Hall & Hall v Basbuild Pty Ltd - [2013] SADC 132

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Appeal Against a Master's Decision)
HALL & HALL v BASBUILD PTY LTD
[2013] SADC 132
Judgment of His Honour Judge Beazley
10 October 2013
PROCEDURE
PRACTICE AND RULES OF COURT - PURPORTED ACCEPTANCE OF OFFER OF SETTLEMENT
Appeal by Defendants/Appellant against a determination of a Master of the Court that a purported offer by the Plaintiff/Respondent to settle its claim for a principal monetary sum and a specific sum for costs was not a valid offer capable of being accepted pursuant to 6 DCR 187 and 188 of the Rules of Court - the Plaintiff's offer to accept the sum of $40,000 inclusive of GST plus costs fixed in the sum of $3,500.00 was filed on the day the proceedings were commenced on 1 May 2008 - almost 3 years later on 9 February 2011, the Defendants purported to accept the offer pursuant to 6 DCR 188 - whether the offer met the description in 6 DCR 187 - whether power to permit withdrawal of offer nunc pro tunc - Rules of Court, 6 DCR 188, amended in 2007 to provide a costs penalty in 6 DCR 188 (6A) for a Plaintiff to accept a formal offer of settlement from a Defendant after a period of 14 days - no amendment to Rules where offer filed by a Plaintiff - query whether unintended differences between Plaintiffs and Defendants in Rule 6 DCR 188.
Held: Appeal allowed. The Plaintiff's Notice of Offer dated 1 May 2008, is compliant with regime under Rules of Court 6 DCR 187 and 188. Prima facie the Defendants are entitled to have judgment entered pursuant to Rule 6 DCR 188(5).
District Court Rules 6 DCR 187, 188 and (1987) Rules 40 and 41, referred to.
Rapuano (trading as Raps Electrical) v Karydis Frisan & Anor [2013] SASCFC 93; United Petroleum Pty Ltd v Skorpos (No 2) [2012] SASC 215; Rule Chambers Pty Ltd v Badge Constructions (SA) Pty Ltd [2009] SASC 70; Verlado & Anor v Andonov [2010] VSCA 38; BHP Billiton Ltd v Parker [2012] SASCFC 73; Bartolo v Hancock [2010] SASC 305; Whitney v Dream Development Pty Ltd [2013] NSWCA 188; Council of Botany Bay v Michos [2013] NSWCA 244; Karabay v Carr (No 2) [2013] NSWSC 773; Vieira v O'Shea (No 2) [2012] NSWCA 121; Brown v Unique Building Pty Ltd (No 2) (2009) 261 LSJS 267; Roads Corporation v Love [2010] VSC 154; Hazelene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; GIO v Nathan Fosse [1999] NSWCA 356; Transport Accident Commission v Coyle [2001] VSCA 236; Vagg v McPhee (No 2) [2013] NSWCA 126; McLaughlan & Bigwood, "Lapse of Offers due to changed circumstances: A Contract Conversation", (2011) 27 JCL 222, considered.

HALL & HALL v BASBUILD PTY LTD
[2013] SADC 132
Introduction

This is an Appeal instituted by the Defendants, David Hall and Joan Hall (“the Appellants”) from certain orders made by a Master of the Court on 29 February 2012.
It concerns an allegedly late acceptance by the Appellants of an offer filed at the commencement of the proceedings by the Plaintiff.
The Appeal involves an important point of law, namely the proper construction of formal offers of compromise under Rules 6 DCR 187 and 6 DCR 188. There were a number of other significant issues. It was unclear as to whether they were ultimately abandoned by the parties before the Master, or left unresolved to await the determination of a point of construction. I will touch upon them later in these reasons.[1]
[1] See P4, infra
This Appeal is restricted to the issue of whether the subject offer, expressed as a principal sum for damages together with a specified sum for costs, is compliant with Rule 6 DCR 187. This issue has “troubled” Courts in various Australian States,[2] leading to a “flood” of recent decisions of interstate Superior Courts, albeit with differences in the expressions contained in the respective Rules of Court.[3]
[2] See Whitney v Dream Development Pty Ltd [2013] NSWCA 188; Rule Chambers v Badge Constructions (SA) Pty Ltd (2009) 261 LSJS 434; Public Trustee v Newman [2012] SASC FC 18; and Bartolo v Hancock [2010] SASC 305; and Rapuano (Trading as Raps Electrical) v Karydis Frisan & Anor [2013] SASCFC 93
[3] Karabay v Carr (No 2) [2013] NSWSC 773; Railcorp v Vero Insurance (No 2) [2012] NSWSC 926; Verlado v Andonov [2010] VSCA 38; Council of Botany Bay v Michos [2013] NSWCA 244; Vagg v McPhee (No 2) [2013] NSWCA 126; Vieira v O'Shea (No 2) [2012] NSWCA 121; Roads Corporation v Love [2010] VSC 154; Hazeldene's Chicken Farm v Victorian Workcover Authority (No 2) [2005] VSCA 298; Transport Accident Commission v Coyle [2001] VSCA 236;
In a different context, in Crawley v Crawley Land,[4] Atkinson J adopted the following comments from Lord Bingham of Cornhill:
The law loves compromise.
It has good reason to do so, since a settlement agreement freely made between both parties to a dispute ordinarily commands a degree of willing acceptance denied to an order imposed on one party by court decision. A party who settles forgoes the chance of total victory, but avoids the anxiety, risk … which is inherent in almost any contested action, and escapes the danger of total defeat.
The law reflects this philosophy; by making it hard for a party to withdraw from a settlement agreement … Rules of Practice are framed so as to encourage settlement, by exposing the substantial loser of the action to a heavy burden of costs, and enabling the same protection against that burden.
But there is always a catch. To negotiate a final and binding settlement agreement, to make sure that all necessary matters are covered, to express the terms clearly and unambiguously … may call for as such much skill, including legal skill, as fighting the action.
[4] [2012] QSC 294
That case law, however, has generally involved the failure of a party to accept a filed offer, and the cost consequences of such a failure.[5] There is a dearth of authority with respect to the purported acceptance of a filed offer.[6]
[5] See United Petroleum Pty Ltd v Skorpos (No2) [2012] SASC 215
[6] Contrast Heather v Vita Pacific Ltd (1996) 6 TAS R 52
Background
On 28 June 2007, the Appellants entered into a building contract with the Plaintiff, Basbuild Pty Ltd, (“the Respondent”) for the construction of a residence on vacant land at Tennyson. That land had been separately purchased by the Appellants from the directors of the Respondent on 16 May 2007.
On 26 March 2008, the Appellants purported to terminate the building contract because of alleged delays.
By letter dated 29 April 2008, the Respondent asserted that the Appellants’ purported termination was wrongful, and constituted a repudiation by them of the building contract. It purported to accept that act of repudiation and to terminate the building contract.
On 1 May 2008 the Respondent issued the within proceedings against the Appellants, seeking damages for loss of profit, claiming therein, the principal sum of $67,500.00 inclusive of GST, interest and costs.
