Brighten v Traino

Court of Appeal (NSW)|2019-08-16|Before: Basten JA, Gleeson JA, Brereton JA

Solicitors: Norwest Lawyers (Appellant) Wotton & Kearney Lawyers (First and Second Respondents) Macedone Legal (Third Respondent) File Number(s): 2018/193822 Decision under appeal Court or tribunal: District Court Jurisdiction: Civil Date of Decision: 30 May 2018 Before: Gibb DCJ File Number(s): 2016/334657

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Costs of trial

At that time, the Court was not aware that the costs order made on 30 May 2018 had been varied on 30 July 2018 with respect to the costs of the first and second defendants. The new order read as follows: "3. I order the plaintiff to pay the first and second defendants' costs of the proceedings: (a) on an ordinary basis until 16 February 2018; and (b) thereafter (and including 16 February 2018) on an indemnity basis."
By motion filed on 18 July 2019 (and thus within 14 days of the entry of orders in this Court) the first and second respondents sought to vary order (2)(d) made in this Court. They proposed reinstating order (3) made on 30 July 2018 in the District Court.
Although the appellant made submissions resisting a proposed change in the costs order in relation to the costs of the appeal, she made no submissions in respect of the reinstatement of the order as to the costs of the trial.
As order (3) made in the District Court on 30 July 2018 was not affected by the orders made on appeal, it remains on foot. It is, of course, inconsistent with order (2)(d) made by this Court. The inconsistency should be removed by revoking order (2)(d).

Costs of appeal

There is a separate issue as to the costs of the appeal. Because the appeal was dismissed with respect to the first and second respondents (Mr Traino and Sting Bar) the Court ordered that the appellant pay their costs of the appeal, limited to the question of liability: order (5). Their notice of motion seeks an order in the following terms: "The appellant to pay the first and second respondents' costs of the appeal on an ordinary basis up to the date of Offer of Compromise dated 17 October 2018 and thereafter on an indemnity basis."
The offer was made in formal terms: on 17 October 2018 the solicitors for the first and second respondents sent a brief note enclosing by way of service an offer of compromise of the same date. The offer of compromise was in the following terms: "The first and second defendants/respondents offer to compromise the plaintiff's/appellant's claim on the following basis: 1. The appeal be dismissed. 2. No order as to costs of the appeal. 3. This offer remains open for acceptance until 14 November 2018. 4. This offer is made in accordance with Part 20, rule 26 of the Uniform Civil Procedure Rules 2005 (NSW)."
The notice of appeal had been filed on 30 August 2018. The offer was in peremptory terms. It was open for acceptance for the minimum period of 28 days.
The written submissions in support of the application for indemnity costs from 17 October 2018 stated: "The first and second respondents' offer involved a significant element of compromise. It was made about 4 months after the appeal proceeding had been commenced. It was at a time when significant costs had been incurred and could be expected that further significant costs would be incurred."
There were three problems with that submission. First, it presumed that the appeal was commenced when the appellant filed her notice of intention to appeal on 22 June 2018; the appeal was in fact commenced on 30 August 2018, some six weeks before the offer was made.
Secondly, the submissions alleged that "significant costs had been incurred" at that time, a proposition for which there was no evidence. Nor was it self-evidently correct. Indeed, if significant costs had by then been incurred in respect of the appeal, one might expect that the letter accompanying the offer would have explained why, in the view of the respondents, the appeal was hopeless. No explanation was provided justifying the offer.
Thirdly, no doubt it could be assumed that thereafter significant costs would be incurred, but that is not a relevant consideration in determining whether to grant indemnity costs from 17 October 2018.
As the appellant noted, to attract the operation of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) relating to orders of compromise an offer must involve "a genuine offer of compromise" and not be made merely to trigger the costs consequences under the rules: Regency Media Pty Ltd v AAV Australia Pty Ltd. [1] This decision related to a form of UCPR r 20.26 before its amendment on 7 June 2013. The amendment expressly permitted that a respondent could seek a judgment in its favour with no order as to costs: r 20.26(3)(a)(i). A similar requirement of a genuine attempt to reach a negotiated settlement has, however, been confirmed in subsequent cases: see Leach v Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2). [2]
It will always be the case that an offer of compromise will be made in order to trigger the costs sanction which it is the purpose of the rules to provide. However, the purpose of the rule is not to provide an unconditional mechanism to vary the usual provisions as to assessable costs. Rather, it is intended to promote genuine attempts at settlement. That purpose is not necessarily served by a demand to abandon proceedings (or capitulate) if nothing is offered in return, unless the proceedings are patently hopeless. Even in the latter case, it may be expected that a respondent to an appeal would seek to point that out and provide a reason why it believes that to be so.
In Leach, there was a genuine compromise offered because the respondent was prepared to abandon a costs order made in its favour in the court below. Even that limited concession was not made in the present case. Secondly, not only is it not clear that the respondents had incurred significant costs when the offer was made; there was no basis upon which the appellant would understand that significant costs had already been incurred. The respondents' unsubstantiated assertion was contained in a submission on the motion in this Court, not in the letter to the appellant accompanying the offer.
Finally, as already noted, there was no attempt to explain why the appeal was doomed to fail. There were undoubtedly significant difficulties with the reasoning of the trial judge in dismissing the appellant's claims. Although it is true that appeals are brought from judgments and not reasons, this was a case in which it would have been appropriate for the respondents to explain the basis on which they asserted the appeal to be hopeless, if they took that view.
In these circumstances, the Court is satisfied that there are proper reasons for otherwise ordering, so as to disapply the consequence provided by the rules. That may be given effect by declining to vary order (5) made on 8 July 2019.

Costs of motion

Both parties sought costs of the motion if successful. The appellant did not oppose the reinstatement of the order as to the costs of the trial to which she had consented. She has been successful as to the disputed issue; she should have her costs of the motion.

Orders

The Court makes the following orders: 1. Vary the orders made on 8 July 2019 by revoking order (2)(d), with the intention that order (3) made in the District Court on 30 July 2018 will continue to operate. 2. Otherwise dismiss the applicants' notice of motion filed 18 July 2019. 3. Order that the first and second respondents (the applicants on the motion) pay the appellant's costs of the motion.

Endnotes

[2009] NSWCA 368 at [16] (Spigelman CJ, Beazley and McColl JJA); Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 at [19].
[2014] NSWCA 391 at [41] (McColl JA, Gleeson JA and Sackville AJA agreeing). DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 August 2019

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