Running an offer of compromise strategy to secure indemnity costs
An offer of compromise made in the prescribed form, not accepted, and bettered at trial ordinarily attracts indemnity costs from a defined time. The strategic value lies in the costs consequences, not usually the settlement itself.
This is an 8-step workflow for running an offer of compromise strategy in NSW civil proceedings under UCPR Part 20, designed to shift costs to an indemnity basis.
Before you start
- Proceedings on foot
- A considered view of the expected outcome at trial
- Current costs estimate for future work
- Client instructions on the commercial range
The workflow
Assess the prospects and quantum range
Form a considered view of the likely judgment range. The offer must be pitched below (for defendants) or above (for plaintiffs) that range to bite.
Draft the offer in the prescribed form
Use the UCPR Form 45 Offer of Compromise format. Drafting errors (including costs provision inconsistencies) can defeat indemnity consequences.
Address costs terms correctly
The offer must be exclusive of costs (plus costs, silent on costs, or costs in a specified amount). Mixed formulations risk invalidity.
Time the offer strategically
Offers made too early are discounted as speculative; too late and the costs saving is limited. Sweet spot is often after pleadings close but before major evidentiary expense.
Serve the offer
Serve on the other party's solicitor by the method required in the UCPR. Do not copy the court. Record the date of service for later costs argument.
Manage the acceptance window
The minimum offer period is 28 days (in proceedings commenced in the Supreme Court and District Court). Do not withdraw before expiry except in specific circumstances.
Preserve privilege and Calderbank fallback
If form defects are discovered later, the offer can fall back on Calderbank principles provided it is marked without prejudice save as to costs.
Argue indemnity costs at judgment
If the offer is not accepted and bettered at trial, tender the offer and service particulars post-judgment. Seek indemnity costs from the date of expiry of the offer.
What you will have at the end
Indemnity costs order from a date earlier than taxation would ordinarily provide, improving the net recovery or reducing the net exposure.
Common issues
- Form defects (costs inclusive/exclusive language) defeating the offer
- Pitching outside the realistic judgment range, making the offer performative
- Serving before the other side can meaningfully assess, drawing the court's discretion against
- Withdrawing too early, losing the costs lever
- Not marking Calderbank fallback, losing the safety net on form defects
Run this workflow on a real matter
Quillio drafts UCPR-compliant offers of compromise and dual-form offers that preserve both statutory and Calderbank consequences. See /practice-areas/litigation-lawyers.
This workflow is a general guide. Offer of compromise rules differ between state courts and the Federal Court — check the relevant rules.
Try this workflow with Quillio.
Quillio can run this workflow on a real matter, with citations to current AU authority on every step. The free trial requires no credit card.
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