Music v State of New South Wales (No 2)

Decision date: 09 March 2026

Jurisdiction: Civil

Before: Abadee DCJ

Decision: See paragraph [107]

Catchwords: COSTS – plaintiff recovers relatively small monetary judgment – defendant made rules offers – whether extant costs order should be varied to reflect the outcome in the proceeding
COSTS – whether, in the event the plaintiff receives a partial costs order, such costs should be capped – whether requirement that applicant seeks declaration
COSTS – defendant’s application for partial order for indemnity costs – whether plaintiff’s rejection of offers was unreasonable – whether unreasonable for plaintiff to have rejected defendant’s settlement offers – defendant’s application for gross sum costs order

Legislation Cited: Civil Procedure Act 2005 (NSW), s 98
Legal Profession Uniform Law Application Act 2014 (NSW), Schedule 1
Uniform Civil Procedure Rules 2005 (NSW), rr 36.16(3A), 42.1

Cases Cited: Blagojevch v Australian Industrial Relations Commission (2000) 98 FCR 45; [2000] FCA 483
Certain Lloyd’s Underwriters v Cross (2012) 248 CLR 378
Commonwealth of Australia v Gretton [2008] NSWCA 117
Guru v Coles Supermarkets Australia Pty Ltd (No 2) [2017] NSWDC 90
Houatchanthara v Bednarczyk [1996] NSWSC 486
Leach v Nominal Defendant (QBE Insurance (Aust) Ltd)(No 2) [2014] NSWCA 391
MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 4) (1996) 70 FCR 236 [1996] FCA 862
McCabe v Riechelmann (No 2) [2023] NSWDC 201
Noon v Bondi Beach Astra Retirement Village Pty Ltd (No 2) [2010] NSWCA 285
Osei v P K Simpson Pty Ltd [2021] NSWDC 254
Rahman v Rahman (No 2) [2025] NSWCA 266
Reeves v State of New South Wales (No 3) [2023] NSWDC 243
Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368
State of New South Wales v Williamson (2012) 248 CLR 412
Vale v Eggins (No 2) [2007] NSWCA 12
Walker v Harwood [2017] NSWCA 228

Category: Costs

Parties: State of New South Wales (Applicant)
Linda Music (Respondent)

Representation: Counsel:
Mr M Gollan (Applicant)
Mr S Grey (Respondent)
Solicitors:
Wotton Kearney (Applicant)
Hugo Law Group (Respondent)

File Number(s): 2023/00261755

Publication restriction: Nil.

REASONS FOR JUDGMENT

Background

1. On 26 November 2025, I published my reasons for judgment in this proceeding: Music v State of New South Wales [2025] NSWDC 487 (the ‘Reasons’). I ordered that the defendant, the State, pay Ms Music the judgment sum of $24,000. I also ordered the State to pay Ms Music’s costs, although I noted the opportunity for the parties to apply to vary that costs order within the 14 day period prescribed by the Uniform Civil Procedure Rules 2005 (NSW) (the ‘UCPR’), r 36.16(3A).

2. The State availed itself of that opportunity. On 10 December 2025, it filed a notice of motion, bringing several alternative applications for a different costs order. The motion was supported by an affidavit of its solicitor, Mr James Clohesy and an Exhibit (JFC-1) to that affidavit.

3. The Court indicated that the dispute was to be determined on the papers. The State’s written submissions in chief were filed on 10 February 2026. Ms Music’s submissions were filed on 19 February 2026. The State’s submissions in reply were filed on 27 February 2026.

4. The State’s application for an order that Ms Music pay costs partly on an indemnity basis centres upon two settlement offers made to Ms Music on behalf of the State on 15 July 2024 and 25 November 2024, both of which were rejected by Ms Music, and takes into account the circumstance that in any event, on the singular cause of action in respect to which she succeeded, her costs would be capped under law. The State did not seek, in the alternative, an order that she only pay the State’s costs on a party and party basis following her rejection of those offers.

5. In addition, the State applies for a gross sum costs order and also an order for costs of its motion dated 10 December 2025. Such amounts, the State envisaged, would be offset against the judgment Ms Music obtained.

6. Ms Music opposed each of the State’s applications.

7. The issues for the Court to now decide are:

8. How does the general rule in r 42.1 of the UCPR apply in the circumstances of this case;

9. Whether the general rule should be modified, if not altogether displaced, by:

(a) the costs-capping provisions in the Legal Profession Uniform Law Application Act 2014 (NSW) (‘the Application Act’); and/or (b) provisions in Court rules, or principles in law relating to the costs consequences of a plaintiff rejecting the State’s settlement offers in circumstances where it is said that Ms Music achieved an outcome that was no less favourable than what State had offered. Bound up in this issue is a question whether, on the assumption a valid rules offer was made, the Court might ‘otherwise order’.

3. In the event that the State should obtain an order for costs in its favour, whether a gross sum costs order should be made in favour of the State and, if so, the quantum of such order.