On the same day, 1 May 2008, the Respondent filed a formal offer of settlement, purportedly pursuant to 6 DCR 187 of the Rules of Court. The offer was expressed as follows:
FORM 23
Offer of Settlement
The Plaintiff’s (sic) OFFER pursuant to Rule 187 to Settlement (sic) the action as follows:
Payment in the sum of $40,000.00 inclusive of GST plus costs fixed in the sum of $3,500.00.
The Summons, Statement of Claim and the Offer of Settlement were served on the Appellants on 2 May 2008.
Rule of Court 6 DCR 187(3)(b) and (c) expressly permitted the offeror to specify the quantum of costs.
The practice under the predecessor, (1987) Rules of Court, provided that an offeror need only specify a “scale of costs”.
In Shaw v Jarldorn,[7] Doyle CJ said of the (1987) Rules:
Another feature of the rule is that it permits the plaintiff to make or revise an offer up to … the start of the trial. In this respect the rule necessarily contemplates that a plaintiff can make or revise a late offer, and that a plaintiff who betters such a late offer is ordinarily entitled to costs for the whole of the action as between solicitor and client.
[7] (1999) 76 SASR 28
Similarly, under the subject (2006) Rules of Court, a Plaintiff might file a Notice of Offer early in the proceedings but revise it up to 7 days before trial. See United Petroleum Pty Ltd v Skorpos (No2)[8] and Rapuano (trading as Rap’s Electrical) v Karydis Frisan and Anor.[9]
[8] [2012] SASC 215
[9] [2013] SASCFC 93
The Respondent did not revise its Notice of Offer. It may be that it anticipated an early compromise, and filed it as a “here and now” offer.[10] It may be that the Respondent had deliberately filed a low figure for costs, assuming that if the Appellants had failed to accept the offer as a whole, then they may face the risk of an order that they pay solicitor/client costs to the Respondent. It may simply be that the Respondent had formed a mistaken view as to whether Rule 6 DCR 188(6A), supra, applied to the acceptance by a Defendant as opposed to a Plaintiff.[11]
[10] See Bartolo v Hancock [2010] SASC 305. Casebook p 68
[11] Email 9/2/11 at Casebook p 57
I will not however speculate as to why the Notice of Offer was not revised by the Respondent, so as to take account of the escalating costs.
As is plain, no specified time limit had been placed by the Respondent upon the acceptance of the Notice of Offer by the Appellants. It seems clear that an offer under 6 DCR 187 cannot be expressed to remain open for a limited time.[12]
[12] See Rule Chambers Pty Ltd v Badge Constructions (SA) Pty Ltd (2009) 261 LSJS 434. Contrast Karabay v Carr (No 2) [2013] NSWSC 773; and Bartolo v Hancock [2010] SASC 305
The Appellants did not immediately accept that offer. Instead, on 6 June 2008, they filed a Defence to the subject proceedings, in which they denied the Respondent’s claim against them, and repeated that they had validly terminated the building contract.
Thereafter numerous emails passed between the solicitors for each party. Those emails are set out in the respective affidavits of the solicitors.[13] Each of those emails contained privileged material which must be taken to have been waived.[14]
[13] Principally that of Mr Ryan sworn 18/11/11 at Casebook pgs 14 and 54
[14] See Evidence Act 1929 (SA) s67C(1)(a) and (c); and Chapman v Allan and Draper (1999) 74 SASR 274 at 287-288
A settlement conference was held on 15 December 2008; however a compromise was not achieved. Very properly no reference was made before me as to any communications at that conference.[15]
[15] See Evidence Act 1929 (SA) s 67C(1)
On 8 December 2010 the within proceedings were set down for a listing conference to be held on 13 January 2011.
On 11 January 2011 the appellants, themselves, filed and served a Notice of Offer to settle in the sum of $25,000.00 in addition to costs in the sum of $3,500.00.[16]
[16] See Casebook p 15, paragraph 21
I do not propose to detail any offers set out in any e-mails, irrespective of whether privilege was waived, save for that of 18 January 2011. At that time the Respondent’s solicitor expressed his client’s instructions, that the Respondent’s filed offer of 1 May 2008, “can be accepted by your clients at any time, and the matter will settle”.[17]
[17] See Casebook p 54
On 9 February 2011, almost 3 years after the Respondent’s Notice of Offer was filed and served, the appellants filed a Notice of Acceptance of that offer, purportedly pursuant to 6 DCR 188 of the Rules of Court. That Notice was expressed as follows:
FORM 24
Acceptance of Offer
David Hall
First Defendant
Joan Hall
Second Defendant
ACCEPTS pursuant to Rule 188 the offer made by the Plaintiff, Basbuild Pty Ltd filed on 1 May 2008 for payment of $40,000.00 (inclusive of GST) and legal costs of $3,500.00 and seeks judgment by consent in terms of that offer.
It would have been patently obvious to the Appellants and their solicitors, in February 2011, that significant costs had been incurred by each of the parties over the period of almost 3 years which had elapsed since the Notice of Offer had been filed.
The Issue
Unfortunately in the subject case, when properly distilled, the real issue between the parties is the responsibility for costs incurred between the date of the Respondent’s filed offer and the date of the purported acceptance by the Appellants.
The parties elected to limit their submissions to the single issue as to the construction of the Rules of Court, and whether the Respondent’s Notice of Offer was compliant with the Rules. This placed the Master in a difficult position, in attempting to resolve all of the issues. It would have been preferable if all of the issues between the parties had been argued and determined by the Master before this appeal was referred to me.[18]
[18] See Scott v Williams (No 2) [2003] SASC 32 at [29]-[33]
If the action has not been compromised, then the proceedings remain on foot. Upon completion of the argument, I reserved my decision. I regret the delay which has occurred; caused in part by my work load. I then became aware that similar issues were being considered by various Courts of Appeal.[19] I thought it prudent to await the guidance of those Courts to reconcile conflicting dicta in the case law.[20]
[19] Rapuano (trading as Rap's Electrical) v Karydis Frisan and Anor
(No 2) [2012] SADC 177 (delivered 7/12/12)
[20] Whitney v Dream Developments, supra, Rapuano (trading as Raps Electrical v Karydis Frisan & Anor, supra
It was obviously in the interests of both parties to resolve the issue of costs. It was common ground that judgment ought be entered for the Respondent in the sum of $40,000.00 inclusive of GST. I invited the parties at the conclusion of their submissions to consider some other resolution of this matter.[21] It is also a matter of regret that the parties have not been able to resolve this matter. They have exposed themselves to further risks of costs.
[21] Transcript pgs 20-21, 30
The relevant Rules of Court
The District Court Civil Rules provide a regime for the making of “formal offers of settlement” by filing the offer in Court.[22] That regime is set out in 6 DCR 187 and 6 DCR188 of the Rules of Court 2006. A formal offer can be filed by a Plaintiff or by a Defendant.
[22] BHP Billiton Ltd v Parker [2012] SASCFC 73 at [261-265].
It must however be in the approved form pursuant to Rule 187(3)(a).
The subject Notice of Offer and the Notice of Acceptance were respectively drawn in accordance with Forms 23 and 24 of the Rules of Court.
