Port Kembla Coal Terminal Limited v Construction, Forestry, Mining and Energy Union

Offers of Compromise 6The Offer was made before the first day of the trial (3 October 2012) for the purposes of rule 42.15A(2)(b) of the Uniform Civil Procedure Rules 2005 ("UCPR"). The Offer was in the following terms: The Respondent [Port Kembla Coal Terminal Limited] offers to compromise the claim on the following terms:

1. Verdict for the Respondent.
2. Respondent's Notice of Motion against the Applicant be dismissed.
3. Each party to pay its own costs.
4. This offer is open for acceptance until 5.00 pm on Friday, 12 October 2012. This offer is made in accordance with Rule 20.26 of the Uniform Civil Procedure Rules 2005 (NSW). 7Port Kembla made a further offer on 20 March 2013, essentially in the same terms as its 28 September 2012 Offer, with the second offer remaining open until 17 April 2013.

Relevant legislation 8The Court's power to award costs is governed by s 181 of the Industrial Relations Act 1996 ("IR Act"): 181 Costs (1) Subject to the rules of the Commission and any other Act or law: (a) the Commission may award costs, and (b) costs are in the discretion of the Commission, and (c) the Commission may determine by whom and to what extent costs are to be paid, and (d) the Commission may order costs to be assessed on the basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis. ... (3) The Commission in Court Session may not award costs in proceedings for a contravention of a dispute order or in proceedings under Division 2 of Part 4 of Chapter 5 (Rules of industrial organisations). ... (4) In this section, costs includes: (a) costs of or incidental to proceedings in the Commission, and (b) in the case of an appeal to the Commission, the costs of or incidental to the proceedings giving rise to the appeal, as well as the costs of or incidental to the appeal. 9The UCPR apply to the Industrial Court: Schedule 1 [8] of the Uniform Civil Procedure Rules (Amendment No 31) 2009, provided that the provisions set out in column 4 of Schedule 1 to the UCPR are excluded. 10Rule 42.1 of the UCPR, which applies to the Industrial Court, relevantly provides: 42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. 11Division 4 of Pt 20 of the UCPR is a part that is excluded from application to the Industrial Court other than where conciliation has been attempted under s 109 of the IR Act: Column 4 of Schedule 1 to the UCPR. There appears to be no issue that conciliation was attempted unsuccessfully in connection with the proceedings before Kavanagh J pursuant to s 109 of the IR Act. Accordingly, in this case, Div 4 of Pt 20 of the UCPR applies to the Industrial Court in respect of any consideration of offers of compromise in connection with an application for costs. 12On 28 September 2012, the appellant made the Offer pursuant to rule 20.26(2) of Div 4 of Pt 20 of the UCPR, as it existed at the time. As at 28 September 2012, rule 20.26(1) and (2) provided that: 20.26 Making of offer (1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms. (2) An offer must be exclusive of costs, except where it states that it is a verdict for the defendant and that parties are to bear their own costs. 13As at 28 September 2012, rule 42.15A of the UCPR (which continues to apply to the Offer) provided for the calculation of costs when an offer is made by a defendant/respondent, and not accepted by the plaintiff/applicant: 42.15A Where offer not accepted and judgment no less favourable to defendant (1) This rule applies if the offer concerned is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim concerned as favourable to the defendant, or more favourable to the defendant, than the terms of the offer. (2) Unless the court orders otherwise: (a) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.

