This blog was co-authored by Thabo Kolele, Candidate Attorney.
Claimants in South Africa who wish to avoid protracted and costly disputes are increasingly resorting to making secret settlement offers of the amount that they will accept that are “without prejudice save as to costs”. Such so-called Calderbank offers were first recognised in the English case of Calderbank v Calderbank 1975 and are intended to put defendants at risk of a punitive costs order if they unreasonably reject the offer and fail to achieve a better outcome at trial.
Calderbank offers are made by claimants, as opposed to defendants who have High Court rule 34 at their disposal. The claimant can rely on the rejected offer after judgment has been granted in their favour in support of a request for a punitive cost order.
South African courts have recognised that public policy considerations of encouraging settlements and discouraging costly litigation supports the recognition of Calderbank offers as an exception to the general rule that without prejudice communications are inadmissible. Courts nevertheless retain their discretion to determine whether a rejected Calderbank offer warrants a punitive costs order and will consider factors including:
- The conduct of the parties during the litigation. The court will examine how both parties behaved throughout the litigation process. This includes their willingness to engage in settlement discussions and their overall demeanour.
- The complexity of the case. More complex cases may justify a party’s decision to reject a settlement offer, as the outcome may be less predictable.
- The amount of money involved. Higher amounts may justify more rigorous litigation efforts.
- The importance of the case to the parties as well as their resources. Cases with substantial personal or business implications may warrant a different approach to settlement offers.
- Any failure to comply with court rules.
- Whether a party’s actions caused unnecessary legal expenses. This includes unnecessary delays or frivolous motions.
- The difference between the offer and the award. The bigger the difference, the more likely that the defendant acted unreasonably in rejecting the offer.
- The history of settlement negotiations. The court will scrutinise the reasonableness of the Calderbank offer and the rationale behind its rejection. A reasonable offer is one that is clear, offers a fair discount based on a realistic assessment of the case, and provides sufficient time for consideration. If a party rejects it without a valid reason (or fails to engage at all), they may be seen as acting unreasonably.
For instance, in Van Reenen v Lewis 2019, the court awarded punitive costs in favour of the claimant from the date of her first Calderbank offer, which was much lower than the award in her favour. The defendant had rejected this offer without a counteroffer, acting unreasonably and wasting public resources with what was described as a hopeless defence.
Similarly, in RNT v Amanfo 2024, the court amended its initial court order to include punitive costs in the claimant’s favour where the defendants had rejected a Calderbank offer without engaging in further settlement negotiations. The court found that the defendants had acted unreasonably and had caused the claimant to incur unnecessary legal expenses, especially considering the nature and extent of the claim. The court considered that the matter was capable of settlement and should have been settled given that no valid defence was raised.
Calderbank offers can be a powerful tool for claimants to induce settlement and to recover their ordinarily irrecoverable costs in the event of a favourable judgment in an amount higher than the rejected offer. They require careful formulation and evaluation and are subject to the court’s discretion and assessment of the reasonableness of the parties’ conduct. Litigants who wish to make or respond to Calderbank offers should therefore be mindful of the relevant principles and factors that may influence the court’s decision on costs.