Background
Following the principal judgment on 12 May 2026, the executors of David Daley’s estate sought indemnity costs against Geoffrey O’Connell, who had been sued to recover funds under a loan agreement. The plaintiff had made two settlement offers: the first in June 2024 for $3,700,000 plus interest; and a second formal offer under UCPR rule 20.26 on 1 May 2025 for $3,868,495.00 plus “costs as agreed or assessed.” The defendant rejected both offers.
At trial, the plaintiff succeeded in recovering the principal sum of $3,700,000 plus interest totalling $498,536.67 (calculated to 18 April 2026), with further interest accruing to judgment entry, resulting in a total judgment of $4,214,185.63. The defendant then sought both indemnity costs (by opposing the plaintiff’s application) and a stay of the judgment pending appeal until 12 August 2026 (by motion filed 16 June 2026).
The Court’s Holding
Chen J granted the plaintiff’s application for indemnity costs and dismissed the defendant’s motion for a stay. First, the court found that the 2025 offer was a valid offer of compromise under UCPR rule 20.26, notwithstanding the reference to “costs as agreed or assessed.” Following Curtis v Harden Shire Council (2015) and Ye v Chen (2022), such language does not violate the prohibition on offers that “include an amount for costs” because the rule focuses on quantified amounts rather than reference to assessed or agreed costs.
Second, because the plaintiff obtained judgment no less favourable than the offer, the court found a prima facie entitlement to indemnity costs under UCPR rule 42.14. The defendant bore the burden of demonstrating extraordinary circumstances to “order otherwise.” The court rejected the defendant’s argument that the offer lacked genuine compromise. The $100,000 discount (approximately 2.6% of the offered amount) represented a substantial forgoing of money and constituted objective compromise. The court also rejected arguments that particular circumstances—such as the defendant’s credibility issues at trial or the defendant’s state of knowledge at the time of the offer—justified departure from the general rule. The adjusted judgment sum, applying UCPR rule 42.16 to disregard post-offer interest, was no less favourable than the offer amount.
On the stay application, the court found the defendant’s evidence of proposed security entirely inadequate. Although the defendant claimed to be selling his business and owned unencumbered residential property, he provided only vague, general assertions unsupported by objective evidence such as business valuation, property valuation, or undertakings not to dispose of assets. The court held that a judgment creditor is entitled to protection from the risk of asset dissipation, and the defendant’s submission that “little could be done” to dispose of assets in the short timeframe was insufficient.
Key Takeaways
- An offer of compromise that refers to “costs as agreed or assessed” is compliant with UCPR r 20.26 and does not violate the prohibition on offers including quantified amounts for costs.
- Where a plaintiff obtains judgment no less favourable than a validly made offer of compromise, indemnity costs follow as the “normal rule” unless the defendant establishes extraordinary or out-of-the-ordinary circumstances; mere reasonableness in rejecting the offer is insufficient.
- A discount representing approximately 2.6% of the judgment amount qualifies as genuine compromise; an applicant cannot simply characterise any discount as “modest” without substantiation.
- A party seeking a stay of judgment must provide concrete, objectively verifiable evidence of security (such as valuations) and undertakings protecting the judgment creditor; vague assertions and reliance on post-judgment events are insufficient.
Why It Matters
This decision clarifies important procedural and substantive questions under New South Wales civil procedure law. It confirms the proper interpretation of UCPR rule 20.26 regarding settlement offers, removing ambiguity about whether references to assessed or agreed costs breach the rule. More significantly, it reinforces the strong policy underlying the indemnity costs regime: rejection of a genuine offer of compromise carries serious cost consequences, and litigants cannot escape those consequences by showing they acted reasonably or faced difficult facts. The burden rests firmly on the defendant to show extraordinary circumstances.
The judgment also establishes important guardrails for stay applications. Courts will require concrete evidence—valuations, undertakings, objective documentation—rather than general assertions about asset availability. This protects judgment creditors from the risk of asset dissipation while appeals proceed, a critical safeguard in litigation involving high-value monetary judgments.