Costs, compromise, and Calderbanks: Recent developments

“The issue of costs is central to essentially all forms of legal practice.” — GE Dal Pont.

It is a common (though perhaps dangerous) assumption that a successful party to litigation will obtain an order that the unsuccessful party pay their costs on a party/party basis.

This is traditionally known as ‘costs following the event’, with the ‘party/ party’ component of a costs order usually amounting to about 70 per cent of the cost a party has actually incurred.

However, the ACT Court of Appeal’s recent decision in Cooper v Singh provides a useful reminder that the awarding of costs is an entirely discretionary power that courts may exercise as they see fit.

It follows that the expectations of a party (and their counsel) as cost may not align with the court’s view as to how its discretion should be exercised.

Singh also highlights the complex relationship between Calderbank offers and Offers of Compromise, the latter a device created by the Court Procedure Rules 2006 (ACT) (“the Court Rules”).

Singh

In Singh, the plaintiff was injured in a motor vehicle accident leading to myriad personal injuries. Prior to the matter being heard, the defendants made an offer to settle the case for $540,000 plus costs. The offer was stated to be pursuant to the principle in Calderbank v Calderbank. The effect of the Calderbank nature of the offer was that, should it not be accepted and the plaintiff fail to obtain an outcome better than $540,000, the defendants could seek an order that the plaintiff pay their costs on an indemnity basis from the date of the offer.

Through this regime, while a plaintiff may enjoy some success in obtaining a judgment, if a defendant can demonstrate that costs were unreasonably incurred because of a plaintiff’s rejection of an offer which would have seen him or her better off overall, a Calderbank may provide costs protection for the defendant. At first instance in Singh, the plaintiff succeeded at hearing but only for $311,603 — a sum considerably less than the defendants’ Calderbank offer.

With the offer having been made shortly before the commencement of the hearing, the defendants sought an order that their costs, essentially those of the hearing days, be paid by the plaintiff on a full indemnity basis.

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First published in Ethos.