Introduction

Settlement offers play a crucial role in civil litigation by enabling parties to resolve disputes without resorting to trial. In Alberta, settlement offers can be made under the common law via Calderbank offers or as formal offers governed by the Alberta Rules of Court, Alta. Reg. 124/2010 (“ARC”). While both avenues are designed to encourage early resolution, they diverge significantly with respect to procedural formalities, legal effect, and cost consequences.

Common Law – Calderbank Offers

Originating from the decision of the English Court of Appeal in Calderbank v. Calderbank, [1976] Fam. 93 (Eng. C.A.)[“Calderbank”], a Calderbank offer is term used to describe a settlement proposal made pursuant to the common law. While historically framed as an offer made “with prejudice as to costs,” the modern articulation of this phrase has evolved to the current formulation ,which settlement offers are tendered on a “without prejudice except as to costs” basis. 

The purpose of a Calderbank offer is to promote settlement while preserving the offering party’s ability to rely on the offer in support of a subsequent costs award, should the matter proceed to trial or adjudication.

While Calderbank offers are not governed by the ARC, they remain influential in the Court’s exercise of its broad discretion regarding costs. A party who unreasonably rejects a Calderbank offer, where the offer was objectively reasonable and its rejection resulted in unnecessary litigation, may be subject to adverse cost consequences.

Calderbank offers are a well-established and effective mechanism for preserving a party’s entitlement to enhanced costs in circumstances where a Rule 4.24 Formal Offer is either impractical or procedurally inappropriate.

The salient features of Calderbank offers include the following:

1. Absence of Automatic Cost Consequences: Unlike formal offers under the ARC, Calderbank offers do not trigger the cost-shifting presumptions codified in Rule 4.29.

2. Application of Traditional Contract Principles: Counteroffers operate to extinguish the original offer, and an offer may be revoked at any time prior to acceptance unless consideration is provided to keep it open.

3. Flexible Form of Communication: Offers can be made through letters, emails, or informal discussions.

4. Strategic Utility: Time-limited offers can create pressure for settlement.

Utilizing the Alberta Rules of Court to Settle

Relying on the ARC, Formal Offers are governed by Rule 4.24 of the ARC and engage the cost consequences delineated in Rule 4.29. These rules establish a more structured framework that incentivizes early resolution by attaching specific cost implications to the rejection of reasonable offers. The essential features of formal offers under the ARC include:

1. Formal Requirements of Form and Service:

• Offers must be made in accordance with Form 22 and properly served on the opposing party; and

• The offer must remain open for acceptance for at least two months or until the commencement of the hearing, whichever occurs earlier.

2. Restriction on Withdrawal:

• Unlike Calderbank offers, formal offers may not be withdrawn unilaterally. Court approval is required to withdraw a formal offer once it has been served.

3. Cost Consequences Pursuant to Rule 4.29:

• Plaintiff’s Offer: Where a plaintiff’s offer is rejected, and the plaintiff subsequently obtains a judgment equal to or more favourable than the offer, the court may award the plaintiff double costs from the date of the offer onward; and

• Defendant’s Offer: Where a defendant’s offer is rejected and the plaintiff obtains a judgment less favourable than the offer, the defendant may be entitled to costs from the date of the offer forward.

4. Strategic Advantages:

• Formal offers encourage parties to engage in meaningful negotiations at an early stage, and deter unreasonable litigation conduct through the threat of adverse cost consequences; and

• The court retains discretion to decline enforcement of cost penalties where the offer was not a genuine compromise or was otherwise unreasonable in the circumstances.

Court Retains Discretion

When parties exchange settlement offers, whether as formal offers pursuant to Rule 4.29 of the ARC or as Calderbank offers, the courts retain discretion to consider these offers in the assessment of costs. A formal offer to settle that is not accepted, and is ultimately more favourable than the judgment obtained, may entitle the offering party to “double costs” under Rule 4.29 of the ARC, subject to judicial discretion. Although not automatic, this rule creates a rebuttable presumption in favour of such an award, thereby encouraging litigants to make reasonable settlement proposals and to seriously consider those received.

Comparative Analysis

Conclusion

Settlement offers, whether made at common law or pursuant to the formal structure under the ARC, constitute powerful instruments within the litigation process. Common law offers offer flexibility and strategic value, particularly where informality is preferred or formal compliance is impractical. By contrast, formal offers create a defined procedural regime with the potential for substantial cost consequences, thereby incentivizing parties to assess the risks of continued litigation.

In determining which approach to adopt, litigants and counsel must consider a range of factors including procedural posture, litigation strategy, risk tolerance, and the likelihood of success at trial. Above all, parties must remain cognizant of the cost implications that may arise from either making or rejecting a settlement offer, particularly where such offers are objectively reasonable and consistent with the principle of proportionality.

You’re reading Part 5 of our Costs series. Continue below:

• Part 1: Understanding Costs in Alberta Litigation Process
• Part 2: The Assessment of Costs in Alberta Litigation
• Part 3: Costs in the Court of Justice
• Part 4: Alberta’s Enlarged Rule of Thumb
• Part 5: Settlement Practices in Alberta: Understanding the Cost Consequences (You are here)