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Category: Consequential orders

Parties: Sungchell Gong (Plaintiff)
AWI Steel Pty Ltd (First Defendant)
Ebenezer Engineering Pty Ltd (Second Defendant)

Representation: Counsel:
S E McCarthy and W J Lidden (Plaintiff)
R Perla (First Defendant)
Solicitors:
Park & Co Lawyers (Plaintiff)
Wotton Kearney (First Defendant)

File Number(s): 2022/387580

Publication restriction: Nil

JUDGMENT

1. In April 2026 I gave judgment for Mr Gong in respect of the claims he pursued in negligence against AWI, having been injured while at work at its factory: Gong v AWI Steel Pty Limited [2026] NSWSC 331. I later resolved a remaining issue about the calculation of his damages: Gong v AWI Steel Pty Limited (No 2) [2026] NSWSC 513.

2. There remains a dispute about the appropriate costs order, despite there being no issue between the parties that at trial, Mr Gong bettered offers he had earlier made to AWI to settle his claims.

3. As a result, Mr Gong seeks a departure from the usual order under the Uniform Civil Procedure Rules 2005 (NSW), that costs follow the event: r 42.1. Contending that he made a valid offer of compromise which attracts the provisions of r 42.14 and if that is not accepted, the Calderbank offer which he also made should result in an indemnity costs order from the day after it was made.

4. Both are disputed.

5. But there is no dispute about the relevant events. They include:

6. The matter was listed for hearing on 13 to 20 October 2025. It was eventually also heard on 1 to 4 December, with resulting considerable additional costs, but that was not known at the time the offers were made;

7. In May 2026 AWI filed a motion seeking a stay of the judgments given, pending the determination of any appeal it might file. Consistently with the obligations imposed on them by s 56 of the Civil P**rocedure Act 2005 (NSW), the parties resolved that motion by agreeing at the hearing to consent orders that:

“1. Stay the judgment entered on 9 April 2026 and 21 May 2026 pending the determination of any appeal filed by the First Defendant.

2. In the event the First Defendant does not file a Notice of Appeal on or before 4 pm on 16 June 2026, the stay granted by Order 1 is to lapse.

3. Each party to pay their own costs of the motion.”

3. On 25 August 2025, Mr Gong had made both an offer of compromise, purportedly under r 20.26, as well as a separate Calderbank offer in similar terms;

4. Neither was accepted, despite being open for 21 days and an extension of time having been offered;

5. It was only on 8 September that AWI’s solicitors advised that AWI was unable to assess the reasonableness of the offers. Advising that they did not comply with the requirements of s 151Z(2) of the Workers Compensation Act 1987 (NSW), and so the offer of compromise could not be regarded as valid under r 20.26, because the Court could not assess whether the offer, given its ambiguous terms, “is a more favourable outcome”. Orders being sought under r 42.14(2) of the Rules was then foreshadowed;

6. There was no separate response to the Calderbank offer;

7. On 11 September Mr Gong’s solicitors replied in intemperate terms, disputing that AWI could not assess the reasonableness of his offers. But its effect was to amend the earlier offers, addressing problems AWI had identified;

8. The letter concluded with an invitation to assist, if AWI required any other information and an offer to extend the time the offer was open, if further time was needed to consider it; and

9. There was no reply.

10. I am satisfied that the 11 September amendments to the earlier offers left AWI with no difficulty in understanding the terms on which Mr Gong was offering to settle his claims. If there had been any remaining question, s 56 of the Civil Procedure Act, which not only specifies the overriding purpose of the legislative scheme to be the just, quick and cheap resolution of the real issues in the proceedings, but imposes obligations on the parties in respect of the achievement of that purpose, required that it be raised with Mr Gong’s solicitors.

11. That this did not occur accords with Mr Gong’s final offer having been understood by AWI and nevertheless rejected. With the eventual result that Mr Gong succeeded at trial and when damages were calculated, considerably bettered what he had offered to settle for.

