Calderbank Offers: Removing the Problem of Disproportionate Costs Orders
Following a building dispute, it is common for the negligent party to submit a “Calderbank offer” to the plaintiff. A “Calderbank offer” provides a financial or other incentive to the plaintiff to settle outside of the court system.
This offer may be of greater value in comparison to the costs order made by a tribunal. In the event that this offer is ignored or not accepted, a tribunal may consider that the defendant placed themselves in a position of detriment through making the offer to the plaintiff (Beazley JA (writing extra-curially) referring to Calderbank v Calderbank  3 All ER 333 in a paper presented to a conference of the Australian Lawyers Alliance in March 2008 quoted in order presented by tribunal). This consideration may diminish the costs awarded to the plaintiff in an attempt to recompense the defendant for their offer (Beazley JA (writing extra-curially) referring to Calderbank v Calderbank  3 All ER 333 in a paper presented to a conference of the Australian Lawyers Alliance in March 2008 quoted in order presented by tribunal).
In so doing, a tribunal removes the injustice that may result from a costs order that fails to consider the defendant’s prior attempts to resolve the dispute. To do so would unjustly enrich one party to the detriment of the other. Specifically, the making of “Calderbank offers” requires the defendant to place themselves in a disadvantageous position, as they must be ready to provide the promised sum or service in addition to entering into a costly negotiation process.
What does this mean in Practice?
Adams & Partners Lawyers recently represented a kitchen manufacturing and installation company that damaged the plaintiff’s house in the course of installation and failed to follow the contractual requirements. The company made repeated offers to the homeowners of a financial incentive to settle the matter in the early stages of the dispute. The homeowners did not accept and instead applied to the Consumer, Trader & Tenancy Tribunal. While the homeowners were awarded costs, the Tribunal ordered that they pay indemnity costs to the kitchen company in recognition of the detriment suffered by making alternate offers. This result subscribes to the underlying principle “of fairness” of costs orders and ensured a positive result for the kitchen company (R[J1] C Titterton at 18 referring to Commonwealth v Gretton, Hogson and Beazley JA).
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