Respondent's contentions 14In relation to the Offer in connection with the first instance proceedings, the CFMEU opposed indemnity costs on three bases: (a)First, the offer also included a collateral term, the dismissal of the Respondent's Notice of Motion, which meant that it did not comply with the requirements of the Rule. Accordingly, rule 52.15A is not enlivened; (b)Second, the offer did not allow a reasonable time for acceptance, and thus did not comply with sub-rule 26(7)(b). Accordingly, rule 52.15A is not enlivened; (c)Finally, even if the Court is of the view that the offer complied on its face with the requirements of rule 26, the Court would regard the offer as merely a strategy to trigger costs consequences. Accordingly, the Court would not exercise the discretion, which discretion is retained in subrule 42.15A(2), to make an indemnity costs order in accordance with (b) therein. 15As to the first basis, the respondent submitted that given the introductory words in r 20.26(2) of the UCPR, and the purpose behind the rule, the Court would construe its terms strictly. It was submitted only an offer that is confined to the terms of the exception in sub-rule 20.26(2) would be regarded as an offer in accordance with the sub-rule. 16The respondent submitted the offer in the present proceedings, whilst employing the words in subrule (2), went beyond them. It included additional terms, namely, that the respondent's motion be dismissed. By including that additional term as part of the offer, it was submitted the respondent had sought to interfere with the Court's capacity to make an order as to costs in respect of the Motion, in circumstances where otherwise that part of the proceedings might properly have been the subject of an application and order for costs other than as provided in the Offer. 17It was further submitted the Court would not regard the offer as effective in a Calderbank sense (Calderbank v Calderbank [1975] 3 All ER 333). There was no intimation in the covering correspondence that the appellant wished to rely upon the letter as a Calderbank offer in the event it was ineffective under the rules: see Whitney v Dream Developments Pty Ltd [2013] NSWCA 188 per Barrett JA at [58]-[60]). 18Finally, on this point it was submitted that if the Court did not regard the Offer as one which has been made in accordance with r 20.26 the provisions of r 42.15A were not enlivened. Accordingly, a basis for the making of an order for costs on an indemnity basis was not demonstrated. 19As to the second basis, the respondent submitted, in the alternative, that the Offer of 28 September 2012 was not one that complied with the terms of r 20.26 as it was not left open for a reasonable time for acceptance. 20As at 28 September 2012, subrule 20.26(7) provided as follows: (7) The following provisions apply if an offer is limited as to the time it is open for acceptance: (a) the closing date for acceptance of the offer must not be less than 28 days after the date on which the offer is made, in the case of an offer made 2 months or more before the date set down for commencement of the trial, (b) the offer must be left open for such time as is reasonable in the circumstances, in the case of an offer made less than 2 months before the date set down for commencement of the trial. 21The respondent observed that the Offer was made by the appellant at 3.50pm on Friday 28 September 2012. The matter was set down for hearing commencing 3 October 2012. Accordingly, sub-rule 20.26(7)(b) applied and the Offer had to be left open for "such time as is reasonable in the circumstances". 22The Offer, according to the respondent, was not left open for such time as was reasonable in the circumstances: The Monday following the offer, 1 October 2012, was a public holiday. The hearing of the matter commenced on Wednesday 3 October 2012. The matter was then set down for further hearing dates on 9, 10, 11 and 12 October in the following week. The Respondent had only one clear working day prior to the commencement of the hearing to consider the offer. Further, its consideration of the offer was complicated by both: (a) Preparation for, and the conduct of, the hearing, which, as the transcript shows, involved the co-ordination of 12 witnesses in the hearing days up to and including 12 October 2012 (Appeal Book Vol 2, Tabs 41-45); (b) The necessity to consult with the 65 individuals the subject of the claim, of whom: (i) all had been employed and resided in the Illawarra area during the period the subject of the claim; (ii) many of whom were no longer employed by the Appellant; (iii) some of whom no longer resided in the Illawarra. The above difficulties were either known to the Appellant, or should have been in the Appellant's contemplation. It was, of course, open to the Appellant to: (a) Make its offer further in advance of the hearing so as to allow the usual time (viz 28 days) for consideration of the offer; or (b) Allow further time for acceptance, having regard to the number of individuals affected by the offer and the exigencies of the commencement of the hearing. As the Court of Appeal said in Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 (per Giles and Tobias JJA at [2]): "...the many observations to the effect that service of an offer of compromise under rules of court obliges the offeree to give serious thought to the risks of the proceedings and their outcomes ( eg Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724; Hillier v Sheather (1995) 36 NSWLR 44 at 422) mean that the court should not be ungenerous to an offeree in determining whether a time is reasonable." In the above circumstances, the Court would not consider the time the offer was open for acceptance was a reasonable time, and accordingly would not regard the offer as one complying with rule 26. 23The third basis upon which the respondent relied in the alternative was that in the exercise of its discretion pursuant to r 42.15A of the UCPR, the Court would not make an order for indemnity costs in favour of the appellant because it would not regard the Offer as anything other than a strategy to trigger costs consequences (Leichhardt Municipal Council v Green [2004] NSWCA 341 at [23] per Santow JA). 