Cunningham v Guardian Royal Financial Services Pty Ltd;; Miller v Guardian Royal Financial Services Pty Ltd;; Smallwood v Guardian Royal Financial Services Pty Ltd;; Smallwood v Guardian Royal Financial Services Pty Ltd;; Visini v Guardian Royal Financial Services Pty Ltd

Background

1. There are on foot in this Court five related sets of proceedings to which the fifth defendant was joined, namely proceedings commenced by each of Paul Michael Cunningham (2015/00119249), by Thomas Bliss Miller (and another) (2015/00119340), by John Frederick Smallwood (2015/00119375), by Sharon Smallwood (2015/00119459) and by Ileana Visini (2015/00119286) against Guardian Royal Financial Services Pty Ltd (the first defendant) and others.
2. The claim against the fifth defendant was brought pursuant to s 51 of the Insurance Contracts Act 1984 (NSW). That section provides, relevantly, as follows: (1) If: (a) the insured or any third party beneficiary under a contract of liability insurance is liable in damages to another person; and (b) the contract provides insurance cover in respect of the liability; and (c) the insured or third party beneficiary has died or cannot, after reasonable inquiry, be found; then the other person may recover from the insurer an amount equal to the insurer's liability under the contract in respect of the liability of the insured or third party beneficiary.
3. Briefly, the substantive dispute relates to the respective plaintiffs' investments in lots in a managed investment scheme (relevantly, the 2007 Timbercorp Almond Post June Project).
4. In summary, by statements of claim filed in each of the proceedings on 22 April 2015, the plaintiffs have alleged that the first defendant (alleged to be an Australian Financial Services Licensee who carried on the business of providing financial product and personal advice to retail clients - see [2] of the respective statements of claim), acting as agent of the third defendant (Timbercorp Finance Pty Ltd (in liq)) and/or the fourth defendant (Timbercorp Securities Ltd (in liq)) (see [43] of the respective statements of claim), contravened the Australian Securities and Investments Commission Act 2001 (Cth) and the Corporations Act 2001 (Cth), and breached a duty of care owed to the plaintiffs in connection with the said scheme. Among other things, allegations are made that the first defendant: provided advice and made representations that were false and misleading; promoted investments and induced the plaintiffs to invest in the scheme, and obtain loans, in circumstances that were unconscionable; failed to provide a Financial Services Guide or Statement of Advice; and failed to have a reasonable basis for recommendations that it made to the plaintiffs, as a consequence of which it is alleged that the plaintiffs suffered loss and damage.
5. The claim made against the fifth defendant was in its capacity as the first defendant's professional indemnity insurer on the basis that the plaintiffs alleged that they had made all reasonable enquiries into the whereabouts of the first defendant and had been unable to find any representative of the first defendant (see [178] of the respective statements of claim).
6. By notices of motion filed 31 January 2017, the fifth defendant sought the summary dismissal of the respective plaintiffs' claims against it pursuant to r 13.4 of the Uniform Civil Procedure Rules 2005 (NSW). Those notices of motion were listed for hearing before me on 7 June 2017. The basis of the respective applications for summary dismissal was twofold: first, that the plaintiffs' claims were untenable as they failed to satisfy the requirements of s 51 of the Insurance Contracts Act (the sole basis on which the fifth defendant was sued in each case); and, second, that the claims could not succeed as the policy of insurance pursuant to which the fifth defendant was sued prima facie did not respond to the plaintiffs' claims. Written submissions clearly outlining the basis of the summary dismissal application were filed on 31 January 2017, as was an affidavit filed in support of the application (affirmed 13 January 2017 by Mr Matthew Korff, a National Claims Manager of the agent acting on behalf of the fifth defendant). In his affidavit, Mr Korff deposed (at [12]) that, prior to service of the statements of claim in the proceedings, the only matters of which the fifth defendant's agent (DUAL Australia Pty Ltd) had received notice in relation to the plaintiffs to the proceedings (whether from the fifth defendant or any third party) were those set out in the letter sent from the solicitor for the plaintiffs to the proceedings on or about 21 November 2014).
7. On 24 March 2017, notices of discontinuance were filed in each of the proceedings, discontinuing the proceedings against the third defendant.