4. In what follows, familiarity with the Reasons is assumed.

The position prior to consideration of the settlement offers

9. Subject to consideration of the settlement offers, the parties accept that although the question of costs is ultimately discretionary [1] , the general rule in r 42.1 of the UCPR should apply. The ‘event’ is the outcome of the proceeding: Commonwealth of Australia v Gretton [2008] NSWCA 117 (“Gretton”) per Beazley JA (as her Excellency then was, Mason P agreeing) at [40].

10. Ms Music’s statement of claim pleaded separate causes of action arising from the events of 30 September 2021; specifically: trespass to land, assault (causing Ms Music to apprehend a battery); two actions in battery (the deployment of capsicum spray against her and subsequent handcuffing, respectively); and false imprisonment (in the period from her arrest until her discharge from hospital).

11. At the hearing, the parties submitted that different damages awards might be made in respect to the causes of action (see, for example [438] of the Reasons).

12. The State contends that it successfully defended three out of five actions in tort advanced by Ms Music and emphasised the ‘narrowness’ of Ms Music’s success. This outcome, the State contends, warrants a ‘differentiated’ costs order in order to reflect the State’s more substantial success in defending the proceeding. It was, the State contends, Ms Music who shared the greater responsibility for costs being incurred in the proceeding. It submits that the time taken on the ‘issue’ upon which Ms Music succeeded assumed a minor proportion of the time occupied in evidence and submissions; which itself reflected the circumstance that the deployment of the capsicum spray constituted a ‘split second decision’ by one police officer.

13. Ms Music submits, as a procedural point, that the Court should not even entertain any variation of the costs order on the basis that there should be some differentiated costs order. I reject that submission. Whether or not the State expressly framed such an order in its motion to vary the costs order is not fatal. The State has, in substance, sought that order by its submissions. Ms Music’s submissions have joined issue with it. There is no prejudice to Ms Music in the Court considering the point.

14. More substantially, Ms Music contends that there is no proper basis for differentiation. All of her causes of action challenged a continuous course of conduct by police. She argued that part of the thinking of LSC Cashmere, who deployed the capsicum spray, was influenced by the views of the other officers involved in the earlier conduct which formed the basis of her action for trespass to land and assault. The State forensically conducted its case in a way that gave it the opportunity to rely on a ‘compendious’ state of mind, of multiple police officers, without singling out the state of mind of the individual officers. It was reasonable therefore for Ms Music to conduct her case on a wider factual basis.

15. In reply, the State emphasised that by running multiple actions in tort, Ms Music sought independent sources of rights to claim damages based on conduct that was distinct from the conduct grounding her success in the singular cause of action. Further, it contends that evidence of the officers of decision-making was entirely irrelevant to LSC Cashmere’s decision to deploy the capsicum spray. It was her complaint about her detention that led the State to call all the evidence that it did.

16. Subject to a qualification, I do not find persuasive the State’s notion that for the purpose of defining the ‘event’, there needs to be a metaphorical scorecard reflecting the causes of action upon which she succeeded upon and those in which she failed. Ms Music brought a claim for damages arising out a course of conduct occurring over a not very substantial period of time on a single day. The State denied liability entirely and, as I alluded to in the Reasons, its refusal to accept the wrongfulness of the police officer’s use of capsicum spray occasioned significant on-going distress to a person whom (on its own case) it knew was, to use a neutral expression, mentally vulnerable.

17. Further, I accept that at a factual level, the State’s defence of the action arising from the use of the capsicum spray was connected to its defence to the earlier (in time) actions for trespass to land and assault, given the input of the two officers to LSC Cashmere about the earlier events. I do not accept the State’s case that such evidence was exclusively called to support the State’s case that it was entitled to detain her, in defence of other actions. It was not a case of a binary choice: the evidence of the officers’ attempts to apprehend her before the deployment of the spray was relevant both to the legitimacy of the officers’ wish to detain her and the force that it deployed to achieve that result. I would also add that, on an impressionistic level, and contrary to the State’s submission, the predominant dispute concerned the circumstances and legal validity of the deployment of the capsicum spray. Ms Music successfully obtained a monetary verdict against the State.

18. The qualification is that a recurring complaint, common to all of Ms Music’s actions, was that police should not have tried to detain her as they did. In respect to this complaint, the State’s position has, by the judgment, been vindicated. In doing so, some not insignificant expense was occasioned to the State in defending a multitude of actions all of which were underpinned by the common misconception that Ms Music was illegally detained by police and/or that the police acted illegally in trying to detain her; and also issues associated with damages. Further, Ms Music fell substantially short on the damages awards that she sought (including her claims for aggravated and exemplary damages) which also occupied not insubstantial time. Whilst she should not be disentitled to a costs order in her favour, in my view, the justice of the case indicated some diminution in what she would ordinarily recover.

19. Subject to other considerations I will shortly turn to, concerning costs capping and the settlement offers, and adopting a broad-brush approach, the result of the operation of the general rule in r 42.1 would have been that the State should pay Ms Music 65% of her costs.

Capping the State’s liability for Ms Music’s costs

The provisions

20. Clause 2(1)(a) of Schedule 1 of the Legal Profession Uniform Law Application Act 2014 (NSW) (the ‘Application Act’) provides that if the amount recovered on a claim for personal injury damages does not exceed $100,000, the maximum costs for legal services provided to a plaintiff in connection with the claim are fixed at 20% of the amount recovered or $10,000, whichever is greater.

