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FYI
Employment Law
06 Oct 2010
An Update on Calderbank Offers and Costs
In this FYI, we discuss some recent cases which provide useful guidance to employers when seeking to maximise the benefit of using a Calderbank letter during settlement negotiations or legal proceedings.
Introduction
Many employers are reluctant to litigate employment problems because the costs awarded by the Employment Relations Authority or Court are so low, even where the employer is entirely successful.
The Authority has traditionally applied a 'tariff' based approach to awarding costs to a successful party, on a scale of between $1,000 to $2,500 per hearing day, regardless of the actual costs incurred. This can often result in a significant shortfall for an employer between their actual costs, and any costs award in their favour.
Calderbank Offers
So what can an employer do, to improve their chances of getting a higher costs award? One possibility, is to send the employee a "Calderbank" letter, to try to settle matters at an early stage in the proceedings.
By way of background, a Calderbank offer is more than a 'without prejudice' offer made during settlement negotiations. The without prejudice offer is framed so that it can be produced in support for an application for costs, if the remedies awarded by the Employment Relations Authority or Court are the same, or less than, those offered in the Calderbank letter. In such a case, an employer may be able to claim their full legal costs.
As an example, if an employer made a without prejudice offer to settle a personal grievance claim for $10,000 in a Calderbank letter before a hearing, and this was rejected by the applicant, the employer would be able to provide a copy of that letter to the Authority or Court in support of a subsequent claim for costs after the hearing. If the applicant was either unsuccessful in their claim, or was successful but awarded an amount less than $10,000, the Calderbank letter could improve the prospects of a higher costs award.
Relevance of Non-Monetary Factors - Vindication and Apologies
An important factor in deciding the weight to be given to a Calderbank letter by the Authority or Court may be whether there are other "non-monetary" factors involved in the offer. For example, in Heath and Auckland City Council, the Authority found that a Calderbank letter was of less relevance where the employee applicant's objectives related primarily to vindication and protecting their reputation.
This issue was also recently considered by the Court of Appeal in Bluestar Print Group v Mitchell. In that case, Mr Mitchell sought an apology from his former employer and an acknowledgement that it had acted improperly, in addition to $10,000 as compensatory damages. The Employment Court had previously disregarded a Calderbank letter made to Mr Mitchell, which was very close to the compensation ordered by the Court, but which did not address his desire for vindication. The Court ordered the employer to pay $5,500 costs to Mr Mitchell.
The Court of Appeal found that there may be cases where vindication may be relevant to the exercise of a discretion when assessing costs and considering Calderbank letters, and stated costs assessments are not confined solely to "economic considerations". The Court also noted however that an offer to pay compensation, at a reasonable level, might well be regarded as conveying a distinct element of vindication, in itself. The Court of Appeal quashed the Employment Court's costs award.
Offers Must Be Timely
In addition to content, the timing of any Calderbank letter is also very important.
In James v New Zealand Vineyard Estates, the applicants were successful in claims of unjustifiable disadvantage, and were awarded compensation by the Authority. When determining costs, the Authority considered two Calderbank offers that had been made by the employer. These were made just four days, and then one day, before the hearing.
The Authority declined to take either offer into account when determining costs because of their 'last minute' nature. The offers were made "so late in the piece" the Authority considered it "difficult to see any costs benefit for either party."
While there is no strict time limit on when a Calderbank offer may be made, in order for it to be effective, the closer an offer is made to the hearing, the less likely it will have any material impact.
Calderbank letters should therefore ideally be made before either party has incurred significant costs in preparing for a hearing (such as before briefs of evidence etc are drafted).
Full Costs May be Awarded
Although unusual, it is possible in some circumstances for an employer to be awarded the full amount of their actual legal costs (often called 'full indemnity client/solicitor costs'). This was demonstrated recently in Chen v New Zealand Sugar Company.
Mr Chen was unsuccessful in the Authority and the Employment Court in his claim for unjustifiable disadvantage. Mr Chen's challenge to the Employment Court caused the company to incur legal costs of $19,550. New Zealand Sugar made three Calderbank offers throughout proceedings, which Mr Chen rejected. The final Calderbank letter was found by the Court to be "more than reasonable" and contained remedies which "Mr Chen could never hope to achieve from the proceedings." On this basis, the Court found Mr Chen's rejection of the offer was unreasonable. The Court awarded full indemnity client/solicitor costs against Mr Chen.
Implications
These cases are a reminder that the proper use of an appropriately worded Calderbank letter can be a useful tool when seeking to maximise a costs award. However, simply labelling an offer "without prejudice except as to costs", without tailoring the offer to the situation and the remedies sought by a grievant, can significantly restrict the potential impact of the Calderbank offer.
Authors
Charlotte Bates
Senior Associate - Employment
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Carl Blake
Senior Associate - Dispute Resolution
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Katherine Burson
Senior Associate - Employment
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In This Article:
A Calderbank offer is more than a 'without prejudice' offer made during settlement negotiations. The without prejudice offer is framed so that it can be produced in support for an application for costs, if the remedies awarded by the Employment Relations Authority or Court are the same, or less than, those offered in the Calderbank letter.
