Orders 3 and 4 made on 21 July 2017 are deleted and the following order made: "The second defendant is to pay the plaintiff's costs of the proceedings on a solicitor and client basis."

CIVIL LAW - PRACTICE AND PROCEDURE - Costs - offers of compromise - whether offer open for "a period that is reasonable in the circumstances" - whether Court should "order otherwise" so as to displace default costs consequences under rule 1010 of the Court Procedures Rules 2006 (ACT)

Court Procedures Amendment Rules 2014 (No 3) (ACT)

Court Procedures Rules 2006 (ACT), rr 1002(5), 1010, 1010(2), 1010(2)(a), 1010(2)(b)(ii)(B), 1011(2), 1011(2)(a), 1012(2), 1304, Part 2.10

Road Transport (Third Party Insurance) Act 2008 (ACT),

Supreme Court (General Civil Procedure) Rules 2006 (Vic),

Uniform Civil Procedure Rules 1999 (Qld), r 360(1)

Uniform Civil Procedure Rules 2005 (NSW), rr 20.25, 20.26, 20.27, 20.28, 20.29, 20.30, 20.31, 20.32, 42.13, 42.14, 42.14(2)(b), 42.15, 42.15A, 42.16, 42.17

Forge v Rewers [2017] ACTSC 179

Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85

Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391

Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368

Shaw v Jarldorn [1999] SASC 529; 76 SASR 28

Taylor v Port Macquarie-Hastings Council [2010] NSWLEC 153; 175 LGERA 189

Insurance Australia Limited trading as NRMA Insurance (ACN 000016722) (Second Defendant)

1. This is a costs application arising from a judgment given on 21 July 2017: see Forge v Rewers [2017] ACTSC 179. The orders of the Court were:

1. Judgment be entered for the plaintiff against the second defendant in the sum of $231,618.

3. The second defendant is to pay the plaintiff's costs.

4. Order 3 does not take effect for a period of 14 days and, if either party notifies my associate by email (copied to the other party) that it wishes to be further heard in relation to costs, does not take effect until further order of the Court.

2. Pursuant to order 4 the plaintiff sought to have the matter relisted to seek a more favourable costs order. The relevant defendant for the purposes of this application is the second defendant because any judgment must be given against the second defendant and not against the first defendant: Road Transport (Third Party Insurance) Act 2008 (ACT), s 151(4).

3. The plaintiff relied upon the making of two offers of compromise shortly before the hearing. They were an offer to settle for $225,000 made on 11 July 2017 and a further offer to settle for $200,000 made on 14 July 2017, the Friday before the commencement of the hearing.

4. The second defendant recognises that the prima facie position under r 1010 of the Court Procedure Rules 2006 (ACT) is that because the plaintiff obtained a judgment more favourable than offered in the offer of compromise, it must pay the plaintiff's costs of the proceedings on a solicitor and client basis. However it contended that the offers did not comply with r 1002(5) because they were not open for a period which was "reasonable in the circumstances". It also seeks that the Court exercise the power to "order otherwise" and that it should do so by reason of the timing of the offers, the circumstances that existed in relation to the expert evidence in the case, and the significant costs consequences that flow from the default position under the Rules.

5. The proceedings involved an assessment of damages as a result of a rear-end collision between two motor vehicles. Following the accident, the plaintiff had altered the nature of his work as a self-employed truck driver and then sold his truck and obtained employment that was at least as remunerative as his previous work. The evidence in relation to past and future economic loss underwent some evolution in the period prior to the trial.

6. The chronology of events in relation to the making of offers to settle the proceedings is as follows.

7. The accident the subject of the proceedings occurred on 4 August 2012. The proceedings were commenced on 23 June 2016.

8. Prior to the commencement of the proceedings the plaintiff had served an economic loss report by Mr Mark Thompson of Vincent's Chartered Accountants, dated 8 May 2015. On 15 February 2017 the defendant served an economic loss report by

Mr David Watt of David Watt & Co, dated 7 February 2017. He assessed past economic loss at $32,000 and that there was no future economic loss.

9. On 9 May 2017 the plaintiff served his statement of particulars pursuant to r 1304 of the Court Procedures Rules. His claim for past economic loss was particularised at $99,630 and his claim for future economic loss particularised in accordance with Mr Thompson's report of the previous day, namely $308,303 to $397,371, depending upon the capacity of the plaintiff to perform over time work.

