If you have been represented by a lawyer in a civil dispute, you may have heard the legal term ‘Calderbank letter’ or ‘Calderbank offer’. The word ‘Calderbank’ is actually a surname, and it originates from the English Court of Appeal case, Calderbank v Calderbank, in 1975. Although the decisions from English cases are not automatically binding in Australia, it has nevertheless been adopted by the Australian judicial system. Australian courts aim to achieve dispute resolution in three ways: litigation management; referral of matters to alternative dispute resolution; and the use of costs orders to penalise parties who reject settlement offers. One way to make a settlement offer is through a Calderbank letter. This article will explain why Calderbank letters are important to clients and examine its essential elements and legal consequences.
What is a Calderbank letter?
A Calderbank letter is an informal offer of settlement which carries potential costs benefits for the party making that offer (‘the offeror’). If several conditions are satisfied, the Court will consider making a costs order after the substantive issues are solved at trial.
Why are Calderbank letters important?
Calderbank letters encourage proper compromise of litigation so that the dispute can end as soon as possible. The potential for Courts to impose costs orders discourages stubborn resistance and unreasonable behaviour by the parties. If the matter is settled early, both parties will save significant legal costs and stress. By encouraging settlement, the substantial case load in NSW courts will also be eased and consequently reduce delays and facilitate greater access to justice for the public.
Case summary of Calderbank v Calderbank  Fam 93
Prior to 1976, informal offers of settlement could not be raised in Court because they were not admissible. The decision of Calderbank is the first time where the Court recognised informal offers of settlement and featured costs orders in favour of the offeror.
English Court of Appeal
The case concerned a matrimonial property dispute between Mr Calderbank (husband) and Mrs Calderbank (wife). Mrs Calderbank, who financially supported her family for 17 years, sought a declaration that she was the sole beneficial owner of the matrimonial home. However, Mr Calderbank refused to leave the matrimonial home and applied for a property adjustment order. Before the matter went to trial, Mrs Calderbank offered Mr Calderbank another house, which was worth 12,000 pounds in exchange for Mr Calderbank leaving the matrimonial home. Mr Calderbank rejected this offer. At trial, the Court ordered a lump sum payment of 10,000 pounds to Mr Calderbank from the proceeds of the sale of the matrimonial home. Unhappy with the outcome, Mrs Calderbank appealed on two grounds:
1. The Court had no legal jurisdiction to make such a property division.
2. Mr Calderbank should not be entitled to legal costs because he declined a reasonable pre-trial settlement offer. Mrs Calderbank submitted that she should have her costs paid by Mr Calderbank as her pre-trial offer was greater than the lump sum awarded by the trial judge.
The Court of Appeal dismissed the first ground and accepted the second ground. The Court outlined that an offer of settlement, although inadmissible as to the substantive issues of the case, can still be relevant when the Court turns to making cost orders. It was subsequently held that this principle would not only apply in family court proceedings but to all civil proceedings.
Elements of a Calderbank letter
Below is a non-exhaustive list of requirements for a Calderbank letter.
1. The letter includes a statement that the offer is made in accordance with the principles from Calderbank v Calderbank  Fam 93.
2. The letter must indicate the period that the offer will remain open. A reasonable period would be 14 days.
3. Some courts have demanded that the letter provide reasons why the offer should be accepted. This can be achieved by raising the offeree’s low prospects of success and the weaknesses in their case.
4. The letter needs to be precise so that the judgment and order can be readily compared. Ideally, the amount should exclude costs and interests.
5. The letter must represent a genuine offer of compromise.
6. The letter must clearly show the words “without prejudice”. This way, it cannot be given in evidence as an admission of liability.
7. The offeror bears the burden of drafting an offer that is clear enough for the court to make the determination as to the reasonableness of the rejection of the offer. The Supreme Court of Victoria in Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) provides guidance in this aspect. The Court should consider the following factors:
– The stage of the proceeding at which the offer was received;
– The time allowed to the offeree to consider the offer;
– The extent of the compromise offered;
– The offeree’s prospects of success, assessed as at the date of the offer;
– The clarity with which the terms of the offer were expressed;
– Whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.
A Calderbank letter must contain an offer that is genuine, precise and not bettered by the offeree upon judgment. Reaching a compromise through a Calderbank letter is generally a better solution than continuing expensive and drawn-out court proceedings. Before you write an offer to the other side, you should contact a lawyer for a consultation. Our litigation team have over 10 years of experience in representing clients across all levels of court.
This publication is general information only and does not purport to provide legal advice. We do not accept responsibility for any losses for reliance upon this publication.
Ge Wu is the solicitor director of Legal Point Lawyers & Attorneys. He has been admitted to practise law since 2005. Throughout his practice, Ge Wu predominantly practises in the areas of Property Law, Immigration Law, Commercial Law, Civil Litigation and Family Law.
His experience covers all aspects of property law, commercial/retail lease, immigration law and civil litigation, while at the same time, he also has experience in family law, criminal law and other areas such as will-drafting and general advice.
He has frequently been instructed by corporate clients in pre-acquisition due diligence reports, structuring property development, land/shopping centre acquisitions, G.S.T. and stamp duty advice for buying/selling businesses, as well as share transfers and company re-structures.
Ge Wu has been appointed as Notary Public since 2011 and started to provide Notary Public service to clients from different cultural backgrounds.
Daniel’s expertise spans civil litigation, criminal law and real property matters.
Daniel is noted for his experience in settling a complex family law matter concerning the division of matrimonial property. Furthermore, he has appeared in Courts across New South Wales for criminal matters ranging from traffic offences to assault charges to bail applications. Daniel also has extensive knowledge and experience to prepare and advise on commercial leases and contracts for the sale of land.
He has a keen interest in obtaining the best possible outcome for his clients in the most cost-efficient way. Clients appreciate Daniel’s responsiveness, business acumen and ability to deliver advice that is easy to understand.
Daniel holds a Bachelor of Laws and Bachelor of Commerce from the University of Sydney. He is a solicitor of the Supreme Court of New South Wales.
He is proficient in English and Cantonese.