February 26, 2013

Calderbank Offers and Costs in Litigation

The recent Queensland Supreme Court case of Mansi v O’Connor is a pertinent reminder of the risks involved in not accepting a reasonable offer to settle before trial.

THE FACTS

This case involved a personal injury claim brought by Mr Mansi against several defendants.  A week before trial, the defendants put a Calderbank offer to Mr Mansi to settle his claim for $400,000 plus costs.  Mr Mansi rejected what turned out to be a very generous offer, and he received a judgement amount of $93,757.51 in his favour.   In addition to receiving a substantially smaller amount at trial, though his claim was successful, Mr Mansi was required to pay all of the defendants’ costs from the date of the Calderbank offer on an indemnity basis.

EFFECT OF A CALDERBANK OFFER

Calderbank v Calderbank established the principle that where an offer is made on a ‘without prejudice’ basis in a confidential communication, a party may reserve its right to waive the confidentiality in order to rely on the offer to apply for indemnity costs later on.

Indemnity costs leave the discretion as to the proportion of costs to the court, and generally result in a higher award of costs. In contrast, costs assessed on an ordinary basis are calculated by taking into account only costs that were necessary or proper for the attainment of justice, on the basis of a scale prescribed by the Uniform Civil Procedure Rules 1999 (Qld).

PROTECTING INTERESTS

Mansi v O’Connor is a good example of what can go wrong when a reasonable Calderbank offer made before trial is not accepted.  This case also demonstrates the effectiveness of strategic planning to protect a defendant’s interests with respect to costs when a matter has not been resolved and is moving toward trial.