In a recent decision by the Supreme Court of New South Wales in Farmer v Broadspectrum (Australia) Pty Ltd (No.3) [2024] NSWSC 53, the court considered the form and validity of offers of compromise when it dismissed a motion for indemnity costs and ordered the plaintiff to pay the defendant's costs.
Background
This claim involved the plaintiff sustaining injury in a fall at a Regional Processing Centre in Nauru. The plaintiff was successful against both defendants, Broadspectrum and Wilson Security. Initially, the plaintiff served an Offer of Compromise on Broadspectrum before Wilson Security was joined as second defendant.
The offer included terms as follows:
- Broadspectrum to pay the plaintiff $700,000 plus costs.
- The plaintiff's costs to be paid clear of any previous costs orders.
- The offer to be clear of any payments made by Fullerton Health.
After Wilson Security was joined to the proceedings, the plaintiff served a similar offer to each defendant, demanding $900,000 but maintaining the same terms. The two Offers of Compromise were not accepted, and the plaintiff sought indemnity costs from the date of each offer, based on rule 20.26 of the Uniform Civil Procedure Rules 2005 (UCPR).
Dismissal of the Motion
The court dismissed the plaintiff's motion and ordered him to pay the defendants' costs.
The court highlighted several key issues with the offers:
Non-compliance with UCPR rule 20.26 – the offers did not meet the requirements, as they failed to specify proposed orders for the disposal of the claim and contained unclear terms.
Lack of Clarity – the term "The plaintiff's costs are to be paid clear of any previous costs orders made" was deemed opaque and imprecise, failing to comply with UCPR rule 20.26.
Ambiguity – the statement "The above offer is clear of any payments made by Fullerton Health Pty Ltd" was vague. The court had no evidence of the amounts paid by Fullerton Health, further contributing to the offer's non-compliance.
Previous costs order – the offer failed to address a prior costs order against the plaintiff, which required a clear and specific proposed order to vacate the initial costs order, as stipulated by UCPR rule 20.26.
Additionally, the court rejected the plaintiff's argument that the offers could take effect as Calderbank offers, noting that there was no indication they were intended to be relied upon irrespective of their effectiveness under UCPR rule 20.26.
The court also referenced rule 42.14, which outlines the costs consequences if an offer under UCPR rule 20.26 is not accepted, and the plaintiff obtains a judgment no less favourable than the offer.
The court cited Whitney v Dream Developments Pty Ltd1, which held that an offer made under UCPR rule 20.26 would not take effect as a Calderbank offer unless it was indicated that it was to be relied upon for costs irrespective of its compliance with UCPR rule 20.26.
The court highlighted the necessity for clear and precise terms in Offers of Compromise to comply with the civil procedure rules. The absence of specific proposed orders and the vague language regarding payments made the offers non-compliant. Moreover, the court emphasised that without an explicit indication, the offers could not be treated as Calderbank offers.
Key lessons
This case offers two important lessons, firstly, that strict compliance with UCPR rule 20.26 is crucial to ensure that all Offers of Compromise meet the rule requirements. Offers must clearly identify the proposed orders for the disposal of the claim and use precise terms.
Secondly, regarding Calderbank Offers, that when serving an Offer of Compromise, careful consideration should be given to whether the accompanying letter should be formulated as a Calderbank offer. This is especially important if there is a possibility that the offer might not comply with UCPR rule 20.26.
Takeaways for Practitioners
- Ensure compliance – offers of compromise must clearly identify proposed orders that can be entered as a final judgment to dispose of the claim.
- Avoid ambiguity – clarity is crucial. Avoid using vague or creative terms that may lead to misinterpretation.
- Consider Calderbank Offers – if there is any doubt about compliance with UCPR rule 20.26, consider making the offer as a Calderbank offer, indicating it is to be relied upon for costs irrespective of compliance.
This decision underscores the importance of adhering to procedural rules in civil litigation in NSW. The plaintiff's failure to ensure compliance with UCPR rule 20.26 in the Offers of Compromise and the lack of clear intent for Calderbank reliance resulted in the dismissal of the motion for indemnity costs. This case serves as a reminder for litigants to meticulously draft offers and consider all potential procedural implications.
Footnote
1 [2013] NSWCA 188.
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