A few thoughts on the Calderbank offer consultation

Divorce|Family Law|July 24th 2019

I mentioned here last Friday that a consultation has been launched in relation to the treatment of ‘Calderbank’ offers when determining issues relating to costs in financial remedy proceedings. I thought I would have a closer look at the subject, and some of the arguments for and against Calderbank offers.

But first, let’s go right back to basics, for the benefit of non-lawyer readers.

Let us suppose that a divorcing couple have assets worth £100,000. The husband wants that sum divided equally, and the wife seeks £75,000. Obviously, if the matter is to be settled out of court then one party has to open the negotiations by putting forward a proposal. The husband, knowing that the wife won’t agree to an equal division, wants to put forward a proposal whereby the wife gets £60,000 and he gets £40,000. He is prepared to agree to less, to save the time and expense of going to court.

OK, let’s stop there for a moment. The husband wants to put forward a proposal. He can do that in one of two ways. It can either be an ‘open’ proposal, or a ‘without prejudice’ proposal. The difference is that an open proposal can be seen by the court, and a without prejudice proposal cannot, unless it is accepted.

Going back to the example, the husband is still hopeful that if matters are not agreed and have to go to court the court will award him a full half share. But if the court knows he is prepared to settle for only 40%, then the court is not going to award him 50%. So the husband puts his proposal forward on a without prejudice basis. In that way, the court will not see it and may still award him 50% if matters aren’t settled.

But what if the wife rejects the husband’s proposal, the matter goes to court and the court awards the husband more than 40%? The wife has not beaten the husband’s proposal, but the husband has still had to incur the cost of going to court.

That is where Calderbank offers came in. A Calderbank offer (named after a 1975 case of that name) is made ‘without prejudice save as to costs’. This means that if the proposal is not beaten by the other party then the maker of the proposal can show the proposal to the court and request the court to order the other party to pay their costs from the date of the offer, on the basis that those costs would not have been incurred if the offer had been accepted.

Thus, in the above example if the husband had put forward his offer as a Calderbank offer he could, at the end of the final hearing, have produced his offer to the judge, and asked the judge to order the wife to pay his costs from the date of the offer.

As I explained on Friday, Calderbank offers were abolished when new costs rules were introduced in 2006. Open offers were to become the norm and the starting point in all financial remedy cases is that there should be no order as to costs – i.e. each party should pay their own costs.

And now the Ministry of Justice and the Family Procedure Rule Committee has launched a consultation seeking views as to whether the rules should be amended in relation to the treatment of Calderbank offers when determining issues relating to costs. The Committee established the Costs Working Group in December 2018 to review the functioning of the current costs regime in financial remedies cases and to make recommendations. We are told that the Working Group “are particularly keen in encouraging parties to engage reasonably and responsibly in settlement negotiations.” Therefore, the consultation seeks views as to whether the rules should be amended to enable any offers which are made in the form of Calderbank offers to be taken into account as “conduct” when the court is considering making an order requiring one party to pay the costs of another party.

As I said here on Friday, many family lawyers lament the passing of Calderbank offers, saying that they encouraged parties to engage in reasonable negotiations. Obviously, you ignored a Calderbank proposal at your peril, knowing that you could end up being ordered to pay the other party’s costs. It is therefore true that Calderbank offers could incentivise settlement.

But some would argue that Calderbank offers have their problems. There is not space here to go into all of the arguments, but here are two possible major issues with Calderbank offers.

Firstly, most financial remedy cases are determined by reference to the needs of the parties, in particular their income and housing needs. When formulating its order, the court will try to ensure that the needs of the parties are met. But if the court then orders the ‘losing’ party to pay the costs of the other party, the ‘losing’ party may well be left with insufficient to meet their needs. The carefully considered order of the court will be thwarted.

The second major issue relates to the inherent uncertainties surrounding financial remedy cases. As I have explained here previously, we have a discretionary system, not a formula-based system. This means that the outcome of a case depends upon what that particular judge thinks is a fair settlement, on that particular day. It can be extremely difficult in some cases to guess what the outcome of the case will be. In those circumstances, how do you know whether to accept a proposal? And should you be penalised for guessing wrong?

Clearly, it will be very interesting to see the outcome of the consultation!

You can find the consultation document here.

John Bolch often wonders how he ever became a family lawyer. He no longer practises, but has instead earned a reputation as one of the UK's best-known family law bloggers.

Share This Post...

Leave a Reply

Close

Newsletter Sign Up

For all the latest news from Stowe Family law
please sign up for instant access today.



Privacy Policy