In Fabre v Lui (No 2) [2015] NSWCA 312, the New South Wales Court of Appeal considered the extent to which offers of compromise under the Uniform Civil Procedure Rules 2005 (UCPR) must contain a "real" concession by the offeror in order to attract the benefits in relation to costs.

Background

Ms Lui and her daughter (as respondents) had offered to compromise an appeal on the basis that there be judgment in their favour with no order as to costs. On 10 June 2015, the court found judgment and costs in their favour - a more favourable result than what they had offered. By notice of motion filed on 22 June 2015, Ms Lui sought an order that the appellant pay her costs of the appeal on the ordinary basis until 18 September 2014 and on an indemnity basis thereafter in light of the offer of compromise.

It was accepted that Ms Lui's offer of compromise complied with the UCPR. However, the issue was whether or not the offer actually constituted a "compromise".

Decision

The Court agreed with Giles J in Horbartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 that to reap the benefits of an offer of compromise, the offeror must in some "real sense" be giving something away by its offer. The court assessed whether, at the date of the offer, Ms Lui was offering to forgo something of substance.

The court found that because the offer was made about three weeks after the notice of appeal was filed, it is unlikely any significant costs had been incurred. Accordingly, if Ms Lui's offer were accepted by the appellant, Ms Lui and her daughter would receive judgment in their favour with little burden to pay their own costs. Therefore, the offer of compromise was not offering to forgo anything of substance. As a result, the offer did not attract the operation of r 42.15A, and even if it did, the court stated that it would have "ordered otherwise" in accordance with r 42.15A(2). The Court dismissed Ms Lui's motion with costs.

Lessons learnt

Even where an offer of compromise complies with the requirements of the UCPR, the offer of compromise must, in a "real sense", be a compromise by the offeror.

The court cited the example of a plaintiff with a strong claim who offers to discount its claim by a dollar. Such an offer will not confer any benefits in relation to costs if the plaintiff obtains judgment for its full claim, because the plaintiff is not forgoing anything of substance.

In particular, Fabre v Lui demonstrates that where no significant costs have been incurred at the date of an offer, it will be difficult to assert that an offer for judgment in the offeror's favour with no order as to costs will be a real offer of compromise. To support an offer of compromise under the UCPR, the offeror must demonstrate that it is offering to forgo something of substance by citing costs incurred up to the date of offer.