Bull v Cooldawinda Pty Ltd

Submissions

1. The defendant submitted that this was a case where there were sufficient reasons to depart from the presumption in r 42.14 and to "order otherwise", noting that it bore the onus: Curtis v Harden Shire Council (No 2) [2015] NSWCA 45 at [27]. It was a "walk-away" offer to capitulate, which contained no real and substantive benefit or compromise in favour of the defendant: Strata Plan No 87265 v Saaib (No 2) [2021] NSWSC at [37]-[40] (Henry J); Goo v Sims (No 2) [2022] NSWSC 651 at [27]-[30]; Abdi v Abdi (No 2) [2022] NSWSC 582 at [34] (Ward P); Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [41] (McColl JA). The only element of compromise by the plaintiff was not to seek his costs. The offer was made at an early stage of the proceedings. Although there is no evidence of the plaintiff's costs at the date of the offer, it is reasonable to conclude that they were unlikely to have been substantial: Taheri v Vitek (No 2) [2014] NSWCA 344 at [10] (Bathurst CJ, Emmett and Leeming JJA).
2. The defendant submitted that its prospects of a successful cross-claim and defence turned upon which version of competing accounts of conversations between two witnesses (the executor and the son) was likely to be accepted. Those competing versions were not tested in evidence until the hearing. At the time of the offer, the defendant's evidence had not yet been served and the plaintiff was in no position to assess whether the defendant's defence and cross-claim were "unlikely to succeed", as suggested in the Calderbank letter. The defendant had an arguable case which ought not to have been lightly abandoned: Saaib at [39]. The defendant's non-acceptance of the offer was not unreasonable: Noon v Bondi Beach Astra Retirement Village Pty Ltd (No 2) [2010] NSWCA 285 at [11].
3. Further, the defendant sought an order that plaintiff pay its costs of this application on the indemnity basis from 1 October 2024. The defendant complained that, despite there being only a $5,000 difference between the parties' respective last offers, this application was brought, the costs of which are likely to exceed the difference between the parties' offers.

