Evidence Act 2011 (ACT) s 131

Becker v Queensland Investment Corp (No 2) [2009] ACTSC 147

Calderbank v Calderbank [1975] 1 All ER 222

Dong v Song [2018] ACTSC 82

Dong v Song (No 2) [2018] ACTSC 180

Evans v Braddock (No 2) [2015] NSWSC 518

Evans Shire Council v Richardson (No 2) [2006] NSWCA 61

Kemp v Ryan [2011] ACTSC 42

Pires v Dibbs Barker Canberra Pty Ltd [2014] ACTSC 283

Primus Telecommunications Pty Ltd v CCP Australian Airships (No 2) [2003] VSC 141

Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170

Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353

Vizovitis v Ryan (No 2) [2014] ACTSC 301

Moray & Agnew (Trustee in bankruptcy appointed for the first defendant)

1. On 21 June 2018, the plaintiff was successful in obtaining a judgment against the defendants in the sum of $251,503, plus costs and interest: see Dong v Song (No 2) [2018] ACTSC 180.

2. The costs order was stayed for seven days to allow the parties an opportunity to apply to vary the costs order made. The plaintiff has sought to vary the costs order. She seeks that the defendants' pay her costs on an indemnity basis from a variety of dates, based on three offers of settlement that were made to the defendants prior to judgment being delivered.

3. The first defendant has entered into bankruptcy since judgment was delivered in the substantive proceedings. A trustee in bankruptcy was appointed on 29 June 2018 and opposes the application to vary the costs order.

4. The application has been determined on the papers and both the plaintiff and the trustee for the first defendant have filed written submissions. The second defendant remained self-represented, but did not file any submissions on the application.

5. In support of the application, the plaintiff relied upon two affidavits, one affirmed by her on 18 July 2018 and the other affirmed the same day by her solicitor.

6. The plaintiff bases her claim for indemnity costs on three separate offers. The first was made orally during a court ordered mediation on 14 November 2016. The second was made a year later, in a document entitled "Notice of Offer of Compromise" dated 21 November 2017, purportedly issued pursuant to r 1002 of the Court Procedure Rules 2006 (ACT) (Rules). The third offer was a handwritten document, which the parties agree was delivered to the defendants on 23 April 2018, being the fifth day of the final hearing.

7. Consideration has been given to the asserted offers of compromise as either offers made under the Rules, or as offers made under the common law in accordance with the principles articulated in Calderbank v Calderbank [1975] 1 All ER 222 (Calderbank), as adopted and applied in Becker v Queensland Investment Corp (No 2) [2009] ACTSC 147 at [11]- [12]. The considerations for the Court were set out by Refshauge J in Pires v Dibbs Barker Canberra Pty Ltd [2014] ACTSC 283 at [97].

8. The mere fact that an offer was made but not accepted does not result in an award of indemnity costs. The critical question is whether the rejection of an offer was unreasonable in the circumstances. The plaintiff bears the onus of establishing that she is entitled to an award of indemnity costs based on the rejection of an offer of compromise being unreasonable: see Kemp v Ryan [2011] ACTSC 42 at [18]; Vizovitis v Ryan (No 2) [2014] ACTSC 301 at [17], each relying on Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [26]. See also the detailed discussion in Evans v Braddock (No 2) [2015] NSWSC 518 at [49].

9. For reasons that follow, none of the offers warrant any variation to the orders made on 21 June 2018.

10. The affidavit of the plaintiff deposes to an oral offer being made during a mediation on 14 November 2016. Section 131(1)(a) of the Evidence Act 2011 (ACT) (Act) provides that evidence must not be presented of a communication that is made between persons in dispute in connection with an attempt to negotiate a settlement of the dispute.

11. However, there are a number of particular exceptions to the application of that section, listed in s 131(2) of the Act. They include matters such as where the person consents to the evidence being presented, where there is a statement in the communication that it was not to be treated as confidential, and where the communication was made in furtherance of the commission of a fraud.

12. The exception relevant to the present issue is s 131(2)(h) of the Act, namely where the communication or document is relevant to deciding liability for costs. As no party raised the operation of any mediation agreement, it is not necessary to consider that issue here. The contents of the affidavit of the plaintiff were therefore admitted.

13. The offer made during the mediation plainly does not meet the requirements in Calderbank. It suffices to note that there is no evidence that the offer made raised any possibility that if it was not accepted, it might later be relied upon in support of an application for a special costs order, such as for indemnity costs.

14. Further, the offer was not made in clear terms and precision is required before an offer will be found to give rise to an order for indemnity costs: Primus Telecommunications Pty Ltd v CCP Australian Airships (No 2) [2003] VSC 141 at [6], where it was held that an offer of compromise must be in unambiguously clear terms, leaving the offeree in no doubt as to what was being offered.