21. The expression ‘personal injury damages’ carries the same meaning as that expression appears in the Civil Liability Act 2002 (NSW). Section 11 of the Civil Liability Act defined ‘personal injury damages’ as “damages that relate to injury to a person”. The word ‘injury’ is defined to mean ‘personal injury’ which, amongst other things, includes ‘impairment of a person’s medical condition’.

22. Ms Music was “the plaintiff” being the person who made a claim for personal injury damages. None of the exclusionary cases in Schedule 1, cl 2 of the Application Act are applicable.

23. Ms Music pleaded in her statement of claim that as a result of the facts, matters and circumstances giving rise to the causes of action, she had suffered and would continue to suffer injuries and disabilities (paragraphs 72 and 74). She also indicated that she made a ‘personal injury claim’ (paragraph 73). She described her injury as comprising “pain, embarrassment, humiliation, mental anguish, injury to her feelings, distress and/or inconvenience” (paragraph 74).

Submissions

24. The State submits that if Ms Music was to receive any order for costs at all, she would only be entitled to receive a maximum of $10,000 (plus disbursements).

25. Ms Music first took a procedural point that the Court should not consider the costs capping issue. She says that the State needed to seek a declaration that the provisions in the Application Act apply but did not do so.

26. If it is suggested that this Court was not itself empowered to cap costs because of the absence of a formal claim for declaratory relief, I disagree. There have been multiple instances in this Court where, after the outcome of litigation has become apparent, when the Court has made, or foreshadowed its intention to make orders capping a plaintiff’s costs, without it being suggested that it was not empowered to do so [2] . I determined the question in Reeves v State of New South Wales (No 3) [2023] NSWDC 243 (that the costs capping provisions were not applicable in that case) without the parties indicating that I was not empowered to do so in the absence of a declaration being sought. In such cases, the Court simply fixes the sum to be recovered by reference to the operation of the capping provisions.

27. To the extent that Ms Music argues a lack of notice, the State made it very clear in substance that part of its application (prayer 3 of the application) involves variation of the costs order to ensure that any costs liability it was exposed to was capped. Ms Music has made submissions to the contrary and there is no prejudice to her if the Court deals with the issue.

28. Alternatively, Ms Music contends that she brought a ‘mixed claim for damages’, including, but not limited to, a claim for personal injury damages. Part of her claim was for damages for false imprisonment, featuring deprivation of liberty, and another part of her claim was for trespass, featuring interference with bodily integrity and/or another part of her claim concerned the occasioning of interference with her dignity.

29. Ms Music also contends that it is erroneous, when determining whether the cap applies, to focus on the result, that is the damages recovered from the successful action(s) in tort. The focus is, rather, on the ‘claim’. There is a policy rationale for this: it would be unfair to diminish a claimant’s costs based upon a retrospective outlook that focusses on a characterisation only of the successful tort action when a claimant has reasonably brought multiple actions. To do that would certainly function as a deterrence to claimants when they formulate their pleaded actions.

30. Alternatively, if capping is to occur at all, it should only be to the costs singularly incurred in connection with the action for battery arising from the deployment of the spray. That can be characterised as a claim for personal injury damages, although not exclusively. Damages can be awarded in an action in battery without personal injury. At any rate, Ms Music argues that the task of apportioning what costs arose peculiarly in relation to that particular action is the province of a costs assessor.

Consideration

31. In Certain Lloyd*’*s Underwriters v Cross (2012) 248 CLR 378 (“Cross”) French CJ and Hayne J (at [40]-[41]) generally cautioned against descriptions of statutory ‘intention’, or ‘policy’ not grounded in text or context.

32. In State of New South Wales v Williamson (2012) 248 CLR 412 (“Williamson”), the High Court determined (at [18]) that the cost capping provisions are potentially engaged whether or not a claim is framed in negligence or as an intentional tort (or torts). In Williamson, as in this case, a range of actions (in the nature of intentional torts) were relied upon by the plaintiff in a claim that the parties ultimately settled, with the Court ordering a monetary judgment in the plaintiff’s favour by consent. Repeating what they said in Cross (at [33] and [41]), in Williamson French CJ and Hayne J observed (at [18]) that ‘personal injury damages’ encompasses any and every form of damages that relate to personal injury to a person.

33. The monetary judgment in Williamson, based as that was on a settlement agreement, did not identify how the damages giving rise to the judgment were computed or on what account they were allowed. Accordingly, it was not possible for the State in Williamson to show that the sum which the plaintiff recovered on her action for false imprisonment, which had been included with another action (trespass to the person) within a claim for damages, was “recovered on a claim for personal injury damages”.

34. There is some force in Ms Music’s argument directed to focussing on the claim that the purposes of the provisions are to guide the parties in their decisions by reference to a common appreciation of the character of the claim upfront, as it were, however, as the High Court stressed in Cross the issue cannot be resolved by reference to what the Court considers most appropriately accords with legislative policy or intention. Ms Music’s problem is that the capping is engaged once it is known that an amount “is recovered”. Generally, where an amount is recovered pursuant to a court judgment, there will be judicial findings about what the action(s) was or were which gave rise to the judgment. In Williamson, because there was only a consent judgment following a settlement of a claim involving mixed actions, there were no such judicial findings illuminating the question of whether or to what extent the amount recovered was attributable to the action for false imprisonment as distinct from the three actions in battery.

