By Stuart Eustice, Partner and Henry Van Til, Graduate Lawyer

The Victorian Court of Appeal has provided useful guidance on when a Calderbank offer framed as a proposal to discontinue proceedings and bear one’s own costs may constitute a genuine compromise for the purposes of enlivening the Court’s discretion to award indemnity costs.

Background

The proceeding concerned an appeal following three interlocutory orders made by the trial judge. During the course of the dispute, the interveners made a Calderbank offer to the applicant proposing to withdraw the proceedings and bear their own costs.

The interveners detailed in the Calderbank that the appeal proceeding lacked merit, and that the opposing counsel will seek to recover costs on an indemnity basis if and when they successfully defend the appeal proceeding.

The offer was not accepted.

Following the determination of the appeal, the interveners sought an order that costs be awarded on an indemnity basis, relying on the earlier Calderbank offer.

The central issue for the Victorian Court of Appeal was whether an offer, which did not involve payment or concession by the offeree, amounted to a genuine compromise that was capable of supporting an indemnity costs order.

Court of Appeal Decision

The Court did accept that ordinarily an offer to compromise on the basis that a proceeding will be withdrawn with no order as to costs will not constitute a genuine compromise.

However, it was recognised that the circumstances in this matter were not ordinary. The offer was between two interveners and both interveners had already incurred significant legal costs. The only relief sought by either intervener was for costs, thus indicating an offer to withdraw and waive any entitlement to said costs was deemed to be an offer of a genuine compromise.

The Court emphasised that the discretion to award indemnity costs is informed by considerations of reasonableness, including whether a party has failed to engage productively with opportunities to settle.

Accordingly, the Court rejected the submission that the absence of a payment or admission rendered the offer incapable of constituting a genuine compromise, with the Court ordering costs incurred after the expiry of the Calderbank offer being paid on an indemnity basis.

Key Takeaways

• A Calderbank offer does not need to involve a monetary component to constitute a genuine compromise.
• An offer to discontinue and bear one’s own costs may still expose the rejecting party to an order for indemnity costs.
• Courts will assess such offers in light of the prospects of success of the offeree.
• The decision reinforces the importance of carefully evaluating settlement proposals, particularly where further progressing the matter will likely yield no benefit.