Introduction
Litigation is expensive, stressful and unpredictable, which is why smart parties look for opportunities to settle early. One of the most powerful tools to encourage settlement (and protect yourself on costs if things head south) is a Calderbank offer.
Named after the English case Calderbank v Calderbank [1975] 3 All ER 333 (Calderbank v Calderbank), this type of offer is made ‘without prejudice save as to costs.’ This means the offer cannot be used as evidence during the hearing, preserving the confidentiality of settlement negotiations. However, once the case ends, the court can be told about the offer when deciding the question of costs. If the offer was reasonable and the rejecting party achieved no better result at trial, the court may use the rejection as a basis for awarding indemnity costs.
Let’s break down in further detail how it works.
What Is a Calderbank Offer?
A Calderbank offer is a written proposal to settle a dispute. It’s flexible, informal and not tied to the strict requirements of court rules. Unlike formal offers of compromise, a Calderbank doesn’t require a specific form, formula or time period.
If the other side rejects the offer, goes to trial, and ends up in no better a position than what you offered, you can ask the court to make them pay your legal costs on an indemnity basis.
This can be thousands of dollars in shifted cost risk.
What Makes a Good Calderbank Offer?
Although flexible, a Calderbank offer must be clear and comprehensive. It usually specifies a proposed settlement amount, any steps to be taken by either party, a precise timeframe for acceptance, and provides reasons why the offer should be accepted. The offer must represent a genuine compromise and remain open for a reasonable period. It should specifically state the consequences of the offeror achieving a better result in litigation, and state that the offer is made in accordance with the principles delineated in Calderbank v Calderbank. Clarity and precision matter: ambiguous or tokenistic offers are unlikely to carry weight when costs are later assessed.
When assessing costs later, the court will look at:
- Was the offer reasonable at the time?
- How does the offer compare to the final outcome?
- Did the rejecting party have any valid reason to say no?
- Was the offer a realistic attempt to settle, or just a tactic?
Some examples of guiding principles are set out in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435, [25]-[29].
Courts are careful, as rejection alone doesn’t guarantee indemnity costs. What matters is unreasonable rejection.
Key Case Principles
Cases such as Roads Corp v Love [2010] VSC 154 and Radovanovic v Stekovic [2024] NSWCA 129 make clear that Calderbank offers operate entirely as a common law mechanism rather than under formal court rules. This flexibility gives them significant strategic power, but it also means their effect is less predictable. Courts focus on the reasonableness of rejecting the offer, not simply whether the final judgment is numerically better or worse than the proposal.
Why Calderbank Offers Matter in Litigation
Calderbank offers can dramatically reshape the risk landscape of litigation. They encourage early, sensible resolution and can save both sides substantial time, money and stress. For the party making the offer, they provide a valuable layer of cost protection, while also applying pressure on an unreasonable opponent to reassess their position. Because they operate outside the strict framework of court-rule procedures, they allow greater flexibility in negotiation. They are particularly useful where the parties are far apart on valuation, where one side is behaving aggressively or unrealistically, where there is a strong desire to avoid a lengthy trial, or where legal costs are likely to escalate rapidly.
The Bottom Line
By encouraging early, sensible negotiation, Calderbank offers can save time, reduce stress, and shift significant cost exposure away from the party acting reasonably. Used strategically, they can reshape the trajectory of a dispute.
If you’re navigating a dispute and want to understand how a Calderbank offer could assist you, our team can guide you through the process and ensure your interests are protected from the outset.
If you have any questions, please reach out to Warlows Legal and our team will be of assistance.
