Amos v Moutidis [2004] VCAT 364

Victorian Civil and Administrative Tribunal|2004-03-09

Without prejudice, settlement offers, s112, 113 and 114 of VCAT Act, "not more favourable", offer which includes costs.

Australian Shell Company Ltd (ACN 079 167 936) (Struck out from proceeding on 24/9/03)

2. The Second Respondent must be served with copies of any documents relating to fixing of costs and is entitled to be present at any proceeding conducted by the principal registrar or his nominee.

1. On 28 November 2003 I made an order that the First Respondent pay the Applicants $15,388.20 with a stay to pay of 28 days. I ordered further that should the First Respondent fail to pay within 35 days, the second Respondent was obliged to pay within a further seven days, and the First Respondent remained obliged to pay the Applicants the balance of $1,687.40.

2. In the course of the hearing I had indicated that there would be no order for costs in circumstances where the amount in dispute was not great and the matter not particularly complex.

3. After the decision was announced on the substantive issues, Mr Bingham for the Applicants wished to show me a letter hand-dated 7 August 2003. Mr McPhee for the First Respondent objected to me seeing the letter on the basis that it is marked "without prejudice". He submitted that in accordance with the rule in Walker v Wiltshire (1889) 23 QBD, a document which is marked without prejudice cannot be shown to a court or the Tribunal unless both the sender and recipient withdraw the protection it affords, which the First Respondent refused to do. He added that the Applicants could have protected their right to produce the letter before the Tribunal by marking it "Without prejudice save as to costs".

4. I chose to view the letter and then decide whether the letter should be taken into consideration Accordingly, I ordered that the Applicants had leave until 11 December 2003 to make a written submission regarding their entitlement to costs generally and in particular the impact of Walker v Wiltshire upon the operation of s113 of the Victorian Civil and Administrative Tribunal Act. A submission for the Applicants was received by the Tribunal on 11 December 2003. The First Respondent had leave to reply until 4 pm on 18 December 2003. I also viewed another letter marked "without prejudice" from Falcone & Adams to Neil McPhee of 13 February 2003.

5. On 28 November 2003 copies of the Order were sent to the parties' representatives. The letter to Mr McPhee for the First Respondents was sent to his old address at Level 2, 480 Bourke Street, Melbourne. Around this time Mr McPhee joined Rigby Cooke and on 8 January 2004 the Tribunal received a letter from them signed by Mr McPhee stating that the Order had gone astray and was not received until 7 January 2004, and seeking a further 14 days to respond. On 14 January 2004 orders in chambers were made giving the First Respondent until 22 January to make any further submission. On 22 January 2004 a further letter was received from Messrs Rigby Cooke, stating that Mr McPhee was overseas and that he would return between 4 and 9 February. An order by consent was made further extending the time for the First Respondent's submissions to 13 February 2004. No further submissions have been received from the First Respondent or on his behalf.

6. The English Court of Appeal found that both the sender and recipient of a without prejudice letter must consent to it being looked at by the court. The issue in that case was also whether the letter could be produced on a question of costs. It is interesting to note that at that time the learned judges considered any later revelation of an offer to settle might weaken the capacity of without prejudice offers to have their desired result, that is, to obtain settlements. It is clear now that their concerns were unfounded.

7. The Applicants referred to the decision of the Supreme Court of Queensland in Transit Australia Pty Ltd v Crewford Australia Pty Ltd (1998) 1 Qd R 690 where Thomas J said at 691: "Sometimes problems arise when the offer is made "without prejudice", but there is a distinct tendency to interpret such offers as reserving the protection from disclosure in relation only to issues such as liability and quantum, but not as preventing disclosure to the Court in the course when the question of costs comes to be considered."

8. Transit concerned an arbitration under the Queensland Commercial Arbitration Act 1990, s34(6) of which obliges the arbitrator or umpire to "take into account both the fact that the offer was made and the terms of the offer" when exercising a discretion as to costs.

9. Section 112 of the VCAT Act is to similar effect. It provides in part:

(a) a party to a proceeding ... gives another party an offer in writing to settle the proceeding; and

(b) the other party does not accept the offer within the time the offer is open; and

(d) in the opinion of the Tribunal, the orders made by the Tribunal in the proceeding are not more favourable to the other party than the offer.

(2) If this section applies and unless the Tribunal orders otherwise, a party who made an offer referred to in sub-section (1)(a) is entitled to an order that the party who did not accept the offer pay all costs incurred by the offering party after the offer was made

(b) without prejudice, meaning that the Tribunal is not able to be told of the making of the offer until after it has made its orders in respect of the matters in dispute in the proceeding (other than orders in respect of costs)

(4) If an offer provides for the payment of money, the offer must specify when that money is to be paid."

"(1) An offer must be open for acceptance until immediately before the Tribunal makes its orders on the matters in dispute, or until the expiry of a specified period after the offer is made, whichever is the shorter period.

(2) The minimum period that can be specified is 14 days.

12. It is found that the Tribunal must consider a without prejudice offer made in accordance with sections 113 and 114, and that while caution would dictate that it is always preferable to mark such letters "without prejudice save as to cost", it is not fatal to the operation of s112 to fail to do so.

