Calderbank v Calderbank
Court of Appeal of England and Wales · 1976
Calderbank v Calderbank [1976] Fam 93
A settlement offer made in confidence, yet shown to the court when it decides who pays. Where did that device come from?
What Calderbank itself decided, recounted by an Australian court. Wilson J sets out the terms of the wife's offer and records that "[i]n Calderbank, Cairns LJ held that the wife was entitled to her costs. Scarman LJ and Sir Gordon Wilmer agreed" ([15]-[16]). On the device itself his Honour is explicit that it was not a holding: Oliver and Fox LJJ in Cutts v Head treated Cairns LJ's formulation as dictum only, however convenient practitioners found it ([17]). Cairns LJ had drawn the idea from existing practice in the Lands Tribunal and the Admiralty Court ([14]). Wilson J treats the authority as "well known since 1975" ([18]).
Australian courts have settled what a refused Calderbank offer actually buys, and it is less than practitioners often assume. Warren CJ, Maxwell P and Harper AJA record and reject the argument "that a Calderbank offer gives rise to a presumption that the party rejecting the offer should pay the offeror's costs on an indemnity basis if the offeree receives a less favourable result", agreeing with Redlich J that the authorities point to "an approach that involves no preconceptions" and that a special costs order follows only "where it is concluded that the rejection of the offer was unreasonable" ([18]-[19]). Their Honours note the same rejection by the New South Wales Court of Appeal, the Federal Court and the Queensland Court of Appeal. The correct approach is "to treat the rejection of a Calderbank offer as a matter to which the Court should have regard when considering whether to order indemnity costs" ([20]). At [25] they list six matters a court should ordinarily consider: the stage of the proceeding at which the offer was received; the time allowed to consider it; the extent of the compromise offered; the offeree's prospects of success assessed as at the date of the offer; the clarity of the offer's terms; and whether it foreshadowed an indemnity costs application.
In the uniform evidence jurisdictions the costs exception now has a statutory footing of its own: s 131(2)(h) provides that the exclusion of evidence of settlement negotiations does not apply where the communication is relevant to determining liability for costs. The practice this case named still governs how such an offer is framed and when refusing it is unreasonable, but a party no longer depends on the reservation alone for the court to see the offer on costs.
What happened?
A wife in ancillary relief proceedings in England offered her husband a house: "I am willing and have always been willing, to make over to the [husband] the house at Alderley Edge." The question the case is remembered for is not who got the house. It is whether a party who makes an offer in a "without prejudice" communication can reserve the right to lift that protection later, so as to put the offer before the court on costs.
At the time the answer was not obvious. Without prejudice letters that did not produce a settlement could not be looked at on costs unless both parties consented. A defendant facing a money claim could get around that by paying the sum into court; a party facing a claim for something else — a declaration, say — had no equivalent.
What did the Court decide?
The wife got her costs: Cairns LJ so held, and Scarman LJ and Sir Gordon Wilmer agreed. But the device named after the case was not the holding. When the English Court of Appeal returned to the point in Cutts v Head [1984] Ch 290, Oliver and Fox LJJ treated Cairns LJ's formulation "as dictum only" — "obviously a sensible and convenient one in a case where payment into court is not appropriate", so that "it (was) not, therefore, surprising to find that practitioners were quick to adopt it". Cairns LJ had himself taken the idea from practice already followed in the Lands Tribunal and the Admiralty Court. That account is Wilson J's, in Agosti & Agosti [2021] FedCFamC1F 72.
The decision was given in 1975 and reported that year at [1975] 3 All ER 333 and [1975] 3 WLR 586; the Family Division report falls in the following year's volume, [1976] Fam 93, by which the case is usually cited.
Proposition
What is the principle?
A settlement offer may be made in a without prejudice communication on terms reserving the right to rely on it when costs are argued, so that a party who refuses a reasonable offer and does no better risks an adverse costs order.
Why does this case matter?
The device now does an enormous amount of the work of settling Australian civil litigation, and what makes it work is the size of the exposure rather than its existence. A party in ordinary litigation already risks paying the other side's costs if it loses, on the ordinary basis. What a Calderbank offer adds is the prospect of paying them on an indemnity basis from a date the court fixes, allowing the offeree reasonable time to consider the offer — a materially larger number, and one that turns on a discretion the offeree can no longer control.
The mistake to avoid is treating that consequence as automatic. Beating your own offer does not entitle you to indemnity costs: Australian appellate courts have rejected any presumption, and the question is whether the refusal was unreasonable. An offeree who declined a reasonable-looking offer early, on incomplete discovery and proper advice, may have acted reasonably and still lost. Doing worse at trial does not itself show unreasonable refusal; the decision is assessed on the circumstances available when the offer could have been accepted, not with hindsight from the judgment.
There is a lesson in the pedigree, too. The most-used costs device in Australian civil litigation descends from a passage a later court called dictum, in an English matrimonial appeal about a house in Cheshire, which itself borrowed the idea from the Lands Tribunal. It became law because practitioners used it and courts let them.
Exam and application relevance
Identify which kind of offer you have. A rules-based offer of compromise is a creature of each court's own rules, with prescribed timing and often prescribed costs consequences; a Calderbank offer is a letter, and its consequences are discretionary.
For a Calderbank offer, work the Hazeldene's factors rather than asserting a conclusion: the stage of the proceeding at which the offer was received, the time allowed to consider it, the extent of the compromise offered, the offeree's prospects of success, the clarity of the offer's terms, and whether it foreshadowed an indemnity costs application. Keep two dates apart. Prospects of success are assessed as at the date of the offer, because that is the information the offeree had. Whether the refusal was unreasonable is judged in the circumstances at the time of the refusal — which, where an offer is left open, may be later and may look different.
Finally, in a uniform evidence jurisdiction say where admissibility comes from. It is s 131(2)(h), not the reservation in the letter, that lets the court see the offer on costs; the reservation now does the work of telling the other side what is coming.
Check your understanding
Your client refuses a Calderbank offer of $400,000 and recovers $360,000 at trial. Opposing counsel says indemnity costs follow. What is the actual question, and what is being assessed as at when?