Calderbank Offers in Victorian Estate Litigation

Four different things people call "an offer"

The word "offer" is used loosely in correspondence. Four distinct instruments are in play, and they do not behave the same way.

• A Calderbank offer — a written settlement proposal made outside the Rules, ordinarily marked "without prejudice save as to costs", which the offeror proposes may be shown to the Court on the question of costs after judgment. Its effect depends entirely on the Court's general discretion as to costs.
• A formal offer of compromise under Order 26 of the Supreme Court (General Civil Procedure) Rules 2025 (Vic) — a rule-based instrument with prescribed form, content, service and timing requirements. If it complies and the specified outcome is achieved, rule 26.08 attaches prescribed costs consequences, each expressed to apply "unless the Court otherwise orders".
• A pre-litigation offer under rule 26.08.1 — a written offer to compromise a claim made before the proceeding was commenced. If it was open for a reasonable time, was not accepted, and the offeror obtains an order or judgment no less favourable than the offer, the Court must take it into account in exercising the costs discretion, and may order costs on a basis other than the ordinarily applicable basis from the day the offer was made, from commencement, or from another time.
• An open offer or contractual settlement proposal — an offer made openly, or a deed proposal, which can be put before the Court at any time and which, if accepted, creates ordinary contractual rights. Open offers are sometimes used deliberately in estate matters to demonstrate reasonableness.

The 2025 Rules commenced on 8 September 2025 and replaced the Supreme Court (General Civil Procedure) Rules 2015 (Vic). The structure and numbering of Orders 26 and 63 are substantially familiar, but any offer should be prepared against the current authorised text rather than commentary written for the revoked Rules.

How the Calderbank analysis actually works

Beating your own offer is necessary but not sufficient. Obtaining an outcome no less favourable than the offer opens the door; it does not produce indemnity costs by itself. The question the Court asks is whether the offeree's rejection of the offer was unreasonable, assessed on the circumstances known to the offeree while the offer was open — not with the benefit of the judgment.

The factors conventionally associated with Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298 include:

• the stage of the proceeding at which the offer was received;
• the time allowed to the offeree to consider the offer;
• the extent of the compromise offered;
• the offeree's prospects of success, assessed as at the date of the offer;
• the clarity with which the terms of the offer were expressed;
• whether the offer foreshadowed an application for indemnity costs in the event of rejection.

That list is not exhaustive and no single factor is decisive. In estate matters, several further considerations regularly carry weight: whether the information needed to evaluate the offer had actually been provided at the time, particularly where the value or composition of the estate was still unclear; whether any condition attached to the offer was one the offeree could realistically accept; and the conduct of the parties, including whether disclosure obligations had been met.

Do not assume enhanced costs run from expiry. Where the Court accepts that rejection was unreasonable, the date from which any enhanced-costs order commences is itself a matter for the Court. It is commonly connected with the expiry of the offer, or with the point by which acceptance reasonably should have occurred, but neither is a rule.

Offers of compromise under Order 26

Order 26 is the formal route. Its requirements are specific, and non-compliance is the usual reason a party's costs argument fails.

• Form and content (r 26.02). The offer must be in writing, prepared in accordance with rules 27.02 to 27.04, and must state that it is served under Order 26. It must also state either that it is inclusive of costs or that costs are additional. That single election changes the arithmetic of the offer and must be a deliberate choice.
• Acceptance period (r 26.03(3)–(4)). Any period specified must not be less than 14 days after service. If no period is specified, the offer may be accepted within 14 days after service, or until verdict or judgment, whichever is sooner.
• Withdrawal (r 26.03(5)). An offer of compromise must not be withdrawn during the time it is open to be accepted, unless the Court otherwise orders.
• Counter-offers (r 26.03(6)). The offer remains open to be accepted within its acceptance period even though the party served makes an offer of compromise in return, and whether or not that counter-offer itself complies with the Order.
• Payment timing (r 26.03.1). An offer providing for payment of a specified sum is, unless it says otherwise, taken to be an offer to pay that sum within 28 days after acceptance.
• Costs on acceptance (r 26.03(7)). Where an accepted offer provides for costs to be paid or received in addition to the offer, then unless the offer otherwise provides or the Court otherwise orders, those costs are paid or received (as the case may be) in respect of the claim up to and including the day the offer was served. Liability for costs after that day is a matter for the Court's discretion, and a party to the accepted offer may apply for taxation.
• Disclosure to the Court (rr 26.04, 26.05). An offer is deemed to be without prejudice unless it provides otherwise. Where it has not been accepted, no pleading or affidavit may state that it was made, and no communication about it may be made to the Court at trial until all questions of liability and the relief to be granted have been determined, save for the narrow interest carve-out in rule 26.08(6).
• Disability (r 26.06). A party under disability may make or accept an offer, but acceptance is not binding until the Court approves it.
• Non-compliance (rr 26.07, 26.07.1). If a sum is not paid within the time provided, the accepting party may, with leave, withdraw the acceptance. Alternatively, the non-defaulting party may apply for orders giving effect to the offer, or for a stay, dismissal or striking out, depending on which party has defaulted.

The Order 26 costs consequences

Rule 26.08 does the work, and it treats plaintiffs and defendants very differently. Each consequence applies unless the Court otherwise orders.

• Plaintiff's offer, judgment no less favourable to the plaintiff (r 26.08(2)). For claims for damages for death or bodily injury, the plaintiff is entitled to costs on the indemnity basis for the whole claim. For other claims — which covers most estate litigation — the plaintiff is entitled to costs on the ordinarily applicable basis up to 11.00 a.m. on the second business day after the offer was served, and on the indemnity basis after that time.
• Defendant's offer, judgment not more favourable to the plaintiff (r 26.08(3)). The plaintiff recovers costs on the ordinarily applicable basis up to 11.00 a.m. on the second business day after service, and the defendant recovers its own costs on that basis thereafter. This reverse-costs effect is the real risk in refusing a defendant's offer.
• Unreasonable refusal by a plaintiff whose claim fails (r 26.08(4)). Where the plaintiff unreasonably failed to accept the offer and the claim is dismissed or judgment is entered for the defendant, the defendant's costs after 11.00 a.m. on the second business day after the offer was made may be on the indemnity basis. Note the wording: rules 26.08(2) and (3) run from the second business day after the offer was served, while rule 26.08(4) runs from the second business day after it was made.
• Preconditions (rr 26.08(7)–(8)). The offeror must have been willing and able to carry out the offer. And where the plaintiff obtains judgment for the recovery of a debt or damages, and the amount of the debt or damages was not in dispute but only liability was disputed, rule 26.08(2) does not apply unless the Court is satisfied that the plaintiff's offer was a genuine compromise.

The "ordinarily applicable basis" is defined in rule 26.01; for costs incurred on or after 1 April 2013 it is the standard basis.

Standard basis, indemnity basis and what you actually recover

Order 63 governs taxation. Under rule 63.28 costs may be taxed on the standard basis, the indemnity basis, or such other basis as the Court directs, and rule 63.31 makes the standard basis the usual basis unless the Rules or an order of the Court, including the Costs Court, provides otherwise.

• Standard basis (r 63.30). All costs reasonably incurred and of reasonable amount are allowed.
• Indemnity basis (r 63.30.1). All costs are allowed except so far as they are of an unreasonable amount or have been unreasonably incurred, and any doubt is resolved in favour of the party to whom the costs are payable.

The difference is real, and in a hard-fought estate case it can be substantial. It is still not the same as full recovery of what you have paid your own lawyers. An indemnity costs order remains an assessment against a reasonableness standard, taxed if not agreed in the Costs Court. Solicitor-client costs — what your retainer obliges you to pay your own firm — is a separate concept and not a third inter-party basis. No costs order should be assumed to make a successful party whole.

Estate costs: what rule 63.26 does and does not do

It is wrong to say there is no default under which estate-litigation costs may come from the estate, and equally wrong to assume that they will.

Rule 63.26 provides that, unless the Court otherwise orders, a party who sues or is sued as trustee or mortgagee is entitled to the costs of the proceeding out of the fund held by the trustee or out of the mortgaged property, so far as those costs are not paid by another person. That is a genuine default, and it can apply to a personal representative sued in that capacity. It sits alongside — and is distinct from — the personal representative's right of indemnity out of the estate for costs properly incurred in the due administration or defence of the estate.

Both are qualified. The default in rule 63.26 yields to a contrary order, and the indemnity extends only to costs properly incurred. A personal representative who defends neutrally, puts the relevant material before the Court and takes a proportionate approach is in a very different position from one who litigates partisanly, pursues a personal interest, resists disclosure or drives up costs. In the latter case the Court may order otherwise and may leave the representative personally liable.

A claimant or beneficiary has no automatic entitlement to estate-funded costs merely because the dispute concerns an estate. Broadly, and without displacing the detailed treatment in our general costs guide:

• Family provision proceedings are adversarial money claims against the estate. Costs largely follow ordinary principles, and an unsuccessful applicant may be ordered to pay costs.
• Probate, validity, capacity and undue influence disputes may attract different considerations where the litigation was genuinely caused by the testator or by circumstances calling for investigation — but that is an exception to be established, not a starting assumption.
• Executor and trustee disputes turn on the capacity in which the party litigated and on the propriety of the conduct complained of.

The practical point for offer strategy is that the costs downside of refusing an offer is not softened by any general expectation that the estate will pay.

Evaluating an offer you have received

An offer should be assessed on paper, promptly, and in writing. The exercise is the same whether the offer is a Calderbank offer or a formal one.