Such an offer can be accepted by the party to whom it is made at any time before the date falling 7 days before the first or any subsequent date fixed for trial. A party may withdraw any Offer of Settlement at any time before it is accepted.
It is convenient to set out the relevant terms of the relevant Rules of Court.
3.     Objects
(a)     To establish orderly procedures for the just resolution of civil disputes; and
(b)     To facilitate and encourage the resolution of civil disputes by agreement between the parties; and
(c)      To avoid all unnecessary delay in the resolution of civil disputes; and
(d)     To promote efficiency in dispute resolution so far as that object is consistent with the paramount claims of justice; and
(e)     To minimise the cost of civil litigation to the litigants and to the State.
187—Offers of settlement
(1)     A party may, before the relevant date, file an offer of settlement in the Court (a formal offer of settlement).
(2)     The relevant date is—
(a)the date falling 21 days before the first, or any subsequent, date fixed for the trial to commence; or
(b)if the offer relates only to costs and is made in proceedings relating only to the adjudication upon costs, the date falling four days before the date appointed for the adjudication.
(3)     The offer must—
(a)     be in an approved form; and
(b)if the offer relates to some, but not all, of the claims involved in the proceedings—state to which claims it relates; and
(c)state whether the offer relates to costs and, if so, the amount of the offer so far as it relates to costs; and
(d)if the offer relates both to principal relief and costs—state whether the party to whom the offer is made may accept the offer of principal without also accepting the offer as to costs, (my emphasis)
and a copy of the offer must be served on all other parties to the action.
(4)     …..
(5)     If a defendant makes an offer of settlement for a specified amount, the offer may be accompanied by a payment into Court of the relevant amount.
(6)     An amount paid into Court may be increased but cannot be withdrawn in whole or part unless—
(a)     the plaintiff consents; or
(b)     the Court permits its withdrawal.
(7)     A formal offer of settlement may be withdrawn at any time before it has been accepted by the filing and service on each party to the proceeding of a notice of withdrawal and in such cases, subject to any Court order to the contrary, the offer will be treated as if it had never been made.
188—Consequences of filing offer of settlement in Court
(1)     A party to whom a formal offer of settlement is made may, before the relevant date—
(a)     accept the offer; or
(b)if the offer relates to both the principal relief and costs and the offeror has not indicated that the offer may only be accepted in its entirety—accept the offer so far as it relates to principal relief. (my emphasis)
(2)     In subrule (1), the relevant date is—
(a)the date falling 7 days before the first, or any subsequent, date fixed for the trial to commence; or
(b)     ….
(3)     The acceptance of a formal offer of settlement—
(a)     must be in an approved form; and
(b)     takes effect on the filing of the acceptance in the Court.
(4)     A copy of the acceptance of a formal offer of settlement must be served on all other parties to the proceedings as soon as practicable after it is filed in the Court.
(5)     If a formal offer of settlement is accepted, judgment may be entered, by consent, determining the relevant action or claim on a basis reflecting the terms of the offer. (my emphasis)
(6)     If a formal offer of settlement so far as it relates to principal relief is not accepted by the party to whom the offer is made and the Court determines the relevant action or claim on terms (as to principal relief) that are no more favourable to the party than the terms of the offer, then, subject to the Court's order to the contrary—
(a)the party to whom the offer was made is not to be entitled to costs referable to the period falling after the relevant date; and
(b)     the party that made the offer—
(i)if a defendant—is entitled to costs referable to the period falling after the relevant date; and
(ii)if a plaintiff—is entitled to the whole of the party's costs of action on a solicitor/client basis and the defendant is not entitled to any costs not otherwise ordered.
(6A) If, after the relevant date, a plaintiff accepts a formal offer of settlement insofar as it relates to principal relief, the Court may, on the application of any other party, order that the plaintiff pay the costs of action incurred by that other party during some or all of the period after the relevant date. (my emphasis)
(7)     In subrules (6) and (6A), the relevant date is the date falling 14 days after the date of service of the offer.
(8)     ….
Summary of the legal principles
Recently the Full Court of the Supreme Court considered the scheme of the Rules in Rapuano (trading as Raps Electrical) v Karydis Frisan and Anor.[23]
[23] [2013] SASCFC 93
In his Reasons, on behalf of the Court, Peek J. extensively reviewed the principles as set out in the relevant case law. The regime under the Rules is distinguishable from those Rules in some interstate jurisdictions which proscribe any reference to costs in filed offers, leaving orders for costs to be separately considered by those Courts.[24] I respectfully adopt and, apply his Honour’s Reasons.
[24] In NSW - See Whitney v Dream Developments Pty Ltd [2013] NSWCA 188, uniform Rules 20.26 and 42.13 - 42.15

His Honour noted that the Rules of Court have a dual purpose, in 6 DCR 188(5) on the one hand, and 6 DCR 188(6)-(7) on the other. The first purpose is to provide, in 6 DCR 188(5), for a means by which a consent judgment may be entered upon the acceptance of a formal offer.
His Honour explained the distinction between an offer of compromise under the general contract law, and that under the Rules. Whereas the terms of an offer of compromise under the general law may be unconfined, an offer under the Rules must be restricted to the subject claim, it must also comply with Rules 6 DCR 187 and 188, and with the Forms prescribed therein.
Peek J. described Rule DCR 188(5) as part of “a stand-alone regime which is not dependent upon the formation of a contract between the parties”. His Honour affirmed the dicta of the Full Court in Rule Chambers Pty Ltd v Badge Constructions (SA) Pty Ltd, supra, that there are clear differences between this kind of regime, and the common law principles relating to the formation of contract, noting that a different result may be obtained from this stand alone regime the from that under “contract law”.
Indeed, in the subject case, the filing of a counter offer by the Appellants, on 11 January 2011, would constitute a rejection of the Respondent’s offer, under the general law, whereas, a Notice of Offer, otherwise compliant with the Rules, would remain capable of acceptance by the Appellants, until it was withdrawn.
To overcome any uncertainty in the nature of the offer, an offeree must make it clear that the offer is a Rules Offer, and not one under the general law principles.
In Verlado v Andonou, the Court of Appeal (Vic)[25] concluded that before a party could face the risk of orders for costs under the Rules, any Notice of Offer had to be clear that the offer was made pursuant to the Rules, both expressly and in its true character.
[25] [2010] VSCA 38
What is common to the respective regimes in the various jurisdictions is that any party seeking to rely upon the Rules must “accommodate and abide by the regime … so that the Rules operate untrammelled by any apparent contractual qualification or contradiction”.[26] Peek J. noted that, “effectively … an offer which did not comply with the Rules, and was not in a form capable of producing a judgment for the Plaintiff upon acceptance, was a nullity for the purpose of the Rules”.
[26] Whitney v Dream Developments Pty Ltd at [50]-[52]
It follows that if a party to an action wishes to make a settlement offer extending to matters outside the specific claim; or if that offer is otherwise not in compliance with the regime in the Rules, then the question as to whether the action has been compromised will be determined by the application of general law principles, and not pursuant to the Rules.
The second purpose is to provide penal sanctions in Sub-Rules 6 DCR 188(6)-(7). In contrast to 6 DCR 188(5), the penal sanctions concentrate solely upon the quantum of the principal relief. They are silent as to offers as to costs.
