Most Read Contributor in Australia, September 2016
The profession had been in doubt as to whether offers which
include the expression "the defendant to pay the
plaintiff's costs as agreed or assessed" were effective as
offers of compromise under the then UCPR 20.26.
The doubt arose from the decisions of the Court of Appeal in
Old v McInnes and Hodgkinson  NSWCA 410 where it was
held that an offer containing a term "costs as agreed or
assessed" did not comply with the then UCPR 20.26 and in
Vieira v O'Shea (No. 2)  NSWCA 121 where it was
held that a mere reference to costs in an otherwise compliant offer
would not take the offer outside the rules unless the reference
operates inconsistently with the relevant costs rules.
The recent decision of Whitney v Dream Developments Pty
Ltd  NSWCA 188 (Bathurst CJ, Beazley P, McColl, Barrett
and Emmett JJA) decided on 25 June 2013 upheld the decision in
Old. Accordingly, an offer purported to be made under the
then UCPR 20.26 including a term that "the defendant to pay
the plaintiff's costs as agreed or assessed" will render
the offer ineffective as an offer of compromise for the purpose of
the then UCPR 20.26.
These words may seem innocuous and merely as giving a
contractual qualification that reflects the usual order for costs
made in the event of a plaintiff obtaining a judgment in its
favour. However, the Court of Appeal noted that any such
qualification would cut across the then UCPR 42.13A(2)(b) as it
applied in consequence of acceptance of an offer, that is, the
Court's discretion to order otherwise if an offer is
The Court of Appeal held that Vieira was not
inconsistent with this approach.
The Court of Appeal confirmed that an offer of compromise which
is silent as to costs is an offer which is exclusive of costs such
that the then UCPR 42 would take effect according to its terms.
The Court of Appeal also examined whether the offer in question
could have effect in the alternative as a Calderbank offer. The
Court of Appeal found that there was nothing in the offer to
indicate that it was intended to have effect other than as an offer
under the then UCPR 20.26 and that there was nothing in the
enclosing correspondence or surrounding circumstances to indicate
that it would be relied on in relation to costs should a verdict
more favourable be received.
Amendments to the UCPR
The position under the UCPR since the amendments of 7 June 2013
is that an offer of compromise "must not include an amount for
costs and must not be expressed to be inclusive of costs"
(UCPR 20.26(2)(c)). The discretion in UCPR 42.13A has also been
UCPR 20.26(3)(b) allows an offer of compromise to propose
"that the costs as agreed or assessed up to the time the offer
was made will be paid by the offeror".
However, offerors who contemplate that the other party will pay
the costs as agreed or assessed up to the time the offer is
accepted are not assisted by UCPR 20.26(3)(b) and risk that offers
of compromise expressed in such terms will be found
Whitney v Dream Developments remains authority, despite
the amendments to the UCPR, for the proposition that parties who
wish their offers of compromise to have effect as Calderbank offers
in the event that they are ineffective under UCPR 20.26 should
expressly provide for this in the offer or the letter enclosing the
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.
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This was an interlocutory decision about the appointment of a tutor for the child appellant, to carry on his proceedings.
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