35. In this case, the only successful action generating the judgment sum that Ms Music recovered was the battery constituted by the deployment of the capsicum spray. It was this which caused the exacerbation of PTSD, clearly a species of personal injury. By her pleading of this action, it was clear that Ms Music was contending that the deployment of the spray caused her personal injury. Although the Court noted (at [445]) in the Reasons that a separate legal interest – the violation of her bodily integrity – was also infringed, that cannot be severed from the essence of the claim being one of damages for personal injury. Put another way, to the extent that the clam related to a violation of bodily integrity, such claim was ‘related’ to a claim based on a personal injury. Under the legislative scheme, that is enough to make this alternative description of the claim a claim for personal injury.

36. I am not persuaded that the issue can be delegated to a costs assessor by use of the expedient that the costs capping applies only to the costs arising in connection with the prosecution of the successful battery action. As I explained earlier in these reasons, when characterising the ‘event’ for the purpose of the usual rule as to costs, it was Ms Music’s successful battery claim, and my assessment that such claim dominated the hearing, which generated my provisional assessment that she generally be entitled to her costs (albeit with some reduction), notwithstanding her lack of success on the other actions she ran.

37. Ms Music recovered, as a judgment sum, on ‘a claim for personal injury damages’. Ms Music did not suggest that any exception to the statutory regime for cost capping in cl 6 of Schedule 1 of the Application Act is enlivened. Prima facie, her costs should be capped at $10,000.

The settlement offers

38. Aside from the capping of costs, Ms Music’s prima facie entitlement to costs under the usual rule is also potentially affected by the operation of court rules applicable to settlement offers. Clause 5 of Schedule 1 to the Application Act provides, in substance, that a defendant to a claim for personal injury damages who makes a reasonable offer of compromise on the claim which is not accepted, is not precluded from receiving an indemnity costs order in its favour after making the offer.

Principles applicable to costs consequences for rejection of settlement offers

Rules offers

39. The policy behind the provisions in Part 42 Division 3 of the UCPR was expressed by Clarke JA in Houatchanthara v Bednarczyk [1996] NSWSC 486 (at 2-3) as follows:

“The idea behind the rule is to encourage settlement of compromise of proceedings, and more specifically, to encourage litigants to give serious consideration to the settlement of proceedings. Where an offer is made by a defendant to a plaintiff, the latter is put on notice that unless he or she accepts the offer, there is a significant risk that the order provided for by the rule may follow. In declining to accept the offer, the plaintiff undertakes the risk and the consequences that flow from that risk.”

40. In terms of the relationship between the usual rule in r 42.1 and the provisions in Part 42 Div 3, in Walker v Harwood [2017] NSWCA 228, Basten JA (Payne JA agreeing) explained that following an offer of compromise, the ‘event’ is redefined as to whether or not the offeror obtained a more favourable result than that which it proposed in the offer.

The discretion to ‘otherwise order’

41. The rules (being rr 42.14-42.15A) create a presumption and the Court’s discretion to order otherwise is preserved where that is warranted. It is for the offeree, however, to establish a basis for depriving the offeror of their prima facie entitlement to costs (Leach v Nominal Defendant (QBE Insurance (Aust) Ltd)(No 2) [2014] NSWCA 391 (“Leach”) per McColl JA, Gleeson JA and Sackville AJA agreeing at [29] and [45]). When a Court considers whether the presumption should be displaced, it typically considers: (a) whether the offer did not involve any genuine compromise at the time it was made; (b) whether the offeree’s rejection of it was not unreasonable; and (c) the period for acceptance of the offer was unreasonable.

42. As to the consideration (a), in order for the compromise to attract an indemnity costs order, it must involve a “genuine offer of compromise” and not merely be made so as to trigger the costs consequences under the rules: Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 (at [16]) (Spigelman CJ; Beazley and McColl JJA). Whether there was a genuine element of compromise is considered objectively according to the circumstances of the particular case at the time the offer was made; rather than with the benefit of hindsight.

43. The mere fact that it was reasonable for a litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule. However, that does not mean that reasonableness of the rejection is an irrelevant consideration (Leach at [48]).

44. In Leach, the Court of Appeal determined that in the circumstances of that case it was not unreasonable for the offeree to reject an offer which provided nothing by way of damages on account of serious injuries and whose terms only compromised on costs. Such offer, it was said, did not serve the public policy of encouraging settlement (Leach at [54]-[55]).

Calderbank offers

45. Where a party relies upon a settlement offer under Calderbank principles, the onus is on the party making a Calderbank offer to satisfy the court that it should exercise the costs discretion in its favour: Gretton at [46]. Moreover, to enliven such discretion, the offeror should establish that the offer represented be a genuine offer of compromise, which it was unreasonable for the offeree not to accept ([44]).

