Cooper v Singh [2017] ACTCA 21

THE COURT:

Background

1. The respondent was injured in a motor vehicle accident on 25 March 2013. She sued the appellants, seeking damages for the injuries that she had suffered in the accident. Mossop AsJ (as he then was) determined that action on 21 August 2015 (Singh v Cooper & Anor (No 2) [2015] ACTSC 243). Liability was not in dispute so the matter came before his Honour for the assessment of damages.

2. The damages were assessed in the sum of $311,603. Judgment was accordingly entered against the second defendant (the insurer).The ‘usual order’ was made for interest and the second defendant was ordered to pay the plaintiff’s costs of the proceedings as agreed or assessed. A further order was made giving leave to the parties to make an application to vary the costs order.

3. The second defendant made such an application. This led to a further decision of his Honour on 27 November 2015. His Honour discharged the earlier costs order and substituted it with the following order:

The second defendant is to pay the plaintiff’s costs of the proceedings up to and including 26 March 2015 and there is no order in relation to costs incurred after that date.

4. This decision concerns the appeal lodged against the order made on 27 November 2015. The appeal was conducted on the papers.

5. It is noted that the present respondent appealed against the original assessment of damages. That appeal was dismissed on 11 October 2016 (Singh v Cooper [2016] ACTCA 55).

6. The background to the costs issue started on 12 March 2015, at a settlement conference, when the respondent made a ‘final’ offer of $790,000 plus costs. The appellants made a ‘final’ offer of $380,000 plus costs.

7. On 16 March 2015, the respondent’s solicitor made a Calderbank offer of $650,000 plus costs, stated to remain open until 5.00 pm on 23 March 2015. This offer was withdrawn by email at 2.07 pm on 23 March 2015. Later that day, the appellants made their own Calderbank offer of $540,000 plus costs, open until 4.00 pm on 26 March 2015. This offer was not accepted.

8. The relevant parts of the appellants’ offer were expressed as follows:

We are instructed to offer the sum of $540,000.00 plus costs to be agreed or assessed in full and final settlement of this matter. This offer is made on the basis of Calderbank v Calderbank (1975) 1 All ER 333 and expires at 4 PM on 26 March 2015. If the plaintiff elects not to accept the offer and proceeds to a hearing and obtains a judgment not more favourable than the offer, we will seek instructions to apply for an order that the plaintiff pay the defendant’s costs on an indemnity basis from the date of this letter

9. There were no further negotiations prior to the delivery of judgment on 15 August 2015. As already stated, the judgment handed down was for the sum of $311,603, a figure significantly below the appellants’ Calderbank offer.

10. The application made by the appellants to vary the original costs order was based on them comprehensively ‘beating’ their Calderbank offer. Accordingly, the appellants argued, there should be an order that the plaintiff pay the defendants’ costs after 26 March 2015 on an indemnity basis.

11. The order sought in the appeal is different. Costs after 26 March 2015 are sought on an ordinary basis, not on an indemnity basis.

12. The provisions in the Court Procedure Rules 2006 (ACT) relating to offers of compromise were central to his Honour’s decision. These provisions took effect on 1 January 2015. His Honour stated the effect of these rules at paragraph [20]:

In a personal injury case such as the present, the making of an offer of compromise by a defendant that was not accepted and not subsequently bettered by the plaintiff would give rise to a default rule that the plaintiff recover costs on a party and party basis up until the day the offer was made but then there is no order as to costs after that: r 1012.

13. The order made by His Honour on 27 November 2015 is consistent with the Calderbank offer being treated as if it was an offer of compromise under the rules. The appellants submit that a proper application of the principles derived from Calderbank v Calderbank [1975] 3 All ER 333 (Calderbank) would have resulted in an order that the appellants pay the respondent’s costs up to 23 March 2015 and that thereafter the respondent pay the appellants’ costs.

Some general observations

14. Orders for costs are made in the exercise of the court’s discretion. Their purpose is to reach a fair and just result. This was stated by the High Court in Gray v Richards (No 2) [2014] HCA 47; 89 ALJR 113 at paragraph [2]:

The disposition of costs is within the general discretion of the Court. Ordinarily, that discretion will be exercised so that costs are awarded to the successful party, but other factors may have a significant claim on the discretion of the Court. The disposition which is ultimately to be made in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires.

15. The application of the Calderbank principles in the Australian Capital Territory was discussed in Quirk v Bawden (1992) 112 ACTR 1. Higgins J (as he then was) noted at page 8:

In the end, the matter is one for the discretion of the trial judge. The exercise of that discretion favourably to a successful plaintiff may well, prima facie, be indicated by a substantial difference between an offer made by the plaintiff and the verdict ultimately found. However, it must also appear that the defendant had failed to act reasonably in declining to accept the plaintiff’s final offer of compromise.

16. Applying the comments of Higgins J, in order for a costs order to be made in favour of the defendant following the making of an offer substantially in excess of the final result, the plaintiff must have acted unreasonably in not accepting the offer.

