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Litigation Update: Can I accept your offer?: Making your Calderbank offers more effective

Calderbank” offers are a flexible and effective tool in civil litigation to try to settle a case, and also – if the offer is not accepted – can give the client more favourable treatment on legal costs than they would have had otherwise.1 However, there has been some doubt about how definite a Calderbank offer had to be in order for it to be the basis of a special costs order. This has been clarified in Victoria in the relatively recent case of Sim Development. 2

What is Calderbank offer?

A Calderbank offer is one of several ways to offer to settle a civil dispute.

It is often the appropriate way to make an offer, because of its flexibility. A Calderbank offer:

  • can be made before a court case is even commenced;3
  • can resolve other disputes as well as the specific court case (if any);4 and
  • does not have a fixed period in which the offer needs to be kept open for acceptance (unlike “Offers of Compromise” under Court Rules).

However, with this flexibility comes uncertainty (so in some situations, an Offer of Compromise is preferable).

Remember, a Calderbank offer can work in two different ways:

  • The offer is accepted – in which case the dispute the subject of the Calderbank offer is resolved on the terms of the offer (usually this is by accepting, or alternatively paying, money). The Calderbank offer has succeeded, and life resumes.
  • The offer is not accepted, and the dispute continues. However the Calderbank offer could still have an important role to play later in the case, to give the client more favourable treatment on legal costs than they would have had otherwise. This happens if, when the case is resolved, the Court’s judgment is equal to or less favourable for the person who received the offer than the offer itself was, eg: A offers B $100,000 by a Calderbank offer, B refuses and obtains a judgment for $80,000. In that situation, the party who made the Calderbank offer can ask the Court for a special costs order.5

What happened in the Sim Development case?

This second situation arose in Sim Development.

And it is here that the element of uncertainty comes into consideration, because as the Victorian Court of Appeal has stated: “The critical question is whether the rejection of the offer was unreasonable in the circumstances”.6

The Court recognised that unreasonableness is a fluid (“protean”) concept that different judges could apply differently, but that that is “entirely appropriate to the exercise of a discretion such as this” in relation to costs.7 So, was B unreasonable to refuse the $100,000 that A offered?

To assist the Court’s apply the concept of (un)reasonableness to decide whether there should be a special costs order, the Court has set out a nonexhaustive list of six factors – when the offer was made, how long it was open for consideration, the extent of the compromise, the prospects of success of the party receiving the offer, the explanation of the consequences of refusing to accept the offer – and relevantly: “the clarity with which the terms of the offer were expressed”.8

The offer in Sim Development was $270,000 to resolve all the disputes in the legal proceedings between the parties. The offer also contained a paragraph – paragraph 7 – that became the focus of argument by Sim Development (which had rejected the offer, and got a lesser judgment amount at trial). Paragraph 7 was as follows:

If the offer is agreed to by your client, it will need to be recorded in terms of settlement drafted by this firm and which are satisfactory to our client, which terms will contain clauses recording the above arrangements, standard mutual releases, mutual non-disparagement clauses and a confidentiality clause.9

Sim Development argued that this offer was not clear and not capable of acceptance (ie not a legally binding offer). There is authority, especially outside Victoria, to support that argument.10 However, both before the trial judge and then on appeal, it was rejected:

  • the trial judge (His Honour Justice Sifris) specifically did not consider he needed to decide whether or not Greenvale’s offer would have been legally binding, as “there is every reason to believe that the parties would have reached agreement on the paragraph 7 matters”;11 and
  • the Court of Appeal agreed with the trial judge, and refused Sim Development leave to appeal on the costs grounds.12

How does this affect you?

The key lesson to take from this is that the Victorian courts will take a nontechnical approach to Calderbank offers. In particular the Court will look at the actual negotiations in the case, including the correspondence between the parties. In Sim Development the offer was put more than once, and was the subject of correspondence.

Another lesson, if you receive an offer, and do not understand it, seek clarification from the offering party before the offer expires. 13

In terms of what one can do to make the offer your offer more effective – be clear what is being offered. In some cases it could be cost effective to actually send a Deed of Settlement with your offer, but even if you do not do that, identify any further terms clearly (as in Sim Development). The Victorian Court of Appeal has made it clear that Victorian courts will take a non-technical approach, and even if there are technical arguments that the offer was not capable of acceptance, they will instead focus on the Hazeldene’s Chicken Farm factors.

Brand Partners acted for Greenvale Property Group Pty Ltd in this matter, both at trial and in the Court of Appeal. Please contact Jeremy Brand or James Greentree if you wish to discuss any issues that arise for you out of this article.

Calderbank” offers are a flexible and effective tool in civil litigation to try to settle a case, and also – if the offer is not accepted – can give the client more favourable treatment on legal costs than they would have had otherwise.1 However, there has been some doubt about how definite a Calderbank offer had to be in order for it to be the basis of a special costs order. This has been clarified in Victoria in the relatively recent case of Sim Development. 2