In this respect the scheme of the Rules is clear.
Rule 6 DCR 188(6) details the consequences of a failure to accept a filed offer as to principal relief.
Rule 6 DCR 188(6A) details the consequences of an acceptance of a filed offer as to principal relief, but only as to a plaintiff accepting it after a period of 14 days.
Sub-Rule 6 DCR 188(6A) was inserted in consequence of an amendment which commenced on 1 August 2007. I infer that its purpose was to overcome perceived difficulties faced by Defendants, who, having filed an early Offer to Settle, had faced increased costs whenever a Plaintiff delayed acceptance until shortly before trial. The amendment restored the position of such a Defendant under the predecessor 1987 Rules of Court.
As is plain, 6 DCR 188(6A), invests the Court with a discretion to award costs against a Plaintiff, whenever a Defendant’s Notice of Offer, is accepted on a date falling 14 days after the service of offer; however no such provision applies to the facts of the subject case, namely the purported acceptance by a Defendant of a Plaintiff’s Notice of Offer on a date falling 14 days after the service of the offer.
I do not accept that this was some oversight in the Rules, nor do the Rules need to be further amended.
Although this might appear, prima facie, to be incongruous, I assume that draftsman of the Rules had considered that there was no need to protect a Plaintiff from later acceptance by a Defendant, because the Plaintiff was entitled to either revise his offer to cover an increase in costs, or to withdraw his offer.
The applications before the Master
Upon those facts, each party brought an application seeking relief against the other, with each supported by affidavit.[27]
[27] The respondent's application was supported by affidavits of its solicitor sworn on 7 September 2011, and 18 November 2011. The appellants' application was supported by an affidavit of their solicitor sworn 23 November 2011. Little or no assistance is provided by those affidavits to the construction of the Rules of Court.
The only common ground was that each party sought orders that judgment be entered for the Respondent in the sum of $40,000.00 inclusive of GST, (the “principal sum”).
The first application, in time, was issued by the Respondent.[28] The amended form of the Respondent’s application disclosed a number of alternatives, some of which were clearly inconsistent. It alleged, that the Court ought not only enter judgment for it for the sum of $40,000.00 inclusive of GST, together with interest thereon, but, that it ought be awarded solicitor/client costs from 15 May 2008 – namely a date 14 days after its otherwise sought to be impugned Notice of Offer had been filed by it. In the alternative it sought declarations that its own Notice of Offer did not comply with 6 DCR 187; that the Appellants’ Notice of Acceptance did not constitute a valid acceptance of offer; and that, in the further alternative the Respondent ought be given leave to withdraw the Notice of Offer.
[28] Dated 7 September 2011; Casebook P7, amended by an application dated 12 December 2011; Casebook P82
The second application was issued by the Appellants,[29] seeking, inter alia, strictly in accordance with the Notice of Offer, that judgment be entered in favour of the Respondent, for the sum of $40,000.00 inclusive of GST (with no allowance for interest) plus costs restricted to those in the filed offer of $3,500.00. In addition they sought an order that the costs of the respective applications by the parties be paid by the Respondent to the Appellants on an indemnity basis.
[29] Dated 26 November 2011; Casebook P 60
The hearings before the Master
The Master heard submissions from the parties on a number of occasions.
Initially the Respondent submitted that because the Rules were silent as to the consequences of an Acceptance of Offer by a Defendant after a period of 14 days, the Court ought to conclude that the subject acceptance constitutes “a determination” for the purposes of sub Rules 6 DCR 188(5) and (6). It submitted that, in the alternative, if the Rules are silent, the Court retains a discretion as to costs. On either view, it was submitted, the Respondent ought have its costs of action on a solicitor/client basis.[30]
[30] Reasons of Master, 5/1/12, Casebook pgs 96-98
Subsequently the parties directed their submissions before the Master to the issue of whether, on the Respondent’s own case, its Notice of Offer was not compliant with the requirements of Rule 6 DCR 187, and was therefore incapable of being accepted by the Appellants.[31]
[31] Reasons of Master, 3/2/12, Casebook pgs 113-114
In order to fully appreciate the Reasons for Decision and the orders made by the Master, it is helpful to set out the relief sought by the Respondent in its amended application dated 12 December 2012 as follows:
The Plaintiff, Basbuild Pty Ltd (ACN 101 196 132) applies for the following orders or directions:
1.   A declaration that the document FDN 24 filed in the within action by the Plaintiff on 1 May 2008 is not an offer of settlement which complies with the requirements of DCR 6R187.
2.   A declaration that, by reason of the declaration made as to FDN 24, the document FDN 25 filed in the within action by the Defendants on 9 February 2011 was not an acceptance of a formal offer of settlement for the purposes of DCR 6R188.
3.   In the alternative that the Plaintiff be given leave to file a notice of withdrawal of offer withdrawing the offer comprised in document FDN 24 filed in the within action by it.
4.   In the further alternative that the Court enters a judgment for the Plaintiff in the sum of $40,000.00 inclusive of GST plus interest from 15 May 2008.
5.   The Defendant pay the Plaintiff’s costs of the action on a solicitor/client basis on and after 15 May 2008.
6.   Such further or other orders as the Court deems fit.
As I have noted, the respective applications had also raised other issues, including whether it was open to the Court to grant leave for the Respondent to withdraw its Notice of Offer, nunc pro tunc, because of some perceived mistake by the Respondent as to the effect of its offer;[32] whether as properly construed the offer was a “here and now” offer, and thereby implicitly no longer available for acceptance after a 14 day period;[33] whether an enforceable agreement to compromise had been achieved irrespective of the proper construction of the Rules of Court[34]; and, implicitly, whether the Court may decline to enter a judgment following the filing of a Notice of Acceptance, where there would be an injustice to a party to do so.[35]
[32] Verlado v Andonov [2010] VSCA 38; Rule Chambers Pty Ltd v Badge Constructions (SA) [2009] SASC 70 and (2009) SASC 384
[33] See Bartolo v Hancock [2010] SASC 305; McLaughlin & Bigwood "Lapse of offers due to changed circumstances: a contract conversation" (2011) 27 JCL 222
[34] Stirnemann v Kaza Investments [2011] SASCFC 77; Segal v Donnelly [2012] NSWSC 833; GR Securities v Baulkham Hills Private Hospital (1986) 40 NSWLR 631 at 634; Profile Events v West Beach Trust [2011] SASCFC 1; Hopcroft v Edmunds (No 2) [2012] SASC 94; Commonwealth Bank of Australia v Carotino [2011] SASCFC 110; Painaway Australia Pty Ltd v Jaki Group [2011] 249 FLR 1 at 51; A W Ellis Engineering v Malago [2012] NSWSC 55; Lucke v Cleary and Others (2011) 111 SASR 134; Australian Broadcasting Corporation v XIVth Commonwealth Games Limited (1988) 18 NSWLR 540
[35] Bartolo v Hancock [2010] SASC 305; City of Unley v Verco (2005) 91 SASR 102; Xenophon v Lucas [2010] SASC 160; Dysart Timbers Ltd v Nielsen [2009] 3 NZLR 160
In the event, those other issues were not resolved by the Master, at the request of the parties.
