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[2025] NSWSC 713
General information, not legal advice.
Supreme Court of NSW
2025-07-04
Brereton J
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Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: 85 Princess Pty Ltd v Fleming [2025] NSWSC 713
Hearing dates: On the papers
Date of orders: 4 July 2025
Decision date: 04 July 2025
Jurisdiction: Equity
Before: Brereton J
Decision: The plaintiff is to pay the defendant’s costs on the ordinary basis up to 6 June 2024 and on an indemnity basis from 7 June 2024.
Catchwords: COSTS – party/party – where defendant made an offer of compromise pursuant to UCPR r 20.26 – where plaintiff rejected this offer – where plaintiff obtained judgment for nominal damages – where UCPR r 42.15 is enlivened – whether the Court should order otherwise under r 42.15 – where there is no reason the Court can only otherwise order if it is in favour of the offeree – where plaintiff was substantively the unsuccessful party – where the policy underpinning the regime is to encourage the proper compromise of litigation – plaintiff is to pay defendant’s costs up to the date of the offer of compromise on the ordinary basis and on the indemnity basis thereafter
Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited: Morgan v Johnson (1998) 44 NSWLR 578
Motium Pty Ltd v Arrow Electronics Australia Pty Ltd [2011] WASCA 65 (S)
Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11
Texts Cited: N.A.
Category: Costs
Parties: 85 Princess Pty Ltd (plaintiff)
Ian Alexander Fleming (defendant)
Representation: Counsel:
J Mack (plaintiff)
Dr A J Greinke (defendant)
Solicitors:
Litigation Specialists (plaintiff)
MV Law (defendant)
File Number(s): 2022/243968
Publication restriction: N.A.
I delivered judgment in these proceedings on 30 April 2025: see 85 Princess Pty Ltd v Fleming [2025] NSWSC 407. The substantive result was that the plaintiff (85 Princess) established that the defendant (Mr Fleming) was in breach of contract but that it was only entitled to nominal damages, which were assessed at $100.
These reasons concern the question of costs.
On 6 June 2024, the defendant served a notice of offer of compromise on the plaintiff, made pursuant to r 20.26 of the Uniform Civil Procedure Rules 2005 (NSW). This offer was for judgment against the defendant in the amount of $125,000, inclusive of interest but exclusive of costs. There is no dispute that the offer was a valid offer made pursuant to r 20.26. The plaintiff did not accept the offer.
UCPR r 42.15 provides:
(1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim no more favourable to the plaintiff than the terms of the offer.
(2) Unless the court orders otherwise—
(a) the plaintiff is entitled to an order against the defendant for the plaintiff’s costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and
(b) the defendant is entitled to an order against the plaintiff for the defendant’s costs in respect of the claim, assessed on an indemnity basis—
(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and
(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.
Both parties accepted that this rule is engaged. That is because 85 Princess obtained a judgment (damages in the amount of $100) that was less favourable than the terms of the offer ($125,000).
Mr Fleming submitted that the ordinary consequence of this rule is that 85 Princess should pay his costs assessed on an indemnity basis from the day following the day on which the offer was made (7 June 2024). 85 Princess accepts that the rule applies and that there should be an order that it pay Mr Fleming’s costs on an indemnity basis from 7 June 2024.
The ordinary consequence of r 42.15 is that 85 Princess is entitled to an order for costs to be assessed on the ordinary basis up to 6 June 2024. That is what 85 Princess contends to be the appropriate order. Mr Fleming contends that the Court should ‘order otherwise’ by ordering that 85 Princess pay his costs on the ordinary basis up to 6 June 2024.
There is a suggestion in the submissions for 85 Princess that the discretion to ‘otherwise order’ afforded by r 42.15 should only ever be exercised in favour of an offeree. It was submitted that it is novel for an offeror to invoke the discretion to achieve an outcome that is more favourable to it than what is provided for by the rule. It is true that the common circumstance where an application is made to ‘order otherwise’ is where an offeree contends that there should not be an order for indemnity costs notwithstanding the offer of compromise. However, there is no reason to suppose that the Court can only ‘otherwise order’ if it is in favour of the offeree. If there is good reason to ‘otherwise order’ on an application by the offeror, the Court can do so. This is such a case.
In Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11, McHugh J (who was in dissent but not relating to this point) noted (at [67]) that the principle that a successful party is entitled to an order for costs is grounded in reasons of fairness and policy. His Honour observed (at [70]) that the Court may award costs in favour of a defendant where the plaintiff has obtained only nominal damages because, “in reality, the successful party lost the litigation and the unsuccessful party won”.
