Civil disputes and litigation can be resolved in a number of ways, with each involving different levels of formality, cost and risk. This article explains the key methods of settlement in litigation to better understand how civil claims are resolved.

An Informal Settlement Conference (ISC) is a structured meeting between the parties (and their legal representatives) without an independent mediator or formal court processes. These conferences allow parties to narrow the issues in dispute and explore potential settlement options.

ISCs can be arranged between the parties at any time, before or during litigation. They are often utilised to provide the parties with confidential, face-to-face negotiations without the cost and formality of mediation.

Mediation is a confidential process where a private independent mediator is engaged by the parties. A mediator will assist parties to address the real issues in dispute, identify possible solutions and seek to achieve a resolution (see Supreme Court of Victoria, ‘About mediation’). The mediator does not provide legal advice or determine the outcome, but instead facilitates discussions and helps manage negotiations.

Mediation is widely used as it allows parties to retain control over the outcome and negotiate a mutually agreeable resolution (see Federal Court of Australia, ‘Mediation’). In litigation, there is often an order from the Court for the parties to attend a mediation to seek a resolution. Resolving a matter ahead of trial is considerably less expensive than proceeding to trial and judgment, and eliminates the risks associated with trial.

Judicial mediation is a form of mediation conducted by a judicial officer, such as a Judge, Associate Judge or Judicial Registrar, rather than a private mediator (see Supreme Court of Victoria, Practice Note SC Gen 6: Judicial Mediation Guidelines, November 2025, para 3.1). Like in a standard mediation, judicial officers do not provide legal advice or determine the outcome.

Courts often order judicial mediation as a final opportunity for parties to resolve a dispute before proceeding to trial, particularly in cases where the cost and time of the trial would be disproportionate to the amount or subject matter of the dispute (see Ibid, para 4.5).

Direct negotiation is when parties communicate with one another (typically through their legal representatives) in an attempt to reach an agreement. Negotiation may take place through meetings, phone calls, emails or the exchange of settlement proposals. Direct negotiations are flexible and can be a more informal method of resolving disputes. However, as they do not involve neutral facilitators or formal court processes, they rely on the parties' willingness to communicate and there may be delays in any resolution as each offer must be communicated to each of the parties and a response sought.

An Offer of Compromise (OOC) is a formal, written offer made pursuant to court rules that must remain open for acceptance for a minimum period of 14 days (see Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 26.03(3)). OOCs can carry significant cost consequences if rejected.

If a party rejects an OOC and the offering party later achieves an outcome at trial that is equal to or better than the written offer, there may be adverse cost consequences against the party that rejected the written offer to settle the dispute ahead of trial. This may include an order by the Court for the rejecting party to pay the offering party's costs from the date the offer could have been accepted.

Given the significant cost risks that can follow rejection of a written offer, OOCs can set the boundaries of a litigation and be a powerful tool for settlement ahead of the significant costs and stress of trial.

A Calderbank letter is a written offer marked ‘without prejudice except as to costs,’ that does not need to comply with specific court rules (see Calderbank v Calderbank [1975] 3 All ER 333). Unlike OOCs, there are no restrictions for how long the offer can be left open to be accepted by the other party. A Calderbank offer will include reasons why the offer should be accepted.

The Court may award favourable costs to the offering party, if it considers the rejection of the Calderbank letter was unreasonable (see Ibid). Calderbank letters offer greater flexibility than an OOC, however, offer less certainty as to the cost consequences.

A judgment is the binding decision of the Court after the conclusion of the trial or hearing. The Court determines the outcome of the dispute and will make orders about any monetary relief and costs. Once a judgment is delivered, the parties lose control over the resolution and must abide by the Court’s ruling, subject to any appeal.

To reach judgment is time-consuming, expensive, stressful and the riskiest method of resolving litigation. Civil judgments include the details of the litigation and unless subject to suppression orders, are ordinarily public.

If you need guidance on navigating settlement options, reach out to our Insurance team for tailored advice and support.