The Master published respective Reasons on 5 January 2012[36] and 3 February 2012[37], and made consequential orders on 3 February 2012[38]; and 29 February 2012.
[36] Casebook pgs 94 - 105
[37] Casebook pgs 112 - 117
[38] Casebook page 117
The Master’s Reasons
In his Reasons, delivered on 5 January 2013, the Master expressed the qualified opinion that the Respondent’s Notice of Offer did not comply with 6 DCR 187(3), because it did not state that the appellants may accept the offer as to damages without accepting the offer as to costs. The Master then invited further submissions as to whether the Respondent’s offer was a valid offer.
In his reasons delivered on 3 February 2012, the Master concluded that[39]:
[39] Reasons dated 3 February 2012 [36] - [43] Casebook pgs 116 -117
What is different in the present case, in my view, is that the offer clearly relates both to principal relief – for which $40,000 is sought and costs - for which $3,500 is sought. The offer contrasts with those in Brown & Brown, where the costs were not specified, and in Waller v Flinders Medical Centre, where the offer was all inclusive.
However, significantly in my view, the offer in the present case does not state whether the defendants may accept the offer of principal without also accepting the offer as to costs, which is a clear and explicit requirement of DCR 187(3)(d). The defendants have urged that the reference to “plus costs” makes the terms of the offer unambiguous and make it clear that the offer could only be accepted in its entirety.
However this can only arise by inference, as it is not specified explicitly.
In my view the offer is ambiguous. The offeree might think it means that it can accept the $40,000 but not the costs. However it might instead think that if the $40,000 is to be accepted it must also accept the $3,500. That is the reason for the clear and specific requirement of the sub rule.
In my view Rule 187(3)(d) requires a positive statement to be made. This cannot be complied with by a reference to an unstated negative proposition.
In these circumstances the offer is not complying with the rule, so it cannot be accepted as was purported in FDN25 dated 9 February 2011.
Accordingly, in terms of the rules regime, the parties have not completed a binding agreement resolving the action so it remains alive.
The issue of a contract between the parties was raised during submissions. However as I indicated in my reasons at paragraph 72 this issue has been left aside. I agree with Mr Jenner that the question of whether a contract was or was not formed should not be resolved in an interlocutory hearing – see Bleby J in Verco v Strata Corporation No 2822 [2005] SASC 403 at 37.
In this circumstance I refuse the orders sought by the plaintiff. I order that the matter be referred to a further directions hearing so I can hear submissions as to the further conduct of the action. If there are any applications including as to the amendment to the pleadings, they should be returnable to that hearing.
The orders, made on 3 February 2012 and 29 February 2012
On 3 February 2012, the Master ordered that:
1.   The plaintiff’s amended application is refused.[40]
2.   I fix a directions hearing on 29 February 2012 when I will hear any further application by the parties.
3.   I will also hear from the parties as to the question of costs.
[40] Presumably dated 12 December 2011
On 29 February 2012, the Master ordered that:
1.   I vary my orders of 30 January 2012 (sic)[41] to the intent that there are orders in terms of paragraphs 1 and 2 of [the respondent’s amended application dated 12 December 2011], but the orders sought in paragraphs 3, 4 and 5 are refused. It is noted that by making those orders the issue of an agreement based on a contract has not been determined.
2.   I will decide the issues of costs based on the written submissions of the parties
3.   I will dismiss the defendant’s application dated 26 November 2011.
4.   I direct that any application by the defendant be returnable to the next direction hearing.
5.   Costs of today in the cause.
[41] This presumably relates to the orders made on 3 February 2012.
I note that subsequent to the initiation of the Appeal the Master made orders as to costs, and published Reasons in respect thereof on 11 April 2012[42].
[42] The Master ordered that the respondent pay to the appellants the costs of and incidental to the above applications in any event.
No appeal has been instituted in respect of the orders as to costs.
Notice of Appeal
In their Notice of Appeal, the Appellants seek orders that paragraphs 1 and 3 of the orders made by the Master on 29 February 2012, supra, be set aside, and that, in lieu thereof, that:
(a) Judgment be entered for the Respondent in the sum of $40,000.00 inclusive of GST plus costs fixed in the sum of $3,500.00; and
(b) The Respondent do pay the Appellant’s costs of the Appeal.[43]
[43] The question of the costs generally was not addressed by the Master until 17 April 2012, and was accordingly not the subject of the within Appeal.
Although the Notice of Appeal is partly directed to the findings made by the Master, the essence of the Appellants’ submission was that the Master had erred in concluding that the Notice of Offer did not comply with the requirements of 6 DCR 187 of the Rules of Court, and/or was ambiguous.
Notice of alternative contention
While the Respondent submitted that the findings and orders of the Master ought be upheld for the reasons expressed by the Master, it submitted additionally that if, contrary to his conclusions, the impugned Notice of Offer was a valid offer for the purpose of 6 DCR 187, the Master should have:
1.   Dismissed the Appellant’s application dated 26 November 2011.
2.   Entered Judgment for the Respondent “with effect from 9 February 2011”, in the sum of $40,000.00.
3.   Fixed a sum for post judgment interest as and from 9 February 2011.
4.   Ordered the Appellants to pay the Respondent’s costs of action on a solicitor/client basis.
Appellant’s Submissions
Counsel for the Appellants, Mr Mitchell, submitted that the language of the Respondent’s filed offer was not ambiguous. Implicitly he submitted that, in any event it did not matter in the subject case because the Appellants had indeed accepted the offer in full. He submitted that on any fair reading of the offer it was clear that the principal sum could not be accepted without also accepting the offer as to costs. Accordingly he submitted that the Notice of Offer complied with Rule 6 DCR 187(3)(d).
He submitted that what the Respondent’s solicitors had intended when filing the Notice of Offer was irrelevant, as is the question as to whether the quantum of the offer as to costs was objectively reasonable.
Mr Mitchell submitted that the consequences of Rule 6 DCR 187 are directed to the offeree rather than the offeror. It is designed to promote the settlement of proceedings.
He submitted that the strict construction of Rule 6 DCR 187(3)(d) must be tempered by Rule 6 DCR 188(1)(b) which envisages that an offer may not strictly comply with 6 DCR 187(3)(d).
Mr Mitchell submitted that the Court retained no discretion to refuse to enter a judgment where a formal Offer of Settlement had been accepted pursuant to Rule 6 DCR 188(5). He finally submitted that sub Rules 6 DCR 188(6) – (8) are irrelevant on the facts of the subject case.
Respondent’s Submissions
The Respondent’s counsel, Mr Jenner, submitted that upon its proper construction, Rule 6 DCR 188(7) “contemplates a 14 day period within which an offer can be accepted without costs consequences”.
He was critical of the approach of the Appellants, submitting that it was “opportunistic” of them to assert that the Respondent’s Notice of Offer was compliant with Rule 6 DCR 187(d).