15. From the affidavit evidence led by the plaintiff, the offer made at the mediation was for "the same amount as prescribed in the Statement of Claim" filed by her, which she then claims was $251,503, plus interest. She does not expressly depose to any terms addressing the costs of the proceedings. Given that the plaintiff says she sought what was in the Statement of Claim, and the Statement of Claim seeks costs, I have inferred that, when making the offer on 14 November 2016, the plaintiff sought costs as well.

16. However, the relief claimed in the Statement of Claim dated 29 March 2016 does not, in fact, match what the plaintiff described as the "offer" in her affidavit. The relief claimed in the Statement of Claim is for unquantified damages, as well as restitution for $298,980, less money received from the defendants by the plaintiff by way of dividends from Ms Vivian Pty Ltd, plus costs and interest.

17. I do not accept that whatever offer was communicated at the mediation was sufficiently clear and in terms that enabled it to be properly characterised as an offer of compromise, so as to require the Court to assess whether its rejection was unreasonable.

18. Further, even if I assume in the plaintiff's favour that the offer was in clear terms, namely that it was for $251,503 plus costs and interest, such an offer merely sought the full amount claimed by the plaintiff at the hearing.

19. There are numerous statements to the effect that an offer to compromise the claim must be genuine: see, for example, Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170 at [20]; and Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353 at 355, a case relied upon by the trustee in bankruptcy, where Rogers CJ Comm D. stated:

Unless circumstances are wholly exceptional a demand for payment to the plaintiff of everything, to which it may possibly be entitled, hardly falls in the category of compromise. ...

What the court is invited to do is to determine whether, in the totality of the circumstances, the offer by the plaintiff represented any element of compromise of whether it was merely, yet another, formally stated demand for payment designed simply to trigger the entitlement to payment of costs on an indemnity basis.

20. The plaintiff did not offer to compromise any component of her claim. She effectively demanded the full amount of the claim, plus costs and interest. Accordingly, it was not genuinely an offer to compromise and, as such, it does not give rise to any consideration of a claim for indemnity costs.

21. The offer of 21 November 2017 falls into the same category. Even though it was a formal offer, being in writing and expressly referring to r 1002 of the Rules, such a rule provides that a party may, by written notice, make an offer to another party to "compromise" any claim in proceedings, either in whole or in part, on stated terms.

22. The material terms of the offer of 21 November 2017 are the same, namely that the defendants pay $251,503 plus costs and interest. There was no genuine compromise offered by those terms.

23. Accordingly, this offer similarly does not found any claim for indemnity costs, either under the Rules or at common law.

24. The third offer relied upon by the plaintiff is handwritten and headed "The Offer (General Idea)." It was in the following terms:

1. The Defendants to pay to the Plaintiff the sum of $200,000.
2. The Defendant pay to the plaintiff interest on the above from December 2014 to date at Court rates.
3. The Defendants to pay the Plaintiff's costs of the proceedings as agreed or assessed.
4. The Plaintiff will ask the Judge to dismiss the Motion for Contempt.
5. The Plaintiff will consent to an application by the First Defendant to be released from her undertaking.

All of the above contained in Deed. When money is paid, signed consent orders for the above (attaching the Deed) will be handed to Defendant.

25. It will be seen that the principal sum the plaintiff offered to accept is $200,000, plus costs and interest. This reduced amount does represent a genuine offer to compromise the claim.

26. The offer was also made during the closing days of the hearing, and importantly after the plaintiff had served all her affidavit evidence and a critical ruling on evidence had been made: see Dong v Song [2018] ACTSC 82. It cannot be said that the defendants did not understand the strengths and weaknesses of the plaintiff's case.

27. However, the offer is really in the nature of a draft heads of agreement given to the defendants for consideration. It speaks about a "general idea" and is subject to a deed. That, of itself, suggests a lack of certainty, and that further negotiation was to take place. There is no specific date from which interest was to be payable. There is no provision for what orders will be made to dispose of the proceedings. For example, it is uncertain whether the plaintiff was offering to dismiss the proceedings after money had been paid, or to discontinue the proceedings, or was seeking for judgment to be entered in the proceedings in a particular sum. I am unable to find that it was an offer made in clear and unambiguous terms.

28. In any event, the offer does not state how long it was open for and it does not contain any indication that, if rejected, it would be relied upon to found an application for a special order for costs.

29. In all those circumstances, and while accepting that the plaintiff intended to make a genuine offer of compromise, I am not satisfied that it was unreasonable for the defendants not to accept the offer at the time it was made.

30. There is no basis to vary the costs order previously made on 21 June 2018. As the plaintiff has been unsuccessful on the application, she ought to pay the trustee in bankruptcy's costs of responding to it, on the basis that costs follow the event.

(1) The application to vary the costs order made on 21 June 2018 is dismissed.

(2) The plaintiff is to pay the trustee in bankruptcy's costs of responding to the application.

I certify that the preceding thirty one [31] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam.