Boulton v Hy-Line Australia Pty Ltd & Anor

2 The matter proceeded to trial on Monday 27 August 2012. On Thursday 30 August 2012, it was settled as between the Plaintiff and the Defendants on the basis that the defendants would pay Mr Boulton the sum of $450,000 and that he would keep WorkCover payments of approximately $72,000 already made to him under the Accident Compensation Act 1985. This meant that he would receive a total sum of approximately $522,000.

3 The contribution proceedings followed. They started on the day of the settlement, Thursday 30 August 2012. Judgment was given in the contribution proceeding on 14 November 2012. Hy-Line was found to be responsible for 40 per cent of the liability to Mr Boulton, and Adept for 60 per cent.

4 The solicitors for Adept had written twice to Hy-Line's solicitors before the trial in the principal proceeding and Adept now seeks costs orders against Hy-Line, both in relation to Mr Boulton's costs in that proceeding and in respect of its own in the contribution proceeding.

5 First, Adept claims indemnity costs in relation to the contribution proceedings for the period from 4.00pm on Friday 24 August 2012. Secondly, it submits that Hy-Line should pay the whole of the plaintiff's costs subsequent to 4pm on Tuesday 28 August 2012: in effect a single day's trial costs for Wednesday 29 August 2012, in the principal proceeding.

6 The parties have agreed that the application is to be determined solely by reference to the contents of Adept's letters, as there was dispute as to how the offers would have been understood by solicitors practising in the area and no evidence relating to the issue.

7 Adept's application for indemnity costs in the contribution proceedings relies on its solicitors' letter, dated 22 August 2012 ('the first letter'), which read:

We advise that we are instructed that our client is prepared to contribute 40% towards settlement of the plaintiff's action up to the sum of $450,000.00 plus party/party costs. This offer will remain open for acceptance until 4:00pm on Friday 24 August 2012.

If the matter proceeds and your client does not obtain a result more favourable than the terms of this offer then our client will rely upon this letter on the question of costs in relation to both the contribution proceedings and the [plaintiff's] damages claim. Our client will seek its defence costs and the costs of the contribution proceedings on an indemnity basis from the date of the [matter] of this [offer] pursuant to the principles enunciated in Calderbank v. Calderbank [1975] 3 ALL ER 333 as approved by Courts in all jurisdictions in this State. (Emphasis added.)

8 The application in respect of Mr Boulton's costs of 29 August 2012 in the principal proceeding is based upon Adept's solicitors' 24 August 2012 letter to Hy-Line's solicitors ('the second letter') which was relevantly in these terms:

We understand that the Plaintiff is presently prepared to settle the claim for $450,000.00 plus retention of benefits received pursuant to the provisions of the Accident Compensation Act 1985 plus party/party costs. ...

We advise that as contribution has not yet been resolved the Second defendant proposes that the Plaintiff's claim be settled for $450,000 on the relevant terms (or less if that proves to be possible) on the basis that it will then only remain for the Court to deal with the contribution issue as between the Defendants.

We would propose that payment of the settlement amount be funded equally by the Defendants on a without prejudice basis pending resolution of the contribution issue either by way of negotiations or judgment if the parties are not able to reach agreement and the issue has to be determined by the Court. ...

We advise that if the second Defendant's proposal is not accepted and the Plaintiff recovers damages in excess of $450,000.00 on a retention basis then we propose producing this letter to the Court in terms of the following applications:-

1. That the First Defendant pay any damages awarded to the Plaintiff in excess of the $450,000.00 that the claim can be settled for at this stage on a retention basis; and
2. That the First Defendant pay the Plaintiff's costs of the trial together with the second defendant's costs of the trial exclusive of that proportion of the trial dealing with the contribution proceedings.

If the Plaintiff's claim proceeds and your client does not obtain a result more favourable than contained in the terms of this offer then our client will rely upon this letter in terms of seeking an Order that the First Defendant pay the Plaintiff's damages assessed over the amount of $450,000.00 together with the Plaintiff's costs of the trial from 4.00pm on Tuesday 28 August 2012 that being the date and time to which this offer will be open for acceptance.

