The general rule with respect to legal costs is that costs follow the event, unless the court determines that some other order should be made. In other words, if you win a legal case, you are entitled to recover your legal costs from the losing opponent, unless the Court says otherwise. A scenario where the Court may go against this general rule is when a party unreasonably reject a Calderbank offer.
The genesis of Calderbank offers is the 1970s English decision in the case of Calderbank v Calderbank. The decision established that when a successful party in litigation rejects a settlement offer from the losing party, the rejection can be used as evidence before the court on the question of who should pay the legal costs and what standard should be applied in calculating those costs.
The evidentiary value of a Calderbank offer is only with respect to costs, this is why the offers contain the phrase “without prejudice save as to cost”. Any admission or denial made in the offer cannot be used as evidence in the legal case. The purpose of these offers is to encourage settlement and if a party rejects a settlement offer (say in the amount of $20,000.00) then goes on to achieve a result less favorable than the offer (say $10,000.00), the general rule that they should recover legal costs as a successful party may not apply.
The Court will consider a couple factors, firstly, was the offer of settlement a genuine comprise and, secondly, was it reasonable for a party to reject the offer when it was made, considering all relevant circumstances of the case.
A Calderbank offer will represent a genuine compromise if the party making the offer ‘gives something away’. This is not restricted to an offer for cash settlement, it may be that a party offers to discontinue the case with both parties paying their own legal costs.
When considering whether a party unreasonably rejected an offer, attention will turn to a number of factors, including the timing of the offer, the time allowed for the receiving party to consider and respond, the clarify of the terms of the offer and the final outcome achieved by the parties.
Costs are one of the most important considerations in litigation. Once litigation is commenced, deciding whether to accept or reject a Calderbank offer presented by the other side, or whether to put forward an offer could have significant ramifications on the costs you recover if successful or the costs you are liable to pay if unsuccessful.
Written by Malik Anne.