Refusing a reasonable settlement offer made in a court case can result in a Plaintiff being penalised financially – Calderbank letters*
The use of Calderbank offers are becoming and seen as an effective tool used by defendants to achieve a settlement and reduce costs.
The use of a Calderbank letter can result in a financial penalty to a Plaintiff where the offer is not accepted.
What is a Calderbank letter?
A Calderbank letter is a formal offer of settlement to the solicitor acting for the Plaintiff. To qualify as a Calderbank letter the letter must
- Be headed “without prejudice save as to the issue of costs”
- It must contain a specific offer to the Plaintiff in settlement of the claim in respect of both general and special damages
- The defendant must also offer to pay the Plaintiff’s reasonable costs and expenses on a party and party basis up to the date of acceptance of the offer
- The letter must confirm that if costs cannot be agreed between the Plaintiff and the Defendant, they will be referred to taxation
- The letter must contain the specific date before which the Plaintiff must accept the offer
- The letter must state that although the offer is made without prejudice to the issue of costs the defendant has a right to refer to the correspondence on any issue of costs which may arise and that their rights in this are reserved
What is the relevant legislation?
Section 17 of the Civil Liability and Courts Act 2004 states that a formal offer must be made during the course of proceedings. However, in the case of a Calderbank letter they will essentially exclude it from the use in personal injury claims. This was until Section 169 (1) of the Legal Services Regulation Act 2015. That Act came into effect on the 7th October 2019.
This issue of Calderbank letters is also covered in Order 99 Rule 3 of (1) of the rules of the Superior Courts.
Are there time limits?
A Calderbank letter is not one that is subject to any time limit. It can be made at any stage in the proceedings. It can even be made during the hearing of a case. So, if a defendant is out of time to make a Section 17 Offer or Notice of Tender Offer the defendant now appears that they can make an offer in writing including an all-Calderbank offer which must be taken into account by the trial Judge when considering the question of costs at the end of any proceedings.
The use of Calderbank letters has become more common and is likely to become more common in the future.
*Before acting or refraining from acting on anything in this guide, legal advice should be sought from a solicitor.
*In contentious cases a solicitor may not charge fees or expenses as a proportion or percentage of any award or settlement.