Industrial Court of New South Wales CITATION: Bowman v Ricegrowers Limited (formerly Ricegrowers' Co-operative Limited) (No 2) [2007] NSWIRComm 267 APPELLANT / CROSS RESPONDENT Rod Bowman PARTIES: RESPONDENT / CROSS APPELLANT Ricegrowers Limited (formerly Ricegrowers' Co-Operative Limited) FILE NUMBER(S): IRC 325 and 476 of 2007 CORAM: Wright J President; Walton J Vice-President; Boland J CATCHWORDS: Costs - Unfair contract - Appeal - Offer of compromise made under Industrial Relations Commission Rules 1996 by appellant prior to hearing at first instance - Offer rejected by respondent - Appellant successful on appeal - Order on appellant's claim more favourable than appellant's offer of compromise - Whether a genuine offer of compromise by the respondent made prior to the hearing of the appeal and rejected by the appellant was such that it displaced the appellant's entitlement to indemnity costs on and from the date of the respondent's offer of compromise - Respondent's offer of compromise inclusive of costs - Effect of including costs in offer of compromise - Orders made including order that respondent pays the appellant's costs on an indemnity basis Industrial Relations Act 1996 s 106 LEGISLATION CITED: Industrial Relations Commission Rules 1996 r 168(4), r 168(5)(a), r 216, r 216(4) Supreme Court Rules 1970 Part 52, r 17 Uniform Civil Procedure Rules 2005 r 20.26(2) Associated Confectionery (Aust) Ltd v Mineral and Chemical Traders Pty Ltd (1991) 25 NSWLR 349 Bowman v Ricegrowers Limited (formerly Ricegrowers' Co-operative Limited) [2007] NSWIRComm 204 Calderbank v Calderbank [1976] Fam 93 Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 Hanave Pty Limited v LFOT Pty Limited (formerly Jager Pty Ltd) & Ors [1998] 1429 FCA Hillier v Sheather (1995) 36 NSWLR 414 CASES CITED: Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 McLean v Commonwealth of Australia (unreported, Supreme Court, NSW, 021250 of 1995, Sperling J, 22 August 1996) Rod Bowman v Ricegrowers' Co-operative Limited [2007] NSWIRComm 27 Rosser v Maritime Services Board of NSW (No 3) (unreported, Supreme Court, NSW, 1624 of 1993, Young J, 25 November 1997) Sheather v Country Energy (No.2) [2007] NSWCA 280 Singh v Harika (No.2) [2005] NSWCA 212 Smallacombe and Others v Lockyer Investment Co Pty Ltd (1993) 114 ALR 568 South Eastern Sydney Area Health Service & Anor v King [2006] NSWCA 2 HEARING DATES: (Written submissions) 27 September 2007, 10 October 2007 and 15 October 2007 DATE OF JUDGMENT: 16 November 2007 APPELLANT / CROSS RESPONDENT Mr R Reitano with Mr A Joseph of counsel Solicitor: Mr P Pasfield Slater & Gordon LEGAL REPRESENTATIVES: RESPONDENT / CROSS APPELLANT Mr S Nixon of counsel Solicitor: Mr M Bastick Freehills JUDGMENT: INDUSTRIAL COURT OF NEW SOUTH WALES FULL BENCH CORAM: WRIGHT J, President WALTON J, Vice-President BOLAND J Friday, 16 November 2007 Matter No IRC 325 of 2007 BOWMAN v RICEGROWERS LIMITED (FORMERLY RICEGROWERS' CO-OPERATIVE LIMITED) Application by Rod Bowman for leave to appeal and appeal from a decision of Justice Marks given on 28 February 2007 in Matter No IRC 1061 of 2003 Matter No IRC 476 of 2007 RICEGROWERS LIMITED (FORMERLY RICEGROWERS' CO-OPERATIVE LIMITED) v BOWMAN Application by Ricegrowers Limited (formerly Ricegrowers' Co-operative Limited) for an extension of time to appeal, and leave to cross appeal and cross appeal, from a decision of Justice Marks given on 28 February 2007 in Matter No IRC 1061 of 2003 JUDGMENT OF THE COURT [2007] NSWIRComm 267 1 In Bowman v Ricegrowers Limited (formerly Ricegrowers' Co-operative Limited) [2007] NSWIRComm 204, the Full Bench upheld the appeal by Mr Rod Bowman from a decision and orders of Marks J in Rod Bowman v Ricegrowers' Co-operative Limited [2007] NSWIRComm 27, a judgment given in Matter No IRC 1061 of 2003 on 28 February 2007. The Full Bench found that his Honour had erred in his decision and in the making of orders under s 106 of the Industrial Relations Act 1996 varying Mr Bowman's contract of employment and providing for compensation. At the same time, the Full Bench dismissed a cross appeal by Mr Bowman's former employer, Ricegrowers Limited (formerly Ricegrowers' Co-operative Limited). The orders and directions made by the Full Bench were in the following terms: Matter No IRC 325 of 2007 (1) Leave to appeal is granted. (2) Order 1 of the orders made by Marks J is varied to the extent that paragraph b) shall be in the following terms: b) The contract shall be terminable on the giving of 12 months' notice