Introduction
A powerful and effective way to resolve legal disputes is the use of Calderbank settlement offers. Named after the landmark case Calderbank v Calderbank [1], these offers are like chess moves – calculated, strategic, and potentially game-changing.
In this article, we delve into the art of mastering Calderbank offers. Understanding this tactic can give you a significant advantage whether you are a seasoned lawyer or a senior executive navigating legal waters.
What Is a Calderbank Offer?
A Calderbank offer, also known as a Calderbank letter or Calderbank proposal, is an offer of settlement made by one party to another during legal proceedings. Its primary purpose is to encourage negotiation and resolution outside of Court.
Key features of a Calderbank offer include:
Genuine Compromise: The offer must represent a sincere attempt to settle the dispute. It should strike a balance between the parties’ positions.
“Without Prejudice Save as to Costs”: This critical phrase ensures that the offer remains confidential during the negotiations and the trial but can be considered afterwards by a Court when determining who should pay the winner's legal costs.
Understanding “Save as to Costs”
The phrase “save as to costs” holds significant weight in Calderbank offers. Here’s what it means:
Confidentiality: During trial or hearings, the offer can not be presented as evidence. Parties can negotiate candidly without fear of their words being used against them.
Post-Trial Consideration: After proceedings conclude, the Court may take the Calderbank offer into account when deciding costs. If the rejecting party does not fare better at trial, they may bear additional legal expenses.
How Calderbank Offers Impact on Costs
Indemnity costs play a crucial role in Calderbank offers:
Indemnity Costs: These include reasonable legal expenses incurred during the proceedings (fees, charges, and remuneration).
Burden Reversal: If a reasonable Calderbank offer is rejected and the rejecting party later obtains a similar remedy in Court, they may be liable for both their own and the other party’s costs. Rejecting a fair settlement unnecessarily prolongs litigation.
The Strategic Moves- Crafting an Effective Calderbank Offer
Timing: Reasonable, early offers are a tool to encourage resolution and maximise value for clients' legal spend. If your opponent rejects your offer and is less successful at trial, you can use it as a sword in an application for indemnity costs. Check mate! When more information comes to light, send well-considered revised offers. You should
Be Reasonable: The offer must be a genuine compromise of the case based on the information available when you are making the offer.
Quantum Precision: Be precise about the amounts being offered, the classifications of the settlement amounts, the rationale for seeking it and how it is a compromise on your trial position.
Facts are your friend: Using the chess strategy of controlling the centre to actively engage in discussion about the facts and merits of the case, weaving in your case theory and narrative while keeping an open ear and mind to your opponent.
Look for Win-Win: Work out where you can find agreement, this gives the negotiations momentum and goodwill.
Play fair: Take proactive steps to minimise the issues in dispute, and communicate politely and fairly. Give your opponent sufficient time to consider the offer.
Real-Life Example
Case Study: When is it reasonable to reject a Calderbank offer? : Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) is the leading Victorian case authority on when it is reasonable to reject a Calderbank offer.
Facts:
A labour-hire worker at a chicken farm was injured at work, Hazeldene’s Chicken Farm. A disagreement arose between Hazeldene's (the host employer), labour hire employer and the Victorian WorkCover Authority regarding the percentage of liability each had for the injury.
The matter went to trial. Hazeldene's appealed the decision of the trial judge.
On 1 July, the Respondent (WorkCover) made a Calderbank offer. The appeal case was due to heard by the Court on 21 July.
The Applicant (Hazeldene) rejected the offer but did not get a better result in the appeal judgement than the offer it rejected.
Outcome: The Court ordered the Applicant to pay the Respondent's costs on an indemnity basis.
Takeaways: The Court of Appeal said the test is whether "in all of the circumstances" it was reasonable to reject the offer. In determining the reasonableness, the Court said that it was neither possible nor desirable to provide an exhaustive list, it did provide the following matters for the Court to ordinarily have regard to:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed; and
(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree’s rejecting it.
Calderbank offers in Fair Work Commission Matters
The usual rule in Fair Work Commission (FWC) matters is that each party bears their own costs. However, under section 6 of the Fair Work Act 2009, the FWC has the power to order a party to pay another party's costs where it is satisfied that:
The application or response to an application was made vexatiously or without reasonable cause, or
It should have been reasonably apparent that the person’s application or response to an application had no reasonable prospect of success.
To determine whether it is ‘without reasonable cause’ is that the case:
is ‘so obviously untenable that it cannot possibly succeed’
is ‘manifestly groundless’
is ‘so manifestly faulty that it does not admit of argument’
‘discloses a case which the Court is satisfied cannot succeed’
‘under no possibility can there be a good cause of action’.
The test of whether the case has reasonable prospects of success is an objective test (this is from the perspective of a third-party viewer).
Additionally, in general protection cases before the Commission, a party can make an application for an order for costs under section 357B where the other party has caused costs to be incurred because of unreasonable acts of omission in connection with the conduct or continuation of the dispute.
Conclusion
Calderbank offers are an important tool to drive commercial resolution of legal disputes and protect your costs position if the case goes to trial.
Should you have any questions, please do not hesitate to contact Caroline Mense of our office on carolinem@legalenablers.com or (03) 8691 3128 for all of your employment law and dispute resolution needs.
Case references:
[1] Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586.
[2] Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (2005) 13 VR 435; [2005] VSCA 298 (‘Hazeldene's Chicken Farm’).
[4] General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, 129; cited in Walker v Mittagong Sands Pty Limited T/A Cowra Quartz [2011] FWA 2225 (Thatcher C, 14 April 2011) at para. 17, [(2011) 210 IR 370].