Offers of Compromise or Rules Offers which are found to be non-compliant with the Rules – are they still relevant to the exercise of the Court’s costs discretion?
Published on February 19, 2021 by Adrian O’Dea
Case of Wiggins Island Coal Export Terminal Pty Ltd v Civil Mining & Construction Pty Ltd  QCA 8
A recent judgment of the Queensland Court of Appeal in Wiggins Island Coal Export Terminal Pty Ltd v Civil Mining & Construction Pty Ltd  QCA 8 (delivered on 29 January 2021) provides important guidance for practitioners on the question of whether a non-compliant rules offer may still be relevant to the exercise of the costs discretion.
In the judgment, Holmes CJ (with whom Philippides JA and Brown J agreed save for two minor caveats) provides a very useful analysis of New South Wales Court of Appeal authority on this issue, noting that there is “a rich vein of authority from the New South Wales Court of Appeal, unfortunately not always flowing in the same direction.”
It is not uncommon for a party in proceedings to purport to make an offer under the Rules only to subsequently discover that the offer is non-compliant because it does not meet all the formal requirements under the Rules. Assuming the party who made such an offer ultimately obtains a better result in a Court judgment, then that party will usually still wish to rely on that offer to argue that a special costs order should be made. The party may argue that even if the offer is invalid as a Rules offer, it should still be seen as a genuine attempt to compromise and resolve the proceedings and should be taken into account by the Court on the issue of costs.
The alternative approach is to say that a non-compliant rules offer has no relevance at all to the exercise of the costs discretion unless the Court is satisfied that the offer also operated as a Calderbank offer. That is, in order for a party to be able to rely on a non-compliant Rules offer, it is necessary to establish that there is some reasonable basis for regarding the offer as intended to have an effect independent of its operation under the Rules. This is the approach which was favoured by the Queensland Court of Appeal in Wiggins.
Having reviewed the relevant New South Wales Court of Appeal authority, Holmes CJ comes to the conclusion in Wiggins that the cases generally stand for the proposition that an intention to seek something other than the usual costs order – and in that sense a “special costs order” – must be intimated.
The following quote from Holmes CJ’s Judgment in Wiggins is pertinent:
“Independently of the respect to be given to the decision of the five-member Court of Appeal in Whitney, it seems to me consistent with the policy of the Rules that the approach articulated by the New South Wales Court of Appeal in Dean v Stockland and by Barrett JA in Whitney should be preferred. The Rules prescribe a specific regime for offers to settle; it is not inconsistent with their spirit to require that parties wishing to take advantage of that regime comply with the relevant rules. There is a value to providing parties with certainty. A party who receives an offer expressed to be made under the Rules, and conveying no intent that it be used for any other purpose, should be entitled to rely on what it represents. If it fails to meet the requirements of the rules under which it purports to be made, it cannot be unreasonable for that party then not to act on it. It does not amount to any limitation on the costs discretion to say a costs order whose only identified purpose is as a Rules offer, but which does not comply with the Rules, will be ineffective.” 
- When making a Rules offer, carefully check the Rules and ensure that the offer actually conforms with all the requirements under the Rules – in some cases it is simply not appropriate to make an offer pursuant to the Rules and it is preferable to instead make a Calderbank offer
- As a precaution consider taking steps to ensure that when you make a Rules offer you clearly convey in writing to the offeree that in the event that the offer is ineffective under the Rules it will still be relied upon as a Calderbank offer
- It is of course important to ensure that the Calderbank offer made “in the alternative” in the covering letter actually has all the necessary characteristics of a Calderbank offer –for example the use of the “without prejudice” formula is not sufficient in itself to indicate that an offer is to be relied upon as a Calderbank offer
- It is important to ensure that the terms of the Calderbank offer made “in the alternative” in the covering letter are clear and certain – for example, costs are often not mentioned in a Rules offer but it may be important to make mention of costs in the alternative Calderbank offer
- Consider making a completely separate and distinct Calderbank offer (on effectively the same terms as the Rules offer) after sending the purported Rules offer.
This information contained in this article is not to be taken as legal advice. Please contact us if you require specific information or advice.