Calderbank Offers in an arbitral context
- NSW
- VIC
- United Kingdom
- See also

Calderbank Offers in an arbitral context

A Calderbank offer is an offer which says that one party will accept $x in respect of a claim (y).
If that party obtains better than or equal to $x at trial it says that if that offer was unreasonably refused the party making the offer should be entitled to its costs on an indemnity costs basis.
The purpose of the rule is to permit a party to make an offer without fear that the Court will interpret same as an inappropriate concession.
However, with a Calderbank Offer there is no presumption in favour of award of indemnity costs (this differs from some Court rules).
Instead the relevant test is whether refusal of offer was unreasonable in the circumstances.
The key advantages of Calderbank offers are:
- that they do not require any rules (this is the case in arbitrations);
- they can made in relation to separate claims and on separate issues; and
- they put significant pressure on a party receiving such an offer to consider the strengths and weakness of their case.

NSW

The State of NSW v UXC Limited (No 2)¹⁾, Ball J
- Expert Determination upheld
- The defendant pay the plaintiff's costs of the proceedings (including the costs of the cross-summons) on the ordinary basis.
- There is no dispute that the court can take into account the offer of compromise in determining an appropriate order in relation to costs in accordance with the principles that have their genesis in the decision of Calderbank v Calderbank ²⁾
- According to those principles, the court may, in the exercise of its discretion, make a costs order in favour of a party who has made an offer of compromise that is more favourable than the order the party would normally obtain if that party can establish that the offer represented a genuine compromise of the dispute and that it was unreasonable for the offeree to have rejected it ³⁾
- In my opinion, BDM's offer did not represent a genuine offer of compromise.
- The only element of compromise it involved was foregoing a small amount of interest and its own legal costs.
- In some cases, having regard to the strength of the plaintiff's case, an offer to forego interest and legal costs may be a genuine offer of compromise. ⁴⁾
- However, I do not think it represents a genuine offer of compromise in this case.
- In my opinion, it was open to UXC to argue that something had gone wrong with the drafting of the disputed clause and that, in those circumstances, the court should seek to find elsewhere in the contract the amount to which the disputed clause referred.
- BDM's primary case before the hearing commenced accepted UXC's starting point, but involved a contention that the amount that should be inserted should be found elsewhere in the Agreement Details and did not affect the outcome of the case.
- Although I rejected UXC's submissions, I do not think that BDM's case was so strong that the offer it made represented a genuine compromise of it.
- In addition, I think it was reasonable of UXC to reject that offer in circumstances where it believed that the case being advanced by BDM was one which ultimately was not accepted by the court
Maitland Hospital v Fisher No 2⁵⁾, Kirby P, Mahoney JA and Samuels A-JA
- The objects of the rule⁶⁾ include:
  - To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff's real claim which can be placed before its opponent without risk that its “bottom line” will be revealed to the court;
  - To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and
  - To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances, that party should ordinarily bear the costs of litigation.
The Uniting Church v Takacs (No 2)⁷⁾

VIC

Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) ⁸⁾, Warren CJ, Maxwell P, Harper AJA
- In Grbavac v Hart,[28] Hayne, J.A. cited with approval what the New South Wales Court of Appeal had said in Maitland Hospital v Fisher (No.2)[29] about the policy rationale underlying the availability of special orders for costs where offers of compromise are rejected. Like his Honour, we think that what was there said is equally relevant to the exercise of the costs discretion where a Calderbank offer has been made.
  The policy objectives were said to be:
  - To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff’s real claim which can be placed before its opponent without risk that its ‘bottom line’ will be revealed to the court;
  - To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and
  - To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances that party should ordinarily bear the costs of litigation.“
At the same time, as Redlich, J. said in Aljade,[30] there are other competing objectives of equal importance.
- Potential litigants should not be discouraged from bringing their disputes to the Courts. It is such considerations which underlie the general rule that an order for special costs should only be made in special circumstances.
- The test of unreasonable rejection In our view, these competing considerations can be sufficiently accommodated by applying a test of (un)reasonableness.
- The critical question is whether the rejection of the offer was unreasonable in the circumstances.[31]
- We see no justification for a more stringent test such as “manifestly” or “plainly” unreasonable.
- Of course, deciding whether conduct is “reasonable” or “unreasonable” will always involve matters of judgment and impression.
- These are questions about which different judges might properly arrive at different conclusions.
- As Gleeson, C.J. said recently, “unreasonableness is a protean concept”.[32]
- But a test of reasonableness is, we think, entirely appropriate to the exercise of a discretion such as this.
- Factors relevant to assessing reasonableness
- The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations.[33]
- It is neither possible nor desirable to give an exhaustive list of relevant circumstances.
- At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
  - the stage of the proceeding at which the offer was received;
  - the time allowed to the offeree to consider the offer;
  - the extent of the compromise offered;
  - the offeree’s prospects of success, assessed as at the date of the offer;
  - the clarity with which the terms of the offer were expressed;
  - whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.
- It has been argued on occasion that the maker of a Calderbank offer should not be entitled to costs unless the offer sets out, with some reasonable specificity, the basis for the offeror’s contention that the offeree should accept the compromise – for example, because the offeree’s case was hopeless or because the offeree had no reasonable prospects of doing better in the proceeding than was being offered in advance.
- Once again, we think it neither necessary nor desirable to lay down any general rule in this regard.
- We agree with what Redlich, J. said in Aljade, as follows:
  - Any attempt to prescribe the reasoning which must accompany [a Calderbank] offer should be resisted.
  - Whether there is a need for the offeror to descend to specificity as to why the offer should be accepted must depend upon a consideration of all of the circumstances existing at the time of the offer.
  - The extent to which the weakness of a party’s position is exposed through the pleadings, affidavits and the various communications between the parties during the course of the litigation may bear upon the significance of the absence of specificity in the informal offer.”[34]
- As we said at the outset, the unreasonable refusal of an offer of compromise is, by itself, a proper ground for the award of indemnity costs or - in the present case - the award of solicitor-client costs.
- It follows that it is not necessary for the applicant for such an order to establish matters which might be relevant to other, well-recognised, grounds for indemnity costs.
- Once again we would adopt what Redlich, J. said in Aljade, as follows:
  - It is not necessary to establish misconduct by the offeree before the rejection of the offer can be viewed as unreasonable.
  - Lack of merit in the way a party has conducted its case is not a pre-requisite for the making of an indemnity costs order [on this ground].“
- Nor is it necessary for the applicant offeror to show that the offeree acted with “wilful disregard of known facts or clearly established law”, or that it acted with “high-handed presumption”.
- We agree with Redlich, J. that such conduct is not a prerequisite for a finding that the rejection of a Calderbank offer was unreasonable.

United Kingdom

Calderbank v Calderbank ⁹⁾

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Calderbank Offers in an arbitral context

NSW

VIC

United Kingdom

See also