Application for indemnity costs.
3 An offer of compromise was hand delivered by the plaintiff's solicitor on 12 October 2006. It was in the sum of $710,000 inclusive of statutory repayments, plus party and party costs to be agreed or assessed (but not affecting any existing costs order in favour of either party). The offer was expressed to remain open until 4.00 pm 26 October 2006, being the Thursday before the commencement of the trial (Monday 30 October 2006). In other words, the offer allowed the defendant 14 days.
4 Part 20, rule 20.26(7) includes the following provision in respect of making an offer of compromise:
"Pt 20 r 20.26
(7) The following provisions apply if an offer is limited as to the time it is open for acceptance:
(a) the closing date for acceptance of the offer must not be less than 28 days after the date on which the offer is made, in the case of an offer made 2 months or more before the date set down for commencement of the trial,
(b) the offer must be left open for such time as is reasonable in the circumstances, in the case of an offer made less than 2 months before the date set down for commencement of the trial."
5 Part 42, rule 42.14 makes provision for the circumstance where an offer is not accepted and judgment is no less favourable to the plaintiff. It is in these terms:
"Pt 42 r 42.14
(1) This rule applies if the offer concerned is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim concerned no less favourable to the plaintiff than the terms of the offer.
(2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim:
(a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and
(b) assessed on an indemnity basis:
(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and
(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made."
6 Here the plaintiff's verdict exceeded by a significant margin the offer made on 12 October 2006. Was the time specified for acceptance of that offer reasonable in the circumstances?
7 Mr Taylor, the solicitor for the plaintiff, was called to give evidence. In cross examination he acknowledged that no statements from lay witnesses had been served upon the defendant as at 12 October 2006, nor the plaintiff's actuarial reports (which at that point had not been completed.)
8 The previous rules, in similar terms, have been examined in a number of authorities. The objective is to encourage settlement by way of compromise. The party receiving the offer is obliged to make a realistic rather than a partisan assessment of the claim. In Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721, the Court of Appeal identified the objectives of the previous rule (Pt 52 r 17) in these terms:
"1. To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff's real claim;
2. To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary ...; and
3. To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable against the costs thereafter incurred ..."
9 The judgment of the Court of Appeal continued: (at 725)
"The rule does no more than to oblige litigants, and those advising them, to consider realistically, upon the best information available to them, the prospects of success and the likely outcome of the litigation. Where, in the particular circumstances the litigant or its advisers misjudge the prospects of success or miscalculate the outcome, their mistake may be warranted on the material which they had available. Alternatively, it may be no more than a miscalculation in a case with large imponderables where the course they took was nonetheless perfectly reasonable. Litigation is inescapably chancy. The purpose of the rule is to put a premium on realistic assessment of cases. It is not to demand perfect foresight which is denied even to the judges. That is why a discretion is retained, under the rule, for the Court to order otherwise than as the rule provides. But the ordinary provision is expected to apply in the ordinary case."
10 Here, the defendant had a wealth of information at its disposal at the time the offer was made. The plaintiff had made an application for an extension of time under the Limitation Act 1969, which was heard by Master Harrison on 19 November 1999 (Covington-Thomas v Commonwealth of Australia [2000] NSWSC 2). He had been cross examined in the context of that application (MFI 48). He had also been examined by a number of medical practitioners at the request of the defendant, as set out in Chapter 5 of the judgment of 2 August 2007. Medical reports from doctors qualified by the plaintiff had been served. The matter had been set down for hearing on 23 June 2003 and adjourned on the plaintiff's application. The defendant had the report of Captain Halley of 20 May 2003, he being one of the experts called in this trial. It also had the report of Captain Toohey of 26 May 2006 dealing with economic loss and pension rights (Taylor affidavit para 4). The matter had already been to mediation before Mr Trevor Morling QC in August 2006. The mediation had been unsuccessful and the defendant had thereafter offered the plaintiff $550,000, plus costs.
11 The actuaries retained by the defendant, Lexiq, provided their report to the defendant on 20 September 2006. The defendant, indeed, had far more information than the plaintiff who had not yet been able to confer with Captain Toohey whose report was not served until 15 September 2006 (Taylor affidavit para 4). Whilst no statement had been served by the plaintiff in respect of lay witnesses he intended to call, no order had been made that such statements should be served, and it would be unusual in the absence of an order to serve such statements.
12 Mr Taylor gave evidence of discussions with the defendant's solicitor following the offer of $550,000, plus costs. According to his testimony, which was not challenged, he said that the plaintiff could not accept that sum because he was obliged to pay the costs of the aborted trial in 2003 and the appeal, estimated by the defendant to be $150,000, and to refund monies to the Department of Veterans' Affairs in respect of medical expenses and pension payments. These were estimated to be $150,000. Mr Taylor suggested therefore that the amount offered did not even cover the value of the TPI pension which Mr Covington-Thomas would lose upon settlement of his claim (T62).
13 I believe the offer of 12 October 2006 was left open for a time that was reasonable in the circumstances. It was not accepted. The plaintiff has obtained a verdict significantly more favourable than the offer. I believe it appropriate to make an order for indemnity costs in favour of the plaintiff in accordance with Pt 42 r 42.14(2).
14 In the course of the application the plaintiff referred to various other offers of comprise which were made after 12 October 2006 (MFI 47). In view of my conclusion, it is unnecessary to deal with such offers.