A classic Calderbank offer was recently considered by the Federal Court in Watton v Whitton (Trustee), in the matter of Watton (No 2) [2021], serving as a timely reminder to both clients and practitioners to be reasonable when considering settlement offers or else risk an adverse cost order.

What is a Calderbank Offer?

A Calderbank offer is a settlement offer made prior to judgement (or before proceedings commence) and can impact cost determinations. Calderbank offers can typically be identified by their labelling; ‘without prejudice, save as to costs’. Put simply; this means that the offer cannot be admitted as evidence in any proceedings but may be used later to determine costs. 

The most important aspect of a Calderbank offer are the consequences of rejection. If the offeror can establish that, given the final judgement, it was unreasonable to have rejected the offer, then the rejecting party may be ordered to pay the proceeding’s costs.

The Present Matter:

In the present matter, the Trustee made a Calderbank offer to the Applicant. The Trustee submitted that the offer was made following opening submissions, while the Applicant understood her case’s weaknesses and was a substantial compromise. The Applicant failed to respond to the offer, and consequentially, it lapsed. The question for the Court was whether the Applicant should be ordered to pay the Trustee’s costs on an indemnity basis. 

The Court’s Reasoning:

The Court determined that since the offer was not made under r 25.14 of the Federal Court Rules 2011 (Cth), the determination of costs was a matter for judicial discretion. In exercising its discretion, the Court made the following findings:

  1. That the rejected offer was more favourable than the proceeding’s final outcomes;
  2. The offer warned that it might be relied on when determining costs;
  3. The Applicant was given a reasonable time and was in a suitable position to consider the offer; and
  4. The offer was not ambiguous and would have brought proceedings to an end. 

Accordingly, the Court held that the Applicant’s rejection of the offer was ‘imprudent’ and unreasonable at the time and was ordered to pay the Trustee’s costs. 

Key Takeaway:

This case proves valuable to both applicants and practitioners alike. Whilst there is the temptation to proceed with litigation with vigour and enthusiasm, it is imperative that any settlement offers are carefully considered and the consequences of rejection are adequately factored in. 

Accessible here: [https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2021/2021fca1003]


***Assisted by: Kayla Cook***