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JUDGMENT

Summary

1. On 10 February 2026, the Court delivered its principal judgment in these proceedings: Carmody v Roseville Golf Club Ltd [2026] NSWSC 45. This judgment should be read, and assumes familiarity, with the principal judgment. Defined terms in the principal judgment have the same meaning in these reasons.

2. Mr Carmody challenged his expulsion from the Club. He was unsuccessful and the outcome of the principal judgment was that his amended summons was dismissed and he was ordered to pay the Club’s costs of the proceedings.

3. In accordance with the Court’s directions, the Club has now applied by motion filed on 19 February 2026 for the costs order made at the conclusion of the principal judgment to be varied by reference to two offers of compromise under the Uniform Civil Procedure Rules 2005 (NSW) (Rules) and two corresponding Calderbank offers.

4. For the reasons which follow, the Court will accede to that application such that Mr Carmody will be ordered to pay the Club’s costs on the indemnity basis on and from 21 September 2024 by reason of an offer of compromise served on 20 September 2024.

5. The Club’s written submissions in relation to costs were prepared by Mr C O’Neill of Counsel with Mr J Charlton of Counsel.

6. Mr Carmody prepared his own submissions. However, I record that Mr Carmody properly complied with Practice Note SC Gen 23 by disclosing that he had used generative artificial intelligence for the preparation of his submissions, including for legal research, drafting assistance and identification of citations. Mr Carmody’s submissions were apposite, concise and referred to relevant authority.

7. After the period for the written submissions had closed, by 10 April 2026 both parties had agreed that the Court should determine the Club’s application on the papers. The Court has done so and these are its reasons.

Facts

8. As I recorded in the principal judgment (at [6]), Mr Carmody’s conduct was the subject of two hearings at the Club. The first was a hearing of a disciplinary committee on 30 January 2024 in which Mr Carmody chose not to participate. He was found guilty of the charge and expelled. The second was a hearing of an appeals committee constituted by three directors of the Club which, after a hearing held on 8 March 2024, determined that Mr Carmody was guilty of the charge of having engaged in conduct which was unbecoming of a member and expelled him from the Club.

9. Mr Carmody commenced these proceedings by summons filed on 30 April 2024. At the same time, Mr Carmody served his evidence in chief which consisted of one affidavit made by him.

10. On 9 August 2024, the Club served seven lay affidavits in chief in the proceedings.

11. On 16 August 2024, the Club served one further lay affidavit in chief in the proceedings.

12. The eight affidavits referred to in the preceding paragraphs were substantial and were prepared by the Club’s solicitors.

13. On 20 September 2024, the Club’s solicitors served an offer of compromise under the Rules (first offer):

“The Defendant offers to compromise the whole of the Plaintiff’s claim on the following terms:

1 Dismissal of proceedings.

2 No Order as to costs.

3 This offer is open for acceptance for 28 days.

4 This offer is made in accordance with the provisions of rule 20.26.

14. The first offer was sent with a Calderbank offer (first Calderbank) as set out in a letter of the same date.

15. The first Calderbank did three things:

16. Confirmed that if the first offer was ineffective for any reason, it would be relied upon separately as an offer made pursuant to the principles in Calderbank v Calderbank [1975] 3 All ER 333;

17. Made the first Calderbank offer:

“To resolve this dispute before further unnecessary costs are incurred, the Club wants to compromise the whole of the claim made against it in these Proceedings pursuant to the principles set out Calderbank v Calderbank on the basis that:

4.1 The claim against the Club is dismissed.

4.2 The parties bear their own costs; and

4.3 A deed of settlement is entered into on the above terms (to be drafted by us).

5. This offer is reflected in the enclosed Offer of Compromise and is open for 28 days from the date of this letter.”

3. Over the course of five pages, set out in detail why the Club contended that Mr Carmody’s proceedings would fail. The reasons given for that contention in the first Calderbank largely, but not completely, reflected the reasons why Mr Carmody’s claim was dismissed by the principal judgment.

4. As at the date of the first offer and the first Calderbank, the Club had incurred the legal costs of reviewing the summons and accompanying evidence, and preparing the Club’s affidavit evidence in response.

5. Mr Carmody did not respond to either the first offer or the first Calderbank, both of which lapsed on 18 October 2024.

6. On 18 October 2024, with the consent of the Club, Mr Carmody filed an amended summons which introduced eight further grounds for the relief sought in the original summons.

7. On 29 November 2024, Mr Carmody served three lay affidavits as his evidence in reply in proceedings.

8. On or about 12 December 2024, the proceedings were listed for hearing before me with an estimate of three days commencing on 4 August 2025.

9. On 28 April 2025, the Club served a second offer of compromise under the Rules (second offer) and a second Calderbank offer (second Calderbank) as set out in a letter of that date.

10. The second offer was:

“The defendant offers to compromise the whole of the plaintiff’s claim on the following terms:

1 Dismissal of proceedings.

2 No Order as to costs.

3 This offer is open for acceptance for 28 days.

4 This offer is made in accordance with the provisions of rule 20.26.”

23. The second Calderbank again did three things:

24. Stated that if the second offer was ineffective for any reason then the second Calderbank would be relied upon in accordance with the principles in Calderbank.

25. Made the second Calderbank offer:

“6. To resolve this dispute before further unnecessary costs are incurred, the Club again offers to resolve the Proceedings on the basis that

6.1 The claim against the Club is dismissed.

6.2 The parties bear their own costs; and

6.3 A deed of settlement is entered into on the above terms (to be drafted by us).

7. This offer is reflected in the enclosed Offer of Compromise and is open for 28 days from the date of this letter.”

3. Over the course of two pages, set out in detail why it was that the Club contended that Mr Carmody’s claim would fail, notwithstanding the additional matters raised in the amended summons. Insofar as those additional issues remained relevant at the time of hearing, the reasons advanced in the second Calderbank as to why Mr Carmody’s proceedings would fail largely reflected the reasons for that outcome in the principal judgment.

4. As at the date of the second offer and the second Calderbank, the Club had incurred the legal costs of reviewing the summons and accompanying evidence, preparing the Club’s affidavit evidence in response, reviewing the amended summons and reviewing the plaintiff’s affidavit evidence in reply.

5. Mr Carmody did not respond to either the second offer or the second Calderbank, both of which lapsed on 26 May 2025.

6. The proceedings were heard on 4 and 5 August 2025, with the principal judgment delivered on 10 February 2026.

Submissions

27. Because of the view to which the Court has come, it is only necessary to deal with the first offer.

28. The starting point is to understand the nature of the proceedings. Mr Carmody sought declarations and injunctions although, if he was successful in having his expulsion set aside, Mr Carmody did seek consequential damages such as his legal expenses. The proceedings were what might be described as non-monetary, all or nothing (or binary) proceedings: Mr Carmody would either succeed or fail to have his expulsion set aside. The proceedings were not, for example, a claim for a debt, which a defendant could seek to compromise by offering a lesser sum in satisfaction.

29. On its face, the first offer formally complied with the Rules such that UCPR Pt 42 r 42.15A had been engaged because the Club had achieved a result better than what it had put in the first offer, having obtained dismissal of the proceedings and a costs order in its favour:

“42.15A Where offer not accepted and judgment no less favourable to defendant

(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, …”

30. In other words, unless the Court ordered otherwise, the Club was “entitled” to orders to the effect of those specified in the rule.

31. In Bates v Cooke (No 2) [2014] NSWSC 1322, I said (at [4]):

“taking into account the language of the r 42.15A, a party seeking to persuade the Court to order otherwise must identify some feature or features of one or more of the proceedings, the claim, the offer (including, for example, when it was made) and the order or judgment obtained by the successful party which provide a rational basis for the Court to displace what the rule specifies is the costs order to which “the defendant is entitled”.”

