News
The sticky issue of costs
"You can't always get what you want,
But if you try sometimes, you just mind find,
You get what you need."
I have been flattered to receive comments from a number of readers about my last article - which dealt with the issue of costs awards in the Employment Relations Authority.
There is another aspect to questions of costs which I thought also merited some investigation. As a result, this week's article is dedicated to an examination of the Calderbank offer.
In a profession where we are regularly accused of using a strange brand of the English language, the term "Calderbank" is a good example of legalese. What is a Calderbank?
If one wishes to be accurate, the proper question is not what is a Calderbank - but who?
Mr and Mrs Calderbank were an English couple who were married in 1956. After a number of years, their marriage fell on unhappy times. In 1973 the wife left the husband, who subsequently obtained a decree for divorce.
As often happens in such cases, a dispute arose about the appropriate sharing of matrimonial property. In the case of the Calderbanks, it appears that the wife was recognised as the owner of a significant amount of property - and the real question was as to the appropriate portion of that property that would be awarded to the husband.
When one reads the case, a feeling emerges that the wife was inclined to an early compromise, possibly to avoid the need for a drawn out court proceeding. At one point - prior to trial - the wife made an offer to give the husband a house which was valued at approximately £12,000. The husband declined this offer and proceeded to a hearing. Following the trial the wife was ordered to pay the husband a lump sum of £10,000.
As you might guess, the wife responded to the Court by disclosing that she had previously made an offer to the husband which was in excess of the order made against her. In essence, she said that the trial had been a waste of time, and that both parties would have been better off had the husband accepted her pre-trial offer.
The Court accepted that this argument had relevance to the question of costs. It ordered the husband to meet the wife's costs of the proceeding which were incurred after the time of her offer. What that meant was that, even though he had been successful at trial, the husband was ordered to pay a substantial portion of the wife's costs.
The principle in this case has continued to hold great attraction for parties in a number of different types of legal proceedings - and it is now recognised that a "Calderbank offer" may be used as a legitimate tactic prior to trial, with a potential costs consequence. In short, the offer is made "without prejudice" (so that evidence of it cannot be brought at trial), but the existence of the offer can be revealed following trial - as to the question of costs.
In New Zealand, the Employment Court has long recognised the potential usefulness of a Calderbank offer. A couple of recent cases have, however, given some indication about certain limitations on the use of this procedure.
In Burns v Attorney-General in respect of the Chief Executive of the Inland Revenue Department (Unreported, Employment Court, Christchurch, 19 August 2002) an employee succeeded in obtaining a damages award of $7,500 from his employer, the IRD. At the conclusion of the trial, however, the IRD revealed that it had previously made Calderbank offers of $10,000 and $15,000. As a result, the IRD sought to have the applicant make a "substantial contribution" to its costs.
While the Court was prepared to give regard to the Calderbank offers in determining the question of costs, its view was that the applicant's case involved a claim for more than just an award of money. The Chief Judge held that the applicant had a "thirst for justice and for vindication of his position as a victimised employee".
In this context, the Court held that while IRD had offered monetary compensation, it had denied the applicant an important part of his claim - it continued to assert that it had acted properly towards him, whereas the applicant sought an acknowledgement that it had not done so. For this reason, His Honour concluded that without an apology it was not surprising that the applicant was unprepared to settle his claim.
In the event, the Court held that the applicant was not obliged to make any payment of costs to the IRD. At the same time, however, it did not make any award of costs in the applicant's favour (apart from an award of disbursements) because he was a litigant in person.
In a subsequent case (Wellington Racing Club Incorporated v Welch & Peard (Unreported, Employment Court, Wellington, 23 August 2002)) the Chief Judge summarised this principle by saying that in cases involving features of a personal nature it may be unreasonable to expect a claimant to consider favourably an offer from a former employer to pay money especially if a dismissal has been "attended by high-handed or arbitrary action or preceded by hurtful quarrels".
Therefore, while the Calderbank offer may have some effect in employment cases in New Zealand, its application is complicated by the fact that many employment matters involve issues which are about more than just money.
