Australia: Offers of Compromise now available in the Australian Capital Territory courts

Parties to a proceeding in the ACT now have another method to protect themselves against costs.

The Court Procedures Amendment Rules 2014 (ACT) (Amendment Rules) enabled a number of amendments to be made to the Court Procedures Rules 2006 (ACT) (CPR). These amendments include specific provisions relating to Offers of Compromise which are now contained in part 2.10 of the CPR, and commenced on 1 January 2015.

What are Offers of Compromise?

The primary purpose of an Offer of Compromise is to provide a method through which a matter may be resolved without incurring the costs of proceeding to hearing. It is an offer made by one party to another, in a proceeding, pursuant to Regulation 1002 of the CPR.

The making of an Offer of Compromise provides cost protection to the party making the offer in the event that the offer is not accepted. The potential costs of failing to accept an Offer of Compromise may encourage an uncooperative party to properly negotiate the settlement of a matter.

Offers of Compromise are also a method which may be used by parties to a proceeding to protect themselves against costs should the offer be rejected. An Offer of Compromise may allow a party to recover costs on a solicitor/client basis, otherwise known as an 'indemnity costs', for a period potentially extending the length of the proceeding.

Offers of Compromise are widely used in a number of jurisdictions, including the Federal Court of Australia.

How is an Offer of Compromise made?

An Offer of Compromise must:

• be made in writing and must identify the claim to which it relates
• specifically state that it is made in accordance with Regulation 1002 of the CPR
• identify the proposed orders for the disposal of the claim, or part of the claim, including the amount of any monetary judgement
• state the period for which the offer is open.

Importantly, an Offer of Compromise must not include any amount for costs, or state to be inclusive of costs.

Acceptance

Should an Offer of Compromise be accepted by a party to a proceeding, Regulation 1009 of the CPR provides that the issuing party is entitled to an order that the recipient of the offer pays the costs of the claim, to be assessed on a party/party basis.

Plaintiffs and defendants who do not accept compromise offers may face adverse costs orders. These are beyond the scope of this article, but further information can be found in Regulations 1010, 1011, and 1012.

Relationship with Calderbank Offers

Offers of Compromise perform a similar function to that of a Calderbank offer.

Like Calderbank offers which may be made on a 'without prejudice' basis, Regulation 1006 provides that no communication in relation to an Offer of Compromise may be disclosed to the court at trial, or included in any pleading or affidavit.

However, there are a number of notable differences between the two types of offer, particularly in relation to personal injury claims. A Calderbank offer will generally permit indemnity costs to be awarded only from the date of the expiry of the offer, in contrast with the indemnity costs order for the entirety of proceedings available to a plaintiff through an Offer of Compromise.

An Offer of Compromise therefore provides greater costs protection to a plaintiff in personal injury matters in comparison to a Calderbank offer. An Offer of Compromise should be considered accordingly when received by a defendant or insurer in a personal injury matter.

An Offer of Compromise made pursuant to Regulation 1002 of the CPR also provides greater certainty with regard to the effectiveness of the costs protection when compared with a Calderbank offer. Regulation 1002 clearly specifies the required components of an effective Offer of Compromise far more concisely than the myriad of case law governing the operation of Calderbank offers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.