Bailey v Meredith

The appeal concerned the application of Part 39A, rule 25 of the District Court Rules, which deals with offers of compromise and *Calderbank* offers, and whether exceptional circumstances or the avoidance of substantial injustice warranted a departure from the usual cost orders. The parties involved were Bailey (appellant) and Meredith (respondent), and the case was heard in the Court of Appeal of New South Wales.

The central legal issue before the Court of Appeal was whether the primary judge erred in her costs order, specifically in relation to an offer of compromise made by the respondent. The court was required to determine if the circumstances of the case justified the primary judge's decision to depart from the usual rule that a party who makes an offer of compromise which is not accepted, and who ultimately obtains a judgment no less favourable than the offer, should recover their costs from the date of the offer.

The Court of Appeal found that the primary judge had erred in her costs order. Their Honours reasoned that the respondent's offer of compromise was a valid *Calderbank* offer and that the appellant's subsequent judgment was no less favourable than that offer. Consequently, the usual rule regarding costs should have applied. The court held that there were no exceptional circumstances or grounds for avoiding substantial injustice that would have justified the primary judge's departure from this rule.

The appeal was allowed. The verdict and judgment on costs made by Judge Sidis on 12 August 1999 were set aside. The appellant was ordered to pay the respondent's costs of the appeal and the leave application. The costs in respect of the claim were divided: the appellant was to pay the respondent's costs up to and including 18 June 1998 on a party and party basis, while the respondent was to pay the appellant's costs after 18 June 1998 on a party and party basis. Finally, an order was made that the costs of each party be set off.