Notice of offer to compromise (Form 45)

Part 25 of the Federal Court Rules 2011 sets up a formal offer system. A party (the offeror) makes an offer to compromise by serving a notice in accordance with Form 45 on another party (the offeree), and the notice must not be filed in the Court (r 25.01). The notice must be signed by the offeror, which a lawyer can do for the party (rr 25.02, 4.02), and it must say whether the offer is inclusive of costs or whether costs are in addition (r 25.03(1)). What makes Form 45 more than a letter is rule 25.14: if a formal offer is not accepted and the judgment turns out worse for the party who rejected it, the Court's starting point is that costs after 11.00 am on the second business day after the offer was served are paid on an indemnity basis.

When you need it

• You are a party to a Federal Court proceeding and want to make a formal offer to settle all or some of the claims at any time before judgment (r 25.05(1)).
• You want the costs consequences in rule 25.14 to apply if the other side does not accept and then does worse at trial than your offer.
• You are making a further or improved offer. A party may make more than one offer (r 25.05(2)).
• Not for accepting an offer: the offeree accepts by serving a notice of acceptance in Form 46 (r 25.08(3)).

1. 1

   Copy the heading of the proceeding

   Use the file number, District Registry, Division and party names exactly as they appear on the originating application (rr 2.13, 2.14).

2. 2

   Address it and say what is being compromised

   Name the party the offer is made to by their role, such as the First Applicant. If the offer does not cover every claim in the proceeding, say which claims it relates to.

3. 3

   State the terms

   Set out the terms of the offer clearly enough that a simple acceptance creates a binding agreement. If the offer is a sum of money, you may separately state the amount for the claim and the amount for interest (r 25.03(2)).

4. 4

   Deal with costs

   Choose either inclusive of costs or in addition to costs (r 25.03(1)). If costs are in addition and the offer is accepted, the offeree may tax party and party costs against the offeror up to and including 14 days after the offer was made (r 25.12).

5. 5

   Set how long it is open and when payment is made

   The offer must stay open for at least 14 days (rr 25.05(3), 25.08(1)). If no time is stated it can be accepted any time before judgment (r 25.08(2)). A money offer is taken to be payable within 28 days after acceptance unless the notice says otherwise (r 25.04).

6. 6

   Confirm the basis, then date and sign

   The form states the offer is made without prejudice, which is also the default under r 25.05(4) unless you say otherwise. Date it and sign it as the party or as the party's lawyer.

• Do not file Form 45 with the Court. It is served on the party it is addressed to (r 25.01).
• Keep proof of when and how it was served. The costs consequences in rule 25.14 run from 11.00 am on the second business day after the offer was served.
• An offer can only be withdrawn within 14 days after it is made with the Court's leave, or by replacing it with an offer on terms more favourable to the offeree (r 25.07).
• While a without prejudice offer is open, nothing about its existence or terms may be communicated to the Court until it is accepted, judgment is given or an application is made under rule 25.07, 25.09 or 25.10 (r 25.06).

• Never mention the offer in a pleading or affidavit (r 25.06(1)).
• Be precise about costs and interest. A vague offer is hard to compare with the judgment later, which is the whole point of the rule 25.14 comparison.
• Where there are several respondents who may be jointly liable, check rule 25.11 before relying on enforcement of an accepted offer under rule 25.10.
• The Court can make orders that depart from Part 25 (r 1.35), so the costs results in rule 25.14 are a starting point rather than a guarantee.