10. A mediation on 10 May 2017 did not resolve the proceedings.

11. On 15 May 2017 the defendants served an offer of compromise on the plaintiff in the amount of $160,000. This offer lapsed without acceptance on 12 June 2017.

12. On 6 July 2017 the plaintiff served a supplementary economic loss reported by

Mr Thompson, dated 5 July 2017. He calculated the plaintiff's past economic loss to be $87,464 and agreed with Mr Watt that there was no future economic loss.

13. On 7 July 2017 the defendants solicitor was instructed to obtain a supplementary report in reply to Mr Thompson's report. She telephoned him and he returned her call on

14. A formal letter of instructions was sent on 11 July 2017. On the same morning at 9:47am the defendants received the plaintiff's first offer of compromise the effect of which was to offer a settlement of $225,000 plus costs. The offer was open until close of business on Thursday, 13 July 2017.

15. On 12 July 2017 the defendants solicitor spoke to Mr Watt who informed her that he was in the process of completing a supplementary economic loss report and would try his best to provide it by 13 July 2017. There was some discussion of the substance of his conclusions. The evidence does not disclose whether or not in that conversation he identified his revised assessment of the plaintiff's past economic loss. The supplementary economic loss report was received at 4:16pm on Thursday, 13 July 2017. However, prior to the receipt of that report the defendants had, at 3:54pm, communicated their rejection of the plaintiff's offer of compromise. The evidence does not explain whether this rejection was made based upon some advance indication of the outcome of Mr Watt's revised assessment of the plaintiff's past economic loss or whether the defendants did not consider that any such revised assessment was necessary in order to permit them to make a decision about the plaintiff's offer.

16. Mr Watt's supplementary report confirmed that his original economic loss report contained a calculation error and he recalculated the plaintiff's past economic loss to be $65,000. That contrasts with the $32,000 from his original report and $89,000 in the plaintiff's supplementary economic loss report.

17. Following the rejection of the offer of compromise on 13 July 2017 the plaintiff made a further offer of compromise at 9:30am on Friday, 14 July 2017. The effect of that offer was to offer a settlement for $200,000 plus costs. That offer was open until 10:00am on Monday, 17 July 2017.

18. There is no evidence as to what was done in relation to the consideration of that offer by the solicitor for the defendants or by the second defendant. At 9:14am on Monday, 17 July 2017 the defendants' solicitor was advised by an unidentified officer of the second defendant that "they did not consider they had sufficient time to consider the offer given the recent developments in the matter". Instructions were then given to make an offer of $225,000 inclusive of costs on a without prejudice basis and that offer was communicated to the solicitor for the plaintiff at 9:18am on Monday, 17 July 2017. There is no explanation in the evidence as to why there was insufficient time to consider the offer of compromise but sufficient time to consider and formulate the counter offer that was made.

19. An offer of compromise is required to remain open for the period specified in r 1002(5) of the Court Procedures Rules which provides:

(5) The end of a period of acceptance for an offer -

(a) for an offer made 2 months or more before the date set down for the start of the trial - must be not less than 28 days after the day the offer is made; and

(b) in any other case - must be after a period that is reasonable in the circumstances.

20. The consequences of a plaintiff doing better than an offer made to the defendant in an offer of compromise are specified in r 1010:

Offer not accepted and judgment no less favourable to plaintiff

(1) This rule applies if an offer is made by the plaintiff in relation to a claim, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim 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 relation to the claim -

(a) if the claim is a personal injury claim - assessed on a solicitor and client basis for

the whole of the proceeding; or

(b) in any other case -

(i) assessed on a party and party basis up to the time when the costs are to be

assessed on a solicitor and client basis under subparagraph (ii); and

(ii) assessed on a solicitor and client basis -

(A) if the offer was made before the first day of the trial - from the day the

period for acceptance of the offer ends; and

(B) if the offer was made on or after the first day of the trial - at and from 11

am on the day after the offer was made.

21. When considering what is a time which is reasonable in the circumstances for the purposes of r 1002(5), it is necessary to note that the terms of r 1010(2)(b)(ii)(B) indicate that the rules clearly contemplate that offers of compromise may be made "on or after the first day of the trial".

