Legal proceedings can be a legally complex, emotionally challenging and can be a costly process. However, parties engaged in litigation can try and engage in pre-trial resolutions to avoid the costs and uncertainty of trial. During the pre-trial process, parties can provide offers to try and facilitate an early resolution and reduce significant financial expenses.
There are two mechanisms that can be used to achieve a settlement: Order 26 offers and Calderbank Offers. While these mechanisms promote early settlement, they can also influence how costs are awarded by the Court.
Offers of Compromise
Offers of Compromise, as set out in Order 26 of the Supreme Court, County Court and Magistrates’ Court Rules, provides a strict and formal framework for making settlement offers during litigation.
Key Features
Formal Structure: A party may make a written offer to settle at any stage of the proceeding. The offer must explicitly reference that it is made in accordance with Order 26. If accepted, the matter is resolved without trial, often with a favourable costs order for the offeror.
Timeframe: The offer must be open for a minimum of 14 days.
Genuine: The offer must be considered genuine and not just as a means of triggering the advantage on costs.
Confidentiality: There can be no mention of the offer being made or rejected to be used against you, until after the substantive issues of the proceedings have been decided. It can be used to determine the cost consequences.
Cost Consequences: If the offer is rejected and the rejecting party fails to achieve a more favourable outcome at trial, they may be liable for the other party’s legal costs from the date of the offer.
Sanctions for Unreasonable Rejection: Courts may impose cost sanctions on parties who unreasonably reject a fair offer and do not obtain a better result at trial.
Calderbank Offers
A Calderbank offer is an informal settlement proposal made on a “without prejudice save as to costs” basis. Calderbank Offers cannot be used as evidence during a trial; however, it may be considered by the Court when determining costs.
Key Features
Structure: The phrase “without prejudice save as to costs” must be written on the offer.
Flexibility: Calderbank offers are not subject to the procedural requirements of formal rules and can be made at any stage of litigation. If an Offer of Compromise is defective, it may be treated as a Calderbank Offer.
No Prescribed Timeframe: Unlike formal offers, Calderbank offers do not require a specific acceptance period, making them suitable for informal negotiations.
Confidentiality: Calderbank Offers cannot be used as evidence during a trial; however, it may be considered by the Court when determining costs.
Cost Considerations: If the offer is rejected and the final judgment is less favourable than the offer, the court may penalise the rejecting party with an adverse costs order.
Why Settlement Offers Matter?
Settlement offers are more than strategic and negotiation tools. It can shape the outcome of litigation as it avoids the financial burden of proceeding to trial, you can gain control over the resolution terms and protect against adverse costs order.
Conclusion
Understanding how and when to deploy these offers can significantly influence the trajectory of the legal dispute. Order 26 and Calderbank offers are powerful tools for resolving disputes efficiently and strategically. Whether used formally or informally, these mechanisms promote early settlement, reduce litigation costs, and provide parties with greater control over outcomes.
The information provided in this article is general advice only. Given that each situation is unique, we recommend that you contact our experienced litigation and dispute resolution team for guidance. We can assist you in navigating the complexities of the litigation process. Our team can be contacted on (03) 9311 8911.
