When an offer of compromise must be a compromise

In Cook v City of Sydney (No 2) [2016] NSWSC 148, the Court had to consider an application made by a successful plaintiff for an order that the first defendant pay his costs, including costs on an indemnity basis from the date when an offer of compromise had been made. That offer was rejected by the defendant.


The offer made by the plaintiff was expressed to have been made pursuant to Rule 20.26 of the Unified Civil Procedure Rules 2005. Where such an offer is made by a plaintiff and rejected by a defendant, and the plaintiff obtains judgment which is no less favourable to him, then the plaintiff is entitled to an order for costs on the ordinary basis up to the making of the offer and on an indemnity basis thereafter [see Rule 42.14 of the UCPR]. In the alternative, the plaintiff based his claim for indemnity costs on the principle in Calderbank v Calderbank [1975] 3 All ER 333, the offer having been expressed also to be a Calderbank offer.


In applying the provisions of the legislative framework in the UCPR as well as the Calderbank principles, the Court declined to make a special costs order. It was held that the base reason for such provisions and principles was the promotion of true compromise. And true compromise ‘connotes that a party gives something away’ (see paragraph 15). The Court’s role was seen as being to ‘determine whether, in all of the circumstances, the offer of compromise made by the plaintiff represented any true element of compromise’ (see paragraph 15).


In the circumstances, the Court found that the ‘offer’ made by the plaintiff contained no element of compromise at all. In fact the terms set out in the offer, representing the basis upon which the plaintiff was prepared to settle the proceedings, amounted to the very relief sought by the plaintiff in commencing the proceedings. Although costs followed the event and the plaintiff obtained an order for costs, such costs were ordered to be paid on the normal basis.


Litigators should ensure that any offer of compromise is a real compromise, in that it does really offer to give something away. Otherwise, at the end of the day, the expected costs consequences may not flow.
The case can be found at www.caselaw.nsw.gov.au/decision/56d37e3ce4b0e71e17f4facd