Supreme Court New South Wales Medium Neutral Citation: Kupang Resources Pty Ltd v Commonwealth of Australia (No 3) [2023] NSWSC 1564 Hearing dates: On the papers Decision date: 14 December 2023 Jurisdiction: Equity - Commercial List Before: Ball J Decision: The defendant pay the plaintiff's costs of the notice of motion filed on 5 September 2023 as agreed or assessed on the ordinary basis. Catchwords: COSTS — Party/Party — Bases of quantification — Indemnity basis — Genuine offer of compromise — Where offer contemplated replacement of security without specified terms — Not unreasonable to reject offer Cases Cited: Calderbank v Calderbank [1975] 3 All ER 333 Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 Ziegler as trustee for the Doris Gayst Testamentary Trust v Cenric Group Pty Ltd [2020] NSWCA 85 Category: Costs Parties: Kupang Resources Pty Ltd (Plaintiff | Respondent) Commonwealth of Australia (Defendant | Applicant) Representation: Counsel: S Hartford-Davis (Plaintiff | Respondent) E Ball (Defendant | Applicant) Solicitors: Banton Group (Plaintiff | Respondent) Australian Government Solicitor (Defendant | Applicant) File Number(s): 2020/106859 Publication restriction: None JUDGMENT 1. On 8 November 2023, I dismissed an application by the defendant, the Commonwealth of Australia, for additional security for its costs of this proceeding. The only outstanding question relates to the costs of the application. Relying on an offer of compromise served on 18 October 2023, the plaintiff, Kupang Resources Pty Ltd, seeks its costs of the application on the ordinary basis up to and including 18 October 2023 and on an indemnity basis from 19 October 2023. 2. The offer was relevantly in the following terms: 4.1 Within 28 days, the plaintiff shall pay a further $66,000 into the bank account maintained pursuant to the Existing Security Orders; 4.2 At least 28 days prior to the commencement of the trial, the plaintiff shall pay a further $138,000 into the bank account maintained pursuant to the Existing Security Orders; 4.3 At any time and at the plaintiff's election, the plaintiff may procure an after the event insurance policy to replace some or all of the amount of security it is required to hold. We will promptly notify you of the terms of that policy in the event that the plaintiff elects to procure one. The offer was expressed to be open until 10am on 20 October 2023 and was stated to be "Without prejudice to [sic] save as to costs". 1. The offer was not expressed to be made in accordance with the principles stated in Calderbank v Calderbank [1975] 3 All ER 333. However, it is apparent that Kupang intended to rely on it in relation to costs and it could only be relied on for that purpose in accordance with those principles. Applying those principles, the Court may make a costs order that is more favourable to the offeror than the order it would have made if the offer had not been made, if the offer was a genuine offer of compromise and it was unreasonable of the offeree not to accept it: see Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8] per Basten JA (McColl and Campbell JJA agreeing); Ziegler as trustee for the Doris Gayst Testamentary Trust v Cenric Group Pty Ltd [2020] NSWCA 85 at [68]—[69] per Gleeson JA (Meagher and McCallum JJA agreeing). 2. In my opinion, the offer was a genuine offer of compromise. The total amount of additional security sought by the Commonwealth was $1,250,000. The amount of security offered was a total of $204,000. Although not a large proportion of the amount claimed, the $204,000 was a significant amount. Moreover, the genuineness of the offer needs to be judged in the context in which it was made. Kupang had already provided $500,000 as security. That was agreed between the parties after Kupang had provided the Commonwealth with a copy of its unaudited balance sheet. It was apparent from that balance sheet that Kupang's principal asset was an investment in a substantial operating cattle station. It was by no means obvious in that context that the Commonwealth would be successful in its application for further security. 3. However, in my opinion, it was reasonable of the Commonwealth to reject the offer. The principal reason was that the offer was not expressed with sufficient clarity because it gave Kupang an option to replace the security at any time with an after the event insurance policy without identifying the principal terms of that policy. It is incumbent on a party who makes an offer of compromise to identify precisely the terms of its offer so that the offeree can make an informed decision whether to accept the offer or not. The onus is not on the offeree to seek to clear up any ambiguity or lack of clarity in the offer; and the offeree is entitled to expect that if it accepts the offer it can be confident that there will be no disputes in the future about the effect of the offer or whether the offeror has complied with it. Satisfaction of that requirement does not depend simply on whether the offer if accepted will give rise to an enforceable agreement. Rather, it depends on whether the offer is sufficiently clear that it would be unreasonable to refuse to accept it for that reason. The offer in this case does not meet that standard. Although many after the event insurance policies would provide an adequate alternative to a payment into a bank account (which was what was initially proposed), without having the terms of the proposed policy, the Commonwealth could not make any assessment of its adequacy. Under the terms of the offer, it had no right to reject whatever was proposed, even if it acted reasonably in doing so. 4. It follows that Kupang is not entitled to the order it seeks. 5. The order of the Court is that the defendant pay the plaintiff's costs of the notice of motion filed on 5 September 2023 as agreed or assessed on the ordinary basis. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 December 2023