Vakiloroaya v Norri (No 2)

The case of Vakiloroaya v Norri (No 2) involved the issue of costs in relation to an offer of compromise under the terms of a Calderbank letter. The applicant, Vakiloroaya, sought to recover costs on an indemnity basis after the respondent, Norri, allegedly unreasonably rejected an offer to settle the proceedings. The proceedings took place in the Supreme Court of New South Wales. The core legal issues before the court were whether the purported Calderbank letter was indeed an offer of compromise, and if the rejection of the offer was unreasonable, thereby warranting indemnity costs.

The court found that the letter in question did constitute a genuine offer of compromise as it proposed a specific settlement amount and a cessation of further litigation. The applicant had effectively proposed a settlement that the respondent could accept or reject. The court then proceeded to examine whether the respondent's rejection of this offer was unreasonable. The respondent's decision to reject the offer and continue with the proceedings was assessed against the criteria for reasonableness, which included the merits of the case, the conduct of the parties, and the overall circumstances. The court held that the rejection was unreasonable given the clear terms of the offer and the fact that it effectively meant the respondent would have to bear costs without any benefit.

Consequently, the court ordered that the respondent pay the applicant's costs on an indemnity basis, encompassing the gross sum of costs incurred by the applicant in relation to the proceedings. This decision underscored the importance of evaluating the reasonableness of rejecting settlement offers in the context of cost recovery, particularly where such offers are made under the framework of a Calderbank letter.