Additionally, our client will also seek its defence costs on an indemnity basis in relation to the costs of the trial in the event that the Plaintiff does recover damages of more than $450,000.00 on a retention basis in accordance with the principles enunciated in Calderbank v. Calderbank [1975] 3 ALL ER 333 as approved by Courts in all jurisdictions in this State. (Emphasis added.)

The application for indemnity costs based on the first letter

9 It is common ground that the applicable test is to be found in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2)[1]. The Court of Appeal there held that, if the rejection of an offer of compromise is found to be unreasonable in all the circumstances, then the offeror may be entitled to indemnity costs from the date of the expiry of the offer.

10 The reasonableness of the rejection of an offer of compromise is to be assessed in light of factors such as:

(a) the stage of the proceeding at which the offer was received;

(b) the time allowed to the offeree to consider the offer;

(c) the extent of the compromise offered;

(d) the offeree's prospects of success, assessed as at the date of the offer;

(e) the clarity with which the terms of the offer were expressed; and

(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it.[2]

11 That list is not prescriptive and the issue of costs remains in the discretion of the judge.[3]

12 A party will be acting reasonably if it rejects a Calderbank offer which is unclear or imprecise.[4] I agree with counsel for Hy-Line that the offer in the first letter lacked sufficient clarity to found a successful application for indemnity costs. It was not clear that it referred to a settlement under which WorkCover payments were to be kept, which was the basis of the settlement ultimately achieved. The second letter highlights the deficiency of the first by its specific references to their retention. On the other hand, I am not persuaded by counsel for Adept's argument that the second letter (sent on the day upon which, but after, the offer in the first expired) rectified the deficiency by referring to the understanding that Mr Boulton would be prepared to settle on the basis that he kept the WorkCover payments received, thereby indicating the basis on which negotiations had continued.

13 In these circumstances, the clarity and precision demanded as a condition of imposing the significant burden of indemnity costs upon the offeree is absent. Hy-Line makes a number of other criticisms of the first letter, but the lack of clarity as to the amount of what might be described as the settlement sum is determinative in my view. It was not unreasonable for Hy-Line to reject the offer made in those terms and Adept's application in relation to the contribution proceedings must fail.

The application for costs based on the second letter

14 The second letter proposes that the principal proceeding be settled with Mr Boulton on the basis upon which it was ultimately settled on Thursday, 30 August 2012. The offer to Hy-Line appears to be to the effect that that the defendants should not only make the joint offer of settlement to Mr Boulton, but that they should each provide half the monies to be paid to him, on an interim basis. The offer also, somewhat confusingly, appears to contemplate settlement for a lesser sum than that which Adept's solicitors understood Mr Boulton was ready to accept. It was an offer to negotiate with a third party. The assertion as to Mr Boulton's willingness to settle on the stated terms is insufficient to satisfy me that he would have done so some time after 4pm on Tuesday, 28 August 2012[5] or that, even if he had been willing, that the costs of the following day would not have been incurred.

15 In all the circumstances, I am not persuaded that it was unreasonable for the offer to be rejected and to exercise my discretion to make the special order for costs sought.

[1] [2005] VSCA 298; (2005) 13 VR 435, 441 [23] (Warren CJ, Maxwell P and Harper AJA).

[3] Luxmore Pty Ltd v Hydedale Pty Ltd [2008] VSCA 212; (2008) 20 VR 481, 484 [11] (Maxwell P and Kellam JA).

[4] BHPB Freight Pty Ltd v Costco Oceania Chartering Pty Ltd (formerly known as Braemar Australia Pty Ltd) (No 4) [2009] FCA 1448; (2009) 263 ALR 63, 66 [13] (Finkelstein J).

[5] See Apostolidis & Ors v Kalenik v Anor [2011] VSCA 329 (where an offer was qualified by a condition requiring the approval of a third party).