OAC Operations Pty Ltd v Coogee Diggers Ltd (No 2)

1. [1]

   I delivered my primary judgment on 26 November 2025: see OAC v Coogee Diggers [2025] NSWSC 1388 (PJ or Primary Judgment). These reasons assume familiarity with and maintain the same definition as in the PJ.

2. [2]

   The outcome of the PJ is that the claims made by OAC succeeded and the claims made by Coogee Diggers failed, save in the amount of $4,745. I directed the parties to seek to agree orders to give effect to the PJ and, to the extent of any disagreement, to provide submissions and supporting material with the remaining issues to be determined on the papers.

3. [3]

   Save for one issue, the parties were able to agree orders. The remaining issue is whether, by reason of an offer of compromise made by OAC to Coogee Diggers in respect of the Amended Statement of Claim (ASC) dated 25 June 2025, Coogee Diggers should pay indemnity costs on and from 26 June 2025.

4. [4]

   I have had the benefit of written submissions from both sides in chief and in reply.

The offer of compromise

1. [5]

   OAC served two offers of compromise under cover of a letter dated 25 June 2025, one in relation to OAC’s claims in the ASC (ASC Offer) and the other in relation to Coogee Diggers Amended Cross-Claim (Cross-Claim Offer).

2. [6]

   There is no dispute that the Cross-Claim Offer was effective and that indemnity costs on the amended cross-claim are payable on and from 26 June 2025.

3. [7]

   The ASC Offer offered to compromise the claims made on the following basis:

4. [8]

   The ASC Offer was open for acceptance until 5pm on 16 July 2025, i.e. 21 days.

5. [9]

   Coogee Diggers contends that the ASC Offer does not contain any element of compromise and therefore is not a valid offer of compromise, or alternatively provides a basis for the Court to order otherwise under r 42.14(2) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR).

Relevant Principles

1. [10]

   The relevant principles were not in dispute.

2. [11]

   UCPR r 42.14 provides:

3. [12]

   In order for an offer of compromise made under the UCPR to attract an indemnity costs order, it must involve a “genuine offer of compromise” and not merely be made so as to trigger the costs consequences under the rules: Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [16] (Spigelman CJ, Beazley and McColl JJA).

4. [13]

   Whether there was a real element of compromise is determined objectively according to the circumstances of the particular case, at the time the offer was made, rather than with the benefit of hindsight: Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd (No 2)) [2014] NSWCA 391 at [42] (Leach).

5. [14]

   In terms of whether the Court should “order otherwise”, assuming the offer is a valid offer, the onus is on the party contending that the Court should “order otherwise”, in this case Coogee Diggers, to demonstrate why the Court should depart from the consequence of the rejection of the offer: Leach at [45].

6. [15]

   It is impossible to exhaustively state the circumstances in which the Court’s discretion to “order otherwise” might be exercised. The mere fact that it was reasonable for the litigant to take the view that they did in rejecting the offer is not enough to displace the rule: Leach at [48].

7. [16]

   A party seeking to persuade the Court to “order otherwise” must identify some feature or features of one or more of the proceedings, the claim, the offer (including, for example, when it was made) and the order or judgment obtained by the successful party which provide a rational basis for the court to displace what the rule specifies is the costs order to which the successful party is entitled: see Bates v Cooke (No 2) [2014] NSWSC 1322 at [33].

Determination

1. [17]

   As the submissions unfolded, the focus was on what element of compromise was included in the ASC Offer. It was ultimately not disputed that the relief obtained by OAC was no less favourable to OAC than the terms of the ASC Offer. The lack of compromise was said to go to both whether there was a valid offer and, if there was, whether the Court should “order otherwise”.

2. [18]

   OAC initially contended that it gave up three claims in the terms of the ASC Offer:

3. [19]

   In its reply submissions, OAC accepted in relation to (c) that because the ASC Offer sought orders in accordance with its primary claim, foregoing the alternative claim of relief from forfeiture was not a compromise.

4. [20]

   Coogee Diggers contended that the position was the same in relation to (a) – foregoing the penalty claim. Properly viewed, in my view, the penalty claim concerning clause 10 of the Lease was in aid of the relief against forfeiture claim. The clause only applies upon termination of the Lease which is inconsistent with the basis on which the ASC Offer was made which was that the purported termination of the Lease was ineffective.

5. [21]

   The fact that the Lease still has 19 years to run and the issue of whether clause 10 is valid may arise in the future does not, in my view, turn the concession on the issue in the ASC Offer into a valid concession or compromise for costs purposes.

6. [22]

   That leaves (b) – the giving up of the defensive damages claim. OAC accepted that the claim under clause 17.3 was only ever defensive. OAC contended however that at the time of the ASC Offer, Coogee Diggers could have succeeded to a significant extent on its damages claims, so OAC’s claim for breach of clause 17.3 of the Lease potentially had utility to reduce the quantum of such damages claims or cancel them out. The damages claim was said to be arguable. It is said that the offer was part of a genuine attempt to reach a negotiated settlement: see Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 at [19] per Allsop P (Beazley and Campbell JJA agreeing).

7. [23]

   Coogee Diggers contends that the offer to compromise the defensive damages claim was an offer to compromise OAC’s case as it related to the cross-claim and not the ASC. Had Coogee Diggers accepted the offer of compromise for the ASC, it would have faced the same claim in defence to the cross-claim in any event. Thus, there was no real compromise in relation to the ASC.

8. [24]

   I accept the contentions advanced by Coogee Diggers in this regard. Properly viewed, the claim in relation to clause 17.3 of the Lease was defensive to the cross-claim. It is pleaded as a defence to the further amended cross-claim. Even if the ASC Offer had been accepted, the issue remained to be dealt with on the cross-claim.

9. [25]

   Accordingly, I accept the contention that the ASC Offer did not contain any real compromise so as to enliven the costs consequences in UCPR r 42.14. Indemnity costs should not be ordered based on the ASC Offer.

Conclusion and orders

1. [26]

   The Court orders that:

   1. (1)

      Notes that in these Orders, the following terms have the following meanings:

   2. (2)

      Declares that the Termination Notice is invalid.

   3. (3)

      Orders that the defendant is permanently restrained from:

   4. (4)

      Orders that the defendant is permanently restrained from:

   5. (5)

      Orders that the Further Amended Cross-Claim is dismissed.

   6. (6)

      Orders that the defendant is to pay the plaintiff’s costs of the Amended Statement of Claim as agreed or assessed on the ordinary basis.

   7. (7)

      Orders that the defendant is to pay the plaintiff’s costs of the cross-claim as agreed or assessed, as follows:

   8. (8)

      In this order: