What is an Offer of Compromise?
An Offer of Compromise is a formal settlement offer made under the rules of court — UCPR Part 20 Division 4 in NSW, Supreme Court (General Civil Procedure) Rules 2015 Order 26 in VIC, and equivalents in other states. If an Offer of Compromise is rejected and the rejecting party does no better at trial, automatic costs consequences follow — usually indemnity costs from the day after the offer expired. Unlike Calderbank offers, the costs consequences are rule-based, not discretionary.
Formal requirements in NSW
UCPR rule 20.26 (NSW) requires an Offer of Compromise to: be in writing; identify the claim to which it relates; be exclusive of costs (unless the offer says it is inclusive); specify whether it is inclusive of interest; remain open for at least 28 days; and be capable of acceptance by notice in writing. Strict compliance with the form is essential — defective offers do not attract automatic costs consequences.
Costs consequences — beating the offer
If the plaintiff makes an Offer of Compromise and the plaintiff obtains a judgment at least as favourable as the offer, the plaintiff gets costs on an indemnity basis from the day after the offer expired under UCPR rule 42.14. If the defendant makes an Offer of Compromise and the plaintiff's judgment is less favourable, the plaintiff pays the defendant's costs on an indemnity basis from the day after the offer — under UCPR rule 42.15.
State variations
VIC: Supreme Court (General Civil Procedure) Rules 2015 Order 26, similar structure. QLD: UCPR Chapter 9 Part 5. Federal Court: FCA Rules Order 23, with different language ("Offer to settle"). Each regime has slightly different form and timing requirements — use the correct form for the court.
How I draft Offers of Compromise
I draft Offers of Compromise in form-compliant format for each Australian jurisdiction, including inclusive/exclusive specification, interest treatment, and correct time frames. For litigation lawyers this is a high-volume routine task. Getting the form right is what unlocks the costs protection.
Common issues
- Non-compliance with form is the most common defect — use the correct court form
- Offers inclusive of costs are typically less favourable than exclusive — specify carefully
- Re-offering is tactical — multiple offers can each have independent costs effects
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