Hopeless proceeding can result in a cost order under Retail Leases Act 2003 (Vic)

Your claim is for $50,000. I have a weak counterclaim for $100,000. It will cost you more than $50,000 to run your case and defend my counterclaim, so you will not see a net return from the litigation, even if you win.

Unsurprisingly, this often prompts a settlement that is favourable to the person with the weak counterclaim.

One way to mitigate the impact of the ‘no cost‘ rule is to serve a well-crafted Calderbank-style letter (see here).

For the Calderbank-style letter to work, there needs to be substance to the threat than the Tribunal will award costs in a hopeless case.

The Court of Appeal’s decision adds weight to that threat, as it provides a real example, sanctioned by a superior court, of a costs award being made against a litigant pressing a hopeless case.

Consequently, the decision could potentially impact settlement negotiations when one litigant is pressing a very weak case.