Consideration

1. The offer of compromise proposed that there be no order as to costs, with the intent each party bear their own costs. The offer complies with sub-rr 20.26(2)(c) and (3)(a)(i) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) as it did not include an amount for costs, was not expressed to be inclusive of costs and proposed that there be no order as to costs: Jojeni Investments Pty Ltd v Mosman Municipal Council (No 2) [2015] NSWCA 208 at [10]-[12]. There is no dispute that the plaintiff obtained an order or judgment "no less favourable" than the terms of the offer: r 42.14(1).
2. A question arises as to whether the offer complied with rule 20.26, UCPR, given the relatively short period of time during which it was open for acceptance. Rule 20.26(5) provides: The closing date for acceptance of an offer - (a) in the case of an offer made two months or more before the date set down for commencement of the trial - is to be no less than 28 days after the date on which the offer is made, and (b) in any other case - is to be such date as is reasonable in the circumstances.
3. As the offer was made less than two months before the date set down for commencement of the trial, the question is whether the offer was left open for such time as was "reasonable in the circumstances". As the learned authors of Ritchie's Uniform Civil Procedure (NSW) observe at [20.26.40]: (some citations omitted) … The assessment of "reasonable time" depends on the circumstances when the offer is made … Those circumstances include the information available to the parties. They will also include awareness of the provisions of UCPR rr 42.13-42.15A - which permit indemnity costs orders in relation to costs incurred from the day following the date the offer was made. The mere fact that a late offer is only left open for a few days will not necessarily preclude compliance with the "reasonable time" requirement … On the other hand, if the offer is made very close to trial, and provides only a short time for acceptance, the competing practical exigencies of both completing final preparation for hearing, and giving prompt consideration to the offer may suffice to preclude characterization of the acceptance period as reasonable: Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 at [18] -[24] (offer day before trial - 22 hour acceptance period - not reasonable acceptance period).
4. At the time that the offer was made, these proceedings had been expedited and fixed for final hearing in three weeks' time. Self-evidently, the offer could not remain open for 28 days; some abbreviated period of acceptance was needed.
5. The offer was open for acceptance for four business days until 12 July 2024, when the defendant's evidence was also due. In deciding whether to accept the offer or proceed to finalise its evidence, the defendant had at its disposal the plaintiff's evidence in chief, closed pleadings and the knowledge of what the evidence of its witnesses was likely to be. The defendant did not give notice that it was unable to assess the reasonableness of the offer because of a lack of information: r 20.26(4). As such, I consider that the defendant had all relevant information to make a decision as to whether the offer should be accepted.
6. The defendant had briefed counsel since the inception of the proceedings, who could advise in respect of the offer. The issues were already well known to the parties and were of short compass: see [2]. The offer was not made so close to the commencement of the trial that the defendant had to choose between considering the offer or preparing for trial. Having regard to all of the circumstances, I consider that the period for acceptance was reasonable and thus the offer complies with the rules.
7. Whilst it is relevant to first consider whether the rejection of a Calderbank offer was unreasonable when deciding whether to make an order for indemnity costs, the same is not the case where an offer of compromise has been served in accordance with the rules: IFTC Broking Services Ltd v Cmr of Taxation (Cth) (2010) 268 ALR 1 at [12] (per Stone, Edmonds and Jagot JJ); [2010] FCAFC 31. In this event, an order for indemnity costs follows, unless the Court orders otherwise: New South Wales Insurance Ministerial Corp v Reeve (1993) 42 NSWLR 100 at 102 (per Gleeson CJ, Clarke and Cripps JJA agreeing); Morgan v Johnson (1998) 44 NSWLR 578 at 581-82 (per Mason P, Sheller and Powell JA agreeing).
8. There does not need to be "exceptional circumstances" before the Court will make orders otherwise. Nevertheless, "the prima facie position should only be departed from for proper reasons which, in general, only arise in an exceptional case": see Leach v Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [47] (per McColl JA, Gleeson JA and Sackville AJA agreeing); Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) [2004] FCA 1437; (2004) 212 ALR 281 at [17] (per Hely J). A "tight leash" should be maintained on the circumstances in which the Court should "order otherwise" so as to promote certainty in the operation of the rules relating to offers of compromise, discourage offerees who seek to 'game the system' and to discourage satellite litigation with respect to costs: Walker v Harwood [2017] NSWCA 228 at [22] (per Basten JA).
9. The onus is on the offeree to demonstrate why the Court should depart from the consequence of its rejection of the offer: Leach at [45]. It is impossible to exhaustively state the circumstances in which the court's discretion to "order otherwise" might be exercised: Leach at [48]. The mere fact that it was reasonable for the offeree to take the view that they did in rejecting the offer is not enough to displace the rule, although this does not mean that reasonableness of the rejection is an irrelevant consideration: Leach at [48].
10. Whether the executor's offer required the defendant to "capitulate" is not particularly relevant in this setting. But it is not entirely clear what the defendant suggests the executor should have otherwise offered. By the statement of claim, the executor sought a declaration that he was not bound to sell the farm to the defendant but was at liberty to exchange a contract for sale with the third party who made the highest unqualified offer. By the cross-claim, the defendant sought a declaration that the executor was bound to sell the farm to it. Identifying a 'halfway house' between those competing positions is not obvious. Either the executor was obliged to sell the farm to the defendant or he was not. Costs would be awarded to whichever party succeeded on that issue. By the offer of compromise, the executor offered to forego his entitlement to costs. That was about all that the executor could offer to compromise the competing claims.
11. It is no answer to say that much turned on the credibility of key witnesses. That may be said for any case. By not accepting the executor's offer, the defendant ran the risk that the son's evidence would not accepted. The defendant also put the executor to the expense of establishing his position. This would have been avoided if the offer was accepted.
12. I am not satisfied that an "exceptional circumstance" has been established such that the Court would "order otherwise". The executor is entitled to indemnity costs from the date of the offer of compromise. It is thus not necessary to consider whether an indemnity costs order should be made in respect of the Calderbank letter, nor the executor's alternative claim for indemnity costs in respect of proof of facts the subject of the notice to admit.
13. As to whether I should order the executor to pay the costs of this application on an indemnity basis, the executor has obtained the order sought over opposition. Whether the executor's costs in seeking a special costs order were unreasonably incurred, given the various offers made by the defendant, is a matter for the costs assessor.

Orders

1. As to compensation under the usual undertaking as to damages, the defendant accepts that it was liable to pay $3,783.90, being additional interest on the legacy payable to the wife. Otherwise, the executor is not presently in a position to seek compensation under the usual undertaking as to damages. An application to the Australian Taxation Office for a private ruling to extend the capital gains tax exemption is underway, but an answer is not expected for some months. The executor proposes to exercise the liberty to apply in the event that the private ruling is adverse.
2. For these reasons, I make the following orders: 1. Vary Order 5 made on 14 August 2024 such that the defendant is to pay the plaintiff's costs of the proceedings on an ordinary basis up to 8 July 2024 and on an indemnity basis thereafter.

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