Federal Court Rules 2011, r 25.10(a), provides that if, after acceptance of an offer to compromise by an offeree, an offeror fails to comply with the offer’s terms, the offeree may apply to the court for an order giving effect to the accepted offer. The Federal Court has held that a failure to comply can include a failure to act reasonably and expeditiously to enable the other party to have the benefit of the compromise, given both the purpose of r 25.10 and the court’s readiness to imply into the compromise agreement an implied term to act reasonably and expeditiously — in particular, where the compromise requires the payment of costs, to act expeditiously in quantifying those costs.
The case was Linke v TT Builders Pty Ltd  FCA 111 where the first and second respondents’ offer had been accepted by the applicant and the trial vacated. The applicant had written to the respondents setting out their costs to be paid by the respondents pursuant to the compromise and requesting that the respondents set out their costs during a particular period which, under the compromise, were to be deducted from the costs payable to the applicants.
However, four months followed in which the respondents failed to formulate their costs pursuant to the offer and six weeks had passed in which the respondents had failed to respond to the applicant’s formulation of his costs. The applicant submitted that the court should make orders with respect to the taxation of the costs to give effect to the accepted offer pursuant to r 25.10 on the basis that the respondents had failed to comply with the offer within the terms of r 25.10. The respondents’ solicitors stated to the court that in response to their request, they simply had not had any instructions.
As to the court’s power in r 25.10 which requires a failure to comply, White J noted that it could be said that, to date, there had not been any failure by the respondents to comply with the terms of their offer. His Honour explained: “Their obligation is to pay the applicant’s costs in an amount to be agreed or taxed less a deduction for their own costs after 20 September 2014. As the applicant’s costs have not yet been agreed or taxed, there cannot have been any failure on their part to meet their liability with respect to costs.” However, said his Honour, r 25.10 was to be construed in its context. In particular r 25.10 was “intended to provide a ready means by which the Court may enforce, or assist in the implementation of, accepted offers so that the parties are not otherwise obliged to rely upon the remedies in contract to which the acceptance of an offer may give rise. It contemplates some degree of supervision by the Court in the implementation of a compromise.”
His Honour also said that in the absence of any express stipulation in the notice of offer to the contrary, it was appropriate to understand an offer of compromise pursuant to r 25.01 as conveying by implication the offeror’s acceptance of a duty to do all such things as were necessary to enable the other party to have the benefit of the offer, if accepted. Here, it was reasonable to suppose that the respondents’ offer contained, by implication, a commitment by them to consider expeditiously a claim for costs put forward by the applicant and, in the absence of agreement, to do all such things as were reasonably necessary to permit a timely taxation of those costs by the court. A similar commitment was to be implied with respect to quantification by the respondents of their costs.
His Honour said that the respondents’ solicitor’s statement that he had not had any response from the respondents to correspondence sent to them earlier and that he was without instructions was indicative of a failure to comply with those implied terms. In those circumstances, it was appropriate to conclude that the respondents had failed to comply with the offer such that the discretion of the court under r 25.10 was enlivened.
This article first appeared in the Australian Commonwealth Courts and Family Law Tracker. The cases will be discussed in more detail in the CCH Australian High Court and Federal Court Reporter. Written by Christine Henchman, Senior Writer