Issues

8. What remained in issue between the parties in relation to the appropriate costs order in those circumstances included:

9. Whether Mr Gong’s offers involved a real compromise;

10. The reasonableness of the time the offers were open;

11. Whether the offer of compromise complied with the requirements of the rules, with the result that under the Rules, Mr Gong is entitled to the indemnity costs order he seeks; and

12. If it did not, whether Mr Gong’s Calderbank offer, which AWI did not accept, provides a just basis for the exercise of the Court’s discretion to make the indemnity costs order AWI opposes.

Did the offers involve a compromise?

9. It is long settled that an offer of compromise, including an offer made under the rules, must involve a “genuine offer of compromise” and is not made merely to trigger the costs consequences of such an offer under the Rules: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [23]; Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353 at 354.

10. The offer must be considered according to its terms, having regard to the claim made: Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [24]. In this case, that requires what Mr Gong offered by the 11 September letter be taken into account.

11. The offer must be assessed at the time it was made. Whether what was offered was a genuine compromise and whether its rejection was reasonable may not be assessed with the benefit of 20:20 hindsight: Regency Media Pty Ltd at [33].

12. Whether there was a real element of compromise must also be determined objectively, according to the circumstances of the particular case, at the time the offer was made: Leach v Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [42].

13. I am satisfied that the evidence establishes that Mr Gong’s offers, amended as they were in response to the issues AWI had raised, did involve a significant compromise. The parties’ cases not having altered after the time for acceptance of the offer ended. Despite the service of further evidence, no further time to consider the offer was sought.

14. That the parties then knew that a joint report from experts was outstanding does not alter that conclusion. They then being well aware of what lay in issue between those experts, and that when they met to discuss what they disagreed, that their opinions might alter, given all that they had to consider together.

15. Mr Gong was pursuing a claim for damages which had been particularised at over $4 million. It was known that if he succeeded, a repayment would have to be made to the Workers Compensation insurer. He was awarded damages of only $1,846,266.21. Before the trial he had offered to settle for significantly less, in total for $1,722,739.81, including the amount, as at the date of the offer, which would have to be repaid to the insurer.

16. At trial he succeeded in establishing AWI’s disputed liability, which turned on questions of whether the evidence which he gave and called from other workers, would be preferred over that which AWI called from those involved in their supervision at its factory. It having decided not to call evidence from managers it employed, who could have shed light on what was known to be in issue.

17. There is no issue that in the result, Mr Gong bettered his offer by what would seem to be $123,526.40.

18. At the time he made his offers, Mr Gong was still receiving workers compensation payments and the amount he had to repay, if he succeeded, was increasing. Since the hearing, these payments have come to an end. But the obligation to repay explains the parties’ disagreement about the requirements of the Workers Compensation Ac**t and what was claimed to be a relevant practice in relation to payments which would have to be made, if Mr Gong’s claims succeeded.

19. On the costs hearing, the parties did not attempt to address who was correct about the competing approaches regarding what that Act required and the claimed practice to which Mr Gong’s solicitors referred. The letter of 11 September having accepted what AWI had raised about how the repayment should be made.

20. In all of those circumstances, I am satisfied that what Mr Gong finally offered by the 11 September letter, did involve a genuine compromise of his claims.

Did the offer of compromise comply with r 20.26?

21. But still, I am satisfied that the offer of compromise did not comply with the requirements of r 20.26. The offer of compromise was:

“1. Judgment for the Plaintiff in the sum of $1,200,000.00 exclusive of the Workers Compensation payback specified in 2 below.

2. The First Defendant pay the amount of $522,739.81 to Employers Mutual Limited (EML) as agent for iCare NSW.

3. This offer is open for acceptance for a period of 21 days from the date on which the offer is made.

4. This offer is made in accordance with the provisions of rule 20.26 of the Uniform Civil Procedure Rules 2005.”

22. I do not accept that there was any uncertainty about the amount offered. Namely, the sum of the amounts specified at 1 and 2 of the offer. Both amounts having to be included in any orders made.

23. But that is not the only consideration. Rule 20.26(2) relevantly requiring that an offer of compromise:

“(a) must identify—

(i) the claim or part of the claim to which it relates, and

(ii) the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment, and

(b) …

(c) must not include an amount for costs and must not be expressed to be inclusive of costs, and

(d) must bear a statement to the effect that the offer is made in accordance with these rules, and

(e) …

(f) must specify the period of time within which the offer is open for acceptance.”

24. The August offer did not specify the proposed orders. That cannot be overlooked, given the consequences of acceptance of an offer, dealt with in r 20.27, which permits entry of judgment without notice to the other party.

25. Non-compliance with the requirement to specify the proposed orders thus raises the question of whether the offer is invalid, as AWI contends. If it is, the provisions of r 42.14 are not attracted. With the undesirable result that an indemnity costs order will then depend on whether the offer may be treated as a Calderbank offer: Whitney v Dream Developments Pty Ltd (2013) 84 NSWLR 311; [2013] NSWCA 188.

26. It being there explained that “an offer made expressly pursuant to r 20.26 will not of itself take effect as a Calderbank offer unless there is something in it or in the surrounding circumstances to indicate that it is proposed to be relied upon on the question of costs, irrespective of its effectiveness as an offer under r 20.26”: at [43].

27. Although in this case, Mr Gong made a separate Calderbank offer, which must also be considered.

28. It was concluded in Whitney that the offer was not compliant with r 20.26 because it dealt with costs, impermissibly purporting to limit the Court’s discretion, the rule intending that a compliant offer does not deal with costs at all: at [24]-[25]. That is not a problem with Mr Gong’s offer.

29. In Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2), the Court also had to consider non-compliance with r 20.26. The offer not specifying the time it was open to be accepted, which was specified in the covering letter.

30. It was there concluded that “the fact that UCPR 20.26 does not sanction non-compliance with the otherwise apparently obligatory requirements for the form of the offer suggests the legislature did not intend to render inefficacious an offer which otherwise complied with its requirements”: at [38]. With the result that the offer was not inefficacious, because the time it was open for acceptance appeared in the covering letter rather than in the body of its text: at [39].

31. But in this case, what was missing from the offer and not dealt with in the 11 September letter, were the orders proposed to give effect to the compromise offered.

32. This appears to be essential. Rule 20.27 providing that if the offer is accepted by written notice of acceptance of the offer at any time during the period of acceptance for the offer, “any party to the compromise may apply for judgment to be entered accordingly”: r 20.27(3).

33. In Farmer v Broadspectrum (Australia) Pty Ltd (No.3) [2024] NSWSC 53, Garling J also had to consider an offer found not to comply with r 20.26, it also not having contained “the proposed orders for disposal of the claim”, in respect of a claim for damages at common law arising out of a personal injury: at [85].

34. The result was his Honour’s conclusion that clarity of expression and formality of the orders offered were essential, given that r 20.27(3) did not require notice to be given to the other party of an application for judgment to be entered, nor consent to the orders sought: at [86].

35. I consider that this is a similar case.

36. That being supported by the parties’ disagreement about what s 151Z of the Workers Compensation Act required in their circumstances and what Mr Gong proposed as a result, in the 11 September letter. Despite which the offer of compromise was not amended, either to reflect what he thereby proposed in relation to the repayment, or to specify the orders necessary to achieve what he thereby proposed.

37. The result was that his August offer of compromise did not comply with r 20.26.

38. I am thus not persuaded that it was valid, attracting the costs rule on which Mr Gong now relies. With the result that costs are in the Court’s discretion: Civil Procedure Act, s 98.

Calderbank offer

39. The unreasonable rejection of a Calderbank offer may provide a just basis for an indemnity costs order: Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8].