46. As Hodgson JA (Mason P also agreeing) stated in Gretton (at [120]), in cases where there is a wide range of possible verdicts, an offer may be a reasonable one, yet it may not be positively unreasonable for the offeree not to accept it. I note that in Gretton, Hodgson JA indicated (at [123]) that if his Honour was free to do so, he would have been inclined in the circumstances of that case, to order that the parties bear their own costs after the date of the offer scrutinised in that case.

47. Other factors bearing upon the reasonableness of an offeree’s refusal to accept a Calderbank offer include the complexity of the issues (MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 4*)* (1996) 70 FCR 236 [1996] FCA 862); and where all the evidence had not been served by the offeror before the offer (Vale v Eggins (No 2) [2007] NSWCA 12 at [22]).

48. Whether it was unreasonable for the offeree to refuse an offer is to be viewed prospectively; not retrospectively: Gretton at [24]; Noon v Bondi Beach Astra Retirement Village Pty Ltd (No 2) [2010] NSWCA 285 at [11].

49. A conventional feature, evident in this case, of Calderbank offers is that the offeror explains to the offeree why it should accept an offer. There is usually commentary on the offeree’s prospects on liability, or damages (or both) and (where appropriate) perceived limits on the offeree’s recovery of legal costs. It is an exercise in persuasion. But it is done in the common expectation that the commentary will later be exposed to judicial consideration when costs questions arise. Well-reasoned explanations for why a Calderbank offer should be accepted are more apt to induce their acceptance and it is not only the parties but also the Courts that have an interest in the quick and cheap disposal of litigation flowing from the acceptance of settlement offers. An important purpose to the commentary that the offeror provides to offeree is to set up a potential argument, when the costs questions arise, that by refusing a settlement offer whose merits have been explained, the offeree has acted unreasonably. A clearly explained offer, particularly the provision of clear notice of certain facts likely to affect the outcome, weighs in favour of the offeror: Blagojevch v Australian Industrial Relations Commission (2000) 98 FCR 45; [2000] FCA 483 at [36].

50. In practice, this can mean that where the commentary has identified why the offeree will not obtain a favourable outcome if the case proceeds, on the issues of liability (or both), it will more likely be apparent to the judge that the offeree has acted unreasonably: it may serve to illuminate that the offeree was not amenable to reason. Conversely, where the commentary is inadequate, the harder it might be for the offeror to persuade the judge that the offeree’s refusal to accept the settlement offer is unreasonable.

51. A circumstance that may bear upon the adequacy of the explanation provided by the offeror is the evidence or information that it has to hand at the date of the offer, but the offeree does not have to hand. There may also be circumstances where it suits the offeror not to disclose its possession of evidence or information, to keep its cards close to its chest. But if it chooses that course for its perceived forensic advantage, with the consequence that the offeree is not notified of evidence that that the offeror has marshalled or is capable of marshalling, at the time a settlement offer is made, it might be more difficult for the offeror to persuade the Court that the offeree’s refusal to accept a settlement offer is unreasonable in all the circumstances.

The State’s settlement offers

The first offer (15 July 2024)

Terms

52. On this day, the State served an offer of compromise. The terms of that offer were:

1 Judgment for the Defendant.

2 Defendant to pay the Plaintiff’s costs in respect of the claim in the sum of $60,000 all-inclusive.

3 The offer is open for acceptance for a period of 28 days.

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

53. This offer of compromise was enclosed under a covering letter which doubled as a Calderbank offer. The content of that letter featured commentary on what the State perceived as to the lack of merit in Ms Music’s claim. The State expressed its view that generally, the conduct of the police officers was lawful and, among other things, asserted that the use of capsicum spray represented no more than the deployment of reasonable force or, alternatively, represented force used in self-defence.

54. On the issue of damages, the letter predicted that “even if she succeeds, damages will be limited.” The letter also contained the following statement:

“… the Plaintiff ceased working in the context of the COVID-19 and there were a number of prior and subsequent events and stressors which adversely affected the Plaintiff’s psychological sequelae, the alleged incident notwithstanding. Plainly those co-morbidities were sufficient to have caused the Plaintiff’s condition.” (emphasis supplied)

55. I interpolate that a reason for my highlighting this statement is that it will be apparent from my Reasons, that significant issues loomed at the hearing about causation. Consistent with that statement, at the hearing, the State disputed that any conduct by the police officers materially exacerbated her PTSD. One issue in the Reasons concerned the application of the difficult principle of quantifying exacerbation of pre-existing PTSD on non-economic loss and economic loss.

56. The covering letter also indicated that what the State was proposing, in substance, was a lump sum payment of Ms Music’s costs of $60,000 and a waiver of its entitlement to recover its own costs.

Submissions

57. In the affidavit in support of the State’s motion, of James Clohesy, a Partner of the firm representing the State (Wotton Kearney, henceforth ‘WK’), estimated (at paragraph 28) what he perceived as Ms Music’s disbursements as at the date of the State’s first settlement offer (15 July 2024). That estimate was $11,100. On his calculations, when that sum was added to the capped costs ($10,000) and the judgment sum she ultimately recovered ($24,000), there is a total of $45,000.The State contends that, on these calculations, what she recovered from the judgment was no more favourable than the amount it offered to pay Ms Music on 15 July 2024.

