Background
PBR Properties sought insurance proceeds after a fire at a large residential property. In the substantive proceeding, Chubb successfully defended the claim, relying on allegations that Mr Richardson intentionally caused the fire. Chubb had also counterclaimed for investigatory costs associated with the alleged arson, but constructively abandoned that counterclaim at the start of trial.
In June 2020, Chubb made a Calderbank offer to resolve “this matter” for $250,000. It argued that PBR’s rejection justified indemnity costs after the offer date. PBR contended that the offer improperly combined the claim and counterclaim and had not been shown to be better than the eventual mixed outcome.
The Court’s Holding
Sullivan J held that the offer clearly extended to both the claim and counterclaim. But it was a rolled-up offer, and the claim and counterclaim were separate costs events: PBR lost the claim but succeeded on the abandoned counterclaim.
Chubb had not discharged its onus of proving that the $250,000 offer was more favourable to PBR than the result it achieved. Its evidence did not adequately establish recoverable standard-basis costs or identify costs attributable to the counterclaim’s distinct issues. The offer therefore did not justify indemnity costs or a departure from the ordinary costs position.
Key Takeaways
- A Calderbank offer must be shown to be more favourable than the result obtained before it can affect costs.
- A rolled-up offer settling both a claim and counterclaim requires evidence allocating costs between their separate issues.
- PBR must pay Chubb’s standard-basis costs of the claim, while Chubb must pay PBR’s standard-basis costs of the counterclaim, subject to the stated exclusion.
Why It Matters
The decision illustrates the evidentiary risks of inclusive, lump-sum Calderbank offers in proceedings with mixed outcomes. An offeror cannot rely on broad estimates of gross costs where the court must assess distinct claim and counterclaim costs events.
Chubb’s counterclaim costs order excludes costs concerning whether Mr Richardson intentionally caused the fire and whether that conduct disentitled PBR to policy proceeds, because PBR did not succeed on those issues in the main claim.