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Cost Law Commentary

Dangers of separate components in Calderbank offers

A recent Federal Court decision considered the reasonableness of rejecting offers made.  Nothing unusual about that, but the unusual aspect of the decision was the consideration of the reasonableness of rejecting the individual components of an offer.

The proceedings involved claim under the Fair Work Act, the claimant seeking damages arising from contravention of the Act.  Under the Fair Work Act, costs are generally not awarded.  The applicant sought costs, relying on the respondents rejection of a series of without prejudice offers as evidence of unreasonable behaviour.  The court looked at the individual components of the offers, and considered the outcome against each of those individual components.  It found that, although the applicants' offers were less than the compensation awarded, some of the individual components were greater than what was awarded and in those circumstances it was reasonable for the respondent to decline that component of the settlement offer.

The particular component considered in this case was costs which had been thrown away.  The case highlights the difficulty of seeking a fixed amount for costs, where a cost order has been made and a party is seeking to compromise that order as part of an offer of settlement.  It would be necessary to establish the reasonableness of the component of the offer relating to that order.