8. On 27 March 2017, the proceedings came before Stevenson J and in respect of each proceeding his Honour noted that the relevant plaintiff(s) proposed to discontinue the proceedings as against the fourth defendant by 5pm on 27 March 2017. No notices of discontinuance as against the fourth defendant appear to have been filed. However, on 23 April 2017 in the Visini proceedings the Prothonotary made orders by consent: first, dismissing the proceedings as against the fourth defendant and, second, that each party bear its own costs of the proceedings. On 30 May 2017, the plaintiffs in the Miller proceedings (2015/00119340) filed a notice of motion seeking leave to proceed against the fifth defendant pursuant to s 6(4) of the Law Reform Miscellaneous Provisions Act 1946 (NSW), and leave to amend their statement of claim to incorporate such leave and to delete pleadings regarding the first and second defendants. They asked that service of the notice of motion be accepted as applying to the related proceedings as the same issues were involved in all matters.
9. When the matter came before me on 7 June 2017, the plaintiffs submitted that the fifth defendant's summary dismissal motions should be heard and determined concurrently with the s 6(4) motion of 30 May 2017 and sought an adjournment to allow for the preparation of the latter motion (and, since I was of the view that motions should formally be filed in each of the proceedings in which that relief was sought, for similar motions to be filed in the remaining proceedings). I made procedural orders for that purpose, including granting leave to the plaintiffs to issue a notice to produce to the fifth defendant and to issue a subpoena addressed to the Financial Ombudsman, and for the filing of any further evidence and submissions. The matter was stood over to 12 July 2017.
10. It is not necessary to say much in relation to the conduct of the proceedings after 7 June 2017, save to note that the fifth defendant has filed evidence (an affidavit affirmed 11 July 2017 by its solicitor, Mr Michael Thornell) as to defaults in compliance by the plaintiffs with the timetable that was set on 7 June 2017 and as to steps taken by the fifth defendant (notwithstanding the delay in service on it of the notice to produce for which leave had been granted) to respond to two notices served on it for the production of documents.
11. As already noted, when the matter came before me on 12 July 2017 the plaintiffs consented to the entry of judgment in favour of the fifth defendant in each of the proceedings (and consented to an order for costs on the ordinary basis to be made against them in those proceedings).
12. The basis on which the fifth defendant has sought, instead, an order for its costs on an indemnity basis is that, on 3 February 2017, shortly after the filing of the summary dismissal application and affidavit/submissions in support, it made a Calderbank offer (expressly invoking the principles in Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586), offering to settle each of the proceedings on the following basis (see annexure A to the affidavit of Mr Thornell affirmed 12 July 2017): 1. Verdict and judgment be entered in favour of the Fifth Defendant in each of the Proceedings; and 2. Your clients and our client each agree to bear their own costs of each of the Proceedings to the date of this letter.
13. The offer was stated to be open for acceptance for a period of 28 days unless rejected or withdrawn in writing. It was expressly made conditional upon acceptance of all of the plaintiffs in each of the proceedings. The fifth defendant's solicitors noted that the offer was made in the circumstances set out in its submissions filed on 31 January 2017 in support of its motion for summary dismissal.
14. The plaintiffs' response, through their solicitors' letter dated 7 February 2017, was that it was not appropriate that there be a verdict and judgment in favour of the fifth defendant in circumstances where they would then be proceeding against the first and second defendants and would "inevitably be making a claim upon the Fifth Defendant assuming the claim against the First and Second Defendants is successful". The letter noted that the plaintiffs' solicitors would be prepared to consider recommending that the proceedings be discontinued against the fifth defendant on the basis that each party bears its own costs. That course was unacceptable to the fifth defendant (being rejected as not achieving finality for it - see the fifth defendant's solicitors' letter dated 15 February 2017). The fifth defendant's solicitors then advised the plaintiffs' solicitors that the 3 February offer remained open for acceptance until close of business on 1 March 2017. The offer of 3 February was not accepted.
15. The fifth defendant has filed evidence as to the costs incurred by the fifth defendant in connection with the respective proceedings (see the affidavit of Mr Michael Thornell affirmed 21 July 2017). As at 3 February 2017, those costs, including disbursements, were in the sum of approximately $24,540.10; as at 15 February 2017, $27,816.60.

