higher proportion of costs.
Calderbank Offer: Elements
Given the significant amounts of legal costs incurred in litigation, the Courts have considered Calderbank offers and indemnity costs applications on numerous occasions. The following elements are important in distinguishing Calderbank offers from other offers (however, this is not an exhaustive list):
- it is must be made “without prejudice save as to costs”;
- it clearly states it is made in accordance with the principles in Calderbank v Calderbank[1975] 3 All ER 333;
- it is capable of acceptance, that is, the terms are clear and precise with a reasonable timeframe;
- there is a genuine element of compromise (i.e. the offer actually gives up something material, for example, a discount on a debt which is owing); and
- it states that if the offer is rejected, the offer will be relied upon on for an application for indemnity costs.
Calderbank Offer: Its Use
Making a Calderbank offer can be a useful tool in improving one’s position regarding costs going forward with litigation. It is important to understand, however, that a Calderbank offer (if rejected) does not guarantee that an indemnity costs order will be granted by the Court. For the most part, an award of costs is at the discretion of the Court. However a properly prepared Calderbank offer is simply a tool which Courts are familiar with and which will normally support an application to recover more of the legal costs which you have been forced to occur in litigation.
Calderbank offers are also often good “ice breakers” to encourage negotiation and communication between parties, and in turn, can avoid further costs in circumstances where a settlement can be reached. As a Calderbank offer can carry more significance and risk, both offerors and offerees should understand what effect a Calderbank offer can have in their particular dispute. Most importantly, obtain legal advice to ensure that a Calderbank offer is properly prepared, and capable of giving you the best argument in support of recovering your legal costs, and if you are the recipient of a Calderbank offer, legal advice should be obtained as to the risks of not accepting an offer, as well as how to mitigate those risks, for instance by making your own Calderbank offer.
Matthews Folbigg Lawyers has a specialist team dedicated to Insolvency, Restructuring and Debt Recovery.
If you would like more information or advice in relation to recovery from debtors, garnishee orders, or in relation to and Insolvency, Restructuring or Debt Recovery practice and procedure, please contact Stephen Mullette or Jeffrey Brown on (02) 9806 7459 or (02) 9806 7446, or email stephenm@matthewsfolbigg.com.au or jeffreyb@matthewsfolbigg.com.au.
