In the recent decision of Trenfield v JMD Park Pty Ltd (No 2)  FCA 45 (Trenfield No 2), the Federal Court of Australia considered when a letter of offer constitutes a “Calderbank” offer, such that indemnity costs may be awarded to the offeror. The judgment followed the decision in Trenfield v JMD Park Pty Ltd  FCA 2154 (Trenfield No 1), in which the Court ordered that the defendant pay a total amount of $534,547.54 in damages to the plaintiffs. The judgment in Trenfield No 2 concerned the appropriate orders as to costs for Trenfield No 1.
A Calderbank offer is an offer to settle a dispute, putting the other side on notice that, if judgment in the proceedings is less favourable to the other side than the Calderbank offer, then the side making the offer may be entitled to an indemnity costs order.
The plaintiffs claimed that they were entitled to an order, pursuant to rule 40.02 of the Federal Court Rules 2011 (Cth) (FCRs), that their costs be paid on an indemnity basis. This claim was made on the basis that the plaintiffs had made a Calderbank offer to settle the claim for the sum of $484,547.83, and that the plaintiffs had secured judgment on better terms than the offer (having been awarded $534,547.54).
The defendant argued that the plaintiffs’ claim should be rejected on the basis that the offer was not a “valid offer” because:
The Court referred to the decision of Barrett JA in Whitney v Dream Developments Pty Ltd (2013) 84 NSWLR 311 and noted that the “essential ingredient” identified by Barrett JA, in determining whether an offer is a Calderbank offer, is the “indication by the offeror that the letter might be deployed as a basis for seeking a special costs order in the event of that party’s ultimate success in the action.”
The Court held that, in this case, the offer should not be regarded as a Calderbank offer because:
The Court explained that “The making of an offer to settle an action is an offer to enter into a contract, on the acceptance of which the parties will be bound. Necessarily, an offer to settle should be drafted in an intelligible way to ensure that, upon its acceptance, the agreement between the parties is reasonably ascertainable.” In this case, the Court held that the offer was not drafted in such manner.
This case demonstrates the importance of ensuring that offers of settlement are drafted carefully to ensure that the intended operation of the offer is clear. The difference between a costs order on a party party basis and an indemnity basis can make a significant financial difference to a litigant. It is therefore important that any purported Calderbank offer can be relied upon. As this case also makes clear, ensuring that offers comply with the applicable statutory regime or the principles in Calderbank v Calderbank  3 All ER 333, will go a long way towards ensuring the intended effect of the offer at hearing.
Authors: Susan Goodman & Melissa de Jongh
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Published by Susan Goodman, Melissa de Jongh