Midcoast Petroleum Pty Ltd v Keldros Pty Ltd (No 2)

In this case, Midcoast Petroleum Pty Ltd initiated proceedings against Keldros Pty Ltd, asserting claims related to alleged breaches of contract and associated damages. The dispute was heard in the Supreme Court of New South Wales. The defendants, Keldros Pty Ltd, made a Calderbank offer prior to the trial, which the plaintiffs, Midcoast Petroleum Pty Ltd, did not accept. The primary legal issue before the court was whether the plaintiff's failure to accept the Calderbank offer was unreasonable, thereby warranting a departure from the usual rule regarding costs in litigation.

The court considered the nature and circumstances of the Calderbank offer, including the timing of the offer and the extent to which it aligned with the defendants' case. It was noted that the offer was made well in advance of the trial and was comprehensive enough to potentially resolve the entire dispute. The court found that the plaintiff's refusal to consider the offer was unreasonable, given the circumstances. Consequently, the court determined that a special costs order was warranted, recognising the defendants' position as having been reasonable and justified under the circumstances.

The reasoning of the court hinged on the principles of fairness and the objectives of the Calderbank provisions, which aim to encourage parties to consider settlement and avoid unnecessary litigation costs. The court emphasised that the failure to accept a reasonable offer can shift the usual rule regarding costs, particularly when such a failure is deemed unreasonable. In light of this, the court ordered that special costs be awarded to the defendants, Keldros Pty Ltd, reflecting the plaintiff's unreasonable conduct in not accepting the offer. This decision underscores the importance of evaluating settlement offers carefully and the potential consequences of failing to do so.