Unreasonable Rejection And Indemnity Costs: Lessons From A Failed Calderbank Offer

Settlement offers can play an important role in protecting a party’s costs position in litigation. A Calderbank offer is a 'without prejudice save as to costs' offer that may later be relied on to seek indemnity costs if the recipient unreasonably rejects it. Indemnity costs are more favourable than the usual costs order because they generally allow a successful party to recover a greater proportion of its legal costs. However, they are not awarded as of right. The Court retains a discretion as to costs, and the rejection of a Calderbank offer is only one factor in deciding whether that discretion should be exercised in favour of indemnity costs.

The Queensland Supreme Court’s decision in South Burnett Regional Council v Aquatec Maxcon Pty Ltd (No 2) [2026] QSC 97 provides a timely reminder of the limits of Calderbank offers as a pathway to an award of indemnity costs. While Calderbank offers remain a valuable strategic tool in litigation, the critical question is whether the