40. Unlike in Farmer, Mr Gong also made a Calderbank offer. It provided:

“We have received instructions to offer to resolve this matter in the sum of $1,200,000.00 plus costs to be agreed or assessed. All the evidence in chief in this matter has now been served, and your client is in a very good position to consider the strengths and weaknesses of the plaintiff’s case and your client’s defence.

For the avoidance of any doubt, the offer of $1.2 million is made on a plus costs basis and is exclusive of the workers compensation payback which, at the date of writing is $522,739.81.

This offer is open for acceptance for a period of 21 days only.

This offer is made pursuant to principles of Cal**derbank v Calderbank [1975] 3 ALL ER 333 and will be relied upon as to the subject of costs.”

41. The 8 September response was that:

“We refer to the Plaintiff’s Offer of Compromise served on 25 August 2025 (the Offer) and your letter of the even date.

Our client is unable to assess the reasonableness of the Offer. The Offer is expressed to be made exclusive of any workers compensation repayments. In circumstances where the Plaintiff is continuing to receive workers compensation benefits, the terms of the Offer creates uncertainty as to the actual amount of the Offer and is inconsistent with Rule 20.26(2)(ii) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) requiring the identification of the monetary judgment proposed.

Further, the terms of the Offer do not comply with section 151Z(1)(b) of the Workers Compensation Act 1987 for the Plaintiff to repay workers compensation benefits out of damages recovered.

On the above basis, the Offer cannot be regarded as a valid offer under Rule 20.26 of the UCPR as a Court cannot assess whether the Offer, in its ambiguous terms, is a more favourable outcome.

We put you on notice if in the event Rule 42.14 of the UCPR applies to the proceedings, our client will seek an order of the court under Rule 42.14(2) of the UCPR.”

42. The 11 September reply advised:

“We reject the contention that your client ‘is unable to assess the reasonableness of the offer.’

Rather, we view your letter as no more than an attempt to establish a paper trail so as to eventually argue against the imposition of an indemnity costs order should the verdict exceed the offer. Your expression of confusion as to the predictably increasing workers compensation payback is a shallow artifice. Within the offer we have set out the precise amount of the payback at the time of making the offer. As you are well aware, the plaintiff receives the amount of $1,488.00 every week in weekly payments. The insurer pays for his medical needs as required. We are certain that you can do the mathematics. If not, the name of the person handling the claim at EML is REDACTED. Her phone number is REDACTED. Her email address is REDACTED. But you already have all this information.

If your client had any genuine interest in assessing the plaintiffs offer, you could pick up the phone at any time to speak to REDACTED obtain an up to the minute payback amount.

To make the task even simpler for your client, for the purpose of the offer of compromise only, the plaintiff will only require repayment to the Workers Compensation Insurer in the amount of $522,739.81. If there is any additional amount owing, the plaintiff undertakes to make up the shortfall. As you can see, the ‘ambiguity’ has disappeared. We hope this cures your client’s confusion.

Your second complaint is equally artificial. As much as it is obvious that your client is attempting to trigger a technicality, as you well know, in practice the common law defendant always remits the payback to the workers’ compensation insurer. If you are genuinely concerned about the operation of s151Z(1)(b), this can be overcome by your client paying the payback amount to the trust account of this firm on our undertaking to remit the amount in full to the insurer.

Either way, in actuality, your client knows exactly where it stands, right down to the last cent. If the plaintiff’s offer is not accepted, it will not be due to some contrived ambiguity, it will be because your client has chosen to gamble with the outcome.

If your client requires any other information at all to assist it in assessing our offer, or requires a short extension, please call our office at any time and we will assist in all ways possible.”

43. There is no presumption that AWI not having accepted the offer, and not having obtained a more favourable judgment, will necessarily pay indemnity costs from the date of that offer, as Mr Gong seeks: Leichhardt Municipal Council v Green at [19].

