In New South Wales, offers of compromise can be under the UCPR or by way of informal offer pursuant to the principles in Calderbank v Calderbank [1975] 3 All ER 333 (Calderbank Offer).
Informal offers of compromise are utilised frequently in practice. In this article I consider the principles that a court would apply upon an application for an award of indemnity costs based on the non-acceptance of a Calderbank Offer. I also consider the question of whether there can be a true offer of compromise where the offeror makes a “walkaway offer” with parties to bear their own costs.
The usual approach in considering whether indemnity costs should be awarded from the date of the Calderbank Offer is to ask two questions:
1) Is the Calderbank Offer a true offer of compromise, in the sense that the offer involves the offeror giving something away?
2) Whether it was unreasonable for the offeree not to accept the Calderbank Offer?
Whether it was unreasonable for the offeree not to accept the Calderbank Offer is measured by reference to the following factors:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree's prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed; and
(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it.
A common question is can there be a true offer of compromise where the offeror offers a ‘walkaway offer’ with parties to bear their own costs? This was one of the issues in contention in Platformco Investments Pty Ltd v Hanna Contracting Services Pty Ltd (No 2) [2024] NSWDC 170.
Platformco was entirely unsuccessful in proceedings against Hanna for damages for the alleged breach of two consulting agreements. Hanna relied on a Calderbank Offer, which was not accepted by Platformco, to seek costs on an indemnity basis from the date of expiry of the offer.
Hanna offered to accept a discontinuance of the proceedings with no orders as to costs. The offer was made 9 months after the proceedings were commenced and 1 month prior to trial. The letter explained, in direct language, why it was believed that Platformco could not succeed in the matter. The offer remained open for a set period of time and it stated that if the offer was not accepted, and Hanna was to achieve a better outcome than the offer, it would be tendered in support of an order for indemnity costs.
One of the arguments advanced by Platformco in defence of Hanna’s application was that the offer did not involve a real compromise because it did not offer anything by way of settlement of the monetary claim made by Platformco. Cole DCJ held:
[11] I reject that argument. Hannas P/L set out the view that it successfully argued at trial, namely that Investments P/L’s claim was bound to fail. Investments P/L’s claim did fail, largely on the grounds foreshadowed in the letter. The offer of compromise made by Hannas P/L in this case was a true offer of compromise because Hannas P/L offered to forgo its costs if the offer were accepted. The offer came at a stage where trial preparation was advanced and counsel had been briefed.
[14] Investments P/L said that the terms of the offer did not invite a sensible commercial discussion of the parties competing positions. The dismissive language used in the letter to describe the plaintiff’s case was said to be such that it “could only have the effect of entrenching positions”. I reject this argument. Like most communication, the letter was capable of evoking a range of reactions, among them a realisation of the flaws in the plaintiff’s argument. A Calderbank offer need not include an offer of damages.
Ultimately, Cole DCJ held:
[16] I find that the offer was made at an appropriate time. Adequate time was given for the plaintiff to consider the offer. In the context of the claim, which had no merit, the extent of the compromise was appropriate. The flaws in the plaintiff’s case were set out clearly in the letter, and were apparent at the time of the offer, flowing, as they did, from the terms of the agreements. It was clearly stated that the letter contained a Calderbank offer. The letter foreshadowed an application for indemnity costs in clear language.
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