17. The respondent’s submissions in the court below are relied upon in this appeal. It was a central plank of the submissions that the Calderbank offers should be treated, for purposes of consistency, as if they were offers of compromise. To that end, the respondent relied on two authorities. Firstly, she relied on Morris v McEwen & Anor [2005] SASC 284 where Debelle J stated at paragraph [4]:

There is a real question whether the time has come for a review of the interaction between a Calderbank letter and rules of court such as Rule 40 of the Supreme Court Rules. It is undesirable to have two differing regimes.

18. The respondent also referred to an earlier decision of Debelle J, sitting in the Full Court of South Australia, in Pirrotta v Citibank Ltd [1998] SASC 6922, at paragraph [25]:

Secondly, it is undesirable to permit a regime which differs in important respects from that contemplated by the Rules of Court and imposes more onerous obligations. Thus, while recognising that the Rules do not provide for every occasion and that there are circumstances which justify the writing of a Calderbank letter, the terms in which such a letter are couched should, as a general rule and so far as is reasonably practicable, conform to the regime in r 41. I do not mean to suggest a slavish adherence to r 41, but a party who seeks to use a Calderbank letter as the basis for solicitor and client costs should frame the letter in terms which are consistent with the spirit and intent of r 41.

19. The undesirability referred to by Debelle J has not been reflected in the attitude taken in New South Wales courts. In New South Wales, Calderbank offers and offers made under the rules of court have been allowed to co-exist, recognising that they may respectively produce a different result. Beazley P (President of the NSW Court of Appeal) made these observations in a paper delivered on 5 August 2015:

20. The Court’s costs powers are found in the CPA, s 98 and the Uniform Civil Procedure Rules (UCPR), pt. 42. Subject to statute and the rules of court, costs are in the discretion of the Court which has full power to determine by whom, to whom and to what extent costs are to be paid. 7. The primary rule, contained in UCPR rr 42.1 and 42.2, is that costs follow the event and that they are assessed on the “ordinary basis”. The “ordinary basis” refers to the basis of assessing costs in s 364(1) and (2) of the Legal Profession Act 2004. 8. Offers of compromise provide a potential exception to this rule. There are two species of offer of compromise that may result in the award of indemnity costs: (1) Offers made under the rules of court; (2) Calderbank offers 9. If a valid offer under the rules is made but rejected, and the offeree obtains an order or judgment on the claim that is no less favourable to that offered, the offeror is entitled (unless the court orders otherwise) to their costs assessed on an indemnity basis from the date of offer. Indemnity costs are defined in UCPR, r 42.5 and generally include all costs than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount. 10. By contrast, Calderbank offers do not comply with the rules of court, and so “the Rules which govern costs in those circumstances do not apply and the matter remains one for the exercise of the Court’s discretion”. This accords with the High Court’s statement in Stewart v Atco Controls Pty Ltd: “This court has a general discretion as to costs. The non-acceptance of a Calderbank offer is a factor, in some cases a strong factor, to be taken into account on an application for indemnity costs”. 11. This observation reflects a significant difference between offers made under the rules and Calderbank offers. Rule compliant offers have this advantage – if the offer is not accepted, and the order made by the court is as good as or better than the offer made by the offeror, the rules operate so as to provide for an indemnity costs order from the date of the offer. While it is subject to the court’s discretion to provide otherwise, the onus of persuading the court to order otherwise has shifted to the party opposing the indemnity costs order. By contrast, the making of a Calderbank offer does not displace the ordinary rule that the party seeking a departure from the general rule as to costs bears the persuasive onus of establishing that a favourable costs order ought to be made. (Footnotes omitted)

21. An initial observation to be made is that, in New South Wales, assuming the benefit of a Calderbank offer or a ‘rules’ offer, the result is the same as far as a plaintiff is concerned. If the plaintiff does not beat the offer, subject to discretionary considerations, and the precise terms of the Calderbank offer, an order will be made compelling the plaintiff to pay the defendant’s costs on an indemnity basis from the date of the offer.

22. The situation is different in the ACT. If effect is given to a Calderbank offer, the plaintiff will pay the defendant’s costs on an ordinary or indemnity basis (depending on the terms of the offer) from the date of the offer. However if a rules-based offer is not exceeded there will be no order for costs from the date of the offer (r 1011(2)).

23. In practical terms this distinction could have a very significant monetary value.

Consideration

23. The appellants, in their written submissions, recognise the principles to be applied in an appeal of this nature, namely an appeal against a discretionary order. This passage is included from the decision of this court in Perisher Blue Pty Limited v Chubb Fire Safety Limited [2014] ACTA 43:

24. In the first place, the appeal is against a discretionary order. As a result, the appeal can only succeed if error of the kind identified in House v The King (1936) 55 CLR 499 at 505 is found. This requires the appeal court, before interfering with the discretion of the Court below, to find that that Court has acted on a wrong principle, failed to consider relevant considerations or considered irrelevant considerations, mistaken the facts or made a decision that was unreasonable or plainly unjust.

