On 29 June 2017 I gave judgment in favour of the defendants and ordered the plaintiff to pay the defendants' costs. [1] Within the two-week period provided by r 36.16(3A) of the Uniform Civil Procedure Rules 2005 ("UCPR"), the second and third defendants made an application for additional or varied orders to include provision for some of the costs to be assessed on an indemnity basis. The first defendant makes no further application in respect of costs and does not appear. The plaintiff also did not appear despite having an interest in the outcome of the motion. I accepted the second and third defendants' election to proceed in the absence of the plaintiff.
So far as the application by the second defendant for indemnity costs is concerned, a number of offers are in evidence. The primary offer relied upon by the second defendant is an offer dated 28 August 2014, which was in the following relevant terms:
"Without prejudice except as to costs
…
My client offers to settle the entire claim made by your client against my client, the second defendant, in these proceedings on the following terms:
1. That the second defendant pay the plaintiff $10,000.
2. That orders be made in proceedings no 2014/24350 in the following terms:
1. Judgment for the Second Defendant against the Plaintiff.
2. No order as to costs.
3. The offer is made in accordance with the Uniform Civil Procedure Rules 2005 (NSW) and in particular r 20.26
4. In the alternative, my client reserves his right to rely on this offer on the question of costs in accordance with Calderbank v Calderbank [1975] 3 WLR 586.
5. The offer is open for acceptance for a period of 28 days after the date on which it is made."
The offer had been preceded some months earlier by a lengthy letter setting out why the plaintiff's case was likely to fail. In my view, the offer complies with the various requirements of UCPR Pt 20. Sufficient time is allowed for acceptance of the offer, it nominates that the offer is made in accordance with r 20.26 and it seems to fall squarely within the terms of r 20.26(3), both in terms of what it says regarding costs and in respect of the proposed payment of $10,000 to the plaintiff.
The offer forgoes any claim for costs in circumstances where two defences have been filed, a request for particulars has been made, and there was the potential under r 42.6 for an entitlement to the costs of and occasioned by an earlier pleadings amendment by the plaintiff. The offer was more favourable to the plaintiff than was the judgment in that it excused the plaintiff's liability for costs (which is ordered under the judgment) and proposed a $10,000 payment to the plaintiff. For these reasons, I accept that the offer represents a genuine attempt to compromise the proceedings.
In the circumstances, the provisions of r 42.15A seem to apply. The second defendant should have his costs assessed on an indemnity basis from the day following the date of the offer which was made on 28 August 2014.
Accordingly, there should be an order in the terms of para 2 of the notice of motion.
The third defendant is a private company owned and controlled by the second defendant and was joined as a party relatively late in the course of the proceedings on 26 July 2016, after a contested notice of motion. The plaintiff was ordered to pay the defendants' costs of the notice of motion. The evidence indicated that the costs of the second and third defendants, of the notice of motion, may have been around $25,000.
The second and third defendants made a Calderbank offer on 27 July 2016, one day after the joinder. It was not accepted. The rejection of a Calderbank offer may enliven an entitlement to an indemnity costs order if the rejection was unreasonable.
The Calderbank offer provided, relevantly, for a period of seven days for acceptance and for a payment of $50,000 in respect of the second defendant's costs, but otherwise that each party pay their own costs. The letter asserts that the second and third defendants had by that stage spent $80,000 on costs. As there is no challenge to that figure, I propose to accept it. Thus, the offer proposed a discount of $30,000 on the second and third defendants' costs to date.
The discount proposed might not be significantly different to the reduction in the amount of costs that would ordinarily be recovered on a party/party basis, but the second defendant was favoured by his earlier offer of compromise of 28 August 2014, about two years earlier, which meant that a greater proportion of his costs would likely have been recoverable. So the offer involved a discount of perhaps $20,000 to $25,000 on the costs the second and third defendants might otherwise have been entitled, and likely, to recover. The Calderbank letter refers to $25,000 of costs on the motion to amend the pleading and join the third defendant. Some of those costs incurred by the third defendant would likely not be recoverable on a party/party basis.
A period of seven days was allowed for acceptance of the offer. The offer was made about a month prior to the commencement of the trial and so would fall within the limits proposed by r 20.26(5), as the 28-day rule does not apply in the two-month period before trial. Of course r 20.26 is not strictly applicable to a Calderbank offer, but the provision recognises that the period constituting a reasonable time is likely to be shorter during the final two months before trial. The period for acceptance of this offer was about three and a half weeks before trial, which is still a later date than an offer made two months before trial with the usual 28-day period for acceptance. I would infer that the plaintiff was well aware of the issues at the time of the offer, shortly before the trial.
In those circumstances, I accept that the period, during which the offer was open for acceptance, was reasonable, a relevant matter as to whether it was unreasonable for the plaintiff not to accept the Calderbank offer.
I have already indicated that the $30,000 discount on the gross amount of costs incurred represented a real benefit to the plaintiff, particularly because of the earlier offer of compromise. In other words, the offer was no less favourable in the result than the judgment to the plaintiff. For the same reasons, I accept that it was a genuine offer to compromise the dispute.
It might be thought that the baseless joinder of a related party, in this case, Mr Hutchinson's private company, late in the proceedings is prejudicial to Mr Hutchinson and his company as it may prevent the usual curial processes applying to the newly joined party. The private company may be deprived of the opportunity to make offers under the rules to settle the proceedings, or at least that opportunity may be limited or more complicated, including by reason of the circumstances that the second defendant, Mr Hutchinson, had already incurred substantial costs by that stage and the practical need for any settlement to involve both the second and third defendants. There appears to be no provision under the rules, and in particular under r 20.26, that enables Mr Hutchinson's offers of compromise to be extended for the benefit of his latterly joined private company. It might be thought that Mr Hutchinson could have raised this as a matter of prejudice at the time of the argument about amendment, and sought a condition on leave being granted that the plaintiff undertake that any previous offers of compromise of Mr Hutchinson be treated as applying equally to his private company. But this was not done, and in any event, even the existence of an offer of compromise is not to be disclosed prior to judgment. [2]
Whether the rejection of a Calderbank offer is unreasonable must be examined at the time of the offer. It is a relevant matter that the plaintiff, at some expense to all parties, joined Mr Hutchinson's private company, but throughout the pleadings, the evidence and submissions, never sought to distinguish it from Mr Hutchinson. It became effectively one party, "Mr Hutchinson and/or Vision". [3] No separately identifiable case was maintained against the company. This circumstance, and that the offer was genuine, more favourable than the judgment, and open for a reasonable time, support a conclusion, which I find, that it was unreasonable for Mr Byers to refuse the Calderbank offer.
Accordingly, I find that the third defendant's costs should be assessed on an indemnity basis from the day following the Calderbank offer, 27 July 2016.
The orders of the Court therefore are:
1. Note the application by the second and third defendants for further orders after entry of judgment but within the 14 days allowed under r 36.16(3A) of the Uniform Civil Procedure Rules 2005.
2. Make orders in accordance with paras 2 and 6 of the notice of motion dated 13 July 2017.
3. Order the costs of the notice of motion to be part of the costs of the proceedings.
[2]
Endnotes
Byers v Frith (No 2) [2017] NSWDC 165.
UCPR, r 20.30(1) and (2); see Macplan Logistics Systems Pty Ltd v Baxter Healthcare Pty Ltd (1996) 39 NSWLR 324.
Byers v Frith (No 2) [2017] NSWDC 165 at [131].
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Decision last updated: 10 December 2018