Mouna Bekdache maintained proceedings for damages for an injury sustained in an incident involving a motor vehicle. Liability was admitted, although contributory negligence was an issue. She received judgment [1] for $31,899.62 after damages were reduced by two-thirds for contributory negligence. This judgment is in respect of the costs of the proceedings.
The defendant seeks that the plaintiff be awarded costs on the ordinary basis until 19 May 2020, and that the plaintiff pay the defendant's costs on an indemnity basis from 20 May 2020. 19 May was the date of service of an offer of compromise which exceeded the amount of the judgment. Ms Bekdache seeks that she receives the costs of the proceedings on the ordinary basis.
[2]
The offer of compromise
The trial commenced on 23 June 2020. Some five weeks earlier, on 19 May 2020, the defendant served an offer of compromise in the following terms:
"1 Judgment in favour of the Plaintiff in the sum of $35,000.
2 The Defendant to pay the Plaintiff's costs as assessed or agreed.
3 This offer is made in accordance with the provisions of Rule 20.26 of the Uniform Civil Procedure Rules 2005 (NSW).
4 This offer is open to be accepted for 14 days from the date of receipt of this Offer and it will be relied on in respect of the question of costs."
A covering letter to the offer indicated that the offer was open to 5pm on 2 June 2020, and also stated:
"If the Offer is found not to be valid for any reason, the Offer is also made in accordance with the principles outlined in Calderbank v Calderbank [1975] All ER 333.
We put you on notice that if your client does not accept this Offer and, upon hearing, an outcome which is no more favourable than this offer is obtained, this correspondence will be tendered in support of an application for indemnity costs from the date of this correspondence." [2]
The offer and covering letter were sent by email at 1.53pm on 19 May. The covering email stated that:
"I am instructed that this offer reflects my client's final position.
I am happy to discuss costs with you at the proposed ISC on Friday if the offer is of interest to your client."
I infer "ISC" is a reference to an informal settlement conference.
[3]
The plaintiff's response
Within five minutes of the email Ms Bekdache's solicitor responded, indicating that he would take instructions and respond. Shortly thereafter, the defendant's solicitor sent a short note of the total of Ms Bekdache's expenses paid by the insurer.
There was no further evidence of consideration of the offer. No settlement was reached at the settlement conference, and the offer expired on 2 June 2020.
About a week later, on 10 June 2020, a telephone conversation occurred between the two solicitors. That prompted the defendant's solicitor to send a further email stating, "I am instructed that my client is unwilling to enter into any further settlement negotiations".
A further week thereafter on 17 June 2020, Ms Bekdache's solicitor sent an email containing a letter with an offer of compromise in substantially the same terms as the defendant's earlier offer, offering judgment for the plaintiff for $35,000, the defendant to pay the plaintiff's costs, made in accordance with UCP Rule 20.26. The offer was stated to be open to 4pm on 19 June 2020.
The covering letter of the plaintiff was marked "WITHOUT PREJUDICE SAVE AS TO COSTS" and stated:
"If, for any reason, the enclosed Offer of Compromise is deemed defective or not made in accordance with the rules, the Plaintiff relies on that offer from the date it was made and intends for that offer to act as an offer in accordance with the principles enunciated in the case of Calderbank v Calderbank [1975] 3 All ER 333.
Whilst this letter is marked "without prejudice" we reserve the right to refer to it on any question of costs that might arise."
The covering email stated, "It may assist in having your client notionally, re-open their previous offer, for the same amount".
The letter did not prompt any response, and the trial commenced on 23 June 2020, and consumed a total of eight days hearing including submissions. During final submissions, an issue arose about whether the defendant had, by her defence, admitted the particulars of negligence of the plaintiff's claim. [3] In the judgment at [57], I stated:
"In these circumstances, I was inclined to hold that the proper construction of the defence was of an admission of negligence but not of the various subparagraphs of paragraph 12 of the statement of claim. But Ms Chen, through her counsel, sought leave to amend against the alternative possibility of a wider admission. Ms Bekdache initially opposed leave on the basis that more would have been asked of Ms Chen if the defence admission had been more narrowly framed. I indicated an inclination to grant leave on condition that Ms Chen be made available for further cross-examination. On that indication, Ms Bekdache abandoned any need for Ms Chen to be recalled and expressly declined to make further submissions against the amendment. The amendment was granted and the pleading point resolved."
