Crossman v Sheahan (No 2)

The case of *Crossman v Sheahan (No 2)* concerned an application for indemnity costs following an appeal. The appellants sought to recover their costs of the appeal on an indemnity basis from a certain date, relying on offers made during the course of the litigation. The respondents argued against this, contending that the offers were not sufficiently clear or that insufficient time was given to consider them. The appeal was heard by Basten, Ward and Payne JJA in the Court of Appeal of New South Wales.

The primary legal issues before the Court of Appeal were whether the offers made by the appellants constituted a compromise or capitulation that the respondents unreasonably refused, and whether the timing and nature of these offers justified an award of indemnity costs for the appeal. Specifically, the court had to consider the reasonableness of the respondents' refusal to accept offers made before the trial and a further offer made shortly before the hearing of the appeal, taking into account the ongoing negotiations and the time allowed for acceptance.

The Court of Appeal found that the appellants' offers, particularly the one made on 11 April 2016, were of a nature that the respondents ought to have accepted. The court reasoned that the offer represented a genuine attempt to compromise the litigation and that the respondents' refusal to accept it was unreasonable, especially in light of the subsequent outcome of the appeal. The court applied the principles governing *Calderbank* offers, considering whether the offer was a reasonable one to accept and whether the party refusing it had acted reasonably in doing so.

Consequently, the Court of Appeal varied the earlier costs orders. The appeal was allowed, and the first and second respondents were ordered to pay the appellants’ costs of the appeal on an ordinary basis until 11 April 2016, and thereafter on an indemnity basis from 12 April 2016. There was no order as to the costs of a subsequent notice of motion filed by the appellants.