13. I therefore find that Walker v Wiltshire does not prevent the Tribunal from viewing a letter marked "without prejudice" in circumstances where only costs are to be determined.

14. Mr Bingham for the Applicants submitted that "The Tribunal is not bound by and should not be constrained by comments made in the course of encouraging parties to settle." Mr Bingham's submission is accepted in this case, in so far as the offers to settle comply with sections 113 and 114. In those circumstances there is an obligation to consider the offers.

15. Mr Bingham also asserted that the conduct of "the Respondents" caused the Applicants extra expense. He referred to concessions on the morning of the trial and repeated directions hearings. While Mr Bingham's submission is accepted that the Tribunal has a wide discretion on the question of costs, the matters asserted do not clearly make out a ground under s109(3) of the VCAT Act.

16. I must therefore consider whether the letters of offer comply with sections 113 and 114 of the VCAT Act, and whether the orders made by the Tribunal in the proceeding are not more favourable to the other party than each offer.

17. The letter of 13 February 2003 was headed "Amos ats [sic] Moutidis and Housing Guarantee Fund Limited" but was written on behalf of three unit holders of which the Applicants must be treated as one. The relevant parts of the letter are:

"We are instructed that our clients are willing to resolve their respective claims against your client at this early time on the following basis:

Your client admits responsibility for all building works up until lock-up stage;

Our clients release your client from and forever abandon any claim that they have now, or may have in the future in relation to building works that have been undertaken subsequent to lock-up stage; and

Your client pay each of the respective Unit owners the sum of $10,000 (that is, a total of $30,000)

(a) We would appreciate being advised within the next seven days of whether or not this proposal is acceptable to your client."

18. It is found that the letter of 13 February 2003 is not clearly superior to the order of 28 November 2003, because it offers no release for the work undertaken to lock up stage, and specifically seeks an admission of liability to that stage. The meaning of the offer seems to be that the Respondent will pay each unit holder $10,000 to be released from undertaking any work beyond lock-up stage. There are also questions about the efficacy of point 2 of the offer with respect to future defects, given the operation of section 10 of the Domestic Building Contracts Act 1995.

19. Further, the letter of 13 February sought a response within seven days. This is not consistent with an offer which is open for 14 days in accordance with S114(2) of the VCAT Act.

20. The letter of 13 February does not attract the operation of S112.

21. The relevant parts of the letter of 7 August 2003 are:

"Please be advised that our clients are willing to finalise matters on the basis that the defects that our expert says were undertaken during base, frame and lockup stage be either rectified, or the cost of rectification be paid, by Mr Moutidis or the HGF, plus payment of our clients' costs of this proceeding.

We look forward to hearing from you in due course."

22. The offer does not state a period during which it is open, which cautious practice would recommend, but it is reasonable to assume that the offer remained open until withdrawn pursuant to section 114, or until immediately before the Tribunal orders. The offer also failed to refer to sections 112, 113 and 114 which would remove any obscurity as to its status, but it is found that failure to do so is not fatal to the efficacy of the offer under section 112.

* Tribunals orders not more favourable than the offer

23. The without prejudice offer of 7 August 2003 was accompanied by a letter of the same date listing the items which remained the subject of the claim. These items were described by stage, and included $7,070.15 worth of items which were for fixing and final stages; that is, stages after lock-up. Had the Respondent accepted that offer, the substantive award would have been only $5101.53, but the offer also included a claim for costs.

24. As indicated during the trial, I was reluctant to order costs, and absent the Applicants submissions regarding offers to settle, it is most unlikely that I would have done so. This is not unusual in the Tribunal, as Division 8 of the VCAT Act commences with section 109(1):

"Subject to this Division, each party is to bear their own costs in the proceeding."

"In determining whether its orders are or are not more favourable to a party than an offer, the Tribunal-

(a) must take into account any costs it would have ordered on the date the offer was made; and

(b) must disregard any interest or costs it ordered in respect of any period after the date the offer was received."

25. I take the sub-section to mean that I have to determine what costs would have been ordered if the order to settle for $5,101.53 plus costs had been accepted on 7 August, and the question of determining what, if any, costs were payable was left to the Tribunal. Given that the length of the hearing was estimated as only two days by that point, and the modesty of the settlement sum, I find that I would have made no order for costs.

26. I therefore find the settlement offer of 7 August 2003 was substantially more favourable to the first Respondent than the orders of 28 November 2003, and there not being a reason to order otherwise, the Applicants are entitled to their costs from and including 8 August 2003

27. The First Respondent must pay the Applicants costs on a party-party basis from and including 8 August 2003. Such costs are to be according to County Court Scale B. Should the Applicants and First Respondent fail to agree upon the amount of such costs by 6 April 2004, pursuant to section 111 of the VCAT Act the costs are to be assessed or settled by the principal registrar or a person appointed by him to do so.

28. The Second Respondent must be served with copies of any documents relating to fixing of costs and is entitled to be present at any proceeding conducted by the principal registrar or his nominee.

Arbitration Act 1990

Building Contracts Act 1995

At a glance

Court

Decision date

Source

Judgment (52 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (1)