NSW Supreme Court considers “genuineness” of an offer of compromise
September 1, 2023
The New South Wales Supreme Court in LCM Operations Pty Ltd v Rabah Enterprises Pty Ltd (No 3)  NSWSC 590 considered whether an offer was one of ‘genuine compromise’, made with sufficient particularity under the Uniform Civil Procedure Rules (2005) (NSW) (UCPR), which provides that any party may offer another party a compromise on any claim in the proceedings. Where an offer is not accepted and the offeror obtains an equal to or more favorable judgment than the terms offered, that party is entitled to costs.
LCM Operations Pty Ltd (LCM), a litigation funder, acquired the right to sue Rabah Enterprises Pty Ltd (Rabah) for an outstanding construction fee owed to 316 Group Pty Ltd (316 Group). LCM obtained a judgment in its favour for the $14.8million debt owed plus interest and subsequently sought an order for indemnity costs on the basis that an offer of compromise for the sum of $2 million was made to and refused by Rabah.
- Rabah argued that the order for indemnity costs should be denied for reasons including the following:
- there was insufficient particulars available for Rabah to assess the reasonableness of the offer;
- the offer was a self-serving tactic and its genuineness ought to be questioned where it was served with the intention of offering the plaintiff costs protection, rather than being a genuine attempt at resolving the proceedings; and
- pleading amendments made by LCM meant that Rabah could not reasonably have assessed the strength of LCM’s claim at the time of the offer.
In rejecting Rabah’s submission, the Court held as follows:
- With respect to the asserted lack of particulars, LCM was only obliged to provide documents available to it at the time of the offer and there was no suggestion that LCM withheld any documents;
- With respect to the genuineness of the offer:
- whether there was a real element of compromise ought to be determined objectively at the time the offer was made, and that it could not seriously be suggested that an offer to accept $2million did not involve an element of compromise; and
- the genuineness of an offer will not necessarily be undermined simply because it embodies a ‘tactical weapon’.
- With respect to the pleading amendments, they did not substantially change the case to be answered and were merely re-assertions of facts.
Having found for the plaintiff, Rees J awarded costs assessed on both an ordinary and indemnity basis.
The full decision can be found here.