58. As to the settlement offer of 15 July 2024, the State relies upon it only as a Calderbank offer. It submits that the discretion to award indemnity costs following its rejection should be exercised. At the point at which it was served, other than the oral evidence, all the evidence was available. The period for acceptance was reasonable. The offer represented a genuine compromise: adopting Mr Clohesy’s estimate, the amount offered exceeded what Ms Music was entitled to; and accommodated a fair assessment of the parties’ prospects (as explained in the covering letter). It was clear and the State conveyed its intention to rely upon the offer in a subsequent costs application.

59. Ms Music submits that by obtaining judgment in her favour, she obtained a more favourable result than the First Offer which, as indicated, offered judgment for the State. For one thing, apart from a monetary judgment, she also obtained a judgment vindicating her rights. For another, it is erroneous to characterise what the State offered as amounting to an offer to pay $60,000. That offer was tied to the notion that the proceeding be terminated in the State’s favour.

60. In reply, the State submitted that even according to her solicitor’s evidence, the monetary value of the first offer exceeded her solicitor and client costs and would have resulted in a payment to her in a sum of approximately $28,300. According to restitutionary principles, she would have achieved a sum of money that went beyond what her solicitors had incurred. This made what was offered more favourable than what she obtained by the judgment.

61. In addition this was not a situation where Ms Music was only seeking vindication (which could, for example, merely sound in nominal damages). She was seeking an order for substantial damages. Further, having regard to its timing, the offer was made after a mediation, and after the pleadings had closed. She had in her possession all of the evidence available at trial (save for viva voce evidence). Her case was at its highest. It made no difference whether the State had complied with the directions for service of evidence. Inferentially if the State had served such evidence, it was unlikely to improve her prospects.

Consideration

62. To reiterate, the State only relies upon the first offer as a Calderbank offer.

63. I accept that the State’s offer was a genuine attempt to compromise. It offered, amongst other things, to waive its own costs incurred by then. There is also no issue as to the period it was open for acceptance.

64. The real question is whether it was unreasonable for Ms Music to reject it.

65. I do not consider that it is fair or reasonable that when weighing up the offer, Ms Music could be taken to have appreciated the costs capping effect of legislation and therefore be reasonably have been expected to have engaged in the costs comparison posited by Mr Clohesy in his affidavit which made those costs capping provisions relevant. The potential costs capping provisions were not referred to in the letter of 15 July 2024 (or, for that matter, the letter of 26 November 2024). At this point (and it remained the case later), such settlement negotiations as occurred between the parties appeared to be conducted on the premise that any costs entitlement Ms Music would receive would be ‘uncapped’. Certainly at that point, where a mixed claim had been brought, it was uncertain whether they would apply at all: as I have explained earlier, whether they were engaged depended on judicial findings; which, as is apparent from what I said earlier, has now worked to the State’s benefit. As far as the evidence on this application is apparent, the first time the State said anything about the costs capping provisions was in its motion of 10 December 2025, after the Reasons were delivered.

66. Thus the State’s arguments about the first settlement offer, effectively directed to a comparison between the costs benefit offered by the State with the costs Ms Music was likely to recover, affords no proper basis for the State to vary the extant costs order.

67. By the terms of that offer, Ms Music with no monetary judgment at all and the prospect of obtaining a sum to compensate her for her costs incurred to that point that, according to her solicitor, would not have met her expected (uncapped) costs liability to her solicitor. True it was that she would be spared any costs liability to the state, but in my view that potential benefit was not a sufficient countervailing consideration as to make rejection of the offer unreasonable.

68. There was a range of alternative monetary outcomes, depending on which action(s) might be sustained. In addition, there were significant complications in Ms Music’s case on damages, particularly in relation to causation. On this the State consistently adhered to a position that the conduct of its officers, if it was determined to be wrongful at all, did not materially contribute to Ms Music’s pre-existing injury. That contention was raised in the Calderbank letter of 15 June 2024 in the part of the letter that I highlighted earlier. But it was rejected in the Reasons.

69. An added complication, was that the damages exercise had to take into account non-tortious conduct and circumstances. Nothing was said in the Calderbank letters about the heads of loss at all. There is no indication that by the dates of both Calderbank offers, the State had served evidence on the causation argument. It did not indicate that in the place of evidence from its own expert, it would rely upon evidence of Peter Gough; which I described as ‘incisive’ in the Reasons (at [406]). The evidence on the application is silent on whether the State had possession of that report at the time it served the offers. These omissions are explicable because the State denied that any tortious conduct exacerbated Ms Music’s injuries. Logically, on the State’s view, even if Ms Music did establish any of her causes of action, she would not recover allowances for non-economic loss or economic loss. The Reasons indicate why these contentions were rejected.

70. In the circumstances, it was not unreasonable for Ms Music to reject it.

71. I am not persuaded that the first offer would displace the usual operation of r 42.1.

The second offer (26 November 2024)

Terms

72. On this day, the State served another offer of compromise. The terms of this were as follows:

1 Judgment for the defendant in the sum of $53,500.

2 The offer is open for acceptance for a period of 28 days.

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

73. This rules offer was served under cover of a letter of the same date which again doubled as a Calderbank offer. In the covering letter, the State’s solicitor invited Ms Music to have regard to the explanatory commentary referred to in the letter of 15 July 2024.