or the payment of moneys equivalent thereto based on the employee's annual remuneration package. (3) Order 2 of the orders made by Marks J in Matter No IRC 1061 of 2003 is set aside and the following order is substituted: Ricegrowers Limited shall pay to Rod Bowman a sum of money equivalent to 43 weeks of his gross annual salary package as at 1 March 2002 plus interest calculated from that date to the date of this judgment. (4) Order 1 of the orders made by consent by Marks J on 23 May 2007 is set aside. (5) The stay order made by Wright J, President on 24 May 2007 is dissolved. Matter No IRC 476 of 2007 (1) Leave to appeal is granted. (2) The appeal is dismissed. [137] On the question of costs at first instance and in the appeal and cross-appeal, the appellant/cross respondent requested that the Full Bench not deal with that question until further hearing from the parties. The appellant/cross respondent is directed to file and serve submissions regarding costs within seven days of the date of this decision. The cross appellant/respondent shall reply in writing within a further seven days. Unless the parties, or one of them, requests to be heard orally, or the Court determines otherwise, the question of costs will be determined on the papers. 2 The parties subsequently filed their respective submissions on costs. This judgment deals with the question of costs. Respective positions of the parties 3 Mr Bowman sought an order that Ricegrowers pay his party/party costs of the proceedings before Marks J up until 21 June 2005 and pay his costs on an indemnity basis of those proceedings on and after 22 June 2005. Further, that Ricegrowers pay his costs of the appeal and of the cross appeal on an indemnity basis. 4 The orders contended for by Ricegrowers were that it pays Mr Bowman's costs: (a) up to 21 June 2005 on a party/party basis; (b) from 22 June 2005 to 15 May 2007 on an indemnity basis; and (c) on and from 16 May 2007 on a party/party basis. 5 There being no issue between the parties regarding costs up to 21 June 2005, we propose to order Ricegrowers to pay Mr Bowman's costs up to that date on a party/party basis. 6 There was also no issue between the parties that Ricegrowers pay Mr Bowmans costs up to 15 May 2007 on an indemnity basis. Accordingly, we will make an order to that effect. 7 In respect of the order seeking indemnity costs, the appellant/cross respondent relied upon an affidavit of his solicitor, Mr Martin Carrick, and, in particular, on an offer of compromise annexed to Mr Carrick's affidavit. The offer (dated 22 June 2005 and which was an offer in respect of the proceedings at first instance in matter No IRC 1061 of 2003) was in the following terms: 1. The applicant receives payment from the Respondent in the sum of $82,500.00. 2. The Respondent will pay the Applicant's costs of the proceedings as agreed or assessed. 3. The Applicant will, with the Respondent's consent, discontinue these proceedings against the Respondent. 4. This offer remains open for acceptance for 28 days from the date it is received. 5. The offer is made in accordance with Part 23 of the Industrial Relations Commission Rules 1996. The Applicant reserves the right to tender a copy of this Offer of Compromise on the question of costs. 8 The offeree served a written acknowledgement of receipt of the offer within three days: r 168(4). The offer was not accepted. 9 It was submitted that as a result of the judgment of the Full Bench the appellant/cross respondent received an order for payment of compensation of $90,533.20. The total interest under the Full Bench's orders was $45,584.07. The interest up until the day of the offer of compromise (22 June 2005) was $27,132.80. 10 Mr R Reitano of counsel for Mr Bowman submitted that the effect of r 216(4) of the Commission's Rules was that there was a presumption in favour of the making of an order for indemnity costs and that there was no basis for the Court to depart from that presumption. 11 Ricegrowers submitted that the Court should exercise its discretion to limit the operation of the indemnity costs to the period from 22 June 2005 to 15 May 2007 because: (a) Ricegrowers made an Offer of Compromise to Mr Bowman on 16 May 2007 on comparable terms to those contained in Mr Bowman's Offer of Compromise dated 22 June 2005; and (b) considerations of fairness require that Ricegrowers should not bear the extra burden of indemnity costs from 16 May 2007. 12 Ricegrowers relied on an affidavit by Mahreen Hassan, solicitor, in respect of an offer of compromise it put to Mr Bowman dated 16 May 2007. That offer stated that in full and final settlement of both the appeal proceedings and the proceedings at first instance Ricegrowers was prepared to pay Mr Bowman's costs as agreed or assessed and an additional amount, being the difference between his costs and $187,500. Mr Bowman did not accept that offer. 13 It was submitted that Ricegrowers' offer constituted a total payment of $187,500 to Mr Bowman in full and final settlement of the proceedings on appeal and at first instance, whereas Mr Bowman's offer of 22 June 2005 sought payment of $82,500 as well as costs agreed or assessed. It was further submitted that a comparison of the two offers required consideration of the interest attributable to the proposed settlement sum between 22 June 2005 and 16 May 2007. Over this period Mr Bowman's proposed settlement payment of $82,500 would have earned interest of $14,097, so that its value at 16 May 2007 would be $96,597 due to the interest component. 14 Ricegrowers submitted that its offer to settle for a total of $187,500 was at least comparable to, if not more favourable than, a settlement amount of $96,597 on the basis that Mr Bowman's assessed costs as at 16 May 2007 were likely to be less than $90,903. Further, that its offer of compromise was an attempt to compromise the matter in a real and material sense, in that the offer was: (a) for an amount substantially in excess of the 15 weeks' compensation plus interest that had been awarded by Marks J at first instance (which equated to $45,792.96); (b) made in the context of the appeal proceedings, where Mr Bowman claimed 12 months' compensation (in contrast to 18 months' remuneration in the first instance proceedings); and (c) of at least comparable value to Mr Bowman's Offer of Compromise dated 22 June 2005. 15 Ricegrowers contended that, in these circumstances, Mr Bowman's refusal to accept its offer of compromise was sufficiently unreasonable to at least displace his entitlement to indemnity costs on and from the date of Ricegrowers' offer of compromise. Ricegrowers, it was submitted, attempted to settle the matter in the course of the appeal proceedings on substantially the same terms as Mr Bowman's offer of compromise. To impose indemnity costs on Ricegrowers beyond 16 May 2007 would be punishing it for Mr Bowman's refusal to settle the matter on terms substantially similar to, if not more favourable than, his own offer of compromise. 16 In his written reply, Mr Bowman referred to Ricegrowers' submission that it had made an offer that was "at least comparable to, if not more favourable than, a settlement amount of $96,597.00, on the basis that Mr Bowman's assessed costs as at 16 May 2007 are likely to be less than $90,903.00." Mr Bowman submitted that there were two "difficulties" with Ricegrowers' submission; the first being evidentiary and the second that the submission was unmeritorious. 17 Mr Reitano submitted: The Commission has no way of knowing at all what Mr Bowman's costs are now or at any other time whether by reason of a costs assessment or on an indemnity basis or on any other basis. The Commission is being invited by Ricegrowers to speculate in the absence of any evidence at all about what Mr Bowman's costs might be. This is in the context of hard fought litigation at first instance which involved comprehensive affidavits, the calling of oral evidence from very many witnesses and the preparation of oral and written submissions. The Offer of Compromise Rules are not concerned with speculation but have as their foundation the need for clarity and precision so that the "carrot and stick" basis upon which they operate is fairly applied. The authorities referred to below demonstrate so much. Given that the Commission does not know any thing about Mr Bowman's costs position it cannot and should not act upon the speculation that is involved in … Ricegrower's submissions… 18 As to the merit of Ricegrowers' submission it was contended that the "purported offer of compromise" was problematical because it was in substance an offer that was "inclusive of costs". 19 Counsel for Mr Bowman submitted: An offer in such terms is insufficiently precise to qualify as an offer for the purpose of the Rules because the offeree is placed in a position of not being able to determine the appropriate amount to attribute to the substantive claim and for costs incurred in advancing it (see Smallacombe v Lockyer Investment Co Pty Limited (1993) 42 FCR 97 at 102 ; Hanave Pty Limited v LFOT Pty Limited [1998] 1429 FCA ; Rosser v Maritime Services Board (No 3) (unreported) Supreme Court of NSW, 25 November 1997, Young J, BC9706221)). An offer of compromise is no different in principle for this purpose from a Calderbank letter and the authorities recognise the importance of isolating the costs component so that it is clear and capable of proper assessment independently of the principle claim. Note also the confusion that is engendered by Ricegrowers purported Offer of Compromise when Rule 216(2) is brought into play. It was not possible on the day that the offer was made to know what amount Ricegrower's was intending to pay Mr Bowman on the one hand and his legal advisers on the other hand such that the Offer of Compromise was entirely invalid. Consideration 20 Rule 216 of the Industrial Relations Commission Rules 1996 provides: 216 Offer of compromise (1) Upon the making of an order under Rule 168 (9), a party entitled to costs may, unless the Commission otherwise orders, have those costs assessed up to and including the day the offer was accepted. (2) If a notice of offer contains a term which purports to negative or limit the entitlement to costs, that term shall, unless the Commission otherwise orders, be of no effect for any purpose under Part 23 or this Rule. (3) Subrules (4)–(7) apply to an offer which has not been accepted at the time prescribed by Rule 168 (8). (4) Where an offer is made by an applicant and not accepted by the respondent, and the applicant obtains an order on the claim to which the offer relates no less favourable than the terms of the offer, then, unless the Commission otherwise orders, the applicant shall be entitled to an order against the respondent for costs in respect of the claim from the day on which the offer was made, assessed on an indemnity basis in addition to costs incurred before and on that day, assessed on a party and party basis. (5) For the purpose of subrule (4), where the offer was made on the first or a later day of the hearing of the proceedings, then, unless the Commission otherwise orders, the applicant shall be entitled to costs in respect of the claim from 11 am. on the day following the day on which the offer was made, assessed on an indemnity basis, in addition to costs incurred before that time, assessed on a party and party basis. (6) Where an offer is made by a respondent and not accepted by the applicant, and the applicant obtains an order on the claim to which the offer relates not more favourable than the terms of the offer, then, unless the Commission otherwise orders, the applicant shall be entitled to an order against the respondent for costs in respect of the claim up to and including the day the offer was made, assessed on a party and party basis, and the respondent shall be entitled to an order against the applicant for costs in respect of the claim thereafter, assessed on a party and party basis. (7) For the purpose of subrule (6), where the offer was made on the first or a later day of the hearing of the proceedings, then, unless the Commission otherwise orders, the applicant shall be entitled to costs in respect of the claim up to 11 am on the day following the day on which the offer was made, assessed on a party and party basis, and the respondent shall be entitled to costs in respect of the claim thereafter, assessed on a party and party basis. (8) Where an applicant obtains an order for the payment of a remuneration, compensation or damages and: (a) the amount payable under the order includes interest or damages in the nature of interest, or (b) by or under any Act the Commission awards the applicant interest or damages in the nature of interest in respect of the amount, then, for the purpose of determining the consequences as to costs referred to in subrules (4) and (6), the Commission shall disregard so much of the interest as relates to the period after the day the offer was made. (9) For the purpose only of subrule (8), the Commission may be informed of the fact that the offer was made, and of the date on which it was made, but shall not be informed of its terms. (10) Subrules (4) and (6) shall not apply unless the Commission is satisfied by the party making the offer that the party was at all material times willing and able to carry out what the party offered. 