Abstract

Indemnity costs - Calderbank letter - Offer amounting to surrender - not usually a offer of compromise - reasonableness of refusal - Onus - Administrative Review application

Article

A prima facie entitlement to costs on an indemnity basis arises where a settlement offer is made under the Uniform Civil Procedure Rules or by a Calderbank letter but not accepted and the recipient achieves an outcome which is no more favourable. An invitation in substance to surrender usually lacks the elements of compromise, but in some circumstances it can trigger the exercise of a favorable discretion if the claim or defence approaches the character of frivolous or vexatious: Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170; Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368; NRMA v Al Bayati (No 2) [2019] NSWCA 14. The critical test is the reasonableness of the recipient’s non-acceptance of the offer. Generally, non-acceptance of an offer to capitulate is not unreasonable if that party’s case has some colour of substance.

The Rule permits an appellate court to have regard to any offer of compromise made below, but the appeal is a separate proceeding as to which the discretion must be exercised. Then, there is a new landscape in which facts have been found, credibility issues resolved and the weight of evidence determined. Although there may be a challenge to such findings, since the parties are in a different position they should assess their cases accordingly, if they intend to seek indemnity costs based upon an offer. Regency Media (supra).

The party making it or a    Calderbank offer bears the onus of satisfying the court that it should exercise the discretion favourably: Evans Shire Council v Richardson (No 2) [2006] NSWCA 61; Commonwealth of Australia v Gretton [2008] NSWCA 117 at [46]; County Securities Pty Limited v Challenger Group Holdings Pty Limited (No 2) [2008] NSWCA 273 at [31]; NRMA Insurance v Al-Bayati (No 2) [2019] NSWCA 14.

AAI Limited v Josipovic (No 2) [2013] NSWSC 1577 analyses the complexity of applying the Rules as to an order for indemnity costs concerning an application for judicial review. If the offer does not identify the “the proposed orders for disposal of the claim”, that is, the application for judicial review, although the basal dispute is the amount of damages payable, an offer to compromise it for a monetary sum would fail if it did not identify the proposed orders for disposal of the claim. But it is necessary to look beyond the narrow scope of the relief sought and although it may be difficult, it is one the Court is able and on one view obliged to undertake to comply with the Rules. Though such an application is strictly an all or nothing claim, it is appropriate to have regard to broader considerations in this context.

The principles concerning a Calderbank offer do not impose the same strictures as the rules concerning offers of compromise. Though it must be unreasonable to refuse it. Conversely, a Calderbank offer does not enliven an entitlement to indemnity costs in the nature of that which arises in respect of an offer of compromise: Insurance Australia Ltd v Yu (No 2) [2019] NSWSC 505. For the principles, see Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344.