Introduction
In the recent public liability case Pervanic v Merri-Bek City Council [2025] VCC 1731, the plaintiff was awarded a total of $85,000 by a jury on 17 November 2025, comprising $80,000 for pain and suffering, $2,000 for past medical and like expenses, and $3,000 for past gratuitous care.
The defendant submitted that the costs orders should be:
- That the defendant pays the plaintiff’s costs on a standard basis up to and including 13 October 2025;
- That the plaintiff pays the defendant’s costs on an indemnity basis from 14 October 2025, or alternatively on a standard basis.
The central questions in this case were:
- Whether the plaintiff’s refusal to accept a Calderbank offer of $250,000 inclusive of costs and disbursements was unreasonable.
- Whether the court should exercise its discretion to order the plaintiff pay indemnity costs when the offer referred to solicitor/client costs and not indemnity costs.
A Calderbank offer is an offer that can put by a litigant in order to apply pressure to the opposing party to settle the case. The general rule in litigation is that the unsuccessful party will be ordered to pay the successful party’s costs. Calderbanks can modify this general rule. If a court finds that a Calderbank offer was unreasonably rejected, then the plaintiff could be ordered to pay the defendant’s costs from the date of the offer despite a successful outcome (in the case of the defendant’s offer) or the defendant could be ordered to pay the plaintiff’s costs at a higher rate than usual (in the case of the plaintiff’s offer).
In the case of Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No.2) (“Hazeldene’s”) the Court of Appeal held that when considering a submission that the rejection of a Calderbank offer was unreasonable, the Court should “ordinarily have regard at least to the following matters:
- the stage of the proceeding at which the offer was received;
- the time allowed to the offeree to consider the offer;
- the extent of the compromise offered;
- the offeree’s prospects of success, assessed as at the date of the offer;
- the clarity with which the terms of the offer were expressed;
- whether the offer foreshadowed an application for an indemnity cost in the event of the offeree’s rejecting it.
Background to the case
The proceedings commenced on 5 October 2023, relating to an injury that occurred on 20 October 2020. The trial was listed to commence on 27 October 2025, with mediation held on 2 October 2025. By the time of mediation, particulars of special damages had not been served, despite a Court order requiring service by 2 July 2024, later extended to 21 July 2025.
On 8 October 2025, the plaintiff served a Calderbank offer of $250,000, with costs fixed and agreed at $100,000, and on the same day also served the overdue particulars of special damages. Following this, the defendant applied to adjourn the trial due to the late service, with the application scheduled for hearing on 17 October 2025.
On 13 October 2025, the defendant served its own Calderbank offer of $250,000 inclusive of costs and disbursements, which included comments on both liability and quantum and was open until 17 October 2025. The next day, the plaintiff’s solicitors indicated that the plaintiff would not accept the $250,000 “all-in” offer but could consider $300,000 “all-in,” with the defendant’s solicitor confirming he would seek instructions.
In the following days until the directions hearing, there were a number of communications between the parties, which resulted in:
- The plaintiff agreeing to withdraw her loss of earnings claim which had been put in the particulars of special damages in order to maintain the trial date;
- The defendant seeking costs of the summons application but saying that if the plaintiff accepted its Calderbank, then they would not seek the costs thrown away.
- The summons was heard on 17 October 2025 and the trial date was maintained.
On 17 October 2025, the defendant reput its Calderbank offer, keeping it open until close of business that day. The plaintiff subsequently made a further Calderbank offer of $200,000 plus costs on a standard basis, open until 24 October 2025, and on 27 October 2025 made another offer of $275,000 inclusive of legal costs, open until close of business on the same day.
The plaintiff submitted that it was not unreasonable to reject the Calderbank. There was no reason why the Calderbank was open for such a short period of time. Due to the flurry of activity caused by the defendant’s summons, it was not possible for the plaintiff to quantify the extent of the compromise. The defendant’s Calderbank referenced both liability and quantum and the plaintiff argued that the comments regarding liability could be disregarded.
The defendant submitted that the offer was clear in setting out comments regarding liability and quantum. The real reason plaintiff rejected the offer because she wanted more money and she took a big gamble rejecting the offer. They submitted that the court should exercise discretion to award indemnity costs in these circumstances.
Court’s Decision
The Court held that the plaintiff was unreasonable in rejecting the offer and that she should pay the defendant’s costs from the date of the offer. In terms of whether to order the plaintiff to pay indemnity costs, the Court held that there no presumption that indemnity costs should be awarded. Had the defendant’s offer referred to indemnity costs, there would have been little difficulty in awarding indemnity costs, but as it did not, the plaintiff was ordered to pay the defendant’s costs on a standard basis.
Key Takeaways
This decision underscores the importance of carefully considering Calderbank offers, both in terms of the timing and the clarity of terms, particularly when liability and quantum are discussed, and highlights the Court’s discretion regarding indemnity versus standard costs.
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This article was written by Danielle Meyer.
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Danielle graduated from Monash University with degrees in Law and Arts. After being admitted to practice, she moved to Taiwan for 15 months to teach English, study Mandarin Chinese and see more of the world.
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