Merciful Group Incorporated v Norfina Limited t/as Suncorp Bank (Costs)

Merciful Group Incorporated, the plaintiff, brought an action against Norfina Limited trading as Suncorp Bank, the defendant, in the Federal Circuit Court. The dispute was concerned with the interpretation and enforcement of a loan agreement between the parties. The plaintiff sought a declaration that it was not liable to pay certain amounts due under the agreement. The defendant, on the other hand, argued that the plaintiff was liable and sought various forms of relief, including costs. The case was decided by the Federal Circuit Court of Australia.

The primary legal issue before the court was whether the defendant was entitled to indemnity costs following the unsuccessful outcome of the plaintiff's claim. The defendant had made a Calderbank offer, which included an offer to pay a specified sum on condition that the plaintiff agree to several terms: an undertaking not to procure a third party to pursue a claim against the defendant, a non-disclosure clause, and a non-disparagement clause. The plaintiff declined the offer, leading the defendant to seek indemnity costs for the legal costs incurred during the trial.

The court held that it was not unreasonable for the plaintiff not to accept the Calderbank offer, given the additional conditions attached. The court emphasised that the primary purpose of a Calderbank offer is to encourage settlement and that the additional conditions imposed by the defendant were not standard terms that would typically be included in such offers. The court found that the plaintiff's decision not to accept the offer was justified, and therefore, the defendant was not entitled to indemnity costs. The court's reasoning was that the additional clauses imposed by the defendant were not reasonable and did not align with the primary intent of a Calderbank offer, which is to facilitate a settlement without the need for litigation.

In conclusion, the court dismissed the defendant's application for indemnity costs. The court found that the additional conditions attached to the Calderbank offer were unreasonable, and the plaintiff's refusal to accept the offer was justified. The defendant was ordered to pay the costs of the plaintiff.