21 The chronology relevant to the offers of compromise was as follows: · 28 February 2003 Mr Bowman files summons for relief, · 22 June 2005 Mr Bowman makes offer of compromise to settle first instance proceedings - $82,500 plus costs, · 22 July 2005 offer expires, · 29 November 2006 trial begins, · 14 December 2006 trial ends, · 23 February 2007 judgment - respondent to pay the applicant a sum of money calculated as the equivalent of 15 weeks of his gross annual salary package as at 1 March 2002 ($31,581.35) plus interest, · 21 March 2007 Mr Bowman files application for leave to appeal and appeal, · 24 April 2007 Ricegrowers files application for extension of time to appeal and leave to cross-appeal and cross-appeal, · 16 May 2007 Ricegrowers makes offer of compromise to settle on payment to Mr Bowman of $187,500 in full and final settlement of both the appeal proceedings and the proceedings at first instance. The amount of $187,500 was said to be inclusive of legal costs in the proceedings at first instance and on appeal as agreed or assessed. The offer expired 28 days after it was made: r 168(5)(a). The offer was not accepted by Mr Bowman, · 23 May 2007 orders made by Marks J in an amount of $31,581.35 together with interest of $14,211.61. Respondent to pay applicant's costs as agreed or assessed, · 1 August 2007 appeal and cross appeal heard, · 26 September 2007 appeal allowed; cross-appeal dismissed. Ricegrowers to pay Mr Bowman an amount equivalent to 43 weeks of his gross annual salary as at 1 March 2002 ($90,533.20) plus interest calculated from that date to the date of the appeal judgment. 22 Whilst the offer of compromise by Mr Bowman was only in respect of the proceedings at first instance, no new offer is required to entitle a successful party to claim indemnity costs in relation to an appeal: Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 at 408-409 (but see Singh v Harika (No.2) [2005] NSWCA 212 and Sheather v Country Energy (No.2) [2007] NSWCA 280 where the appeal is to the Court of Appeal from the District Court). The relevant rules of the Commission regarding offers of compromise are modelled on the Supreme Court Rules 1970, which were the subject of the proceedings in Ettingshausen. There is no basis for distinguishing Ettingshausen. 23 Given that Mr Bowman obtained on appeal an order no less favourable than the terms of his offer of 22 June 2005, then, prima facie, he is entitled to an order against Ricegrowers for costs in respect of the claim from 22 June 2005, assessed on an indemnity basis in addition to costs incurred before and on that day, assessed on a party and party basis: r 216(4). But for its offer of 16 May 2007, the respondent would have accepted that Mr Bowman was entitled to indemnity costs from 22 June 2005. So much is evident from the respondent's concession that indemnity costs were applicable for the period 22 June 2005 to 16 May 2007. 24 The respondent, however, contended that Mr Bowman's refusal to accept its offer of compromise was sufficiently unreasonable to displace his entitlement to indemnity costs on and from the date of Ricegrowers' offer of compromise and that he should only be entitled to party/party costs from 16 May 2007. In other words, it was unreasonable for Mr Bowman not to have accepted the respondent's offer. 25 Rule 216(4) provides the Court with a discretion as to whether it will order indemnity costs. Generally, exceptional circumstances are required to justify an order denying the applicant's entitlement to indemnity costs in the circumstances referred to in r 216(4): see South Eastern Sydney Area Health Service & Anor v King [2006] NSWCA 2 and the cases referred to at [83]. 26 Mr Bowman had, prior to the trial, made an offer of compromise of $82,500 plus costs. That was rejected by Ricegrowers. The judgment at first instance then found that: the contract was unfair; there were no grounds to summarily dismiss Mr Bowman; Mr Bowman - a senior employee having significant managerial responsibilities with 25 years' service - was entitled to reasonable notice; the contract should be (and was) varied to provide for reasonable notice; but that the compensation payable in connection with the varied contract should only be 15 weeks' pay. 27 Having filed a notice of appeal Mr Bowman received the respondent's offer of compromise. In light of the judgment at first instance, it was open to the appellant to assess that he had a reasonable chance of success on appeal, especially where he had sought 12 months' pay as compensation and not 18 months as originally claimed. He would have considered the offer in the context of his assessment of a successful appeal, which potentially may have seen him awarded 12 months' pay ($109,000) plus interest (in the vicinity of $55,500) plus costs. We note that the evidence regarding mitigation was sparse and it would have been reasonable for the appellant to expect that the prospect of any compensation being reduced for mitigation was not high. As to costs, we do not know what they were. Nevertheless, it could not be said that Mr Bowman acted wholly unreasonably in not accepting the respondent's offer. 28 On the other hand, the respondent may have made a similar assessment of what might be the outcome on appeal and it seems to us that the offer made by the respondent was a genuine attempt to compromise. Given that the purpose of the rule is to encourage the proper compromise of litigation, in the private interests of individual litigants and the public interest of the prompt and economical disposal of litigation (see Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 at 725-726 and Hillier v Sheather (1995) 36 NSWLR 414 at 421, 431), it is not a clear cut case for concluding that Mr Bowman should have his costs on an indemnity basis. 29 We note that the respondent's offer of compromise was an offer of a "rolled up" amount of $187,500, which includes interest and costs. The question arises whether the offer is a valid, formal offer of compromise made in accordance with r 216. There is authority in relation to counterpart rules in the Supreme Court Rules that an offer may be made "plus costs", but cannot be made inclusive of costs: Associated Confectionery (Aust) Ltd v Mineral and Chemical Traders Pty Ltd (1991) 25 NSWLR 349, 351; McLean v Commonwealth (unreported, Supreme Court, NSW, 021250 of 1995, Sperling J, 22 August 1996); Rosser v Maritime Services Board of NSW (No 3) (unreported, Supreme Court, NSW, 1624 of 1993, Young J, 25 November 1997). The rationale for this was explained by Giles J in Associated Confectionery at 350-351: Part 52, r 17(1), provides that on the acceptance of an offer of compromise, the plaintiff may unless the court otherwise orders tax his costs in respect of the claim against the defendant up to and including the day the offer was accepted. It goes on to provide that if the costs are not paid within four days after the signing of a certificate of taxation the plaintiff may enter judgment against the defendant for the taxed costs. Those words are apt to bring about the result that if the plaintiff had accepted the defendant's offer by the offer of compromise of 29 November 1990 then unless the court otherwise ordered the plaintiff would be entitled to tax its costs. There is immediately a conflict with the fact that the offer was made for a sum inclusive of costs. Part 52, r 17(2) provides: (2) If a notice of offer contains a term which purports to negative or limit the operation of subrule (1), that term shall be of no effect for any purpose under Part 22 or this rule. If this subrule be given the effect which its words seem to require the difficulty would be resolved by treating the making of the offer as an offer inclusive of costs as of no effect, and it should be noted of no effect not only for the purpose of Pt 52, r 17(1), but for any purpose under Pt 52, r 17. 30 The rationale for what his Honour appears to have decided in Associated Confectionery was that (at 351): If the impact of costs upon an offer had to be borne in mind then whenever a court was required, in order to give effect to Pt 52, r 17(4) or r 17(5), to determine whether the offer was more favourable or less favourable than the result of the proceedings it would be necessary to indulge in a taxation of costs. That is simply not practicable. 31 The respondent's offer of compromise was expressed in such a way that it allowed the appellant to have his costs as agreed or assessed and an amount equal to the difference between $187,500 and the appellant's costs, less any amount required to be deducted for taxation purposes. In other words, the appellant could have his costs (as agreed or assessed) and a further amount that presumably must relate to the order on the appellant's claim, provided the total amount payable by the respondent did not exceed $187,500. This approach would still seem to be objectionable based on the view expressed by Giles J in relation to Part 52, r 17 of the Supreme Court Rules in Associated Confectionery. We do note in passing that r 20.26(2) of the Uniform Civil Procedure Rules 2005 (which do not apply here) now provides: An offer must be exclusive of costs, except where it states that it is a verdict for the defendant and that the parties are to bear their own costs. 