Submissions

74. As an alternative basis for a partial order for indemnity costs, the State relies upon its settlement offer dated 26 November 2024. In particular, the State relies upon it as being a valid rules offer but, if not, also relies upon it as a valid Calderbank offer. The State acknowledges that term 1 featured a typographical error, or ‘infelicity’. The State plainly had no money claim against Ms Music. It says that its offer plainly intended that judgment would be for Ms Music. The intention was manifested, among other things, in the explanatory covering letter; which indicated (in paragraph 5.2) that the State offered to waive recovery of its own costs and pay Ms Music a ‘judgment sum’ of $53,500 and, separately, pay her a sum of $30,000 for her costs and disbursements.

75. The monetary judgment Ms Music recovered was no more favourable to her than the settlement sum the State had offered. Indeed the offer more than doubled the judgment sum. Anticipating the possibility that Ms Music might apply for the Court to ‘otherwise order’, the State also argues that it was inarguable that the State’s offer featured a genuine attempt to comprise.

76. If for some reason, this offer could not be treated as a valid rules offer, then the same considerations favour the exercise of the costs discretion in the State’s favour under Calderbank principles.

77. Ms Music says that, by its terms, the offer of 26 November 2024 was not an offer capable of acceptance. She could not have applied for judgment to be entered in accordance with its terms.

78. Further, it should not be accepted that the offer could effectively be saved, in the sense of according with the requirements of the rules, by reference to the explanatory letter. The State in its submissions neglected the first sentence of paragraph 2 of the letter reiterated that what the State sought from the offer was “judgment in its favour”. The second sentence could be characterised as an invitation to treat.

79. To the extent that the State relies upon the letter of 26 November 2024 on Calderbank, Ms Music also contends that the State was impermissibly inviting the Court to read the letter and the enclosed offer of compromise together. But that, it is said, must mean that the terms of the Calderbank offer must be identical to those in the rules offer. It was no business of Ms Music to look behind the subjective intention of the State in framing the offer that it did and thus no occasion for her to seek any clarification.

80. Alternatively, Ms Music took issue with the reasonableness of the offer in terms of its timing. She relied upon evidence of Mr Sanjay Aelvakumaran, a solicitor of Hugo Law Group, who prepared an affidavit dated 18 December 2025. The main features of that evidence were to establish that, firstly, at the time the proceeding commenced, Ms Music served a psychiatrist’s report of Dr Stephen Allnutt. Dr Allnutt’s report was relied upon by Ms Music at the hearing. The State was then the subject of many court directions, in the period from 16 October 2023 to 11 June 2025 to serve responsive medical evidence. Ms Music had been examined by a psychiatrist engaged by the State on 4 September 2024. From that point, the State was directed to serve any report by 18 October 2024. Ultimately, the State did not serve any such evidence. Ms Music points out that the State did not notify her that it did not intend to rely upon such medical evidence. It is possible to discern in this a complaint that earlier extensions of time given to the State to serve medical evidence turned out to be a waste of time. At any rate, as is apparent in the reasons, the State did ultimately rely upon a report of a psychologist, Peter Gough; albeit that this report was not prepared for the purpose of this proceeding but, rather, a criminal proceeding concerning Ms Music.

81. Ms Music submits that at the time of the 26 November 2024 offer, the State had not served expert medical evidence. There were, she said, complicated issues of medical causation and she was justified in wanting to adopt a ‘wait and see’ attitude, in viewing that foreshadowed evidence pending any contrary indication by the State that it would not rely upon medical evidence. She needed this in order to properly consider the value of what the State offered.

82. The State, in reply, submitted that what was expressed in the offer of compromise was patently a mistake. Even if the offer, in the form of a rules offer or in the form of Calderbank offer, were ‘interdependent’ did not change the fact that a mistake had been made. The State’s intention was manifest, when the letter was read as a whole: it was offering to pay a judgment sum and also to pay her (uncapped) costs. The State argued that Ms Music, and her lawyers, were aware of the background circumstances and knew of the mistake in the document.

Consideration

83. As to the second settlement offer, treating it as a purported rules offer, I accept that Ms Music was incapable of applying for judgment to be entered in accordance with what the State offered her. Moreover, the State’s problem cannot be brushed aside on the basis of its suggestion of a slip. Indeed, noting that the same mistake was repeated twice, in my view, in separate documents, the reference to a monetary judgment for the State cannot be classified as a slip. Offers of compromise have clearly set rules and, where they are complied with, they generate presumptive entitlements in the offeror, which may entail serious financial consequences for an offeree who does not go on to obtain a more favourable outcome. Where the rules are not complied with, in my view, the offeror cannot avail itself of the advantages conferred on it. The offeree is entitled to expect a level of exactitude in compliance with Court rules and, moreover, not be required to have regard to material extrinsic to what is contained in the offer of compromise. That is all the more so where the non-compliance with the rules has occurred by the unilateral conduct of the offeror which, in no way, has been contributed to by the offeree. It is not good enough, especially for a Model Litigant, to seek to excuse itself by asserting that the offeree really knew what the offeror was offering or that the words did not mean what they said.

