The Federal Court judgment in Linke v TT Builders Pty Ltd [2015] FCA 11 serves as a useful reminder of parties’ obligations to carry out the terms of a settlement expeditiously, and the circumstances in which the court will make orders giving effect to an accepted offer of compromise.

In that case the applicant commenced proceedings in the Federal Circuit Court in 2012 seeking, amongst other things, compensation, damages, the costs of rectification, and incidental relief for defective building works on a residential property in South Australia.

The first respondent, TT Builders, was the building company that the completed the works. The second respondent, Mr Tessitore, was the sole director of TT Builders and was licensed as a Building Work Contractor.

The parties settled the matter by way of an offer of compromise and the trial was vacated.

The accepted offer provided for the respondents to pay $80,000 to the applicant plus for the respondents to pay the applicant’s costs up to the date of the offer on a party/party basis, less the first and second respondent’s costs on an indemnity basis commencing 15 days after the offer had been served.

The matter was adjourned for about a month to permit the terms of settlement to be carried out. As that had not been achieved when the matter returned, the matter was then adjourned again for approximately 3 months.

The respondents paid the applicant the primary $80,000 settlement sum but the issue of costs languished.

When the matter returned again to the court, the respondents’ solicitor was without instructions, despite the fact that the respondents had more than six weeks to respond to the applicant’s formulation of his costs, and more than four months to formulate their own costs. In the circumstances, the court found that:

‘…the first and second respondents have failed to comply with the implied terms of their offer…such that the discretion of the Court under r 25.10 is enlivened.’

Under Rule 25.10 of the Federal Court Rules the court may make an order giving effect to an accepted offer of compromise.

The court considered that, by implication, the terms of that offer of compromise made by the first and second respondents contained:

1. A commitment to expeditiously consider a claim for costs put forward by the applicant;
2. In the absence of agreement, to do all such things reasonably necessary to permit a timely taxation of those costs by the court; and
3. A commitment by the parties to act expeditiously in quantifying the costs incurred by them, and, in the absence of agreement, to do all such things reasonably necessary to permit a timely taxation of those costs by the court.

(Readers will note that a taxation of costs is broadly equivalent to an assessment of costs in NSW).

The court considered that an order under Rule 25.10 was appropriate in the circumstances as:

1. Rule 25.10 contemplates some degree of supervision by the Court in the implementation of a compromise;
2. The applicant was entitled to the benefit of the compromise in a timely way and it was not desirable that the process of quantifying the applicant’s costs be prolonged; and
3. It was in the public interest for all outstanding matters in the protracted litigation to be finalised as soon as practicable.

As a result, the court made orders requiring that the first and second respondents pay the applicant’s costs of the proceedings in accordance with the Notice of Offer of Compromise with the applicant’s costs to be taxed.  The court also ordered that the first and second respondent to lodge a bill of costs or face a default taxation of costs by the registrar.  The court permitted the applicant to discontinue the proceedings.

While the dispute in this case was limited to costs, it is applicable to other matters concerning settlements where a recalcitrant party fails to live up to their obligations under a settlement reached from an Offer of Compromise.