22. Part 2.10 of the Court Procedures Rules (rr 1000-1014) were inserted in into the Rules by the Court Procedures Amendment Rules 2014 (No 3) (SL2014-34) which commenced on 1 January 2015. The rules are largely identical to the rules in New South Wales, namely rr 20.25-20.32 and rr 42.13-42.17 of the Uniform Civil Procedure Rules 2005 (NSW). There is, however, a significant difference between the costs consequences of offers of compromise in relation to personal injury proceedings. Under the Rules, if a plaintiff in personal injury proceedings does better than an offer of compromise made in the proceedings then the default rule is that the plaintiff obtains a costs order on a solicitor and client basis for the whole of the proceedings: r 1010(2)(a). This is similar to the situation in a number of other jurisdictions: Victoria (Supreme Court (General Civil Procedure) Rules 2015 O 26.08); Queensland (Uniform Civil Procedure Rules 1999 r 360(1); Northern Territory (Supreme Court Rules r 26.08(2)), although the rules in relation to the period during which such offers must remain open is different from that in the Australian Capital Territory. On the other hand, if the defendant makes an offer in personal injury proceedings which is not bettered by a plaintiff then although the plaintiff gets costs up to the day of the offer, there is no order as to costs in favour of the plaintiff after that date: r 1011(2)(a).

23. This contrasts with the position under the New South Wales rules where, if a plaintiff does better than an offer made by the plaintiff, the advantage gained is indemnity costs, usually from the day after the date of the offer: Uniform Civil Procedure Rules r 42.14(2)(b). Where a plaintiff fails to do better than an offer made by the defendant, then not only does the plaintiff not recover costs, but the plaintiff must pay the defendant's costs on an indemnity basis, usually from the day after the date of the offer: r 42.15.

24. The Rules reflect the fact that in most personal injury litigation there is an insurer involved and hence the potential for a significant disparity between the incentives on a party to settle proceedings, or, more accurately, disincentives to not settling proceedings. These differences are reflected in the disparity between the costs consequences flowing from a failure to accept an offer of compromise in relation to personal injury proceedings. Having regard to the fact that otherwise the Rules are based upon the New South Wales rules and that, other than in relation to personal injury proceedings, they have the same costs consequences as the New South Wales rules, the adoption of the somewhat different scheme reflects a clear choice within the rules to adopt a different regime.

25. Rule 1002(5) requires that an offer made less than two months before the date set down for the start of the trial must be open for a period "that is reasonable in the circumstances". In Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 at [20], Basten JA (with whom Giles and Tobias JJA agreed) identified matters that needed to be considered in order to determine whether the time during which an offer of compromise was open was reasonable in the circumstances:

In considering whether the time allowed for acceptance is "reasonable in all the circumstances" once a trial commences, or indeed final preparation commences, three factors come into play. The first is that both parties may reasonably be expected to have a clear perception of the strengths and weaknesses of their positions, so that the reasonableness of a particular offer may be speedily assessed. Secondly, because significant costs will be accruing on a daily, even an hourly basis, there is a heightened incentive to respond within the time permitted. Thirdly, and counterbalancing the first factor, the need to address the terms of an offer, provide advice and obtain instructions will often be a significant distraction from final preparation.

26. His Honour's judgment also identifies (at [22]) that the question of reasonableness:

must be judged objectively, in the circumstances known, all which should reasonably have been anticipated, by both parties. In setting the time during which the offer is to remain open, the offer or must necessarily rely upon the circumstances as known to it, or which should reasonably be anticipated by it.

27. Rules 1010(2), 1011(2) and 1012(2) each provide for costs consequences "unless the court orders otherwise". This language is identical to that in the equivalent New South Wales Rules, rr 42.14, 42.15 and 42.15A. In relation to these latter rules, the New South Wales Court of Appeal pointed out in Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [15] that:

these rules do not specify that exceptional circumstances or the avoidance of substantial injustice must be established before the court will make a different order to the prima facie order for which the rules provide and, in our opinion, the rule should not be so construed. Rather, the discretion is one that has to be exercised having regard to all the circumstances of the case

28. Later decisions have somewhat finessed the point. In Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [45]- [47] McColl JA (with whom Gleeson JA and Sackville AJA agreed) said:

1. Accordingly, the question is whether, as the appellant submits, the Court should "order otherwise": UCPR 42.15A(2). The onus is on the appellant to demonstrate why the Court should depart from the consequence of his rejection of the Offer: Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109 (at [35]) per McColl JA (Mason P and McClellan CJ at CL agreeing); Miwa (at [16]).
2. There is a conflict in decisions of this court as to whether exceptional circumstances are required before the court may exercise the discretion to "order otherwise" in relation to an unaccepted offer of compromise or whether that discretion has to be exercised having regard to all the circumstances of the case: Commissioner of Taxation v Moodie [2014] NSWCA 59; (2014) 282 FLR 453 (at [64]) per McColl JA.
3. An "exceptional circumstances" test could be seen as a gloss on the language of the relevant rules their text does not admit. That suggestion was discounted by Hely J in relation to the like power to "otherwise order[s]" in O 23, r 11(4) of the Federal Court Rules 1979 (Cth) (as then in force): Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) [2004] FCA 1437; (2004) 212 ALR 281 (at [17]). Rather, his Honour was of the view that such language merely "convey[s] that the prima facie position should only be departed from for proper reasons which, in general, only arise in an exceptional case". In my view his Honour's observation sufficiently encapsulates the approach to be adopted in the present case.

29. The use of an expression such as "exceptional circumstances" is thus not to be treated as an impermissible gloss on the language but rather a practical explanation of the predicament facing the offeree in the light of the obvious purpose of the Rules to encourage settlement of the proceedings and their structure in so far as they provide a default position which cannot be ignored when exercising that discretion. This was made clear by Doyle CJ in Shaw v Jarldorn [1999] SASC 529; 76 SASR 28 at [4]:

The power to "order otherwise" confers upon the Court an unfettered discretion. But it is a discretion which, if exercised, is exercised to displace what will otherwise be the required effect of [the relevant rule], which is that the defendant pay the whole of the plaintiff's costs of action as between solicitor and client. In other words, it will be proper for the court to order otherwise only if, in the exercise of that wide discretion, there is good reason to order that the rule is not to have its usual effect. In considering whether there is good reason to so order, it is necessary to bear in mind the manner in which the rule operates, and the context in which it operates.

30. These remarks are equally applicable to the operation of r 1010.

31. Finally, the fact that the Rules impose burdensome costs consequences upon defendants in personal injury proceedings who fail to accept an offer of compromise made by a plaintiff who subsequently obtains a more favourable judgment is a consequence that is part of the scheme of the Rules. The fact that the costs consequences are significant and affect the costs liability of the second defendant in relation to the whole of the proceedings is embedded as the default position under the Rules and hence does not provide a basis for the Court to order otherwise. This feature of an equivalent rule in South Australia was remarked upon by Doyle CJ in Shaw v Jarldorn at [5]:

The rule expressly contemplates that a defendant who does not accept an offer that the plaintiff ultimately betters, will pay the whole of the plaintiff's costs of action as between solicitor and client. It is part of the ordinary operation of the rule that it affects the amount to be paid by way of costs in respect of steps in the action that precede the making of the offer. That is an aspect of the incentive, deliberately created, to respond to an offer, rather than to continue to litigate in the hope of achieving a better outcome. In this respect the operation of the rule can be said to be penal, in the manner that the predecessor rule was described in Whitehead v Maas [1991] SASC 3011; (1991) 56 SASR 362 at 367. But this operation of the rule cannot, of itself, be a reason to order otherwise. It is part of the very scheme of the rule.

32. The Rules appear to reflect a concern that, in order to ensure that proper consideration is given to the compromise of cases by institutional litigants who are defendants in personal injury proceedings, greater consequences must follow for such defendants than for individual plaintiffs. The scheme does not have the neat logic of the New South Wales model or the scheme applying in the Territory in relation to matters other than personal injury matters, but it reflects the economic reality of litigation for parties in this limited category of cases. It reflects pragmatic realism rather than theoretical purity.

33. The reasonableness of the period during which the offer was open needs to be assessed in the light of what is known about the state of preparation of the case. In this case, several points emerge.

34. The second defendant was in a position to make an offer of compromise of $160,000 on 15 May 2017. This was based upon the expert report of Mr Watt which assessed past loss at $32,000 and future loss at nil.

35. No factor other than the developments in relation to past and future economic loss was identified as providing a basis for an inability to fairly assess an offer of settlement.

36. Once the supplementary report of Mr Thompson was received on 6 July 2017, the difference between the expert's reports was $55,464, being the difference between

Mr Watts calculation of $32,000 and Mr Thompson's calculation of $87,464.