32. Mr Carmody’s submissions may be summarised as:

33. Formal compliance with the requirements for an offer of compromise does not automatically engage the indemnity costs presumption. The offer must involve a genuine element of compromise and not merely be made to trigger cost consequences. In this case, the first offer was an invitation to surrender rather than a genuine compromise. Given the case was binary, a “walk away” offered Mr Carmody nothing. Furthermore, the only element of compromise, being the costs forgone, was not demonstrated to be significant.

34. “Exceptional circumstances” were not required for the Court to order otherwise. If the first offer did engage the presumption for indemnity costs, the following matters provided a proper basis for the Court to order otherwise:

(a) Mr Carmody’s claim was not frivolous, vexatious, or hopeless; (b) Mr Carmody had reasonable prospects of success when the first offer was made; (c) There had been no “relevant delinquency” in Mr Carmody’s conduct of the litigation; and (d) As a binary case with no scope for genuine commercial compromise, the first offer required Mr Carmody to abandon his claim completely.

33. For the reasons which follow, the Court accepts the Club’s submission that there is no feature of the proceedings that would warrant the Club being deprived of its conditional entitlement to an indemnity costs order pursuant to r 42.15A.

Consideration

34. I respectfully adopt and apply what was said by Ward P (Kirk JA and Basten AJA agreeing) in Langdon v Carnival PLC (2024) 115 NSWLR 78; [2024] NSWCA 168:

“[187] At the outset, it should be noted that a rule such as r 42.15A has been treated as conferring a conditional entitlement to indemnity costs subject to the discretion to order otherwise (see Hillier v Sheather (1995) 36 NSWLR 414). Exercise of the discretion to order otherwise does not necessarily require that there be “exceptional circumstances” (see Barakat v Bazdarova (No 2) [2012] NSWCA 140 at [42]-[49] per Tobias AJA, Bathurst CJ and Whealy J agreeing). More recently, it has been said that “the prima facie position should only be departed from for proper reasons which, in general, only arise in an exceptional case”, rather than the Court’s discretion being impermissibly fettered by a requirement of exceptional circumstances (see Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 (Perisher Blue) at [36]-[37] per Gleeson JA and Tobias AJA, citing Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) [2004] FCA 1437; 212 ALR 281 at [17] per Hely J).

[188] What is required is that the Court be satisfied that in the particular circumstances of the case a departure from the rule is justified. Courts have declined to define exhaustively the factors that may justify displacing this entitlement (see *New South Wales Insurance Ministerial Corporation v Reeve (*1993) 42 NSWLR 100, at 102 per Gleeson CJ). However, what has been accepted is that the reasonableness of the rejection or non-acceptance of the offer is a relevant (though not determinative) consideration (see The Uniting Church in Australia Property Trust (NSW) t/as Northaven Retirement Village v Takacs (No 2) [2008] NSWCA 172 at [15] per Hodgson JA, McColl JA agreeing). When considering the reasonableness or otherwise of a party’s rejection of the offer, there are again a number of factors that may be taken into account (see Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 at [25] per Warren CJ, Maxwell P and Harper AJA (approved by Basten JA in Miwa Pty Ltd v Siantian Properties Pte Ltd (No 2) [2011] NSWCA 344 at [12])). Those may include the offeree’s prospects of success assessed at the date of the offer (which in turn may depend on the state of awareness by the offeree of adverse material evidence).

35. Mr Carmody referred the Court to [28] to [31] of the decision of the Court of Appeal in Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368, to which citation I would respectfully add one additional paragraph:

“28 It will rarely be the case that a decision needs to be made as to whether or not an “offer” answers the description of an “offer of compromise” within the rules. To the extent that the element of compromise is absent, the Court will be more likely to “otherwise order”. In the present case, we are content to proceed on the basis of exercising the discretion to “otherwise order”.

29 As is usually the case in proceedings turning on an issue of contractual interpretation, this was an all or nothing case. The claims did not involve a process of evaluation or assessment in which the end result could vary over a range. Either one party or the other party was correct. Whilst a marginal difference between the offer and the result may constitute a real and genuine offer of compromise in a personal injury context, that is not generally true in an all or nothing case. (See The Anderson Group supra at [9]; Robb Evans supra at [18].)

