Australia, Aug. 4 -- New South Wales Land and Environment Court issued text of the following judgement on July 4:

1. I delivered judgment in these proceedings on 30 April 2025: see 85 Princess Pty Ltd v Fleming [2025] NSWSC 407. The substantive result was that the plaintiff (85 Princess) established that the defendant (Mr Fleming) was in breach of contract but that it was only entitled to nominal damages, which were assessed at $100.

2 These reasons concern the question of costs.

3 On 6 June 2024, the defendant served a notice of offer of compromise on the plaintiff, made pursuant to r 20.26 of the Uniform Civil Procedure Rules 2005 (NSW). This offer was for judgment against the defendant in the amount of $125,000, inclusive of interest but exclusive of costs. There is no dispute that the offer was a valid offer made pursuant to r 20.26. The plaintiff did not accept the offer.

4 UCPR r 42.15 provides:

(1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim no more favourable to the plaintiff than the terms of the offer.

(2) Unless the court orders otherwise-

(a) the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and

(b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis-

(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and

(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.

Both parties accepted that this rule is engaged. That is because 85 Princess obtained a judgment (damages in the amount of $100) that was less favourable than the terms of the offer ($125,000).

5. Mr Fleming submitted that the ordinary consequence of this rule is that 85 Princess should pay his costs assessed on an indemnity basis from the day following the day on which the offer was made (7 June 2024). 85 Princess accepts that the rule applies and that there should be an order that it pay Mr Fleming's costs on an indemnity basis from 7 June 2024.

6. The ordinary consequence of r 42.15 is that 85 Princess is entitled to an order for costs to be assessed on the ordinary basis up to 6 June 2024. That is what 85 Princess contends to be the appropriate order. Mr Fleming contends that the Court should 'order otherwise' by ordering that 85 Princess pay his costs on the ordinary basis up to 6 June 2024.

7. There is a suggestion in the submissions for 85 Princess that the discretion to 'otherwise order' afforded by r 42.15 should only ever be exercised in favour of an offeree. It was submitted that it is novel for an offeror to invoke the discretion to achieve an outcome that is more favourable to it than what is provided for by the rule. It is true that the common circumstance where an application is made to 'order otherwise' is where an offeree contends that there should not be an order for indemnity costs notwithstanding the offer of compromise. However, there is no reason to suppose that the Court can only 'otherwise order' if it is in favour of the offeree. If there is good reason to 'otherwise order' on an application by the offeror, the Court can do so. This is such a case.

8. In Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11, McHugh J (who was in dissent but not relating to this point) noted (at [67]) that the principle that a successful party is entitled to an order for costs is grounded in reasons of fairness and policy. His Honour observed (at [70]) that the Court may award costs in favour of a defendant where the plaintiff has obtained only nominal damages because, "in reality, the successful party lost the litigation and the unsuccessful party won".

*Rest of the document can be viewed at: (https://www.caselaw.nsw.gov.au/decision/197d3792965fa4c09f5f6ad0)

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