[4]
The effect of the defendant's offer
No issue was taken about whether the defendant's offer of compromise complied with r 20.26. Although the offer was only open for, or about, 14 days, the requirement of 28 days in subr 20.26(5) was inapplicable to the offer made less than 2 months before the trial date, and Ms Bekdache did not assert that the period of about 14 days was unreasonable. Such a concession would appear to be well made, especially in circumstances where a settlement conference occurred in the period the offer was open and when the offer was open until three weeks before the trial date.
Similarly, although an offer by the defendant to pay the costs as agreed or assessed might, being the costs of the proceedings, go marginally beyond the costs "up to the time the offer was made" as permitted in paragraph 20.26(3)(b), since there may be costs after the offer and before the acceptance, I do not see that that further minor amount offered by the defendant was material or could make the offer non-compliant. The plaintiff did not submit otherwise.
Accordingly, the non-acceptance of the offer, the qualities of the judgment and the quantity of the damages in the judgment, enlivened r 42.15 which entitled the defendant to the orders she sought subject to the Court otherwise ordering.
[5]
The plaintiff's response
The plaintiff contended that in view of her latest offer, and the amendment referred to earlier, the Court should order otherwise than in accordance with the orders contemplated by r 42.15 as sought by the defendant.
As the judgment was less favourable than the plaintiff's offer, it gave the plaintiff no entitlement to an indemnity costs order under r 42.14. Ms Bekdache did not contend otherwise, but asserted that the defendant's offer was not genuine because the later offer, although in the same terms as the defendant's offer, was neither accepted nor the subject of further negotiations. Ms Bekdache referred to the Court's discretion and power both in Pt 42 and under s 98 of the Civil Procedure Act 2005. The discretion in s 98 is in the chapeau to subs (1) expressly made subject to the Rules.
It is open to be inferred from the two offers, as I do, that the plaintiff's claim was assessed by the parties to be worth about $35,000. But an offer of $35,000 by the plaintiff is of little protection against the consequences of the defendant's offer. If the judgment is less than $35,000, the plaintiff's offer is ineffective, and if the judgment is more than $35,000, there would be no need for the protection, as the defendant's offer did not enliven any costs consequences. The plaintiff's offer could only have some effect on the defendant's offer if the judgment was precisely $35,000, an unlikely event with unliquidated personal injury damages.
It follows that the plaintiff's financial outcome was at some peril as a result of failing to accept an offer by the defendant that according to the above inference, was a fair offer. Only by offering less than $35,000 could the plaintiff secure any real protection against its consequences. She chose not to do that.
It might be thought that a genuine offer of compromise of the defendant could not become defective because of a later offer of the plaintiff, or the defendant's response to that later offer. Even though the offer is the same, it might be expected that in the final three weeks before trial, costs are likely to be incurred, as preparation increases. The plaintiff's offer makes no allowances for these matters.
The Civil Procedure Act obliges all parties and their legal representatives to act to facilitate a just, quick and cheap resolution of the proceedings. [4] A failure to comply can affect the exercise of the costs discretion [5] connected to the s 56 obligation for there to be a "timely disposal of the proceedings…at a cost affordable by the respective parties". [6] One aspect of costs being affordable is that they bear some proportionality to the "importance and complexity of the subject-matter in dispute". [7]
It might be thought that the costs of a substantial trial, ultimately lasting eight days, might operate on the minds of the parties to take further steps to settle proceedings when they are agreed that a reasonable amount of damages is about $35,000.
However, it seems unfair to dilute the defendant's ordinary entitlement to an order under r 42.15 by reason of her failure to respond to or accept the plaintiff's offer. The offer was not proved to be reasonable by the amount of the judgment, and the plaintiff by the offer did not propose to compensate the defendant for the costs she likely incurred after her earlier offer had expired.
