Offer of Compromise v Calderbank Offer

When a party wants to settle in the proceedings, an offer of compromise can be made. The offer of compromise however must be made under regulation 20.26 of the Uniform Civil Procedure Rules 2005 (“UCPR”). A Calderbank offer is more informal and unpredictable than an offer of compromise.

A Calderbank offer should be used in matters when there are more terms involved in the offer than only an offer to pay money or when the defendant does not want a formal judgement. When a Calderbank offer is drafted there is no requirements as to the form of the letter.
Calderbank offers were originally made in proceedings where the offeror did not want to offer costs or when the offer was made less than 28 days before trial. Today the offers of compromise are regulated by the UCPR which enables a party to serve an offer of compromise whenever suitable and it can be drafted in a way for the parties to bear their own costs. If a party has a hard time complying with the rules of an offer of compromise, a Calderbank offer may be suitable.


Offer of Compromise

Regulation 20.26 of the UCPR states that an offer of compromise must include the following:
• the claim of part of the claim to which it relates;
• If part of a claim:

  • The offer made by the plaintiff and whether the proceedings should be abandoned or pursued;
  •  The offer made by the defendant and whether the proceedings will be defended of conceded.

• Not an amount of costs and it must not express to be inclusive of costs;
• A statement that the offer is made pursuant to the rules in the UCPR;
• If an interim payment has been made by the offeror to the offeree it must be stated whether or not the offer is in addition to that interim payment;
• The time during which the offer can be accepted.
• proposed orders;

  • a judgement in favour of the defendant;
  • despite of the rule not to include costs it may state an amount to be paid to the plaintiff in respect of the their costs.

• Costs as agreed or assessed up to the time the offer was made will be paid by the offeror, or
• Costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer.
• If the offeror makes an offer before the offeree has been given such particulars of the offeror’s claim, and copies or originals of such documents available to the offeror, as are necessary to enable the offeree to fully consider the offer, the offeree may, within 14 days of receiving the offer, give notice to the offeror that:

  • the offeree is unable to assess the reasonableness of the offer because of the lack of particulars or documents, and
  • in the event that rule 42.14 applies to the proceedings, the offeree will seek an order of the court under rule 42.14 (2).

• The closing date for acceptance of an offer:

  • in the case of an offer made two months or more before the date set down for commencement of the trial is to be no less than 28 days after the date on which the offer is made, and
  • in any other case is to be such date as is reasonable in the circumstances.

• Unless the notice of offer otherwise provides, an offer providing for the payment of money, or the doing of any other act, is taken to provide for the payment of that money, or the doing of that act, within 28 days after acceptance of the offer.
• An offer is taken to have been made without prejudice, unless the notice of offer otherwise provides.
• A party may make more than one offer in relation to the same claim.
• Unless the court orders otherwise, an offer may not be withdrawn during the period of acceptance for the offer.


Calderbank Offer

When drafting a Calderbank Offer the following should be included:
• An explanation that the offer is made pursuant to the principle derived by the matter of Calderbank v Calderbank and make notice that the offer will be relied upon for an application for indemnity costs;
• A statement that the offer is made “without prejudice save as to costs”;
• State why the other party will fail in the proceedings, but it may be relied upon even though no reasons are stated;
• State the time during which the other party has to consider the offer;
• State a genuine compromise;
• The offer may be inclusive of costs, unlike a formal offer under the UCPR: Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322; Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15
• State the time within which the offer has to be accepted, the time may be shorter than what is acceptable for a formal letter if it is considered reasonable: Red Engine Group Pty Ltd v Hotel Agencies Pty Ltd [2007] VCC 398.

When a party decides to make a Calderbank offer, the court usually take the offer in account when delivering a verdict which justify the making of an indemnity costs order. Indemnity costs are usually rewarded when a Calderbank offer has been made and the party does not receive a better result at trial than they would have received by accepting the offer. When evaluating a Calderbank offer it must be considered whether the offer was genuine and if it was unreasonable for the party to reject it: Miwa at [8]; cited in Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124 at [10]. If an offer is rejected, the letter may be tendered in court for the order of costs.
The defendant may also receive an order for indemnity costs when the offer, rejected by the plaintiff, is better than the outcome of the proceedings, although there is no presumption in relation to such an order: Jones v Bradley (No 2) [2003] NSWCA 258 at [8].
Submissions to why the rejection of an offer is unreasonable are not necessary when drafting an offer of compromise under the UCPR.


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