37. The first offer of compromise from the plaintiff was received shortly before 10:00am on 11 July 2017, the Tuesday before the Monday of the hearing. It was open until 5:00pm on 13 July, just under two working days. On Wednesday 12 July 2017 it is clear from the affidavit of the second defendant's solicitor that Mr Watt had considered and formed an opinion about the Thompson report. The affidavit does not disclose whether Mr Watt was asked or whether he disclosed his ultimate conclusion about the extent of economic loss in that conversation or at any time prior to the receipt of his supplementary report the next day.

38. However prior to the receipt of that report (and contrary to what was stated in the affidavit of the second defendant's solicitor) the second defendant had rejected the offer made by the plaintiff. There is nothing in the email rejecting the offer or in the affidavit of the second defendant's solicitor indicating that the second defendant had any difficulty in making a decision about the offer because of the state of the expert evidence as to past and future economic loss. That indicates either that the second defendant did have information about the final position of Mr Watt or that it did not see the lack of that information as an impediment to making a decision about the offer that had been made.

39. In the circumstances, I consider that the offer was open for a reasonable time. The case was at a stage where both parties were reasonably expected to have a clear perception of the strengths and weaknesses of their positions so as to enable an assessment of the offer notwithstanding the fact that the defendants' evidence was not in its final form. Having regard to the lack of complexity in the case and the institutional nature of the second defendant, the time in which the offer was open was sufficient to permit advice to be given and instructions to be obtained without a significant distraction from final preparation for the hearing (cf Taylor v Port Macquarie-Hastings Council [2010] NSWLEC 153; 175 LGERA 189 at [50]).

40. The next offer was made on the Friday morning prior to the commencement of the hearing the following Monday. When the offer was received the second defendant had in its possession the final report of Mr Watt. It had also recently demonstrated its capacity to consider and respond to the first offer.

41. There is no clear evidence about when the offer was communicated by the second defendant's solicitor to the second defendant. However in the ordinary course it is likely to have been shortly after it was received. Although the affidavit of the second defendant's solicitor records instructions received on the Monday morning of the trial that "they did not consider they had sufficient time to consider the offer given the recent developments in the matter", why this might have been the case is not clear. The hearsay statement of the opinion of some unidentified representative of the second defendant does not prove the fact.

42. I find that the period for which the offer was open was reasonable. Reasonableness is to be assessed not on the basis of abstract assessment of the period for which the offer was open but in the circumstances of this particular case. There will be many cases in which making an offer on the Friday prior to a trial commencing on a Monday will obviously not be reasonable. However in this case the offer was made in a case (being a rear-end collision in which liability was admitted) in which the issues were reasonably narrow and the only significant matter in relation to which the evidence had altered was past and future economic loss which was the subject of the accountants' reports. The second defendant was an institutional litigant experienced in motor vehicle litigation in the Territory. It had available to it, if it needed it, the advice from the solicitor and counsel who were about to represent it in the trial commencing on the Monday. There is no evidence as to whether this was obtained or, if it was, its content. The difference between the expert evidence was by the time of the plaintiff's second offer very modest, $22,464 ($87,464 - $65,000). It is not clear why someone from the second defendant considered that there was inadequate time to consider the offer in circumstances where the second defendant had previously been in a position to make an offer and respond to the plaintiff's first offer, the trial was about to commence and the officers of the second defendant felt in a position to make the counter offer that was in fact made. Had appropriate attention been paid to the issue, the evidence does not disclose a proper basis for saying that the time available to consider the offer was not reasonable.

43. While the magnitude of the costs consequences are considerable and are matters to which regard must be had, as Doyle CJ pointed out in Shaw v Jarldom, it would not be appropriate to detract from the deliberate structure of the Rules by a discretionary approach that places a great degree of weight upon that issue when the Rules have deliberately provided the differing costs consequences that they have. Further, the structure of the Rules which provide for default consequences of a failure to accept an offer and their purpose in compelling realistic and serious consideration of the compromise of proceedings are important matters to be considered when determining whether to otherwise order.

44. In this case, neither the proximity to hearing, the changes in the expert evidence at about the time the offers were made or the significant consequences that follow from the default operation of the Rules are matters which, individually or cumulatively, persuade me that I should "order otherwise" under r 1010(2) of the Court Procedure Rules.

1. Orders 3 and 4 made on 21 July 2017 are deleted and the following order made: "The second defendant is to pay the plaintiff's costs of the proceedings on a solicitor and client basis."

I certify that the preceding forty-five [45] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop.