Insight
Calderbank Offers
18 September 2026
In short
A Calderbank offer is a written settlement offer marked "without prejudice save as to costs". The court cannot see it while deciding the case, but after judgment it can be used to argue that the other side's refusal was unreasonable — which may result in an indemnity costs order against them from the date the offer expired.
Why it exists
Costs are the real leverage in most commercial disputes. Ordinary costs orders recover only a portion of what a successful party actually spends. A Calderbank offer changes the arithmetic for both sides: reject a reasonable offer and do no better at trial, and you may end up paying the other party's costs on the more generous indemnity basis, on top of your own.
Its purpose is to make continuing the fight commercially irrational for the party in the weaker position — which is why it is often the most valuable letter sent in a dispute.
What a Calderbank offer must do
- Be in writing and expressly marked "without prejudice save as to costs".
- Be clear and capable of acceptance — a defined sum or outcome, what happens to costs, and how the proceedings end.
- Represent a genuine compromise. A demand for everything claimed, or a token discount, will not attract a costs order.
- Stay open for a reasonable time, with a stated expiry date.
- Explain, at least briefly, why the recipient should accept — the strengths of your case and the costs exposure they face. This supports the later unreasonableness argument.
- Be made at a point where the other side has enough information to assess it.
How courts assess rejection
The discretion is well settled in Australian practice. Relevant factors include the stage of proceedings when the offer was made, the time allowed for consideration, the extent of the compromise, the offeree's prospects viewed objectively, the clarity of the offer, and whether it foreshadowed the costs consequences of refusal. The question is not whether the offeree was wrong, but whether refusing was unreasonable.
Common mistakes
- Marking the letter only "without prejudice" — it then cannot be used on costs at all.
- An open-ended offer with no expiry, so there is no date from which costs shift.
- Silence on costs, leaving it unclear what the recipient was actually being offered.
- Offering before disclosure, when the other side cannot fairly evaluate it.
- A 48-hour deadline in a matter with multiple parties or overseas decision-makers.
- Combining the offer with threats or inflated claims that make the whole letter look tactical.
Where it fits in a commercial dispute
Typically after the letter of demand stage and once the key documents are known — often alongside mediation. In many matters the sequence is: demand, response, exchange of material, Calderbank offer, then either settlement or a properly costed decision to proceed. Formal offers of compromise under the court rules may be used in addition, and the two are frequently run in parallel.
When to involve a lawyer
- You are in, or heading toward, a commercial dispute over an amount that matters to the business.
- You have received an offer marked "without prejudice save as to costs" and need to know your exposure if you refuse.
- You want the costs pressure of a well-constructed offer without weakening your substantive position.
- Proceedings are on foot and nobody has assessed the realistic cost of running to judgment.
Frequently asked questions
What is a Calderbank offer?
A written offer to settle, made 'without prejudice save as to costs', which can be shown to the court after judgment on the question of costs. If the rejecting party does no better at trial than the offer, the court may order it to pay indemnity costs from the date the offer expired.
How is it different from a formal offer of compromise?
An offer of compromise is made under the court rules and carries prescribed costs consequences if the rules are followed exactly. A Calderbank offer sits outside the rules, is more flexible in what it can include, but its costs effect is discretionary rather than automatic.
Does a Calderbank offer guarantee indemnity costs?
No. The court asks whether the rejection was unreasonable in the circumstances — considering the stage of the proceedings, the time allowed to consider the offer, the information available to the other side, the genuineness of the compromise and the clarity of the offer. A poorly timed or trivial offer achieves nothing.
How long should the offer stay open?
Long enough for the other side to obtain advice and instructions. Fourteen to 28 days is typical; a very short window in a complex matter is one of the quickest ways to have the offer disregarded on costs.
Can the offer be shown to the judge before judgment?
No. It stays privileged on the substantive issues and is produced only after the decision, on costs. That is what the phrase 'without prejudice save as to costs' preserves — leaving it off, or simply marking the letter 'without prejudice', undermines the whole exercise.
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