The use of Calderbank offers1 is long established in Irish litigation, and was explicitly endorsed by the Supreme Court in 2005.2 A Calderbank offer is essentially a written offer made without prejudice save as to the issue of costs, to satisfy the whole or part of the opposing party's claim or counterclaim (or appeal). If the offer is not accepted, and the plaintiff fares worse at trial or at the appeal hearing, it is opened to the court in support of an application to fix the plaintiff with costs, on the basis that the trial or appeal was unnecessary, because a sufficient offer to compensate had previously been made.

Since 2008,3 procedural rules have required the Irish superior courts, in considering the award of costs following the determination of a trial or an appeal, to have regard to the terms of any Calderbank offer, though for the purposes of costs applications, Calderbank offers are not regarded as available at first instance in cases where the defendant is able to make a lodgment or tender in lieu of a lodgment with its defence. Relatively little regard is in any event likely to be given to a Calderbank offer which is not made sufficiently in advance of the trial (or appeal) to give the plaintiff a fair choice.4

In its recent judgment in Shannon v O'Sullivan,5 the Court of Appeal considered the effect of Calderbank offers where the plaintiffs had succeeded in their claims in the High Court but the damages awarded had been reduced on appeal. The defendant argued that the costs of the appeals should be awarded to the defendant and set off against the award of costs at first instance, because the plaintiffs had rejected the defendant's Calderbank offers, which provided for sufficient compensation for their losses.

In the High Court, Mrs Shannon was awarded 131,463 damages and Mr Shannon 91,463. In the Calderbank offers, the defendant offered 72,001 and "the costs of the High Court hearing" to settle Mrs Shannon's case and 42,401 and High Court costs to settle Mr Shannon's. The offers were not accepted. The damages were reduced on appeal to 66,463 in Mrs Shannon's case and 41,463 in Mr Shannon's. The Calderbank offers were opened in support of an application to affix the plaintiffs with all of the costs subsequent to latest date for their acceptance.

The Court of Appeal accepted that plaintiffs who receive excessive awards from a court of first instance are in a difficult position. "They obtain a court order for payment of a sum that is likely to be set aside on appeal with the effect that they will usually have to pay the costs of that appeal, unless they can point to some special circumstances which would render that approach unjust. In many instances a defendant, confident of the likely outcome of the appeal, may not afford such a plaintiff the opportunity of settling for a lesser sum than that awarded by the High Court and thus denying them the opportunity of avoiding the costs of the appeal." However, in this case, the defendant by making the Calderbank offers afforded the plaintiffs an opportunity to avoid the consequences of a costs order being visited on them should they recover less than that the sums awarded by the High Court.

The Court of Appeal concluded that "harsh and all as it is on the plaintiffs it would not be just or fair to the defendants who made such offers, which had they been accepted would have protected the plaintiffs from the risk of incurring costs on this appeal, to be affixed with paying their own costs in respect of two appeals which they considered were unwarranted having regard to the offers which they made." Accordingly, the court awarded the costs of the appeals to the defendant and directed that those costs be set off as against the award of costs in the plaintiffs' favour in the High Court.

This judgment is a significant statement of intent by the Court of Appeal in relation to allocation of costs where a Calderbank offer is made on an appeal and underlines the potential utility of, or risk created by, the use of a Calderbank offer on appeal where the defendant believes that the quantum of damages awarded at first instance was excessive.