24The respondent submitted the timing of the Offer immediately prior to the hearing and the fact that the Offer was that which was the least beneficial (to the appellant) available to the respondent, suggested strongly that its only purpose could have been to obtain for the appellant a costs advantage in the event it was successful in the proceedings. 25The respondent submitted, however, that if the Court was persuaded that an order for indemnity costs pursuant to subrule 52.15A(2)(s) (sic) should be made, the Court would exercise its discretion not to order costs in accordance with the time-frame contemplated in subrule (2)(s)(i) (sic). The relevant rule is subrule 42.15(2)(b)(i). That subrule states that the timing of an indemnity costs order is consequent upon a rejected offer of compromise by the defendant: 42.15 Where offer not accepted and judgment no more favourable to plaintiff ... (iv) 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.... 26The respondent submitted that in circumstances where the defendant/appellant delivered the offer late on the afternoon prior to a public holiday long weekend, the Court should not give effect to any order until at least a working day had elapsed, that is, any order should not take effect before 3 October 2012. 27In relation to the second offer of compromise by the appellant, the respondent relied on its 'Notice of Motion' ground. It further submitted that having regard to its timing, the Court would not regard the offer dated 20 March 2013 as a genuine offer, and would decline to make an order for indemnity costs for the same reasons as outlined above. 28The respondent submitted: [T]he offer came after some 14 days of hearing had already been concluded. It is striking that the offer, unlike the previous offer, allowed the Respondent 28 days to accept. It thus appears as an attempt to perfect the previous offer, which might well have been regarded on reflection as falling short of a reasonable period for acceptance. It would be regarded as nothing more than a further attempt to enliven the costs provisions and not a genuine attempt to compromise the matter. 29As to indemnity costs of the appeal, the respondent submitted that bearing in mind that the respondent was successful at first instance, and had the benefit of that judgment, the Court would not order indemnity costs in respect of the appeal.

Notice of Motion 30An offer of compromise under subrule 20.26(2) of the UCPR is one that does not deal with costs at all, except where it provides that there is to be a verdict for the defendant and that the parties are to bear their own costs: Whitney at [24] per Bathurst CJ; at [52] per Barrett JA. The rationale for this as explained by Bathurst CJ at [25]: [25] The reason for this is that the cost consequences are dealt with in the relevant subrules of r 42 to which I have referred above. Importantly, these rules not only deal with the cost consequences of non-acceptance of an offer but also the cost consequences when an offer is accepted. Although r 42.13A(2) provides for an order for costs in favour of the plaintiff after the time the offer is accepted, the court has power to make a contrary order. An offer providing for payment of costs removes that residual discretion. It is thus inconsistent with the scheme for the making of offers of compromise laid down by the rules at the relevant time. Whilst it would not be of significance in all cases, there are instances where a plaintiff or defendant may wish to argue that the costs order which generally follows acceptance of an offer, is not the appropriate order. An offer containing a term that the offeree pay the costs of the offeror takes away that right which was part of the scheme of the rules at the time. See also Dean v Stockland Property Management Pty Ltd & Anor (No 2) [2010] NSWCA 141 at [25]-[26]. 31The question is whether the term of the Offer that "Respondent's Notice of Motion against the Applicant be dismissed", changed the character of the Offer such that it is not one made in accordance with subrule 20.26(2). 32The CFMEU submitted that Port Kembla had sought to interfere with the Court's capacity to make an order as to costs in respect of the Motion in circumstances where otherwise that part of the proceedings might properly have been the subject of an application and order for costs other than as provided in the Offer. 33By way of background, the Notice of Motion referred to in the Offer was filed by the appellant on 19 October 2010. The Motion sought orders to the effect that if the Court found unfairness on the part of Port Kembla, that its liability be reduced by an amount proportionate to the Court's finding as to the CFMEU's contribution to the unfairness, and consequential orders. The appellant's Motion was dealt with by Haylen J in his principal judgment at first instance. His Honour referred to it as "the cross-claim". At [328] his Honour effectively dismissed the "the cross-claim": [328] After all the evidence has been considered, the Court has accepted that the representations made to the workforce concerning superannuation by PKCT were arguably more definite than Mr Bunting's statement to the Industrial Commission in the dispute proceedings. There was a consistent flavour that although the precise terms may be different, the outcome would be such that they would have equivalent benefits. Mr Cram, in addressing members during this period of intense industrial pressure, was doing no more than passing on to the workforce what the management members of the Joint Working Party expected him to do. Having reached that conclusion, there is no basis for the cross-claim. 34As the appellant submitted, the dismissal of the Notice of Motion is a matter that inevitably followed a verdict for the respondent (Port Kembla) in the substantive proceedings. In a verdict for the respondent no issue would arise from the Motion on the issue of responsibility for apportionment of compensation as between Port Kembla and the CFMEU and there would be no costs consequences. The CFMEU put no substantive submission that any different costs consideration could have arisen on the Notice of Motion. 35Given Port Kembla's Offer sought to compromise the CFMEU's claim on the basis of a verdict for Port Kembla, we are unable to see how the term "Respondent's Notice of Motion against the Applicant be dismissed" made the Offer inconsistent with subrule 20.26(2).