General Principles

1. There is no dispute between the parties as to the principles that apply when there is an application for indemnity costs following non-acceptance or rejection of a Calderbank offer. Those principles are well known and do not need here to be restated (see, for example, Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344; Treloar Constructions Pty Limited v McMillan (No 2) [2017] NSWCA 146). Broadly speaking, an order for indemnity costs may be made in those circumstances if the offer is a genuine offer of compromise and the Court is persuaded that it was unreasonable for the offeree not to accept the offer. The onus is on the party making the Calderbank offer to satisfy the court that it should exercise the costs discretion in its favour (Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [26]).
2. In the present case, the dispute between the parties is as to whether the offer of 3 February 2017 involved a genuine element of compromise and whether it was unreasonable for the plaintiffs not to accept it.

Was there a genuine offer of compromise?

1. As to the question whether the offer was a genuine offer of compromise, the plaintiffs maintain that it did not involve a real element of compromise but, rather, amounted to an invitation to capitulate (referring to Herning v GWS Machinery Pty Ltd [No 2] [2005] NSWCA 375 at [4|-[5]; Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) (2006) 67 NSWLR 706; [2006] NSWCA 120 at [8]). In that regard, they point to the fact that the offer was made only two days after filing the motion and before any defence had been filed by the fifth defendant. They submit that any costs incurred by the fifth defendant at that stage in relation to the summary dismissal motion were costs of its own making, the fifth defendant having filed its notice of motion before responding to a request made by the plaintiffs' solicitors (by letter dated 15 December 2016) in which information was sought as to the relevant insurance policy and the basis of any denial by the fifth defendant of liability to the first defendant and/or of liability for the plaintiffs' claims.
2. The fifth defendant accepts that in certain circumstances a "walk-away" offer will not be viewed as a genuine compromise but points to the conclusion in Leichhardt Municipal Council v Green [2004] NSWCA 341 at [36] that there is no error of legal principle in holding that such an offer can be viewed as a genuine offer of compromise.
3. The fifth defendant argues that, by the time of the Calderbank offer of 3 February 2017 (and when it was confirmed on 15 February 2017 as remaining open for acceptance), significant costs had been incurred by it in the initial investigation of the respective claims (noting that there are five proceedings the circumstances of each of which needed separately to be investigated) and in the preparation of the motions, affidavits and submissions filed in January 2017 (as deposed to by Mr Thornell in his affidavit affirmed 12 July 2017). The fifth defendant submits that an offer to forego those amounts involved a genuine element of compromise, especially in light of the strength of its case.

Was it unreasonable for the plaintiffs not to accept the offer?