In Motium Pty Ltd v Arrow Electronics Australia Pty Ltd [2011] WASCA 65 (S), after citing the reasons of McHugh J in Oshlack v Richmond River Council, the Court observed:
[10] While each case must depend upon its own facts, where it is not a primary purpose of proceedings simply to establish or vindicate some legal right but the primary purpose is to recover substantial damages, ordinarily an award of nominal damages will not entitle a party to the costs of the proceedings: see Thiess Contractors Pty Ltd v Placer (Granny Smith) Pty Ltd [2001] WASCA 166 [9]. In such a case, the party has obtained something of no real use to them and something which, if they had known it was all that was available, they would not have brought proceedings to recover. It would be contrary to modern notions of the efficient and cost-effective use of judicial resources to enable a party to recover its costs for a pyrrhic victory, having substantively failed in the action.
(1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim no less favourable to the defendant than the terms of the offer.
(2) Unless the court orders otherwise—
(a) the defendant is entitled to an order against the plaintiff for the defendant’s costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and
(b) the defendant is entitled to an order against the plaintiff for the defendant’s costs in respect of the claim, assessed on an indemnity basis—
(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and
(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.
Under this rule, unless ordered otherwise, Mr Fleming would obtain an order for costs assessed on the ordinary basis for the period up to 6 June 2024, and on an indemnity basis thereafter. While this rule was not formally engaged in this case, as a matter of substance, the outcome of the case more closely aligned with r 42.15A than r 42.15.
Given that 85 Princess won only nominal damages, there is a strong basis to treat it, for costs purposes, as the unsuccessful party, with the consequence that it should pay the costs of the successful party, Mr Fleming, in respect of the period before the offer was made.
85 Princess contends that Mr Fleming’s reliance on the discretionary outcome reverses the incentives in r 42.15 and distorts the policy behind the regime. I disagree. The policy is to encourage the proper compromise of litigation, in the private interests of individual litigants and the public interest of the prompt and economical disposal of litigation: see Morgan v Johnson (1998) 44 NSWLR 578 at 581. The issuing of offers of compromise encourages compromise. Mr Fleming’s reliance on the discretionary outcome does not distort the policy behind the regime. The opposite is true. That is because where a defendant is in a position where it may be the successful party but lose the litigation (to continue to use the description made by McHugh J), it will be discouraged from serving an offer of compromise if the result of success is that it will have to pay the plaintiff’s costs for the period up to the date the offer is made. That is because in the absence of an offer of compromise, that defendant would ordinarily reasonably anticipate a favourable costs order for the whole of the proceedings. The offer of compromise regime is most likely to achieve its policy goal if it provides the prospect of a costs advantage to the successful party. The position advanced by 85 Princess would do the opposite – it would penalise the successful party and discourage a defendant from making an offer of compromise. It is correct that Mr Fleming will do better than what would flow from the ordinary operation of r 42.15, but that is in the unusual circumstances where he lost the litigation but was nonetheless the successful party.
85 Princess contends that there are various grounds why the Court (assuming the discretion can be exercised in favour of an offeror) should not exercise any discretion in favour of Mr Fleming.
85 Princess submitted that it won its case on liability and thus was successful on the issue that was most heavily contested and took up the most time required for oral evidence. This is true only to a point. The position taken by Mr Fleming was that there was no breach of contract but that if there was a breach, it was not the breach that was advanced by 85 Princess. Its case, which succeeded, was that if there was a breach there was no evidence of damages for that breach. Much of the hearing was taken up with exploring the issue of the cause of the cracking and on that subject, Mr Fleming was essentially successful.
85 Princess also points out that Mr Fleming did not file any evidence on damages. I do not understand how that could affect the exercise of discretion. Mr Fleming was entitled to choose not to file any evidence on damages. That decision was likely to have shortened the hearing. It does not weigh against Mr Fleming’s application.
**********
85 Princess Pty Ltd
Fleming [2025] NSWSC 713
(1998) 44 NSWLR 578
(1998) 193 CLR 72
Nor do I think the defendant can be criticised for what was said to be “its failure to put on a timely offer of compromise”. Whether and when to make an offer of compromise was a matter for Mr Fleming. The incentive to make an early offer is that the offer, if rejected, will provide better cost protection for a successful defendant. UCPR r 42.15 expressly contemplates that an offer of compromise may be made even after a trial has commenced.
No other reasons were advanced that weigh against the exercise of discretion to award Mr Fleming, who was the successful party in substance, his costs for the period before the offer was made. If Mr Fleming had not made the offer, he would have been entitled to his costs on the ordinary basis, because as a general rule, costs follow the event (see r 42.1). Nothing put for 85 Princess would have been sufficient to cause a departure from the general rule.
The orders of the Court are:
The plaintiff is to pay the defendant’s costs up to and including 6 June 2024 on the ordinary basis.
The plaintiff is to pay the defendant’s costs on and from 7 June 2024 on the indemnity basis.