Whether reasonable time for acceptance 36The next issue is whether the appellant's Offer was left open for a reasonable time for acceptance. The Offer was made on 28 September 2012 and was left open until 12 October 2012, a period of 14 days. Subrule 20.26(7)(b) relevantly applied and provided that the offer must be left open for such time as is reasonable in the circumstances. 37The respondent's submission was that it "had only one clear working day prior to the commencement of the hearing to consider the offer." That submission appears to proceed on the assumption that the commencement date of the trial is some sort of cut-off point beyond which no offer of compromise may operate. That is a wrong assumption. 38In our opinion, for the reasons put forward by the appellant, 14 days was a reasonable time in which the respondent had available to consider the Offer. Those reasons were as follows: (a)the Offer was made at a point when all of the evidence was filed and well after written submissions had been exchanged ; (b)the issues in the case were clearly known because on 3 October 2012 (within the period for acceptance of the Offer) the respondent opened its case; (c)there was a hiatus in hearing dates from 3 October 2012 to 9 October 2012 during which instructions could have been taken regarding the Offer; (d)there is no evidence of any attempt by the respondent to extend the time of the Offer because of difficulty in contacting its members or the like. The respondent was clearly capable of obtaining instructions on running the trial during this period and there was no reason it could not consider the Offer and make a decision about it; (e)The respondent had been able to obtain sufficient instructions to make an offer of its own on 3 September 2012; (f)There is no basis for suggesting that the respondent could not give serious thought to the Offer during the 14 day period. 39The respondent's submission also appears to rely on Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 where Basten JA at [12] observed: [12]...The second offer of compromise made by Kooee was served electronically at 11.30am on 30 January 2007, the day before the trial was due to commence. It offered settlement on the basis of a payment by Kooee in the amount of $1.55 million. The offer was expressed to remain open until 10.00am on Wednesday, 31 January 2007, being the time of commencement of the trial. There was no response to that offer. 40The Court of Appeal was required to determine whether this offer was in accordance with subrule 20.26(7)(b), that is, whether it was left open for a reasonable time for acceptance. Basten JA (with whom Giles and Tobias JJA agreed) held it was not (at [23]), although his Honour considered the case was "truly borderline". 41It is to be observed that in Kooee the time left open to consider the offer was approximately 23 hours, the expiration of which coincided with the commencement of the trial. That is not the situation in the present proceedings, with the time left open being 14 days. 42In Kooee, Basten JA identified the factors that come into play in considering whether the time allowed for acceptance is "reasonable in all the circumstances" once a trial commences, or final preparation commences. At [20]-[22] his Honour considered three factors: [20]...The first is that both parties may reasonably be expected to have a clear perception of the strengths and weaknesses of their positions, so that the reasonableness of a particular offer may be speedily assessed. Secondly, because significant costs will be accruing on a daily, even an hourly basis, there is a heightened incentive to respond within the time permitted. Thirdly, and counterbalancing the first factor, the need to address the terms of an offer, provide advice and obtain instructions will often be a significant distraction from final preparation. [21] In relation to the first factor, it should be accepted that by the day before the hearing, in commercial litigation involving experienced counsel and solicitors, the legal representatives would have been able to give the client an immediate assessment of: (a) the approximate costs incurred to date; (b) the likely length of the trial; (c) the approximate amount of costs assessed on an indemnity basis if the matter proceeded to trial, and (d) the most likely outcome, which may involve a range as to quantum. It should also be accepted that someone with authority to bind the client would have been available to give instructions based on legal advice as to the preferable response. [22] In seeking to demonstrate that the offer had not been left open for a reasonable time in all the circumstances, Primus sought to put before the Court evidence of how the offer was made and the circumstances of its own legal representatives at the time. However, that material was not relevant for this purpose. The question of reasonableness must be judged objectively, in the circumstances known, or which should reasonably have been anticipated, by both parties. In setting the time during which the offer is to remain open, the offeror must necessarily rely upon the circumstances as known to it, or which should reasonably be anticipated by it. The actual circumstances of the recipient, unknown to the offeror, may be relevant to an application that the Court otherwise order in relation to costs of a valid unaccepted offer, but so might evidence as to whether the recipient took any steps to bring such matters to the notice of the offeror. 