13 Solicitors for the appellant, Parry Carroll, wrote to Somerville and Co. on 16 December 2004 outlining an offer that the appellant submitted should be treated as a Calderbank offer from which indemnity costs should flow. The letter attempted to summarise the position of the first and second respondents and suggested "it is obvious that the sum in dispute over this claim is negligible, and out of all proportion to the legal costs involved in litigating it". The appellant offered to settle the proceedings, together with the two Supreme Court proceedings on foot at the time by offering the following:
1. Our client [Ms Deng] transfer her 51% shareholding in the Company [Dengs Investments] to Landmark (or its nominee) for the sum of $89,515.91 and resign as the Company's Director, with the intent and to the effect that Landmark (or its nominee) will have sole ownership and control of the Company and the Coogee 'Movie City' video store business.
2. Our client do all other acts, matters and things necessary on her part to effect the transfer of ownership and control of the Company, and of its video store business, to Landmark (or its nominee).
3. These Industrial Relations Commission proceedings be dismissed.
4. Both sets of Supreme Court proceedings be dismissed.
…
6. All existing costs orders in these Industrial Relations Commission proceedings, both sets of Supreme Court proceedings, and all other proceedings between our respective clients be vacated.
7. In all of those proceedings, there be formal consent orders that there is no order as to costs.
14 The letter clearly stated that it was made in accordance with the principles of a Calderbank offer, that the terms would be relied on in any costs claims should the Court(s) ultimately deliver judgment in terms no more favourable to the first and second respondents than those contained in the offer, and that the appellant would seek an order for indemnity costs from the date of the offer. The offer was open to the offerees for a period of 28 days. Although the terms of the second offer provide more clarity than that of the first, we do not consider the offer to be one that was unreasonably rejected by the first and second respondents. Whilst the Full Bench found that the contract was not unfair, an offer from the appellant to be paid $89,515.91 by the offerees and for there to be no order as to costs cannot be viewed as a compromise action from which indemnity costs may be triggered. This Court must be satisfied that the offeror has made a genuine offer of compromise in order for it to consider awarding costs on an indemnity basis following the rejection of the offer: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [23]-[24]; West & Anor v The Owners Strata Plan No 54288 (No 2) [2009] NSWIRComm 61 at [14]; Wheelahan v North Coast Area Health Service (No 2) [2008] NSWIRComm 244.
The third offer
15 The appellant's third offer of 21 August 2006 was in a similar vein to that of the second offer. The letter from Parry Carroll to Somerville and Co. reiterated the parties' respective positions and once again suggested that the net outcome of any judgment for the first and second respondents would be less significant than the legal costs associated with the continuing litigation. Due to legitimate time constraints placed on the parties at the time requiring them to finalise negotiations with the lessor of the premises of "Movie City", the offer was open to the offerees until 5pm on the day the letter was faxed to Somerville and Co. An offer open for such a limited period of time should not carry with it consequences of indemnity costs should it be rejected, and for this reason will we not consider awarding to the appellant costs on an indemnity basis from the date of her third offer. A rejection of an offer that might trigger indemnity costs must be open for a reasonable time in order for the offeree to assess its merits: Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [99]; Ng v Chong [2005] NSWSC 385 at [13]-[14]; Boyd and Anor v Maxx Implementation Pty Limited and Ors (No 3) [2008] NSWIRComm 200 at [29] - [32].
The fourth and fifth offers
16 The appellant, through her solicitors, made a fourth offer to the first and second respondents on 21 August 2006. The offer may be regarded as a Calderbank offer. The hearing of the matter had previously been set for February 2006, but was vacated and re-listed for hearing over four days commencing 28 August 2006. It is apparent from the terms of the offer that the appellant was eager to settle the matter. Ms Perry, solicitor for the appellant, submitted the following:
The offer was:
1. made on a "without prejudice" basis;
2. was a genuine attempt to resolve the proceedings;
3. a final attempt before incurring the cost of the hearing to reach a settlement of the claims of Mr Lieu and Landmark in order to avoid the cost of the hearing;
4. provided for a transition of the company to Paul Lieu at no cost to him;
5. compromised Margaret Deng's position by transitioning the business and its assets to Paul Lieu for no consideration;
6. provided for a better outcome than was achieved by Paul Lieu in the proceedings;
7. was an acknowledgment of the substantial costs which had been incurred by that time which were yet to be incurred in relation to a protracted defended hearing conducted a settlement conference on 22 August 2006 which was followed by a formal offer of settlement incorporating the re-registration of Landmark Enterprises Pty Ltd which was in fact undertaken by the Appellant at her cost;
8. made provision for disposal of the proceedings with no order as to costs;
9. dealt with all ancillary aspects of the operations of the business including employee entitlements, motor vehicle, telephone accounts, interim arrangements, inventory of stock, rental and the like.
