Calderbank offers: When will indemnity costs be awarded?

• Published date: 06 February 2024
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation
• Law Firm: Gilchrist Connell
• Author: Mr Alex Haslam and Louisa Henderson

The recent decision of Teo & Anor v Twyford bht Cunningham (No 2) [2023] NSWSC 1626 provides a useful reminder of the Court's approach to exercising its discretion to award indemnity costs where a settlement offer has been made during the course of litigation.

Background

Two vendors and a purchaser entered into a contract for sale of land located at Tanja, New South Wales (Contract).

Prior the completion of the Contract, the purchaser's solicitors served a notice on the vendors purporting to rescind the Contract on the basis that the purchase had been assessed as a "mentally ill person" under the Mental Health Act 2007 (NSW). It was asserted that the purchaser was entitled to do under clause 34 of the Contract.

The vendors disputed the notice and issued a notice to complete, with which the purchaser did not comply. The vendors issued proceedings seeking a declaration that the Contract was valid and enforceable.

At an early stage in the proceedings, the purchaser made a "walk away" settlement offer to the vendors, that is, primary term was that the vendors discontinue the proceedings against him and each party would bear their own costs (Offer). The Ofer was expressed to be open for acceptance from 17 days from its date, and made in accordance with the principles outlined in Calderbank v Calderbank [1975] 3 All ER 333 (Calderbank). The letter containing the Offer set out...