Background
These are related proceedings concerning statutory demands. On 3 June 2026, the court made substantive orders (reported at [2026] NSWSC 629): in the Great Northern matter, setting aside a statutory demand for the full amount; in the Ironbark matter, varying a statutory demand from $1,176,461 to $276,461. This judgment addresses costs.
The Great Northern plaintiff sought to recover all costs. The Ironbark defendants, having obtained only partial success (the demand was reduced but not eliminated), relied on an offer of compromise served 14 May 2026, proposing to vary the statutory demand to $250,000. The plaintiff rejected the offer and proceeded to trial, ultimately achieving a better outcome than the defendants’ offer.
The Court’s Holding
In the Great Northern proceeding, the plaintiff was wholly successful and costs follow the event. The court rejected the defendant’s submission that partial success occurred on an unstated “limitation period issue,” finding the plaintiff achieved complete success on its primary argument and the fallback issue became irrelevant at trial.
In the Ironbark proceeding, the court found the plaintiff’s rejection of the 14 May 2026 offer was unreasonable. Although the offer was silent on costs, it proposed an outcome superior to the final judgment ($250,000 versus $276,461). Under UCPR r 42.13A(2), had the plaintiff accepted, it would have been entitled to ordinary costs. The rejection therefore triggered UCPR r 42.15, imposing indemnity costs on the plaintiff. The court rejected the defendant’s arguments for departing from this rule, finding no transgressions of sufficient moment to warrant exception.
Key Takeaways
- Complete success in set-aside proceedings entitles plaintiff to full costs; no apportionment for fallback arguments abandoned at trial.
- A settlement offer superior to the ultimate judgment makes rejection unreasonable, triggering indemnity costs consequences even where the plaintiff achieves substantial relief.
- An offer of compromise silent on costs nonetheless triggers the default cost provisions of UCPR r 42.13A and r 42.15.
- Late filing of evidence, abandonment of arguments at trial, and raising matters in reply do not justify departure from ordinary application of the costs rules.
Why It Matters
This judgment reinforces the commercial incentive to accept reasonable settlement offers. A plaintiff who obtains substantially better terms at trial than were offered is nonetheless exposed to indemnity costs if the offer itself would have been more favorable—a counterintuitive but significant consequence under the UCPR. The judgment clarifies that courts will enforce settlement offer consequences strictly unless there are transgressions of real magnitude.
The decision is also significant for statutory demand practice, where partial reduction of a demand can still leave a plaintiff exposed to cost penalties if settlement proposals are rejected unreasonably. Practitioners must carefully assess settlement offers against likely trial outcomes, accounting for the potential shift to indemnity costs if rejection proves unjustified.