1. As to whether it was unreasonable for the plaintiffs not to accept the offer, the fifth defendant submits that: the plaintiffs were provided with an appropriate opportunity to consider and deal with the offer (see Elite Protective Personnel v Salmon [2007] NSWCA 322 at [99]), the offer being open for 28 days and being confirmed in the letter of 15 February 2017; the plaintiffs had adequate information to enable them to consider the offer (having been served at the time of the offer with written submissions making clear why it was said that the plaintiffs' claim was bound to fail); and, noting that the prospects of success have been said to be relevant in the context of considering a "walk-away" offer (see Sagacious Legal Pty Ltd v Wesfarmers General Insurance Limited (No 5) [2010] FCA 630 at [21]; affirmed in Sagacious Legal Pty Ltd v Wesfarmers General Insurance Limited (No 5) [2011] FCAFC 53), that the plaintiffs' claims were hopeless from the outset.
2. As to the prospects of success of the plaintiffs' claims, the fifth defendant points to the following matters identified in its January 2017 submissions and in the evidence served in support of the summary dismissal motions (an affidavit from Mr Korff affirmed 13 January 2017).
3. First, that each of the proceedings involved attempts to make claims on a claims made and notified insurance policy that ceased on 21 March 2009, in circumstances where the evidence was that no claim had ever been made on the policy by the insured (that is, the first defendant) in respect of the plaintiffs and no notification of facts or circumstances relating to such a claim had been made to the insurer (that is, the fifth defendant) by the first defendant in respect of the plaintiffs. Second, the fifth defendant points out that no claim was made by any of the plaintiffs on the fifth defendant until the commencement of proceedings on 22 April 2015 and that the first notification to the fifth defendant of a potential claim against the first defendant by any of the plaintiffs was by letter dated 21 November 2014 (limited to the plaintiffs in the Miller proceedings).
4. Further, the fifth defendant says that no facts were notified to it prior to 21 March 2009, the last day of the policy, that could support an argument under s 40(3) of the Insurance Contracts Act - that being the cut-off date under that section. Section 40 provides, relevantly, as follows: (1) This section applies in relation to a contract of liability insurance the effect of which is that the insurer's liability is excluded or limited by reason that notice of a claim against the insured in respect of a loss suffered by some other person is not given to the insurer before the expiration of the period of the insurance cover provided by the contract. … (3) Where the insured gave notice in writing to the insurer of facts that might give rise to a claim against the insured as soon as was reasonably practicable after the insured became aware of those facts but before the insurance cover provided by the contract expired, the insurer is not relieved of liability under the contract in respect of the claim, when made, by reason only that it was made after the expiration of the period of the insurance cover provided by the contract.
5. The fifth defendant argues that the plaintiffs' case against it was therefore doomed to failure and points out that the strength of a party's case is a relevant consideration to whether it was unreasonable to refuse an offer (referring to Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (No 2) [2009] NSWCA 12 at [22]; Miwa Pty Ltd v Siantan Properties at [19]).
6. It is submitted that the plaintiffs' own evidence disclosed that there had been no claim and no notification of facts prior to 21 March 2009; and that the plaintiffs should have made whatever enquiries they deemed relevant far earlier than they did (before filing the statements of claim or, at the latest, shortly after filing the statements of claim, in 2015). The fifth defendant points to the fact that the plaintiffs only made the relevant enquiries after the hearing of the summary dismissal motion was adjourned, with costs, on 7 June 2017.
7. Insofar as the plaintiffs submit that the Calderbank offer was not capable of acceptance by any individual plaintiff (having regard to the condition that all plaintiffs in the respective proceedings must accept the offer) and that, for that reason as well, it was not unreasonable of them not to accept it, the fifth defendant argues that the weakness of the plaintiffs' position was common to all the claims, so that the merits of the separate claims is not a reason for not accepting the offer.
8. The plaintiffs submit that the non-acceptance of the offer of compromise was not unreasonable.
9. First, it is submitted that the plaintiffs are "unsophisticated investors who claim to have received poor and self-interested advice from the first defendant which resulted in them signing up to investment schemes which have proved disastrous for them" (see the plaintiffs' written submissions at [3]). It is said that they are being pursued by the liquidators and administrators of the disastrous schemes. The plaintiffs say that, in circumstances where: the second defendant is overseas and cannot be located; they have not been able to locate a business address for the first defendant; and neither the first nor the second defendant has defended the proceedings, their only hope of recovery was pursuant to insurance policies taken out by the first defendant with the fifth defendant, hence the commencement of the proceedings against it.
