The new Supreme Court (Chapter 1 Offers of Compromise and Amendments) Rules 2013 (New Rules) amend the Supreme Court (General Civil Procedure) Rules 2005 (Principal Rules) by inserting new rules relating to pre-litigation offers and revoking certain sections of the Principle Rules. The New Rules came into operation 1 September 2013, and as such, the substantive changes the New Rules make to the operation of Offers of Compromise need to be understood and utilised.
This update is intended to highlight the important changes.
Offers of compromise generally
The New Rules replace Rule 26.02 of the Principal Rules with a new Rule 26.02 which provides Offers of Compromise can now be made inclusive of costs.
The New Rules revoke Principal Rule 26.03 (3.1) which provided a party on whom an Offer of Compromise was served had to provide written acknowledgement of service within 3 days of the date of service.
The New Rules amend Rule 26.03 (7) of the Principal Rules such that, if an Offer of Compromise is made on a plus costs basis, the Court is now given discretion to make an Order in relation to costs incurred after the date on which the Offer was served.
The New Rules amend Rule 26.03.1 of the Principal Rules by extending the time limit for payment following acceptance of an Offer of Compromise from 14 days to 28 days.
Withdrawal of acceptance and failure to comply
The New Rules replace Rule 26.07 of the Principal Rules with a new Rule 26.07 and an additional Rule 26.07.1 which provide:
A party who has accepted an Offer of Compromise:
- Can withdraw that acceptance if the sum of money is not paid within the time prescribed in the Offer, or if no time is prescribed in the Offer, within 28 days of the date the Offer is accepted;
- Can seek Orders to restore the parties “as nearly as practicable” to their respective positions at the time of that acceptance.
- The Court can now stay a Plaintiff’s claim should the Plaintiff fail to comply with an accepted Offer of Compromise, not just dismiss it.
- The Court can now order any claim not the subject of an Offer of Compromise proceed should a party fail to comply with an accepted Offer of Compromise, not just a Counterclaim or Third Party Notice.
Cost consequences of failure to accept
The New Rules amend Rule 26.08 (3) and (4) of the Principal Rules to provide a Plaintiff who or which fails to accept a Defendant’s Offer of Compromise and later obtains a judgment no less favourable than the Offer:
- Is now entitled to his, her or its costs until 11.00 a.m. on the second business day after the Offer was served rather than only until the day the Offer was served; and
- Is now only liable to pay the Defendant’s costs from 11.00 a.m. on the second business day after the Offer was served rather than from the day the Offer was served.
The New Rules insert a new Rule 26.08.1 which allows the Court to take into account any written Offer of Compromise a party makes before the proceeding when determining what costs orders to make in the proceeding provided:
- The offer to compromise was open for a reasonable time;
- The offer to compromise was not accepted; and
- The offeror obtains an order or judgement in respect of the claim no less favourable to the offeror than the terms of the offer to compromise.
In exercising its discretion, the Court may order the offeree pay all or part of the offeror’s costs of the proceeding taxed on a basis other than the ordinary applicable basis from the day the Offer of Compromise was made or from the commencement of the proceeding or from any other time the Court sees fit.
The purpose of this rule appears to be an attempt to encourage more rigorous consideration of an offer made in the pre-litigation stage.
The New Rules replace Rule 26.10 of the Principal Rules with a new Rule 26.10 which establishes a presumption, not just a discretion, that a Defendant who or which makes an Offer to Contribute which is more favourable than the eventual judgment is entitled to an Order the Defendant who or which did not accept the Offer to Contribute pay the costs of the Defendant who or which made the Offer to Contribute up to 11.00 a.m. on the second business day after the Offer to Contribute was made on an ordinary basis and, thereafter, on an indemnity basis.
However, the new Rule 26.10 removes the requirement the Defendant who or which did not accept the Offer to Contribute pay any costs the Defendant who or which made the Offer to Contribute is liable to pay the Plaintiff.