For over half a century, the Calderbank offer has served the canny lawyer as a critical strategic tool in civil litigation, and is particularly useful in complex and high-stakes disputes such as those in the construction industry, writes Nick Collier.
Originating from the English Court of Appeal decision in Calderbank v Calderbank [1975] 3 All ER 333 (Calderbank), this form of offer encourages settlement outside courtrooms by creating cost consequences for unreasonable rejection.
Rejecting a Calderbank offer can present the consequence that the rejecting party pays the offering party’s indemnity costs from the date of the offer.
In the Australian legal context, especially in Queensland, Calderbank offers have become widely used across civil litigation, including commercial, employment, family law, and construction disputes, because of their significant cost consequences. They have the greatest effect in the construction sector due to the sums and timelines involved.
However, the construction industry is grappling with productivity decline, which is being addressed by the Queensland Productivity Commission and initiatives to streamline processes, such as the kit-of-parts approach for housing. What should be a steady pipeline of major engineering projects supplemented by government housing initiatives has been bottlenecked by regulatory complexity, a nationwide housing shortage most pronounced in Queensland, and a tight labour market. Developments in the judicial consideration of Calderbank offers should provide an avenue to address public concerns; however, the increasing complexity and discretionary nature have only made this mechanism more uncertain.
What is a Calderbank offer?
To be legally effective, a Calderbank offer must meet several essential criteria:
First, a genuine attempt at settlement. Where the offer must be made in good faith and reflect a reasonable compromise rather than a tactical ploy.
Second, it must have clearly stated terms. A valid Calderbank offer should be unambiguous, exact, and in writing. It should be clear whether the offer is inclusive or exclusive of costs.
Third, it must clearly show “without prejudice save as to costs”. It is a crucial phrase. While the offer remains confidential in relation to liability, it can be disclosed to the court for costs purposes.
Fourth, consider the timeframe for acceptance. The offer must allow a reasonable time (usually fourteen (14) to twenty-eight (28) days) for the recipient to consider and seek legal advice.
Finally, and perhaps most importantly, the potential cost consequences. If the offer is unreasonably rejected, and the recipient obtains a less favourable outcome in litigation, the offering party can apply for indemnity costs from the date of expiry of the offer.
For high quantum disputes, particularly as concern industrial and commercial contracting, these principles create a powerful incentive to settle early and reasonably, particularly when litigation costs can escalate rapidly, as often seen in construction disputes involving technical evidence, expert reports, and contractual interpretation.
Legal principles
Meldov Pty Ltd v Bank of Queensland (No.2) [2015] NSWSC 2015 (Meldov No 2)
Though an NSW case, Meldov No 2 has had a significant influence on Queensland courts due to its thorough articulation of Calderbank principles.
The case concerned costs of the dispute in the associated matter of Meldov Pty Limited v Bank of Queensland (Meldov No 1). BOQ had made a Calderbank offer of $80,000, open for 12 days, which Meldov rejected. Justice Slattery ruled that Meldov’s rejection was unreasonable and BOQ was entitled to ordinary costs until the expiry of the offer, and indemnity costs thereafter, for nearly 12 months until final judgment.
Meldov No 2 offers some interesting takeaways:
Recent Queensland case law and Calderbank offers in the construction sector
Springfield City Group Pty Ltd v Pipe Networks Pty Ltd (No. 2) [2022] QSC 299 (Springfield)
In this first case, Pipe Networks sought indemnity costs, arguing it made a Calderbank-style offer. The issue under consideration was whether the offer was framed under chapter 9, part 5 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR), and not common law, as is the case for a Calderbank offer. The court ultimately found that the offer could not be treated as a Calderbank offer for several reasons.
First, it was expressly stated to be made under the UCPR and not as a Calderbank offer. Second, it did not foreshadow a future indemnity cost application. Finally, Springfield City Group’s rejection was not unreasonable, due to evolving pleadings and a lack of clarity in the offer.
A key takeaway from the judgment is that simply using the label “without prejudice save as to costs” is not sufficient. Courts will consider whether the offer was genuinely a Calderbank offer in substance, and not just in form.
Paladin Projects Pty Ltd v Visie Three Pty Ltd & Ors (No. 2) [2024] QSC 244 (Paladin)
In this second case, a dispute arose under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) concerning adjudicated payments and liquidated damages. Visie made a Calderbank offer, which was rejected by Paladin.
The court found that the issues had been clearly identified through the adjudication process. The legal framework was not unduly complex, and Paladin had sufficient time to assess the offer. In the decision, Justice Williams noted that rejection of the offer was unreasonable, leading to an order for indemnity costs from the expiry of the offer.
A key takeaway from the judgment is that courts will not automatically excuse a party just because of the complexity of construction disputes. Furthermore, time constraints related to internal stakeholder approvals (especially in large or international firms) may not excuse delay if the issues are clearly defined. Finally, whether an offer was reasonably rejected is a matter of judicial discretion, subject to each case’s specific context.
Post-COVID and the current state of the construction sector
The post-COVID-19 economy and more complex industrial regulations have added an unexpected volatility to the construction sector, with price escalations, supply chain disruptions, and labour shortages leading to more and varied disputes. This has led to increased complexity and uncertainty in the sector, which makes cost-conscious litigation strategies essential.
In such an environment, Calderbank offers not only early exit strategies from litigation through a cost control mechanism, but tactical leverage in disputes over payment claims, delays, and defects.
However, with this strategic tool comes risk. Poorly drafted or premature offers may backfire, offering no cost protection and possibly undermining settlement negotiations.
Strategic considerations, common pitfalls, and best practices
For lawyers operating in this uncertain but massively expanding area, it is essential to assess timing carefully. Too early and the offer may be reasonably rejected; too late, and it may have limited impact on costs. The offer must reflect a realistic evaluation of the litigation’s strengths and weaknesses. It is worth considering whether a formal offer of compromise (UCPR r. 358) might be more appropriate in some contexts.
Some common pitfalls for the wary industrial lawyer to avoid are:
It is worthwhile to maintain the following practices:
Judicial commentary and evolving standards in Queensland
For better or worse, the Queensland Supreme Court is moving away from rigid formalism towards a substantive evaluation of whether an offer was reasonably rejected. Key developments include that the courts are giving considerable weight to timing and complexity but no longer accept them as blanket justifications. There is also an increasing emphasis placed on the recipient’s ability to assess their prospects, especially where issues are well-defined by pleadings or adjudication. Finally, decision-makers like Justice Williams have openly acknowledged the subjectivity involved, stating that these are matters of judgment and impression.
This judicial approach increases unpredictability, placing pressure on practitioners to carefully evaluate and document every stage of negotiation and offer-making.
Consequences
Recent developments have included significant government investment in housing, a focus on boosting productivity through regulatory reform and infrastructure planning, and the founding of a new city in South-East Queensland, relevantly the aforementioned city of Springfield – the only city to be constructed in Australia in the last 25 years.
Though of greater uncertainty, Calderbank offers will continue to play a vital role in Queensland construction litigation. They are a powerful cost-protection mechanism and settlement driver when properly deployed.
However, it is worth noting that:
The effectiveness of a Calderbank offer ultimately hinges on clear, strategic thinking and an understanding of the legal, contractual, and economic context. For litigators and parties in Queensland’s construction industry, the message is clear: use Calderbank offers wisely, or risk significant cost consequences.
Nicholas Collier is a practitioner admitted in the Supreme Court of Queensland, the High Court of Australia, and the High Court of New Zealand. He currently works as an associate at JHK Legal.