He submitted that it was never intended by the Respondent nor even contemplated that the Notice of Offer could be accepted as to principal and costs after the period of 14 days. Had it been in contemplation the offer would have been phrased, in terms of the sum of $40,000.00 “plus costs to be agreed or taxed”.[44]
[44] See Scott v Williams (No 2) [2003] SASC 32; and Brown & Brown v Unique Building Pty Ltd (No 2) [2009] SADC 18
Mr Jenner submitted that the Master was correct in concluding that the Respondent’s Notice of Offer did not comply with Rule 6 DCR 187. He submitted that the proceedings ought now proceed in the ordinary way namely that his client would seek damages in the sum of $67,000.00 plus interest and costs.
Mr Jenner then addressed his client’s Notice of Alternative Contentions.
He submitted that if I were to conclude, contrary to his submissions that the Respondent’s Notice of Offer did indeed comply with Rule 6 DCR 187; then it is necessary to turn to sub Rules 5, 6, and 7 of 6 DCR 188.
He submitted that a consent judgment in 6 DCR 188(5) is directed to the principal relief alone. Therefore any consent judgment is limited to the principal sum of $40,000.00.
He submitted that the entry of the consent judgment would constitute a “determination” of the action by “the Court” on terms no more favourable to the appellants, such that the Respondent is entitled to its costs[45], after a 14 day period.
[45] Transcript pgs 24-28
Discussion

In my opinion the Rules of Court 6 DCR 187 and 188 ought be construed by reference to their apparent purpose, as relevantly expressed in the objects of the Rules of Court, namely, to encourage the compromise of proceedings, and to minimise the cost of civil litigation to the litigants and the State.
I will now deal with each of the submissions as to the status of the Respondent’s filed offer of 1 May 2008.
·Is the acceptance of a formal offer, for which a consent judgment may be entered, under 6 DCR 188(5) restricted to the principal sum?
In some other jurisdictions the respective Rules of Court have expressly restricted Notices of Offer to the principal relief.
In the Supreme Court of NSW, Rule 20.26 had specified the terms of a Notice of Offer. The question of costs was provided for, separately, in Rules 42.14 and 42.15.
NSW Rule 20.26(12) expressly provided that “a Notice of Offer that purports to exclude, modify or restrict the operation of Rule 42.14 or 42.15 is of no effect”.
There were a number of, apparently, inconsistent decisions of the Court of Appeal (NSW), as to whether some provision for costs could be included in a Notice of Offer. There were resolved by a specially convened coram in Whitney v Dream Developments Pty Ltd.[46]
[46] [2013] NSWCA 188 Bathurst CJ did not accept that there had been any inconsistency.
The Court concluded that such Notices of Offer under the Rules must be restricted to the principal claim. It must not include any offer as to costs. The Court relied upon the express terms of the Rule 20.26(12). The purpose of the Rule was to ensure that the Court would retain a residual discretion as to costs.
It said:
Of course, a party is quite free to make a settlement offer that seeks to deal not only with the substantive claim but also with costs.
The significant point is that such an offer can only be made outside the scheme based on Rule 20.26. If such a non-complying offer is not accepted, the fact that it was made and not accepted may be relevant to the exercise of the Court’s jurisdiction with respect to costs. Whether it is so relevant will depend upon whether it has the characteristics associated with the Calderbank case.
Counsel for the Respondent, in effect, submitted that the relevant Rules 6 DCA 187 and 188 ought be construed in a similar way, so as to ensure that the Court retains a residual discretion as to the costs of a “late” acceptance by a defendant.
In my opinion the NSW Rules of Court are clearly distinguishable from the subject Rules 6 DCR 187 and 188.
While I accept that the penal provisions as to costs contained in 6 DCR 188(6); (6A) and (7) are directed to the quantum of “the principal relief” alone, this, in my opinion, does not restrict the entry of a consent judgment to principal relief alone pursuant to 6 DCR 188(5).
I do not accept the submission of the Respondent that the phrase “the Court determines the relevant action”, in 6 DCR 188(6) ought apply to a consent judgment based upon the acceptance of a formal offer. That Sub-Rule is directed solely to the case where a formal offer is not accepted.
Counsel for the Respondent submitted that there was a common thread in 6 DCR 188(6) and (6A) to discourage offerees from accepting offers after a 14 day period. If an offer is not accepted at all, then draconian consequences follow in 6 DCR 188(6). By contrast if it is accepted by a Plaintiff after 14 days, the Court may order the Plaintiff to pay the costs of the other party after that date.
He submitted that because the Rules were silent as to an acceptance by a Defendant after 14 days, the Court ought conclude that it retains a general direction to award costs after that 14 day period.
I do not accept that submission. I have already explained why it is that special provision has been made for the late acceptance by a Plaintiff in 6 DCR 188(6A). I repeat that, unlike the position of a Defendant, it was always open to a Plaintiff to withdraw its offer or revise it, so as to allow for the increase in costs. The principal sum would have remained the same, for the purpose of 6 DCR 188(6). It is for that reason that no time limit of 14 days is prescribed for the acceptance by a Defendant.
The subject Rules 6 DCR 187(2)(b); (3)(c) and (d); and 6 DCR 188(1)(b) and 2(b) expressly permit the inclusion of an offer for a specific sum for costs.
Upon it proper construction a “formal offer” in 6 DCR 188(5) includes an offer as to costs. It is in the interest of the parties to obtain certainty of outcome. Each party will know how much they will pay or receive. “It is manifestly desirable that an offer should contain each of two elements, namely the principal monetary component, and a separate amount for costs. It is only by specifically referring to each that certainty can be achieved for both the offeror and the offeree”.[47]
[47] Railway Corporation (NSW) v Vero Insurance [2012] NSWSC 926 at [93]
Accordingly I am of the opinion that the entry of a consent judgment under 6 DCR 188(5) is not limited to the “principal” sum but may include a sum for costs.
In the event that such an offer is accepted by a defendant, the Rules speak for themselves. A consent judgment will be entered in respect of the principal sum and costs, as agreed, pursuant to 6 DCR 188(5). It is only when a late acceptance is filed by a Plaintiff that 6 DCR 188(6A) applies, and a special order for costs after the 14 day period may be made.
·Must the Notice of Offer comply strictly with 6 DCR 187 and 188 and the relevant Forms under the Rules of Court?
As the Master had correctly determined, the Respondent’s Notice of Offer had failed to state that the Appellants could accept the offer of principal without also accepting the offer as to costs. It therefore did not comply with Rule 6 DCR 187(3)(d).
In Rapuano (trading as Rap’s Electrical) v Karydis Frisan and Anor,[48]supra, the trial Judge, had determined that an initial offer and two revised offers filed by the Defendants, had complied with Rule 6 DCR 187.
[48] [2013] SASCFC 93
The first had offered a sum “to settle the principal claim and $1,000.00 in respect of costs”. It expressly permitted the Plaintiff to accept the principal sum without the need to accept the offer as to costs. The subsequent two offers had provided for increased sums to settle the principal claim, while specifying the respective sums of $5,000.00 and $10,000.00 for costs. They did however provide that the Plaintiff could not accept the relevant principal sum without also accepting the relevant offer as to costs.
