Consultation in relation to the treatment of Calderbank offers when determining issues relating to costs

Closes 31 Oct 2019

Calderbank offers: FPRC considerations and consultation question

The FPRC recognises that views may differ within the wider financial remedies community as to whether Calderbank offers should be reintroduced and, if so, how they should be taken into account in deciding whether to make orders for costs in relation to financial remedy proceedings:

a. on the one hand, it might be suggested that the criticism voiced by Thorpe LJ in Norris still holds good, in that far too much weight was previously attached to whether one party (usually the respondent) had ‘won’ or ‘lost’ regardless of the other matters of ‘conduct’ to which reference is now made in FPR 2010 r.28.3(7)

b. however, on the other hand, it might be legitimately suggested that the reforms introduced in 2006 have failed to meet their objective, to the extent that parties are still far more reluctant to negotiate ‘openly’, as opposed to on a ‘without prejudice’ basis, than was expected and intended;

c. in particular, it could be that open offers are often either unduly inflated or deflated, because parties are reluctant to put in an open offer which is not their ‘best hope’ of the possible outcome without being completely unreasonable, often having little or no regard to the content of any previous ‘without prejudice’ offers or the stage at which their negotiations failed;

d. so too, under the current rules, there is no sanction for unreasonably rejecting a ‘without prejudice’ offer, resulting in one party being prepared to ‘take the risk’ of going to a contested final hearing, whilst the other party is obliged to incur additional costs with little or no prospect of obtaining any recompense[1].

Taking all these factors into consideration, the FPRC is now seeking views on whether the FPR 2010 should be amended so that offers made “without prejudice save as to costs” should be admissible in considering “conduct” of a party for the purposes of FPR 2010 r.28.3.  (It should be noted that this would not be reinstating the “cliff edge” position as it was in the FPR 1991 immediately before the 2006 reforms.)

Any such new provision would be made on the basis that the general ‘no order’ rule set out in FPR 2010 r.28.3(5) should remain. In this way, excessive weight ought not to be attached only to whether one party has ‘won’ or ‘lost’ but proper account could be taken of whether either party has acted reasonably or unreasonably in the course of their negotiations (including those undertaken “without prejudice save as to costs”) having regard to all of the matters to which the court is required to have regard under FPR 2010 r.28.3(7) when deciding whether it is ‘appropriate’ to make an order requiring one party to pay the costs of another party having regard to ‘conduct of the party in relation to the proceedings’ under FPR 2010 r.28.3(6).

For completeness, consultees should be aware that the FPRC’s Costs Working Group unanimously rejected the introduction of any procedure equivalent to CPR 1998 Part 36 (Offers to Settle) on the basis this would be unduly complex and restrictive, and would be likely to give rise to unnecessary satellite litigation. It was considered that any such procedure would be inappropriate (and so largely unworkable) in financial remedies cases, in which the concept of whether one party has ‘won’ or ‘lost’ is often much less clear than in conventional civil litigation given the range of possible orders and outcomes available to the court.

The FPRC appreciates that if this change were to go ahead, then other consequential amendments would be required (e.g. FPR 2010 r.9.17(4) which preserves the inadmissibility of any without prejudice offer produced at the FDR, r.28.3(7)(b) which allows the court only to take account of an open offer to settle when deciding what (if any) order to make in relation to costs, and FPR 2010 PD28A generally).

Footnotes

1. This can be a particular problem when one party is not legally represented because they may think they have nothing to lose because they will not incur any legal costs themselves.

1. Do you consider that offers made “without prejudice save as to costs” should be admissible in considering the “conduct” of a party for the purposes of FPR r28.3?

Please give full reasons and examples to support your answer.