84. The offer of 26 November 2024 can still be treated as constituting a valid Calderbank offer, independently of rules offers that do not comply with Court rules.

85. To repeat, the onus falls on the State to persuade the Court that the discretion should be exercised in its favour on account of Ms Music’s rejection of it.

86. In this regard, I consider a reasonable person in Ms Music’s position would have understood well enough that the State was offering to pay her a monetary judgment of $53,500 and, additionally, was offering to pay her a sum of $30,000 for her costs. Further, a reasonable person in her position would have also understood that the additional offer for payment of a fixed sum for her costs was not tied to her acceptance of the amount offered in the monetary judgment.

87. I earlier noted that the commentary in the letter of 26 November 2024 cross-referred to the commentary in the earlier letter of 15 July 2024.

88. I accept that Ms Music did not obtain an outcome more favourable than what was offered in the Calderbank offer. She did materially worse.

89. I also accept that the State’s offer represented a genuine attempt to compromise. I accept further that it was open for a reasonable period of time.

90. The question is whether Ms Music’s rejection of the offer was unreasonable such as to ground an order that, in all the circumstances, she should pay the State’s costs from the date after the offer on an indemnity basis.

91. Relevant factors to my mind, when considering this question are all the matters I referred to earlier in my consideration of the reasonableness of Ms Music’s rejection of the first settlement offer. Those matters continued to be relevant. But there were further considerations as well.

92. By 26 November 2024, subject to the operation of the costs capping provisions (which, to repeat the State had apparently said nothing about, to that point), the offer of $30,000 for costs was unlikely to reflect her likely solicitor-client costs incurred since she commenced the suit in August 2023. Indeed, according to her solicitor, her costs and disbursements had already reached the sum in excess of $41,000 by 15 July 2024. Moreover, there may even be some doubt whether the combined sum of $83,500 would have left her with much, if anything, after payment of solicitor’s costs.

93. By the date of the offer, the State has had recourse to rely upon the Calderbank offer because of an inefficacious rules offer.

94. By the terms of the offer, in contrast to the earlier offer, Ms Music had been offered an amount representing a monetary judgment which was not insignificant.

95. There is nothing to indicate that, after 26 November, and after having received two separate settlement offers from the State, Ms Music made any settlement offers herself. This is despite the enticement of the latter offer yielding a monetary sum representing judgment as well as a sum for her costs (as well as the State’s waiving the benefit of its own costs).

96. In the circumstances, as at the date of the second offer, it was difficult to see what kind of quantum for an offer for judgment could have satisfied Ms Music, but her subjective outlook has to be evaluated against the objective risks, relating to liability and damages issues, that she faced.

97. On balance, I am not persuaded that it was positively unreasonable that for Ms Music to refuse the offer of 26 November 2024. But I have identified areas where in my view, the prolongation of the case beyond that point was jointly the responsibility of the parties.

98. As a final matter in relation to the rules offer, and for the above reasons, I would have been inclined to ‘otherwise order’ for the purposes of r 42.15.

99. In those circumstances, in my opinion, the proper application of the discretion (subject to costs capping) would be that Ms Music should have her costs up to 26 November 2024 (on the reduced basis indicated earlier) and that thereafter, the parties should bear their own costs.

The gross sum costs order application

100. In the circumstances, it is unnecessary for me to consider the State’s additional application for a gross sum costs order.

The costs of the notice of motion

101. The State has materially improved on its position since the provisional costs order was made on 26 November 2025. It did not however, achieve all that it set out to achieve and some of Ms Music’s opposition to the State’s various applications has been vindicated.

102. In my view, as far as the costs of the State’s application are concerned, the State should receive 50% of its costs.

103. Although it was unnecessary to decide its application for a gross sum costs order, much of what the State contended has force. In particular, there is much to be said for trying to bring about the final disposition of the matter at first instance as quickly as possible where that can be done fairly. There is also force in the State’s point concerning doubt about Ms Music’s capacity to pay, having regard to her resources.

104. As part of his calculations for the costs of the State’s application for a gross sum costs order, Mr Clohesy estimated that the costs of an incidental to its motion was in the order of $6,000. At paragraph 69 of his affidavit, he provided a breakdown to substantiate that estimate. He anticipated that if those particular costs were assessed, on an indemnity basis, the likely recovery would be approximately $5,965.

105. On this point, there was no evidence to the contrary served on Ms Music’s behalf. However, I do not consider that the costs the State should obtain should be assessed on an indemnity basis.

106. In my view the State’s costs of the motion should be fixed at $3,900.

Conclusion

107. The State should bring in short minutes of order to reflect these reasons within 3 days to enable the Court to finally dispose of the proceeding. That should occur after consultation with Ms Music’s lawyers.

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Endnotes

Civil Procedure Act 2005 (NSW), s 98.

For example, Guru v Coles Supermarkets Australia Pty Ltd (No 2) [2017] NSWDC 90; Osei v P K Simpson Pty Ltd [2021] NSWDC 254; McCabe v Riechelmann (No 2) [2023] NSWDC 201.

Amendments

09 March 2026

Amendment to coversheet