• Compare against outcomes, not aspirations. Set out a realistic best case, worst case and probable case, and place the offer against all three.
• Add the costs. Include accrued and prospective party-party costs and your own solicitor-client costs, and the gap between them. An offer that looks light before costs is often adequate after them.
• Account for interest and delay. Money received now is not the same as money awarded after a contested hearing and any appeal.
• Read the non-monetary terms. Releases, confidentiality, admissions or non-admissions, discontinuance, indemnities and the precise costs wording can change the value of an offer materially.
• Check tax and duty. Where real property, superannuation proceeds, business interests or in-specie transfers are involved, obtain advice on the consequences before comparing headline figures.
• Test payment and liquidity. Consider when payment is due — for an Order 26 offer of a specified sum, 28 days after acceptance unless otherwise provided — whether the estate holds cash, whether assets must be sold, and who bears the cost and risk of that sale.
• Identify approvals. Where a person under disability or a protected interest is affected, acceptance may require Court approval, and the timetable must accommodate it.
• Assess the information you had. If disclosure was incomplete when the offer was made, say so in writing at the time and ask for what is missing. That contemporaneous record is often decisive later.
• Preserve the chronology. Keep every offer, response, request for information and extension in a single dated schedule.

Where the parties are engaged in a settlement process, offers are usually exchanged around mediation. Our guide to mediation in estate litigation covers how that process is run and how offers fit into it.

Drafting checklist — Calderbank offers

Nothing here is mandatory. Each item exists because its absence is regularly used to argue that rejection was reasonable.

• Identify the offer clearly as a Calderbank offer, mark it "without prejudice save as to costs", and state that you will rely on it in support of an application for indemnity costs if it is not accepted.
• State the amount, or the outcome offered, without ambiguity, and break down any bundled figure so the offeree can see what is being compromised.
• Deal expressly with costs — whether the sum is inclusive of costs or costs are additional, and on what basis.
• Offer a genuine compromise. A demand for total capitulation dressed as an offer carries little weight.
• Allow a period that is realistic for the stage of the proceeding and the material the offeree holds, and give a defined expiry date and time.
• Explain briefly why the offeror's position is strong, so the offeree cannot later say it could not assess the risk.
• Keep conditions to a minimum, and make any that remain transparent and capable of performance.
• Serve it on the correct party or their solicitor, and keep proof of the date and time of service.
• Be willing and able to perform the offer if it is accepted.

Drafting checklist — Order 26 offers

These are requirements of the Rules, not matters of style. Getting one wrong may leave you with no rule-based consequence at all.

• In writing and prepared in accordance with rules 27.02 to 27.04.
• Expressly stated to be served under Order 26.
• Expressly stated to be either inclusive of costs, or with costs additional.
• An acceptance period of not less than 14 days after service, or none specified so that the 14-day default applies.
• Payment terms addressed if a specified sum is offered, bearing in mind the 28-day default.
• Served on the correct party, with the date the offer was made and the date and time of service both recorded, because rules 26.08(2) and (3) run from 11.00 a.m. on the second business day after service while rule 26.08(4) runs from 11.00 a.m. on the second business day after the offer was made.
• A genuine compromise where the plaintiff's claim is for a debt or damages and only liability, not amount, is in dispute.
• Capable of performance by the offeror, who must be willing and able to carry it out.
• Not disclosed to the Court before liability and relief have been determined.

A short hypothetical

Hypothetical example. An estate is worth about $1.2 million. An adult child brings a family provision claim. Six weeks before trial, and after affidavit material and the estate accounts have been exchanged, the executor serves an Order 26 offer of $180,000 plus costs to the date of service, open for 21 days. The claimant does not accept it, makes a counter-offer of $400,000, and proceeds to trial, where the Court orders provision of $150,000.

Because rule 26.03(6) applies, the counter-offer did not prevent the executor's offer remaining open for its full 21 days. The judgment is not more favourable to the claimant than the offer, so rule 26.08(3) is engaged and, unless the Court otherwise orders, the claimant recovers costs only to 11.00 a.m. on the second business day after service, while the executor recovers its costs on the standard basis after that time. Had the claim failed entirely and the refusal been found unreasonable, rule 26.08(4) could have produced indemnity costs against the claimant from 11.00 a.m. on the second business day after the offer was made. The outcome in any real case depends on its own facts and on the Court's discretion.

Overarching obligations and settlement conduct

The Civil Procedure Act 2010 (Vic) applies to every participant in a Victorian civil proceeding. The obligations most relevant to settlement are the obligation to use reasonable endeavours to resolve the dispute by agreement, including by appropriate dispute resolution where appropriate (section 22), the obligation to narrow the issues in dispute (section 23), the obligation to ensure costs are reasonable and proportionate (section 24) and the obligation to minimise delay (section 25). Under section 28 the Court may take any contravention into account in exercising any power, including its discretion as to costs, and section 29 permits a range of orders where a contravention is established.

Rejecting an offer is not, of itself, a contravention. The obligations bite on conduct: refusing to engage at all, withholding material the other side needs to evaluate an offer, or maintaining issues that could sensibly have been abandoned.

Sources and further reading

• Supreme Court (General Civil Procedure) Rules 2025 (Vic) — authorised in-force version
• Civil Procedure Act 2010 (Vic) — authorised in-force version
• Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298
• Supreme Court of Victoria — Practice Note SC Gen 11 (Costs Court)
• Supreme Court of Victoria — Costs Court
• Supreme Court of Victoria — current practice notes

Getting help

Our estate litigation team advises executors, beneficiaries and applicants on settlement strategy, Calderbank offers, offers of compromise under Order 26 and costs applications in Victorian family provision, testamentary capacity, undue influence and executor-conduct disputes.

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