Calderbank Offers And EHi Car Services: Time For A New Vehicle To Encourage Settlement Of Cayman Litigation?

• Published date: 30 May 2020
• Author: Mr Andrew Pullinger and Jeremy Durston
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, M&A/Private Equity, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Law Firm: Campbells

Most cases should not reach trial. Parties should usually, with the help of their legal teams, be able to resolve their dispute without the cost and court time associated with a trial being incurred. Public policy encourages the settlement of disputes out of court, whether by the use of alternative dispute resolution processes such as arbitration or mediation, or by resolution on mutually acceptable terms.

In the Cayman Islands, 'without prejudice save as to costs' settlement offers play an important role in encouraging the settlement of litigation. This type of offer, also known as a Calderbank offer after the 1975 English case in which the concept was established,¹ was subsequently enshrined in the Grand Court Rules². However, as Lady Justice Butler-Sloss observed in Gojkovic v Gojkovic³, "Calderbank offers require to have teeth in order for them to be effective".

This article considers whether Calderbank offers are, in Cayman practice, an effective means of encouraging parties to resolve their disputes and posits that the time has come to introduce a more robust and predictable costs procedure to operate in tandem with Calderbank offers, such as that provided under Part 36 of the Civil Procedure Rules in England and Wales, to promote the settlement of disputes out of court in order to save court time and costs. This is timely in light of the anticipated increase in Grand Court litigation as a result of the ongoing pandemic and the economic destruction it has wrought.

What is a Calderbank offer and how do such offers encourage settlement?

A Calderbank offer is an offer of settlement made by one party to existing or contemplated litigation to another on a 'without prejudice save as to costs' basis.

Calderbank offers can be made by any party to the actual or threatened proceedings. The offer must clearly set out the proposed settlement terms, including the scope of the settlement, the amount of any settlement sum and the period within which the offer is open for acceptance. Such an offer can be made at any time prior to judgment and there is no limit to the number of offers a party may make.

The offer is made 'without prejudice save as to costs', meaning that the fact and terms of the offer cannot be brought to the attention of the Court (or other tribunal resolving the dispute) until the substantive dispute has been resolved and the Court is considering the issue of costs between the parties⁴.

In Cayman, the 'loser pays' principle applies with respect to costs such that, as a general rule, the unsuccessful party will be ordered to pay the costs of the successful party on what is known as the 'standard basis'. However, this relates to those costs deemed to be reasonable and proportionate, with any doubt being resolved in favour of the paying party, which is determined in amount by the process of 'taxation' in the absence of agreement between the parties. In practice, this typically results in the recovery by the successful party of approximately 60-70% of its costs.

Under the Grand Court Rules, the Court may also order costs payable on the 'indemnity basis' if the Court is satisfied that a party conducted the proceedings in a manner which was "improper, unreasonable or negligent".⁵ An indemnity costs order typically results in the successful party recovering a significantly higher proportion of its costs, however in practice such orders are rare.⁶

If a Calderbank offer made by a party is not accepted by the other party, and the party which did not accept the offer ultimately does not do better than the offer at trial, it is in the discretion of the Court to order costs against that party payable from the date on which the offer should, in hindsight, have been accepted. Such costs...