10. Second, the plaintiffs point to correspondence from their solicitors to the fifth defendant in November and December 2016, prior to the filing of the summary dismissal motion, seeking information in relation to the various insurance policies and the basis for any denial of indemnity/liability, to which there was no response. They maintain that they were not in a position, absent evidence either produced under a notice to produce or subpoena or otherwise served, to know what defences the fifth defendant might raise or to assess the strength of any such defences; and say that it was not unreasonable for them to conduct enquiries in relation to the specific matters raised in the fifth defendant's submissions in order to test the veracity of the fifth defendant's written submissions and evidence before conceding as against the fifth defendant.
11. The plaintiffs say that the first time that the information they had sought from the fifth defendant, including policy schedules and wording, was provided to them was by way of the summary dismissal motion and affidavit served on 1 February 2017. They maintain that the nature of the enquiries to be made by them would have differed depending on the basis on which indemnity was being denied (whether for fraud or breach of policy conditions or on the basis that the policy did not cover the claims) (see the affidavit of their solicitor, Christopher Clancy, sworn 20 July 2017).
12. It is submitted that it was "especially unreasonable" for the fifth defendant not to reply to the 21 November 2016 and 15 December 2016 requests for information while at the same time relying upon its Calderbank offer dated 3 February 2017 allowing 28 days for acceptance.
13. The plaintiffs' solicitor (Mr Clancy) has deposed that, as at February 2017, he "recognised" that on the evidence then currently available to the plaintiffs the fifth defendants' notice of motion had "some prospects of succeeding" but that in his view the fifth defendant's evidence did not establish that the plaintiffs had no reasonable prospects (of success) (affidavit of Mr Clancy affirmed 20 July 2017 at [16]). In his letter of 23 February 2017 to the fifth defendant's solicitors he advised that "it would be inappropriate and negligent to finally dispose of any claim against the insurer whilst the Plaintiffs were awaiting results of further searches and investigations" (affidavit of Mr Clancy affirmed 20 July 2017 at [25]).
14. Third, as adverted to earlier, the plaintiffs submit (at [6] of their written submissions) that the Calderbank offer was not an offer capable of acceptance by any individual plaintiff and that it was plainly unreasonable for the offer to contain a condition where no single plaintiff could accept it unless all of the plaintiffs in the various actions (whose factual circumstances were necessarily different from each other and where one or more of the plaintiffs "may have been entitled" to continue their claim) also accepted the offer. They point out that the Calderbank letter did not set out any reasoning as to why a settlement where judgment should be entered in favour of the fifth defendant was reasonable and/or why all the plaintiffs should accept the offer.
15. Fourth, it is submitted that, in terms of timing, it was necessary for the complicated insurance policies referred to in the affidavit of Mr Korff which accompanied the notices of motion "to be digested" (plaintiff's written submissions at [8]). The plaintiffs note that the policy wording varied between 2006 and 2009. It is noted that the rejection by the fifth defendant of their offer of a discontinuance left only a little over 14 days for acceptance of the Calderbank offer (and still only if all plaintiffs accepted) which it is said was an unreasonably short period. It is submitted that any offer, in order to have been reasonable, should have allowed time for each plaintiff to obtain and assess all of the relevant evidence. (Pausing there, the fact that the plaintiffs sought agreement for a discontinuance does not mean that there was only 14 days in which to consider or respond to the offer. The plaintiffs' solicitors letter of 15 February 2017 simply confirmed that the offer remained open for acceptance - as logically must have been the case it not having expressly been rejected by the request to consider a discontinuance.)
16. The plaintiffs argue that the main issue taken up in correspondence in late February 2017 (after the Calderbank letter had been issued and before it expired) was as to whether or not the insured (the first defendant) could be located. The plaintiffs maintain that they were "on reasonable ground" concerning that issue, disagreeing with the fifth defendant's position that the fact that there was a registered office on ASIC's records was determinative, and say that their willingness to argue that point cannot be said to have been unreasonable. The plaintiffs also point to the offer of a discontinuance of the proceedings against the fifth defendant with the right to reactivate them in appropriate circumstances, which it is said was not an unreasonable position to take in light of the predicament in which the plaintiffs all found themselves.
17. The plaintiffs maintain that what ultimately became the "main issue" in the motion was the applicability of and the facts concerning s 40(3) of the Insurance Contracts Act. They say that this was dealt with "only obliquely" (at [37] of the fifth defendant's original submissions) and was the issue which ultimately would have needed to be agitated if the plaintiffs were to succeed in the proceedings. They say that there was no evidence from the fifth defendant concerning that issue by the expiration of the Calderbank offer and that, until the fifth defendant's motion and affidavit attaching relevant policy wording and schedules had been provided to the plaintiffs and the fifth defendant had outlined its position as to why the three policies each did not respond to the various plaintiffs' claims, the need for enquiry at all (and specifically what enquiries), was unknown to the plaintiffs.