32 There is also a line of authority, which we regard as more pertinent to the issue at hand than Associated Confectionery, to the effect that an offer that is inclusive of costs is not an offer of compromise because the court is not able to determine the appropriate amount to attribute to the substantive claim and for costs incurred in advancing it: see Smallacombe and Others v Lockyer Investment Co Pty Ltd (1993) 114 ALR 568; Hanave Pty Limited v LFOT Pty Limited (formerly Jager Pty Ltd) & Ors [1998] 1429 FCA; Rosser; and Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602. These cases related to offers made by Calderbank letters (see Calderbank v Calderbank [1976] Fam 93). However, the same difficulty arises in respect of a formal offer of compromise under r 216. In deciding whether it should 'otherwise order' under r 216(4), the Court does not know whether the 'order on the claim to which the offer relates' is or is not less favourable than the terms of the offer because the offer does not distinguish between the amount of offer attributable to the order on the claim and the amount attributable to costs. In Rosser, Young J made the following relevant observation: Doubtless the plaintiff's solicitor could have done a calculation as to how much the plaintiff would have had in his pocket after paying his own costs and could have advised the plaintiff accordingly. However, the vice of the offer is that the court cannot easily make this calculation. Either the court has to guess, and with quantum of costs these days I would not even want to hazard a guess, or the question of quantum has to be referred to an expert at cost to the parties. It was this step that Giles , J considered was the real vice in the Associated Confectionary (sic) case . Thus, in my view, the Court should in this respect treat Calderbank letters by analogy with Offers of Compromise. 33 Similarly, in Dr Martens Australia, after referring to the judgment in Smallacombe, Goldberg J stated at [24]: [24] If the purpose of a Calderbank letter is to offer to bring litigation to an end it should be couched in such terms as enable the offeree to make a carefully considered comparison between the offer made and the ultimate relief it is seeking in all its aspects. An offer inclusive of costs confuses this issue as it puts the offeree in a position of not being able to determine the appropriate amount to attribute to the money sum it is seeking. Although an estimate can be made of what the offeree's taxed party and party costs might be at the time of the offer, the offeree is not being offered the opportunity to have those costs assessed by taxation in default of agreement, in addition to being made an offer to settle its claim. As a matter of principle, if a party is to be put at risk of losing its costs, even if ultimately successful, by not accepting an offer made to settle or compromise the proceeding at a point of time prior to trial, that risk should only be imposed if the party is given the opportunity, at the time of the offer, to obtain its taxed costs to date in addition to the offer made, knowing that it has been able to make a careful comparative assessment of the value of the offer as against the ultimate relief sought to be obtained. 34 Even if we were to regard the respondent's offer as a Calderbank letter, and we do not think we should because the offer was specifically made pursuant to the Commission's Rules, the offer suffers from the same problem we have described in the previous two paragraphs. 35 Given the absence of any evidence relating to the appellant's costs and the inability to properly relate the respondent's offer to the Court's order on the appellant's claim, we have decided, in the exercise of our discretion, that Mr Bowman should have his costs of the first instance proceedings assessed on an indemnity basis from 22 June 2005 and that Ricegrowers shall pay Mr Bowman's costs of the appeal and of the cross-appeal on an indemnity basis. Orders 36 The Full Bench makes the following orders: (1) Ricegrowers shall pay Mr Bowman's costs of the proceedings before Marks J in Matter No IRC 1061 of 2003 on a party and party basis up until 21 June 2005 and pay his costs on an indemnity basis of those proceedings on and after 22 June 2005. (2) Ricegrowers shall pay Mr Bowman's costs of the appeal and of the cross appeal on an indemnity 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.