25. Although not expressed in precisely these terms, the appellants have raised two issues for consideration:

(a) Whether His Honour made an error in principle by approaching the matter on the basis of a need for consistency between the Calderbank offer and an offer of compromise, notwithstanding that the written offer had been explicitly put on a different basis to the terms of a rules based offer of compromise.

(b) Whether his Honour’s exercise of his discretion was erroneous in that it failed to recognise that the respondent’s rejection of the offer was so unreasonable as to compel the application of the terms of the Calderbank offer. This issue includes the appellants’ submission that his Honour failed to find that the respondent had positively refused to engage in the negotiation process after 25 March 2015 and failed to find that the appellants had expressed a clear willingness to continue negotiations.

25. Dealing with each issue in turn, the starting point in respect of the first issue is paragraph [25] of his Honour’s judgment:

The existence of the regime for an offer of compromise under the Rules and the process for the making of mandatory final offers does not preclude reliance upon Calderbank offers in circumstances where those other regimes are not applicable or not relied upon. Therefore it is open to the defendants to seek a better than usual costs order in the present case.

26. Having made the above finding, namely that it was open to the appellants to rely on the Calderbank offer, his Honour then went on to discuss, in detail, whether or not the appellants should have the benefit of the terms of the offer.

27. His Honour then, applying the principles set out by him in paragraph [23] as being derived from Quirk, reaches a conclusion that the plaintiffs conduct “should be characterised as unreasonable” (para [27]). The appellant’s submission is that this finding should have concluded the matter leading to the ‘enforcement’ of the Calderbank offer. His Honour should not have then gone on to consider other matters before making a consequential order.

28. What the submission ignores is that a finding of unreasonable conduct on the part of the respondent did not automatically dictate the exercise of the discretion. It is in the nature of a discretion that any number of relevant factors may be taken into account. This is precisely what His Honour did following the making of the ‘unreasonableness’ finding.

29. One of the other factors was the existence of the rules concerning offers of compromise. His Honour quoted from the decision of the New South Wales Court of Appeal in Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [133]:

It has always been necessary to consider the operation of such offers against the background of the relevant rules of Court at a particular time.

30. What his Honour does not then do is carry on his analysis as if the Court rules had achieved any ascendancy. He specifically states, at paragraph [32]:

It remains open, in an appropriate case, to the Court to make a costs order which would be substantially different from the kind of order that would be made if an offer of compromise under the Rules had been made as opposed to a Calderbank offer.

31. Perhaps the high point of the appellants’ argument can be derived from this statement, in paragraph [34]:

But for the introduction of rules-based offers of compromise and the specific provisions of those rules relating to personal injury proceedings, I would have made an order that required the plaintiff to pay the defendants’ costs from the date of expiry of the defendants’ offer on a party and party basis. However, in the light of the existence of the provisions for rules-based offers which provide a regime more favourable to a plaintiff in personal injury proceedings, I consider it appropriate to give weight to the desirability of there being some consistency in approach between costs orders made as a result of offers of compromise and costs orders made as a result of Calderbank offers.

32. If his Honour were stating that the existence of the rules-based offers of compromise dictated the orders to be made, the appellants point may have been sound. However this Court is of the view that the statement in paragraph [34] does no more than include as a factor in the matters to be taken into account, in the exercise of the discretion, the existence of the Court rules. That this was His Honour’s approach can be seen from the balance of paragraph [34] as well as to the restriction of his comments in the above quoted passage that he is giving “weight” to the rules but not applying the rules.

33. It follows therefore that the first of the appellants’ issues does not succeed.

34. Turning now to the second issue, it has to a large degree already been dealt with. His Honour made a finding that the offer had been unreasonably rejected. This finding, of itself, deals with the submission that the two findings referred to in paragraph 24(b), above, should have been made. The two findings could only have gone to the overall conclusion of unreasonableness which his Honour actually made. His Honour’s conclusion therefore obviated the need for the two specific findings.

35. The finding of unreasonableness played a significant part in the exercise of his Honour’s discretion. His Honour however also considered other matters such as the existence of the rule based offers of compromise regime, the unique considerations applicable to personal injury cases and “the extent of unreasonableness on the part of the plaintiff that may be inferred is not so great as to require a consequence greater than that which would apply had there been a rules-based offer” (para [34]).

36. The fact that the discretion may have been exercised otherwise does not result in a successful appeal. Unless a specific deficiency can be identified in the exercise of the discretion, such as the consideration of irrelevant matters or a mistake as to the facts, the discretion will stand. No such identification of error is evident here. Accordingly the second issue is also found against the appellants.

Orders

37. The resulting orders are:

(a) The appeal is dismissed.

(b) The appellants are to pay the respondent’s costs of the appeal.

I certify that the preceding thirty-seven [37] numbered paragraphs are a true copy of the Reasons for Judgment of the Court.

Associate:

Date: 11 May 2017