18. It is thus submitted that the service of the Calderbank offer two days after service of the fifth defendant's summary dismissal motion allowed insufficient time to the plaintiffs to digest the complicated factual and legal issues involved on the motion. It is said that the s 40(3) "issue" only attained "prominence" in June 2017, after which the process of actually obtaining the documents was undertaken and that this process was "somewhat convoluted and was affected by delay in production of documents by the subpoena recipients and delay by the fifth defendant in compliance with the notice to produce" (plaintiffs' written submissions at [14]).
19. In particular, the plaintiffs maintain that, having regard to the time for compliance by the Financial Ombudsman's Service in Victoria with a subpoena (10 business days pursuant to s 30 of the Service and Execution of Process Act 1992 (Cth)), even if the relevant enquiries had been undertaken by the plaintiffs after 15 February 2017 and before 1 March 2017, the outcome of the enquiries would be unlikely to have been known before expiry of the Calderbank offer. (Pausing there, that offers no explanation as to why a subpoena could not have been issued any time between 1 February 2017 and 15 February 2017 for relevant documents).
20. Complaint is also made as to delay in access to the subpoenaed documents. It is said that the documents "never could have materialised overnight" and that, once those documents had been obtained, and it became apparent that the plaintiffs would not succeed in their substantive claim proper, the plaintiffs immediately took a responsible position, made various offers to settle, and advised both the fifth defendant and the Court that the motion would no longer be contested and that the plaintiffs would consent to judgment. It is submitted that once all of the information was available to the plaintiffs (which information it is said should have been part of the fifth defendant's own evidence in support of the motions) the plaintiffs acted responsibly but that all of that necessarily occurred well after the expiration of the Calderbank offer.
21. In this regard I note that it appears that the enquiries that were made on behalf of the plaintiffs were: to issue, in March 2017, a subpoena to the Department of Immigration and Border Protection (presumably relevant to the whereabouts of the second defendant) and a subpoena to Capital Australia Finance Limited; to make an urgent FOI request to ASIC in May 2017 (well after the expiry of the Calderbank offer) for professional indemnity insurance documents for the first defendant for the period from 1 January 2009 through to March 2015 and for documents relating to the return of the security bond to the first defendant; to issue a subpoena or request to AON (presumably also seeking insurance documents); and to issue notices to produce on the fifth defendant in relation to prior notifications by the first defendant.
22. As to the ASIC request, ASIC responded that it had previously provided copies of the requested documents (from which it must be assumed that there were no insurance documents for the period after 2009, since documents up to that period had been made available in or about October 2013).
23. The fifth defendant, in answer to the notice to produce served by letter of 16 June 2017 (again well after expiry of the Calderbank offer), notified the plaintiffs that it had no documents to produce in answer to a request for professional indemnity policies issued to the first defendant for the period March 2009 to March 2014. It responded to a request as to prior notifications by referring to circumstances notified by the first defendant in relation to a limited number of persons (not including the present plaintiffs) and by confirming that further claims or circumstances had been notified in relation to some other persons (copies of which were still being located). The plaintiffs in correspondence with the fifth defendant's solicitors on 7 July 2017 asserted that these were "the same or similar complaints … all of which were settled" and said that the fifth defendant had investigated those claims and was aware that the first defendant had breached its duty of care to each claimant in the same or similar manner. The fifth defendant did not accept the assertions there made but in any event it appears that there was no evidence of any notification of circumstances or a claim, prior to March 2009, in relation to any of the present plaintiffs.
24. In summary, the plaintiffs maintain that in circumstances where: the Calderbank letter required judgment in favour of the fifth defendant and could not be accepted by any individual plaintiff unless all other plaintiffs also accepted the offer; the Calderbank letter did not set out the basis on which the offer was reasonable and why it should be accepted by all plaintiffs; the time allowed for acceptance of the offer was unreasonable (where the offer was made without any defence having been filed indicating the basis of denial and only two days after service of the fifth defendant's motion and before the plaintiffs could investigate the various defences indicated in the motion); the offer was an offer to capitulate and/or did not involve a true element of compromise; and the plaintiffs offered twice to seek instructions to discontinue and to bear their own costs, the plaintiffs have not been shown to have acted unreasonably prior to expiry of the offer on 1 March 2017 and the application for indemnity costs should be dismissed with costs.