44. The party seeking an indemnity costs order bears the onus of demonstrating that the other party’s failure to accept the Calderbank offer was unreasonable, in all the circumstances: C&V Engineering Services Pty Ltd v Metropolitan Demolitions Pty Ltd (No 2) [2023] NSWCA 240 at [31]-[32]. The relevant matters being:

45. The stage of the proceeding at which the offer was received;

46. The time allowed to the offeree to consider the offer;

47. The extent of the compromise offered;

48. The offeree’s prospects of success assessed as at the date of the offer;

49. The clarity with which the terms of the offer were expressed; and

50. Whether the offer foreshadowed an application for indemnity costs in the event of the offeree’s rejecting it.

51. In this case, I am satisfied that these matters support the conclusion that Mr Gong has established that the refusal of his offer was unreasonable, given what he finally offered by the 11 September letter.

52. I have already discussed the extent of the compromise offered.

53. That the August Calderbank offer was but one part of the parties’ wider negotiations must be taken into account. The totality of which must be considered in the exercise of the Court’s cost discretion: Whitney at [43].

54. The negotiations pursued, albeit with less civility than is desirable, reflecting what Garling J described in Farmer at [86]. The Calderbank offer being “of the kind ordinarily seen in without prejudice correspondence in circumstances where the parties will, if the offer is accepted, prepare and agree upon the actual Terms of Settlement and consent orders which the Court is asked to make.”

55. It is thus relevant that the initial settlement Mr Gong offered in August was amended as the result of AWI’s response, given the disagreement about who should make the repayment, which had to be made, in respect of workers compensation payments it was known Mr Gong then continued to receive.

56. What Mr Gong finally offered in September, had it been accepted, could easily have been reflected in consent orders. Which, unlike an offer of compromise, are not required to be proposed in a Calderbank offer. But AWI did not respond to what Mr Gong finally offered.

57. That there was then any remaining confusion about the offer, not long before the scheduled hearing, cannot be accepted. The time that the offer was open for, I am satisfied, was also adequate in the circumstances. That there was insufficient time to consider what Mr Gong offered cannot be accepted, given that AWI did not take up the extension it was offered.

58. If further time had been required, it would no doubt have been sought. But the 11 September letter was not even replied to. That was not only discourteous but did not help establish that the offer was unreasonable, given what it accepted in relation to the workers compensation repayment, which had been disputed.

59. The proper inference is that Mr Gong’s amended offer was understood and rejected, AWI being content to risk him bettering that offer at trial, as he did. That Mr Gong had prospects of success, if his evidence was accepted, being then apparent. AWI’s decision thus reflecting its preparedness, before the offer expired, to risk the evidence it proposed to call, not being preferred over that it knew Mr Gong would give and call.

60. That at the time the August offer was made, AWI was not aware that Mr Gong would serve further lay evidence, cannot detract from that conclusion. That evidence having been served while the offer was open, when the parties were also aware that a joint expert report had not yet been received.

61. That did not make the rejection of what was a genuine offer of compromise, in the circumstances, reasonable. The parties then both knowing that when the experts met, there was a possibility that they would resolve differences which their known reports had revealed, in Mr Gong’s favour. Or that at trial, the views of Mr Gong’s expert would be preferred.

62. Given all that has to be considered, I am satisfied that justice does require the exercise of the costs discretion in Mr Gong’s favour. He having made as he did a genuine offer of compromise, which he amended in September to address the disagreement about repayment of workers compensation and its amount. AWI’s rejection, without explanation, of what Mr Gong so finally offered, to address problems it had raised, having been unreasonable in all of the circumstances.

63. The indemnity costs order must thus reflect, I am satisfied, AWI’s rejection of what Mr Gong finally offered in September.

Orders

58. For these reasons I order that:

59. AWI pay Mr Gong’s costs on the ordinary basis, as agreed or assessed, up until 11 September 2025; and

60. From 12 September 2025, AWI pay Mr Gong’s costs as agreed or assessed on an indemnity basis, including the costs of the costs motion, but not the costs of the stay motion, which have already been dealt with by consent.