30 The offer of $10,000 made at an early stage of these proceedings – indeed, before a defence had been filed – was an invitation to surrender, rather than any form of commercial compromise. Clearly, the offer reflected the strength of the appellant’s belief in its interpretation of the contract. This belief has been fully vindicated in this Court. Nevertheless, it is difficult to characterise the offer as one of “compromise”. Any such element of compromise was, at best, “of limited significance”. (Hancock v Arnold supra at [15].) The offer can be accurately described as derisory. The Court should adopt the approach in Robb Evans.

31 An offer which is in substance an invitation to surrender can result in the successful triggering of the indemnity costs mechanisms under the rules. (See r 20.26(2); Leichhardt Municipal Council supra at [36]-[37], [40].) However, as Basten JA suggests in Robb Evans supra at [20], the claim or defence would have to approach something of the character of being frivolous or vexatious for that to be the case. (See also Hancock v Arnold supra at [17].) If it were otherwise, the public policy to encourage settlement would rarely be served, in an all or nothing case. These proceedings were not of that character, as indicated by the success which the respondent had at first instance.

32 The normal order for costs, even in a clear case, is that each party bears its own costs without full indemnity. If a derisory offer, of the kind made in these proceedings, could result in an order for indemnity costs, then it is likely that many, perhaps most, contract interpretation disputes would result in an indemnity costs order, if the formality of an offer in accordance with the rules had been made at an early stage. If the appellant were to succeed in the present case, it is quite likely that such an offer would accompany most statements of claim as a matter of commercial practice. The purpose of the special order – to encourage settlement – would no longer be served. An order for indemnity costs could, in our opinion, become the normal order in many commercial disputes.”

36. It is also instructive to recall what was said by the Court of Appeal (Santow JA; Bryson and Stein JJA agreeing) in the passage referred to in Regency from Leichhardt Municipal C**ouncil v Green [2004] NSWCA 341:

‘36 Clearly the trial judge was proceeding on the basis that the offer of compromise was a valid and genuine offer of compromise, but one which should fail in the exercise of discretion. The Court of Appeal declined to interfere with this discretionary decision on costs, as no appellable error had been shown. Thus, it evidently concluded that no error of legal principle exists in holding that a ‘walk-away’ offer can in a particular case be a “genuine offer of compromise”. There is no reason to doubt the correctness of that conclusion. It follows the approach of Dunford J should, if understood as stating a universal, non-discretionary rule to the contrary, not be followed.

37 In the circumstances of this case it is difficult to characterise the defendant’s offer as merely a tactical step designed to secure the benefits which flow from whatever incentives there are. It should not, with respect, be seen as involving no realistic or genuine attempt to resolve the dispute by agreement, without going to the expense and time involved in court proceedings. Since the circumstances of the case are important, and in this case the Council’s case was a strong one, it was appropriate for the offer to reflect the degree of optimism and confidence felt by the Council. In some cases a plaintiff’s offer which allows only a small discount from 100% success on the claim can be genuine and realistic always depending upon the circumstances. The same is true of defendant’s offers: in some cases it will not be necessary to offer any monetary proportion (however slight) of the plaintiff’s claim.”

37. The effect of the authorities to which I have referred is to explicate the meaning of “an offer… to compromise” in r 20.26(1). To be an offer of the relevant kind, it must involve a genuine element of compromise, that is to say that the offeror is giving away something of substance. As a matter of principle, giving away a prospective entitlement to costs can be a concession of substance. Whether it is sufficiently substantial will involve an assessment of its quantum, not necessarily always in an absolute sense, but in all the circumstances of the particular case. Those circumstances may include the strength of the offeror’s case and, conversely, the reasonableness of the offeree’s decision to reject any offer. Such considerations may be particularly important in the case of a “walk away” offer in proceedings where the outcome is binary.

38. It is true that in the present case the Court does not know the actual quantum of the costs that had been incurred by the Club at the time it made the first offer. However, what the Court does find from the number and detail of the affidavits that had been served by the Club and the detailed consideration of Mr Carmody’s case as reflected in the letter enclosing the first offer, is that an obviously more than trivial legal effort had been expended in considering Mr Carmody’s claim and his affidavit, determining what evidence was required to meet his case, preparing that evidence and considering the legal merits of Mr Carmody’s claim. The Court is entitled to, and does, take notice of the fact based on its own experience that the undertaking of that work would have generated legal fees in the thousands of dollars.

39. How many thousands of dollars is not to the point (although in some cases it may be). What is to the point is that the Court can conclude that an offer to forgo that amount (even on a party party basis) would be sufficiently of substance (in the sense that I have used [37] above) to represent a genuine element of compromise. That it is “genuine” is demonstrated not only by the likely quantum being forgone (which may in some cases may be sufficient of itself to demonstrate that it is “genuine”) but that it was accompanied by a thorough legal analysis to the effect that the Club’s defence was a very strong one which, as it happened, was ultimately vindicated by the Court. To adopt the language of the Court of Appeal in Leichhardt, in this case the Court is unable to characterise the first offer as “merely a tactical step designed to secure the benefits which flow from whatever incentives there are”.

40. For these reasons, the Court is satisfied that the first offer was “an offer to … compromise” the proceedings within the meaning of r 20.26. Therefore, the Club has demonstrated that it has an entitlement to indemnity costs subject only to the Court’s discretion to order otherwise.

41. The public policy to encourage settlement which underlies the rules governing offers of compromise means that such an entitlement, once established, is not to be lightly displaced. That conclusion is compelled, in part, by the Court’s obligation to exercise its discretion under the Rules to order otherwise so as to give effect to the overriding purpose, being the just, cheap and quick resolution of the real issues in dispute (Civil Procedure Act 2005 (NSW), s 56).

42. To be entitled to something bespeaks a right to it. As the authorities to which I have referred make clear, while “exceptional circumstances” are not necessary to exercise the discretion to order otherwise, in general the discretion should only be exercised in an exceptional case, that is a case which presents a feature which warrants an exception being made.

43. None of the four reasons advanced by Mr Carmody meets that description, whether considered individually or together. That is because each of those reasons invokes an unremarkable or usual feature that applies to many cases that are properly brought (in the sense of not being hopeless from the outset) but are ultimately unsuccessful. It would undermine the operation of offers of compromise as a means to encourage settlement if any such matters were sufficient for the Court to order otherwise.

44. It may be accepted that Mr Carmody’s claim was not frivolous, vexatious or hopeless. However, many claims which answer that description ultimately fail.

45. Mr Carmody’s submission that his case had reasonable prospects of success at the time of the first offer was based on the fact that he had the benefit of legal advice from experienced solicitors and counsel who had accepted the brief and were preparing the case for trial. This characterisation also is unremarkable, applying to many cases, if not most, that fail at trial.

46. The same observation may be made of Mr Carmody’s submission that there had been no “relevant delinquency” in his conduct of the litigation. Timely compliance with Court directions and engaging appropriately with the Court process are what is required by the Rules and, fortunately, have not become unusual or exceptional in most cases before the Court.

47. Mr Carmody’s final ground is that his case was binary. Again, that is to describe many cases which fail at hearing. It would be to undermine the utility of the rule to find that just because a case had a binary outcome would render it sufficient for an exception to be made to displace a successful offeror’s conditional entitlement to indemnity costs even where that offer was to “walk away”.

48. For completeness, I record that for substantially the same reasons I would have reached the same conclusion based upon the second offer. Similarly, applying the relevant principles to either the first Calderbank or the second Calderbank, I would have exercised the Court’s discretion to bring about the same result.

Conclusion

49. The Court’s order is:

50. Vary order 2 made on 10 February 2026 by the addition of the words “on the ordinary basis up to and including 20 September 2024 and thereafter on the indemnity basis including the defendant’s costs of its motion dated 19 February 2026”.

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