43In the present case, for the reasons submitted by the appellant, the factors identified in Kooee support a conclusion that the period of 14 days was a reasonable time for the respondent to consider the Offer: (a)the costs incurred to date were clearly substantial and could be objectively seen as substantial given the involvement of significant expert evidence, affidavits and preparation over a very long period of time since the commencement of the proceedings on 12 December 2005; (b)the length of the trial remaining was very substantial (at least 20 hearing days) and was known to be substantial at the time the Offer was made; (c)the costs to be incurred if the matter proceeded to trial, assessed on an indemnity basis if the matter proceeded to trial, must have been known to be very substantial; (d)the most likely outcome, that is the "all or nothing" type of outcome, in the litigation was objectively obvious; (e)given that the offer in the present case was open for 14 days, there is no objective basis for suggesting that assessing the offer over the 14 day period would involve a "significant distraction from final preparation". This is particularly so where there was a significant break from hearing between 3 to 8 October 2012, by which time the opening had been given by the respondent [Port Kembla]; and, given the estimated hearing length, there was no need for the respondent to prepare cross examination of the appellant's witnesses during the time the Offer was open.

Whether Offer genuine 44The respondent referred to Leichhardt Municipal Council at [23] in support of its contention that the appellant's Offer was not genuine: [23] It is clear that an offer with no real element of compromise in it, which is designed merely to trigger the costs sanctions, will not be treated as a genuine offer of compromise. Thus an offer by a plaintiff demanding the full amount claimed was held not to be an offer of compromise attracting costs penalties: Tickell v Trifleska Pty Ltd (1991) 25 NSWLR 353. Rogers CJ Comm D concluded that the test was: "... whether in the totality of the circumstances, the offer by the plaintiff represented any element of compromise or whether it was merely, yet another, formally stated demand for payment designed simply to trigger the entitlement to payment of costs on an indemnity basis." (at 355) 45In Leichhardt Municipal Council, the Council had issued a letter making an offer of settlement in terms of "verdict in favour of the Council with each party to bear its own costs". The settlement offer was expressed to be open for 28 days from the date of the letter. The offer appeared to have been a Calderbank offer, but not an offer under Pt 19A of the District Court Rules (at [2]). The offer was in the nature of a "walk-away" offer. 46In Leichhardt Municipal Council, Santow JA reviewed a number of cases involving "walk-away" offers. At [34]-[36] his Honour observed: [34] Nor is the line of authority in this area uniform. In GIO General Ltd v ABB Installation & Service Pty Ltd [2000] NSWCA 118, the issue arose tangentially before the Court of Appeal in the following circumstances. The defendant to a mesothelioma suit (ABB) cross-claimed against GIO, who were the insurers on risk in 1986 (at the time when the plaintiff was found to have been last employed by ABB in an employment of the nature of which the disease was due). TGI had been the insurer on risk at the time of the negligent exposure to asbestos (1963-69) and GIO contended that TGI (rather than it) was liable to indemnify ABB since it was the only insurer on risk during the period of causative exposure. [35] This argument was unsuccessful, the Court holding that s151AB of the Workers' Compensation Act applied, which at the time provided that "any liability of that ... is taken to have arisen when the worker was last employed ... by that employer in an employment to the nature of which the disease was due." Thus GIO was liable. TGI claimed indemnity costs based upon Calderbank offers it had made to ABB prior to the cross-claim proceedings. Those offers were that TGI be let out of the proceedings on the basis it would meet its own costs to that point. In its letters it pointed out to ABB that it considered that s151AB of the Workers' Compensation Act would operate as a defence to its liability. Solicitors for ABB declined the offer. The trial judge rejected the application for indemnity costs and ordered GIO to indemnify ABB and pay all the costs of all parties on the insurance issue on a party-party basis. The trial judge stated: "In the circumstances when all later insurers denied, and one would have thought on instructions and for good cause, liability to indemnify, I do not regard the actions for the solicitors for ABB, in declining to accept the Calderbank offer as unreasonable. I decline to make such an order." [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. 47Indemnity costs, however, were not ordered in Leichhardt Municipal Council. The reasons for declining to do so concerned the effect of the District Court Rules and not any absence of genuineness in the offer of compromise: [42] The first thing to be noted is that under the Rules of Court, indemnity costs are not the stipulated costs sanctions for unaccepted offers of compromise by defendants. As indicated above, the rules of court provide for different costs consequences to flow from unaccepted defendant offers than from unaccepted plaintiff offers. In the Supreme Court Rules, the relevant rule after 30 June 1994 is Pt 52A r 22(6) (which in this respect is not materially different from the predecessor Pt 52 r17(5)). SCR Pt 52A r 22 is mirrored with minor differences in the District Court Rules Pt 39A r 25(6). This version of the rule came into force on 1 January 1998 and was accompanied by Practice Note 42 (above). Under the District Court rule, an unaccepted offer by a defendant has the following consequences: "DCR Pt 39A r 25(6) [c.f. SCR Pt 52A r 22(6)] Where an offer is made by a defendant and not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim to which the offer relates not more favourable to him than the terms of the offer, then, unless the Court in an exceptional case and for the avoidance of substantial injustice otherwise orders, the plaintiff shall be entitled to an order against the defendant for the plaintiff's costs in respect of the claim up to and including the day the offer was made, assessed on a party and party basis, and the defendant shall be entitled to an order against the plaintiff for the defendant's costs in respect of the claim thereafter assessed on a party and party basis." [emphasis added] [43] The rule provides basically that a defendant will be entitled to party and party costs from the date of an unaccepted offer of compromise, if the plaintiff obtains a result no better than the offer. This incentive only really has any effect when the plaintiff is successful, which is not the case here. It is important to note that this is not really anything over and above what the defendant would recover if it had been totally successful in the case. Unlike with the case of offers by a plaintiff, the rules of Court do not provide any entitlement to indemnity costs for a defendant. The rules do not have anything at all to say in a situation such as the present. [44] Given that this is the case under the Rules, it would be a curious thing if a different result were to prevail if a defendant makes its offer by way of Calderbank letter. Although the rules do not constrain a Court's discretion as to costs when dealing with a Calderbank letter (Jones v Bradley (supra)) it should not be forgotten that policy objectives behind the two procedures remain wedded. Furthermore, it would be incorrect to assume that policy cannot move forward. Thus Practice Note 42 and the new DCR Pt 52A r 25(1A) reveal quite clearly a more refined articulation of the policy objectives underlying the offer of compromise procedure in the District Court Rules. It is difficult to accept that the fact that a Calderbank offer by a defendant was not accepted gives rise to a prima facie entitlement to costs on an indemnity basis, when the course of authority in this area has been so overwhelmingly to the contrary. Such a large disparity between the result flowing from an offer of compromise under the Rules and a Calderbank offer can serve no useful purpose. Rather it would tend to increase the mischief which the 1998 DCR amendments sought to rectify - that is that enduring uncertainty as to the effect of offers of compromise on costs reduces their general effectiveness as incentives to litigants to settle early. 48"Walk-away" offers have been accepted as true compromises in other cases, for instance: Melchior v Sydney Adventist Hospital Ltd (No 2) [2009] NSWSC 65; Vagg v McPhee (No 2) [2012] NSWSC 187. In Taheri v Vitek (No 2) [2014] NSWCA 344, the Court of Appeal considered "walk-away" offers: [9] However, as the appellant's submissions point out, the offers made on 17 July and 10 December 2013 in large measure invited capitulation by the appellants in each appeal. There is no evidence before the Court as to the costs incurred by the respondents at those times (some three weeks after the commencement of the first appeal, and seven days after the commencement of the second appeal). It would be expected that virtually no costs would have been incurred by those times. [10] In our view, it would not be appropriate for the non-acceptance of either of those offers to lead to the consequences for which Pt 42, r 42.15 provides. The only measure of compromise involved on the part of the respondents was not to seek their costs which could not, by that stage, have been significant: cf Botany Bay City Council v Latham (No 2) [2013] NSWCA 450 at [12] (Adamson J, Ward and Leeming JJA agreeing). If that were not so, then the rule could be engaged by a defendant (or a respondent to an appeal) early in the litigation making a "walk-away" offer of compromise; that would not serve the public policy of encouraging settlement. [11] For the same reasons, if the correspondence of 17 July and 10 December 2013 be treated in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333, the same result obtains. [12] The position is different in relation to the final offer of compromise, which was served under cover of a letter dated 2 May 2014. By then, there had been an exchange of written submissions on each appeal. The offer of compromise was that in each appeal there be "judgment in favour of the respondents" with no order as to costs. Those offers were open for acceptance for 14 days, until 16 May 2014. Moreover, the letter stated that the respondents' costs on a solicitor/client basis in both appeals, excluding fees of senior counsel, were approximately $120,000. The letter said "accordingly, the compromise proposed in the offer of compromise is very generous". [13] It is not possible, on the materials available to this Court, to determine whether the costs recoverable on assessment incurred by the respondents are $120,000 or anything approaching that amount (which seems extraordinarily high). However, by that time, the respondents had undoubtedly incurred substantial costs and the appellant was well aware of the nature of the submissions the respondents would be making on the appeals. It was correct to say that this final offer of compromise involved a significant element of compromise, and it was unreasonable for the appellant not to accept it. [14] Accordingly, the respondents are entitled to have their costs on an indemnity basis, in each appeal, from 2 May 2014 onwards. 49In an affidavit filed in the present proceedings in support of the appellant's position on costs, the appellant's solicitor deposed that the costs of the appellant incurred in connection with the proceedings as at 28 September 2012 were in excess of $1,300,000. 50By any measure, the amount of costs the appellant was prepared to forego was significant. The Offer by the appellant that the parties would bear their own costs was a genuine attempt to compromise.

Conclusion regarding 28 September 2012 Offer 51We find that the Offer made by the appellant on 28 September 2012 was an offer made in accordance with subrule 20.26(2) of the UCPR. It was a genuine attempt by the appellant to compromise. The Offer was not accepted by the respondent. The appellant obtained an order or judgment on the claim concerned as favourable to the appellant as the terms of the Offer.

Offer of 20 March 2013 52Given we have accepted that the Offer by the appellant of 28 September 2012 met the requirements of subrule 20.26(2) and subrule 42.15A(1), it is unnecessary to consider the later offer of 20 March 2013, although we note it was in the same terms and made at a time when the appellant's costs would have exceeded $1.3 million.

Timing of the Offer 53 Subrule 42.15A(2)(b)(i) of the UCPR provided: 42.15A Where offer not accepted and judgment no less favourable to defendant (2) Unless the court orders otherwise: ... (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and ... 54The respondent had submitted that any order made should not take effect before 3 October 2012. 55Subrule 1.11(3) of the UCPR provides: 1.11 Reckoning of time (3) If, apart from this subrule, the period in question, being a period of 5 days or less, would include a day or part of a day on which the registry is closed, that day is to be excluded. 56Having regard to subrule 1.11(3), our view is that any order for indemnity costs should take effect from 2 October 2012, that being the first working day after 28 September 2012 (28 September 2012 was a Friday, Monday 1 October 2012 was a public holiday. The Registry was closed on 29, 30 September and 1 October 2012).

Costs of the appeal 57The appellant contended r 51.49 of the UCPR is relevant to the issue of costs on the appeal in the Industrial Court. We do not consider that to be correct. Part 51 of the UCPR applies only to the Court of Appeal (see r 51.1). In those circumstances it would appear that Div 4 of Pt 20 of the UCPR applies to questions regarding offers of compromise in appeal proceedings before the Full Bench of the Industrial Court (although this seems doubtful) or, in the alternative, the general discretion to award costs under s 181 of the IR Act applies or, in the further alternative, a combination of s 181 and r 42.1 of the UCPR . 58In these circumstances, the approach taken by the Court of Appeal in Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 is instructive because in that case the provisions of Div 8 of Pt 51 of the UCPR did not apply and the Court of Appeal relied on its general powers relating to costs under s 98 of the Civil Procedure Act 2005. 59In Regency Media the respondent was successful at first instance, but the appellant was wholly successful on appeal and the Court of Appeal ordered that the respondent pay the appellant's costs at first instance and costs of the appeal. The appellant filed submissions seeking indemnity costs in relation to the trial and the appeal on the grounds that it made an offer of compromise to the respondent pursuant to r 20.26 of the UCPR. The offer was for judgment to be entered for the respondent in the sum of $10,000 plus costs assessed up to the date of the offer. The respondent did not accept the offer. 60The Court of Appeal rejected the claim for indemnity costs at first instance on the basis that the offer of $10,000 made at an early stage of the proceedings - indeed, before a defence had been filed - was an invitation to surrender, rather than any form of commercial compromise. In relation to the costs of the appeal the Court stated that its conclusion regarding costs at first instance would lead to the same result with respect to the application for indemnity costs of the appeal. However, the Court stated at [37]: [37] [E]ven if we had been of a different opinion with respect to an order for indemnity costs at trial, we would reject the application that an order of that character should be made with respect to the proceedings in this Court. 61In that respect, the Court stated at [38]-[43]: [38] No offer of compromise was made in this Court pursuant to rr 51.47 and 51.48 of the UCPR. We note that r 51.49 permits this Court to have regard to any offer of compromise made in the court below; however, that rule operates to inform the discretion which must be exercised pursuant to r 51.48, insofar as it picks up and applies in this Court Div 3 of Pt 42 of the UCPR. We do not understand the appellant to invoke r 51.48. [39] In view of the inapplicability of Div 8 of Pt 51, in the present proceedings the Court is concerned with the exercise of the general discretion to award costs pursuant to s 98 of the Civil Procedure Act 2005. A pre-trial offer is relevant in the exercise of that discretion. (See Grace v Thomas Street Café Pty Ltd (No 2) [2008] NSWCA 72 at [33].) The original offer has cost consequences, in the sense that it is a relevant consideration, but it is not an offer under the rule applicable in this Court. The proceedings in this Court are distinct proceedings. [40] One of the reasons underlying the practice of the Court referred to in Grace v Thomas Street Café is that on appeal, parties are in a different position from that which they were in prior to or at trial. Prior to trial, the facts are still to be determined. There may be questions as to the credibility of witnesses or as to the weight of evidence that are in issue. By the time of the appeal, facts have been found, credibility issues resolved and the weight of evidence determined. Although there may be a challenge to such findings, the parties are nonetheless in a different position from that prior to trial and should assess their cases accordingly, if they intend to seek indemnity costs based upon an offer of compromise. [41] Furthermore, the presumptive quality of the rule, leading to a situation in which the Court has to "otherwise order", does not apply in a case in which no offer of compromise has been made in this Court. The original offer was not open to be accepted at any time after judgment below. [42] The respondent was successful at first instance. It was reasonable to support the reasoning of the trial judge. (See Takacs supra at [16].) The discretion to make special costs orders will not generally be exercised in favour of a successful party who has not invoked Div 8 of Pt 51. (Grace v Thomas Street Café supra at [33].) The public policy to encourage settlement is equally applicable in this Court. The fact that one party has won at first instance does not mean that efforts to compromise should cease. [43] Something special is required to vary the usual order as to costs in this Court. We can see no basis for making a special order for the costs of the appeal. 62The offers made by Port Kembla in relation to the first instance proceedings had lapsed and were not open to be accepted after the period for acceptance had expired: cf Regency Media at [41]. There was nothing in either of the offers to indicate that they were intended to have effect other than as offers under r 20.26 of the UCPR, limited as to the time they were open for acceptance. The appeal proceedings before the Full Bench of the Industrial Court are distinct proceedings from the proceedings at first instance. No offer of compromise was made in relation to the appeal proceedings. 63Moreover, we note what was said in Grace v Thomas Street Café Pty Ltd (No 2) [2008] NSWCA 72 at [33], that although costs are in the discretion of the Court, pre-trial settlement offers do not necessarily continue to operate for the purposes of an appeal: Generally, if an offer is not renewed (either in the same or different terms) prior to the appeal, the Court will not make a special costs order in respect of the appeal. 64We are not satisfied that costs of the appeal should be on an indemnity basis. The respondent shall pay the appellant's costs of the appeal on the normal basis as agreed or assessed.

Orders 65The Court makes the following orders: (1)In respect of proceedings in Matter No IRC 6506 of 2005: (a)The Construction, Forestry, Mining and Energy Union (New South Wales Branch) shall pay Port Kembla Coal Terminal Limited's costs: (i)Ordered on 24 May 2007 (in respect of the costs thrown away by the amendment of the proceedings); (ii)On an ordinary basis as agreed or assessed from 12 December 2005 to 1 October 2012; (iii)On an indemnity basis as agreed or assessed from 2 October 2012. (2)In respect of proceedings in Matter No IRC 895 of 2013, the Construction, Forestry, Mining and Energy Union (New South Wales Branch) shall pay Port Kembla Coal Terminal Limited's costs on an ordinary basis as agreed or assessed.

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