The Full Court concluded that the offers did not comply with 6 DCR 187 because they included, in their terms, the resolution of separate actions outside the scope of the claim. It affirmed that, under the Rules of Court regime, a Notice of Offer must not be couched in terms inconsistent with Rules 6 DCR 187 and 188, nor the approved forms.
In Benton v Noye[49], Asche CJ concluded that an attempt by a party to limit a time fixed by the Rules would lead to it being declared a nullity, saying:
The (offeror) must comply with what is plainly stated in the rule. If it deliberately limits the document to something not within the scope of the rule, then it is not delivering a notice of compromise within the meaning of the rules … it cannot approbate and reprobate”.
[49] (1990) 101 FLR 18
In Heather v Vita Pacific Ltd[50], Zeeman J. considered a somewhat similar factual situation to the subject case.
[50] (1996) 6 TAS R 52
The Defendant had served on the Plaintiff an offer in writing to compromise the action by the payment of a principal sum and costs. The offer complied in all respects with the Rules of Court save that it did not “contain … (iv) a statement that it is served in accordance with this (Rule)”. The Plaintiff had purported to accept the offer.
Zeeman J. concluded that the offer was not compliant and therefore a nullity because it did not include the above statement, saying:
I do not consider that the requirement … that an offer of compromise “is to state” that it is served in accordance with the (Rule), is a mere formality. It is a crucial part of the scheme because the presence or absence of such a statement will determine whether or not the offer made is one which attracts the consequences provided for by the (Rule).
It is to be treated as a mandatory requirement. The absence of this statement takes the offer outside the ambit of the (Rule), and makes it an offer which is solely governed by the general law of contract.
An appeal to the Tasmanian Full Court was allowed,[51] on the basis that while there was such a mandatory requirement, the absence of the statement, was not a “fundamental error”, and thus did not render the offer a nullity.
[51] (1996) 6 TAS R 120
In the event, the Court concluded that it was appropriate to employ the equivalent of rules 6 DCR 12 and/or 117 to overcome what it perceived to be a procedural irregularity. It therefore held that the action had been settled by the filing of an acceptance under the Rules.
In Rule Chambers Pty Ltd v Badge Constructions (SA) Pty Ltd,[52]the question was whether the failure to serve a Notice of Withdrawal of an Offer, pursuant to Rule 6 DCR 187(7), resulted in the withdrawal being ineffective.
[52] [2009] SASC 70
The Full Court affirmed that the purpose of the Rules is to encourage litigants to make and accept reasonable offers of settlement, and accordingly the relevant rules should be construed with that purpose in mind.
It regarded the failure to serve the Notice as a “procedural irregularity”. The Court noted the wide powers in Rules 6 DCR 12 and 117 respectively, and the general power to prevent an abuse of process of the Court.
In the subject case, the Respondent’s Notice of Offer was clearly one made under the Rules of Court, and related to principal relief and costs.
While undoubtedly the Respondent had failed to state whether the Appellants could accept the offer of principal without also accepting the offer as to costs, contrary to Rule 6 DCR 187(3)(d), in my opinion, this failure did not render the offer a nullity.
The consequences of non compliance with that Sub-Rule are provided for in the Rules. It is open to an offeree, pursuant to 6 DCR 188(1)(b) to choose to either accept the offer in its entirety as the Appellants did in the subject case, or alternatively to limit its acceptance to the principal relief. There is no need to consider 6 DCR 12 or 117, as there has been no procedural irregularity.
In my opinion the Notice of Offer was compliant with Rules 6 DCR 187 and 188.
In any event is the Notice of Offer uncertain?
In Rapuano’s case the Court affirmed principles expressed in recent decisions of Courts of Appeal in Victoria and in Queensland that a filed offer must not be uncertain in its effect.[53]
[53] [2013] SASCFC 93 at [52]-[63]
In particular the Court approved the dicta of Beach AJA in AJ Lucas Drilling Pty Ltd v McConnell Dowell Constructions (Aust) Pty Ltd (No 2)[54]:
… an offer of compromise ought not leave an offeree in any reasonable doubt about the consequences of its acceptance. Further the terms of an offer of compromise should be reasonably certain …
[54] (2010) 78 ATR 925, 933
The Master held that the offer was ambiguous because, in the absence of an express statement by the Respondent, in accordance with 6 DCR 187(3)(d), that the offeree may accept the offer of principal without also the offer as to costs, the Appellants would be left in two minds as to whether they would be obliged to accept both.
I readily accept that reasonable minds might differ as to whether the offer may be ambiguous. However, as I have explained Rule 6 DCR 188(1)(b) removes the effect of any such ambiguity.
I do however respectfully disagree that the offer was ambiguous. Properly construed, the offer was expressed in such a way that any offeree would have known that it had to be accepted in its entirety. This indeed was how it was treated by the Appellants.
In my opinion, a Court should be reluctant to find any such ambiguity. In the subject case the Appellants in fact accepted the offer in its entirety.
In Vagg v McPhee (No 2)[55], the Court of Appeal (NSW) said in respect of a similar matter:
Ambiguity should be resolved in favour of validity. If the appellants had been uncertain and it mattered to them, they could have sought clarification. They did not, nor did they seek to rely on the ambiguity in resisting the present application. The Court should not decide the issue on this basis unless the proper application of the law relating to practice and procedure requires it. In this case it does not.
[55] [2013] NSWCA 126, and See Vieira v O'Shea (No2) [2012] NSWCA 121
In any event, as I have already noted any alleged ambiguity was removed by the Rules themselves. Rule 6 DCR 188(1)(b) permits the offeree, in this case, the Appellants, to choose to accept the offer in its entirety or simply as to the principal sum.
In those circumstances it cannot be said that an offeree could be left in two minds. There was no uncertainty, nor ambiguity.
Conclusion
I have found that upon the proper construction of Rules 6 DCR 187 and 188, the Respondent’s Notice of Offer was compliant with those Rules, and was not ambiguous.
Accordingly the Appeal instituted by the Appellants must be allowed.
Very properly counsel for the Respondent conceded that, upon the above construction of the Rules, in the ordinary course, the Appellants would be entitled to have judgment entered in accordance with the terms of the offer pursuant to Rule 6 DCR 188(5).
I do not know whether the Respondent intends to argue that there is some other basis for not entering judgment. Both parties intimated that I ought return the matter to the Master for its determination according to law.
Although I have heard no argument from the parties as to the other matters raised in their respective applications, and apparently left unresolved before the Master, it may be of assistance to the parties if I make the following observations:
·The alternative claim in contract
I assume that the alternative claim would have been based upon the email of 18 January 2011 as, in effect, renewing the filed offer of 1 May 2008.
It must however be remembered that different principles apply to a contractual offer under the general law than those applicable to a Rules of Court offer. Under the general law a time for acceptance may be implied.
In Bartolo v Hancock[56], Doyle CJ considered the effect of an offer, unlimited as to the time for acceptance, under the general law.
[56] [2010] SASC 305
His Honour said that the meaning of the offer is to be determined objectively, and from the surrounding circumstances. In that case a “reasonable recipient” of the offer would have understood that the offer was a “here and now” offer, only open for a short time.
In light of my findings this alternative issue becomes redundant. In any event the Respondent’s offer was clearly a Rules of Court offer, and not one made under the general law.
·Whether the Respondent could withdraw its offer nunc pro tunc
Rule 6 DCR 187(7) permits an offeror to withdraw an offer at any time before it has been accepted.
While the Respondent did not attempt to withdraw its offer at all, the question raised by the Respondent’s application is whether a Court would ever permit a party to be deemed to have withdrawn it before acceptance, by the offeree.
In Verlado v Andonou[57], the Court of Appeal (Vic) considered whether a Tribunal had the power to enable an offeror to withdraw an offer, nunc pro tunc, after it had been accepted by an offeree.
While the Court concluded that a Tribunal had no such power, it left open the possibility that a superior Court may have such a power to prevent an abuse of the process of a Court.
It noted that in H Wilson Pty Ltd v Pitman,[58]the Court of Appeal had assumed that in the context of an offer made under the Rules of Court, “there is no power to make an order nunc pro tunc permitting withdrawal after an offer had been accepted”. By contrast in Scanruby Pty Ltd v Caltex Petroleum Pty Ltd,[59]such an order was made.
I do not know whether the Respondent will seek such an order, nor on what basis such an application could be made. In my opinion it would not be open to make such an order merely by establishing an alleged mistake by the Respondent’s Solicitor, nor even some perceived unfairness to the Respondent.[60]
·Perceived unfairness to the Respondent
In the subject case the Respondent asserts that it is unfair that it should be restricted to costs in the sum of $3,500.00 when it would have been obvious to the Appellants that its offer was based upon costs as at 1 May 2008.
[57] [2010] VSCA 38 at [50]-[52]
[58] (unreported decision 6 December 1990)
[59] [2001] NSWSC 411
[60] See Badge Constructions v Rule Chambers [2009] SASC 384 at [47] and [52]
In Rule Chambers Pty Ltd v Badge Constructions (SA) Pty Ltd,[61] in the context of a purported withdrawal of an Offer of Settlement, the Full Court, relevantly; said:
In my opinion resort to notions of unfairness does not assist in the construction of r.r. 187 and 188 in the present context. In the first place there is potential unfairness in whatever construction is adopted: … In the second place, as the regime concerning formal offers of settlement is part of the procedural rules of the court, the court may exercise its inherent jurisdiction to prevent an abuse of its own process. If the conduct of an offeror or of an offeree amounted to an abuse of the court’s process, the court could exercise its inherent jurisdiction to prevent that abuse”.
[61] [2007] SASC 70
In United Petroleum Pty Ltd v Skorpos (No2),[62] Stanley J. considered the question of alleged unfairness in a case where the offeree had not accepted a filed offer. The Plaintiff had offered to pay a principal sum together with the sum of $1,000.00 “on account of cost”, with the express caveat that the Defendants could not accept the principal sum without also accepting the offer as to costs.
[62] [2012] SASC 215
The Plaintiff sought orders pursuant to the equivalent of 6 DCR 188(6) (b) (ii) as the Defendants had obtained judgment following a trial for a sum less than the principal sum so offered.
The Defendants submitted that they could not have accepted the offer as the offer as to costs was grossly inadequate.
His Honour considered the question of perceived unfairness in the context of 6 DCR 188(6). While it is in a different context in the subject case, His Honour’s dicta is apposite:
On the contrary, I consider that the operation of the rule was intended to be much simpler. Subject to one matter, whether a party is liable to the costs penalty contemplated by the rule is intended to be determined solely by reference to the adequacy or otherwise of the offer as to principal relief by an assessment of whether the Court has determined the relevant action or claim on terms as to the principal relief that is no more favourable to the party than the terms of the offer. The existence of the residual discretion in the Court to depart from applying the provisions of 6SCR 188(6) strictly, allows for circumstances where the offer only is open to be accepted in its entirety and the term of the offer, insofar as it relates to costs, is manifestly inadequate. For example, if an action had been on foot for some years and an offer as to principal relief and costs was made, but the offer of costs was for $1,000 where the actual costs were substantial, where the offer could only be accepted in its entirety, and the Court determined the action on terms that were no more favourable to the offeree than the terms of the offer as to principal relief, it would be open for the Court to decline to apply the costs penalty in the exercise of the residual discretion. While there is scope for some amelioration in the harshness of the operation of the rule by reason of the residual discretion reposed in the Court to make an order to the contrary, that residual discretion, to my mind, only reinforces the construction I would give to the rule rather than detracting from it.
In this case, plainly the Court has determined the relevant action on terms as to principal relief that are no more favourable to the defendants than the terms of the offer as to principal relief. Accordingly, subject to the exercise of the Court’s residual discretion, the plaintiff is prima facie entitled to the order contemplated by 6SCR 188(6)(b)(ii).
In this case, I would not exercise the Court’s discretion in favour of the defendants so as to deprive the plaintiff of the order to which it has a prima facie entitlement.

In Neilsen v Dysart Timbers Ltd[63] the Supreme Court of New Zealand, in a different context, held that where circumstances had changed in a fundamental way, then a Court could intervene.
[63] [2009] 3 NZLR 160
In my opinion there was no relevant unfairness to the Respondent in the acceptance of the offer by the Appellants. The Respondent had filed its offer in a form which it alone had now sought to impugn. Even though the Appellants knew that costs had increased significantly over the three year intervening period, they had been informed by the Respondent’s solicitors on 18 January 2011, that its initial offer of 1 May 2008 could be accepted by them. It is not to the point that those solicitors may have intended that to apply only to the principal sum and not the quantum of costs. This followed directly upon the Appellants filing their own offer on 11 January 2008 for a reduced principal sum, but with the same quantum for costs of $3,500.00. An objective observer would not necessarily assume that the renewed offer was other than an assessment of the risks of litigation.
In my opinion there is no unfairness in the subject case. It was always open to the Respondent to file a revised offer prior to its acceptance by the Appellants, or indeed to revoke the offer.
Conclusion
I repeat that for the above Reasons I have found that the Respondent’s Notice of offer dated 1 May 2008 was compliant with the Rules of Court, and that it was not ambiguous or uncertain.
Accordingly I allow the appeal by the Appellants. I set aside the orders in paragraphs 1 and 3 of the orders made by the Master on 29 February 2012; and substitute a finding that the Respondent’s Notice of Offer was compliant with the Rules.
I note again that there was no appeal from the orders as to costs made by the Master on 11 April 2012.
Upon the assumption that the Respondent wishes to address any unresolved issues before the Master as to whether the Notice of Offer was validly accepted by the Appellants, I return the matter to the Master for further consideration. In the event that the Respondent does not wish to argue any otherwise unresolved matters before the Master, then judgment ought be entered for the Respondent in the sum of $40,000 inclusive of GST but in addition to costs fixed in the sum of $3,500.00. The Master would need to address the question of interest, if any, upon that judgment.
Formal Orders
1.   That the Appellants’ appeal be allowed.
2.   The orders numbered 1 and 3 of the orders made by the Master on 29 February 2012 be set aside.
3.   The subject matter be returned to the Master, for further consideration according to law.
I will hear the parties as to the question of the costs of the appeal, and any further orders.