It is often said that the issue of costs is of primary importance in litigation. However, 2012 saw the issue of costs become one of increasing uncertainty for litigants in New South Wales (NSW). This is in large part due to differing judicial opinions on the application of rule 20.26 of the Uniform Civil Procedure Rules 2005 (NSW). This rule relates to offers of compromise and provides, in general terms, that such offers must be "exclusive of costs".

In Old v McInnes and Hodgkinson [2011] NSWCA 410 (Old), the NSW Court of Appeal found that the relevant offers were not "exclusive of costs" because they provided that the offeror would also pay the offeree's costs. In that way, rather than being "exclusive of costs", the offers included an offer to pay costs. Such a "plus costs" offer was therefore invalid.

The matter was then revisited in Vieira v O'Shea (No.2) [2012] NSWCA 121 (Viera), where the (differently constituted) NSW Court of Appeal again considered the effect of a "plus costs" offer. This time, the court found that the mere reference to costs was not sufficient to take the offer outside the rules unless the reference operated inconsistently with the rules. Such a "plus costs" offer was therefore valid.

Since that time, numerous judges have aligned themselves with the views expressed in Old. Numerous others have preferred the views in Vieira. The only aspect of certainty – is one of inherent uncertainty. One of the cases that followed Vieira, a decision of Justice Garling in Rail Corporation NSW v Vero Insurance [2012] NSWSC 632, is presently on appeal. The Court of Appeal will therefore have the opportunity to set things straight.

As the Honourable Justice M J Beazley AO (who is of the view that Old represents the law as it presently stands in NSW) says:

"[i]t must be conceded, however, that the proliferation of inconsistent statements on a matter of practice and procedure, but which has such a substantial impact on the parties, is unsatisfactory and should be addressed by the Rules Committee of the Courts".

We presume that there is almost unanimous agreement that this uncertainty should be resolved, forthwith. We understand that the Uniform Rules Committee is reviewing the matter in conjunction with the NSW Bar Association.

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