17 The appellant submitted the following in relation to the fifth offer made on 22 August 2008:
In a final bid to avoid the cost of the hearing by email dated 22 August 2008 from Greg Ganz of Parry Carroll to Somerville & Co (copy enclosed) ("the Fifth Offer"), an offer of further compromise was made by a transfer of all assets of the "Movie City Coogee" business (excluding the motor vehicle) to Paul Lieu or his associated entity. The offer was unreasonably rejected and Somerville & Co subsequently ceased to act for Paul Lieu and Landmark on the eve of the hearing.
18 This Court must consider whether an offer was a genuine offer of compromise and whether it was unreasonable for the first and second respondents to reject the offer (Wheelahan v North Coast Area Health Service (No 2) at [55]; Leichhardt Municipal Council v Green at [23]-[24]). In relation to the fourth offer, the letter from the appellant's solicitors to Somerville and Co. opens with: "We refer to our conference on 21 August 2006 and thank you for taking the time to attend our office to see whether there is the making of a settlement between the parties". Following in the letter was a detailed outline of how the parties might execute a settlement which would effectively transfer the business to Mr Lieu for no consideration, by way of transferring to Mr Lieu the appellant's shareholding in Dengs Investments. The offer stipulated that "the proceedings be dismissed with an order that each party pay their own costs".
19 The letter stated that the "terms of this offer are open for acceptance until 9:00am on 22 August 2006". Whilst this period of time is again considered a limited time in which an offer may be regarded as appropriate upon which to grant indemnity costs, we are of the view that this offer is capable of justifying indemnity costs. The letter details the specifics of how the parties will deal with issues such as the vehicle transfer, stock bills and rental adjustments, delivery dates and accounts, information regarding the lease and the casual employees. It is apparent from the letter that negotiations had reached some level of detail in attempting to resolve the matter. The email from Mr Ganz (of Parry Carroll) to Somerville and Co. at 3:48pm on 22 August 2006 is further indication that negotiations were continuing between legal representatives throughout the following day in an attempt to finalise the matter. The email starts with "Further to your fax of this morning and our subsequent telephone conversation, I believe the following suggested course of action will, commercially, satisfy both of our clients' objectives (if settlement is to take place)".
20 The appellant's fourth offer was open for longer than originally stipulated in the terms of the letter, as evidenced by the ongoing discussions between solicitors. The terms of the appellant's offer were clearly compromising her position, in that the appellant offered to have all aspects of the business transferred to the first and second respondents at no costs to them. At this point in the proceedings, the matter had been on foot for over five years and the appellant had made several attempts to resolve the matter. For the following reasons we consider it was unreasonable for the first and second respondents to reject the fourth offer:
(1) the offer was the culmination of a number of attempts by the appellant to resolve the dispute between the parties;
(2) the offer was open to the offerees for a sufficient period of time to enable ongoing discussions between the parties; it allowed the offerees, with legal advice, reasonable time to assess the merits of the offer and their position in respect of it prior to the hearing dates;
(3) the offer was a genuine one and a significant compromise on the appellant's part, as she was offering to transfer the business to which she had dedicated substantial time and energy. The appellant had previously paid $38,000 to the Liquidator of Lieu Investments, a sum she understood to be a final amount that would cause Mr Lieu's interests in the Deng interests to be finalised; and
(4) the Full Bench gave judgment in terms no more favourable to the first and second respondents than those contained in the offer.
21 On behalf of the first and second respondents, Mr Lieu submitted that "the Appellant resisted and obstructed the Respondents throughout the proceedings and cannot now claim she should now be entitle [sic] to all of her costs". The Full Bench does not have before it such evidence, although the court records for this matter do suggest substantial delays occurring throughout the proceedings. The original summons was filed in April 2001 and the substantive matter was heard by December 2006, during which time there were several motions before the court, hearing dates vacated and re-listed, non-production or non-adherence to summonses for production, and other circumstances that caused delay in the hearing of the matter.
22 The Court's records indicate that there was a plethora of issues between the parties throughout the five and a half years resulting in much longer than usual litigation, but the first and second respondents have failed to show that it was the appellant who was obstructive in her dealings during this period.
23 The Full Bench considers that the appellant's fourth offer just prior to the hearing was a genuine attempt to settle the matter and unreasonably rejected by the first and second respondents. We, therefore, propose to order that the first and second respondents pay to the appellant her costs on an indemnity basis from 21 August 2006.
Interest