Determination

1. In the circumstances, the fifth defendant's offer to forego a claim for cost did in my view offer a genuine element of compromise. The proceedings had been commenced in 2015. It would be reasonable to have assumed that, even though no defence had been filed, a responsible insurer would have taken steps to investigate the claim and would have incurred costs in so doing (as the fifth defendant clearly did, having regard to the evidence as to costs incurred from April 2016 onwards). The fact that costs were incurred in preparing the summary dismissal application before providing a response to the requests for information is hardly to the point, since it would presumably have been necessary for the enquiries that produced the fifth defendant's evidence/submissions on the summary dismissal application to have been conducted in order to respond to the November/December 2016 enquiries in any event. Moreover, the provision of that information to the plaintiffs (albeit by way of the material served on the summary dismissal application) does not even then appear to have led to any prompt enquiries by the plaintiffs.
2. The offer of 3 February 2017 being a genuine offer of compromise, the question is whether the plaintiffs' non-acceptance of that offer was unreasonable. I consider that it was. The assumption that more than 28 days was needed "to digest" the information in the notice of motion cannot be accepted. The fact is that, however unsophisticated the plaintiffs and however poorly advised their investment decisions were or were proved to be, they were represented by legal practitioners who, as at 3 February 2017, were on notice that the fifth defendant contended not only that the plaintiffs had not satisfied the reasonable enquiries condition for the purposes of a s 51 application but also (and perhaps more significantly in the present context) that the insurance policy in question did not respond to the claimed liability. Whatever the merits of the dispute as to whether a registered office address for the first defendant precluded an argument that the first defendant could not, after reasonable enquiry, be found (for the purposes of satisfying s 51(1)(c) of the Insurance Contracts Act), it should have been apparent by then that there would be real problems establishing a claim against the fifth defendant under a claims made policy that had expired many years earlier, in the absence of any evidence of notification of circumstances of a claim by the plaintiffs (or even of facts that might give rise to a claim) prior to the expiry of the policy.
3. The fact that an insurer might have been the plaintiffs' only real hope for recovery of their losses does not mean that it was not unreasonable for them not to accept the Calderbank offer that was made in February 2017. Nor is their impecuniosity, or the disastrous outcome of their investments, relevant to that issue.
4. The plaintiffs' conduct in not accepting the offer was not rendered not unreasonable because the fifth defendant did not give a more reasoned explanation as to why entry of judgment, rather than discontinuance of proceedings, was sought in the fifth defendant's offer. The reason for that, it seems to me, was made perfectly clear. The fifth defendant was seeking finality of the litigation. A discontinuance did not offer that (as the plaintiffs' solicitors well understood - since they considered it 'inevitable' that the fifth defendant would be sued if the claim against the first two defendants were to be successful). A similar point may be made as to why a condition that all plaintiffs accept was considered necessary.
5. The time allowed for consideration of the offer gave the plaintiffs in my opinion a reasonable opportunity (with the benefit of legal advice) to assess their options. They had in effect a month to make whatever enquiries they wished in order to satisfy themselves of the prospects of success of the fifth defendant's contention that the policy did not respond to a claim in damages of the kind they were making against the first defendant (which, by 1 February 2017, they knew was the basis on which the fifth defendant would be denying indemnity). They chose, with the benefit of legal advice, not to accept the offer in the apparent hope that evidence would emerge (from whatever enquiries might thereafter be made) that would bring the claim within the policy; and in the meantime sought to negotiate for a discontinuance of the proceedings rather than their dismissal.
6. As to the condition attached to the offer (namely, that all plaintiffs accept the offer) that does not of itself provide a basis to conclude that the offer was plainly unreasonable nor does it alter my view that it was unreasonable for the plaintiffs not to accept the offer made to them in early February 2017 (and confirmed in mid February 2017). Had there been a basis for considering that the defect or weakness in the plaintiffs' claims was not common to all the proceedings, my conclusion might have been otherwise. As it is, the condition for acceptance by all plaintiffs does not lead me to depart from my conclusion that their non-acceptance of the offer was unreasonable. Whether only "obliquely", or not prominently, raised in the fifth defendant's written submissions, those submissions did alert the plaintiffs to the difficulty that this was a claims made policy which had expired without (on the fifth defendant's evidence) a claim being made and without circumstances that might give rise to a claim having been notified.
7. The plaintiffs did not accept that position and chose to test the "veracity" of the submissions. So be it. But the fact that they delayed in so doing and chose not to accept the Calderbank offer made to them makes their conduct in not accepting the offer unreasonable in my view.
8. The fifth defendant's costs involved up to the point of the making of the Calderbank offer are not substantial. Nevertheless, the rationale for the making of offers of this kind includes the public policy objective of providing an incentive for disputants to end their litigation as soon as possible and to discourage wasteful and unreasonable behaviour by litigants (Leichhardt Municipal Council v Green at [14] (Santow JA); see also Commonwealth of Australia v Gretton [2008] NSWCA 117 at [41] (Beazley JA, as her Honour then was)).
9. In the circumstances I am of view that it is appropriate to award indemnity costs.

Orders

1. Accordingly, I order as follows: 1. Vary orders made on 12 July 2017 in each of proceedings 2015/00119249, 2015/00119340, 2015/00119375, 2015/00119459 and 2015/00119286, such that the plaintiffs pay the fifth defendant's costs on the ordinary basis to 3 February 2017 and on the indemnity basis on and from 4 February 2017 to 12 July 2017. 2. The plaintiffs in each of the proceedings to pay fifth defendant's costs incurred in the preparation of submissions on the application by the fifth defendant for indemnity costs, on the ordinary basis.

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: 14 August 2017