The Federal Court Rules 2011 allow an offeree to apply to the Court for an order giving effect to an accepted offer to compromise in the event an offeror fails to comply with the terms of that offer (rule 25.10(a)).

Non-compliance with an accepted offer to compromise can include a failure to do all things necessary to enable to offeree to receive the benefit of the offer in a timely way. In other words, parties must act quickly to give effect to the accepted offer.

LINKE V TT BUILDERS PTY LTD [2015] FCA 111

The Federal Court has recently held that an offer to compromise under rule 25.10 conveys by implication the offeror’s acceptance of a duty of cooperation to do all things necessary to enable the other party to have the benefit of the offer (if accepted) in a timely way.

The facts

The offer to compromise, made by the respondents, contemplated costs payable by the them to the applicant as follows:

  1.  The applicant’s costs to the date of service of the offer, as agreed or taxed; less
  2. The respondents’ costs on a solicitor/client basis incurred from the 15th date after service of the offer.

The offer was accepted and the hearing was vacated.

The applicant’s solicitors wrote to the respondents’ solicitors advising of their costs and seeking costs assessment if there was no agreement. The letter prompted the respondents to advise of their costs for the purpose of calculation as per the offer terms.

In reply, the respondents’ solicitors stated they were seeking instructions, required further time to respond, and would furnish the respondents’ costs to the applicant. As the respondents’ solicitor did not receive instructions, the respondents did not subsequently advise the applicant of their costs, or engage in negotiations with respect to costs.

The applicant sought orders in accordance with rule 25.10(a), and submitted the Court should make orders as to taxation of the parties’ costs pursuant to the offer.

The ruling

The Federal Court noted the Court’s expectation that parties achieving a compromise will cooperate to ensure the offeree obtains its benefits in a timely way.

As in excess of four months had passed in which the respondents could formulate their costs, and more than six weeks in which to respond to the applicant’s formulation of its costs, the Court found the respondents failed to comply with the implied terms of the offer, such to enliven the Court’s discretion under rule 25.10.

The Federal Court made orders for the applicant’s costs to be paid by the respondents in accordance with the offer to compromise. Additionally, the Court made orders requiring the respondents to lodge a bill of taxation for their costs by a set date, and if that date was not met, the orders allowed the Registrar to tax the applicant’s costs without the deduction of the respondents’ costs as contemplated in the terms of the offer to compromise.

Conclusion

An offeror must do all the things necessary and act expeditiously so that the offeree may obtain the benefit of that offer to compromise in a timely manner. Not doing so may result in Court intervention into the terms of the offer itself.

Parties should note the orders available under section 25.10 to seek the Court’s intervention in the event of non-compliance with an accepted offer to compromise. In addition to seeking orders giving effect to the accepted offer, orders may be sought staying or dismissing the proceedings, striking out a defence, or allowing a cross-claim to proceed (section 25.10(b)-(d)).