In the circumstances, the parties each sought to take advantage of the rules, and, perhaps by a matter of relative inches, only one party was successful in that conduct. As indicated, Ms Bekdache had means to protect herself, by a lower offer but choose not to do so.
An argument was advanced that a wider discretion as to the use of the plaintiff's offer was available as a Calderbank offer. The defendant said the plaintiff's offer was not a Calderbank offer because it was neither defective nor not in accordance with the rules, and only in these circumstances did the plaintiff's covering letter of 17 June 2020 seek to make the offer a Calderbank offer. I did not find that argument persuasive.
In the matter of Alsafe Security Products Pty Ltd atf the Alsafe Trust (in liquidation) [2016] NSWSC 575 at [6], Black J decided that an offer by the plaintiff in a similar form to the offer made by the plaintiff here fell outside r 20.26 even if, as appears here, the same offer by the defendant would be within the rules. I questioned that decision in Babylon Aluminium Pty Ltd v Khazma Aluminium Windows & Doors Pty Ltd, [8] but it remains authority on the point.
In addition, the plaintiff's offer could be ineffective or "defective" because the size of the judgment rendered it of no utility under the rules.
Whilst I incline to the view that the plaintiff's offer could be treated as a Calderbank offer, it is of no significance. The failure to accept it cannot be proved to be unreasonable by the amount of the judgment, which was less, and there was no other evidence of unreasonableness. Any assessment of unreasonableness of declining the offer must bear in mind the defendant's legal position as a result of the plaintiff's failure to accept the defendant's offer, as well as the likely judgment sum and the costs incurred, particularly after 2 June 2020. I was not persuaded that the defendant acted unreasonably.
[6]
The amendment
The plaintiff also relied on the defendant's amendment during the trial. It was at least arguable that the amendment was regularising a position that already prevailed. And the plaintiff's final position on the amendment was not one of strong opposition, as indicated by [57] in Bekdache quoted earlier. But the plaintiff could not raise the offer of compromise as a prejudicing factor against the amendment: no disclosure to the Court of an offer or its contents is permitted prior to judgment. [9] And I am persuaded that the amendment impacted on the assessment of the potential seriousness of the defendant's negligence, and thus on the assessment of apportionment of liability for contributory negligence. The plaintiff's counsel said that this impacted on the decision to maintain the application to rely on the admissions in the defence, which I accepted although it was formally without evidence. The defendant asserted that it is only relevant if the amendment impacted on the decision to reject the defendant's offer, a matter about which there was no evidence. But, in my view, there could be no persuasive evidence on what impact the hypothetical event of an earlier amendment might have had on the decision of the plaintiff not to accept the defendant's offer. The state of the pleadings was at least relevant to that decision.
I do not think the nature of the amendment is sufficiently substantial to displace entirely the existence and effect of the defendant's offer of compromise. However, in these circumstances, I think that the defendant should pay any costs thrown away by the amendment, should not obtain her costs of the application for the amendment and on the pleadings point generally and should receive her costs from the date of the offer on the ordinary basis only.
[7]
Orders
The orders of the Court are:
1. The defendant to pay the plaintiff's costs up to and including 19 May 2020, and any costs thrown away by the amendment during the trial.
2. No order as to the costs of and arising from the pleading point and the amendment referred to in paragraphs 48 to 57 of Bekdache v Chen [2020] NSWDC 830.
3. Subject to orders 1 and 2, the plaintiff to pay the defendant's costs from 20 May 2020 on the ordinary basis.
[8]
Endnotes
Bekdache v Chen [2020] NSWDC 830.
Exhibit 1.
Bekdache v Chen [2020] NSWDC 830 at [48]-[57].
S 56(1), (3) and (4).
S 56(5).
S 57(1)(d) and (2).
S 60.
(unreported, 16 October 2020, District Court of New South Wales, Taylor SC DCJ).
See r 20.30, Macplan Logistics Systems Pty Ltd v Baxter Healthcare Pty Ltd (1996) 39 NSWLR 324.
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Decision last updated: 09 March 2021