There are three ways in which a proposal to settle a financial dispute can be made. These are as follows:-
A Open Proposal
This is a proposal which can be presented to the court and relied upon by either party at any stage during the proceedings. As a result, it is important to bear in mind that once an open proposal has been made it can always be referred to even though it may be rejected or withdrawn.
B Without Prejudice Proposal
In many ways this is the opposite of an open proposal. Basically no without prejudice proposal can be presented to the court at any stage during the proceedings unless the maker of the without prejudice agrees.
The without prejudice proposal can be a very effective way of trying to resolve a financial dispute as it enables both parties to express their views freely in the knowledge that these will not be put before the court at a later stage. As a result, the without prejudice process is often used to allow the parties and their solicitors to negotiate a settlement.
C Without Prejudice Save As To Costs Proposals (Calderbank Proposals)
A proposal that is put forward on the basis that it is "without prejudice save as to costs" is in some ways like a strictly without prejudice proposal and an open proposal. It is also known as a Calderbank proposal/letter because of a case decided some years ago which endorsed this way of trying to deal with the financial issues.
In order for this procedure to be adopted it is necessary for a letter to be written to the other party/their solicitor setting out the proposals for settlement. The other side can then either accept the proposals, reject them or leave them unanswered. If the proposals are accepted in full then there will be a fully binding agreement between the parties (please see Section D which refers to acceptance).
If the proposals are either rejected or unanswered and the matter goes to a fully contested hearing then neither party can rely upon the proposals contained in the without prejudice letter in the course of the proceedings. However, once the court has made a decision about the financial issues it will then be necessary for the Judge to consider whether or not any costs orders should be made. A costs order is an order requiring one party to pay all or part of the other's costs incurred in dealing with the financial issues.
In considering whether or not a costs order should be made the court has to have regard to both parties' conduct throughout the proceedings. Whilst this will include a number of issues (i.e. providing disclosure promptly and complying with court orders etc.) the court also has to take into account any proposals that have been put forward by either party either on an open basis or on a Calderbank basis (remember that without prejudice proposals cannot be referred to at any stage). As a result, it is at this stage when the court comes to consider the position on costs that a party is entitled to present a copy of their Calderbank letter to the court. If the proposals contained within the Calderbank letter either equal or are better than the award made by the court then the other side can be ordered to pay your costs. As a result, it is very important that when Calderbank proposals are put forward one has an eye on the costs implications that arise from them.
You should be aware that the costs protection following a Calderbank letter will generally start from 14 days after the letter/proposals were sent. This is because the court takes the view that the other side should have at least 14 days (in some cases 21 days) to consider any proposal before putting themselves at risk on costs. The other factor which you need to be aware of is that the court would not expect your spouse to consider a proposal if you had not provided full and frank disclosure of your own financial circumstances.
An example of a Calderbank letter which may assist would be as follows. Your spouse is seeking a settlement which would provide them with a capital amount equal to £100,000. You think that your spouse should only receive £60,000. As a result, your open position to the court is that your spouse should receive £60,000. However, you are aware that the court may make an order that your spouse receives, say, £80,000. As a result, you make a Calderbank proposal offering £80,000. If your spouse then rejects this proposal it will obviously lead to further legal costs being incurred. As a result, if the court makes an order that your spouse should receive £80,000 you can legitimately ask the court to make an order against your spouse for all the costs you have incurred due to their refusal of your offer.
In the same way that you can put forward a Calderbank proposal your spouse is also entitled to do so. As a result, it is very important that when a Calderbank proposal is received by us we look carefully at the implications of it not only in terms of the actual amount that is being suggested but also having regard to the overall costs situation. This is because if your spouse's Calderbank proposal is either equal or better than the award made by the court then you may be ordered to pay your costs.
It should be noted that the costs implications for open proposals is exactly the same as for Calderbank proposals. The only major difference is that an open proposal can be referred to at any stage during the proceedings whereas a Calderbank proposal can only be referred to when the court comes to consider the issue of costs.
D Acceptance of Proposals
It is very important to always remember that if any proposals (open, without prejudice or Calderbank) are put forward and agreed by the other side then a legally binding agreement will have been reached which either party can then present to the court even though the original proposal may have been put forward on a without prejudice or Calderbank basis.
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