Gulab Khan v Matthew Rathjen

The defendant's opposition to the plaintiff's costs application

1. The defendant accepted that the offer contained in each of the Offers of Compromise served by the plaintiff represented a genuine compromise of the plaintiff's claim. However, the defendant opposed the making of the orders sought on the following bases: 1. That all three Offers of Compromise were invalid, in that they did not comply with Pt 20 r 26 of the UCPR. 2. If the court did not uphold the first argument above, then the court would otherwise order pursuant to Pt 42 r 14(2) in respect of the first and second Offers of Compromise, because of the way in which the plaintiff particularised his case, including by serving medical and other evidence late in 2015 so as to materially change the nature of the claim.
2. In putting the second argument, the defendant accepted that it was not available in respect of the third and final offer of compromise dated 2 December 2015, but relied on the invalidity argument in respect of this offer as set out in (1) above.

The relevant rules

1. Part 20 r 26 of the UCPR provides relevantly as follows: "20.26 Making of offer (1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms. (2) An offer under this rule (a) must identify: (i) the claim or part of the claim to which it relates, and (ii) the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment, and (b) if the offer relates only to part of a claim in the proceedings, must include a statement: (i) in the case of an offer by the plaintiff, as to whether the balance of the proceedings is to be abandoned or pursued, or (ii) in the case of an offer by a defendant, as to whether the balance of the proceedings will be defended or conceded, and (c) must not include an amount for costs and must not be expressed to be inclusive of costs, and (d) must bear a statement to the effect that the offer is made in accordance with these rules, and (e) if the offeror has made or been ordered to make an interim payment to the offeree, must state whether or not the offer is in addition to that interim payment, and (f) must specify the period of time within which the offer is open for acceptance. (3) An offer under this rule may propose: (a) a judgment in favour of the defendant: (i) with no order as to costs, or (ii) despite subrule (2)(c), with a term of the offer that the defendant will pay to the plaintiff a specified sum in respect of the plaintiff's costs, or (b) that the costs as agreed or assessed up to the time the offer was made will be paid by the offeror, or (c) that the costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer."
2. Part 42 rule 14 of the UCPR provides as follows "Rule 42.14 Where offer not accepted and judgment no less favourable to the plaintiff (1) This rule applies if the offer is made by the plaintiff, 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 respect of the claim: (a) assessed on an ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under (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 11am on the day following the day on which the offer was made."
3. If the defendant's first argument is correct, and the Offers of Compromise made by the plaintiff are invalid, and there would be no basis for making the first three orders sought by the plaintiff. For that reason, it is convenient to deal with this aspect of the matter first. As the plaintiff's counsel was taken by surprise by this argument, he was given leave to file a further written submission in respect of it by 5 September 2016, and counsel for the defendant was given leave to file and serve any further submission in reply by 9 September 2016.
4. Each of the plaintiff's three Offers of Compromise were in the same form, except for the amount of money contained in [1] thereof. The first offer stated as follows: "The plaintiff offers to compromise his claim in the following manner: (1) Payment of $110,000.00 plus costs, as agreed or assessed. (2) This offer is made without prejudice except as to costs and remains open for twenty-eight (28) days from the date hereof. This offer is made in accordance with Rule 20.26 of the Uniform Civil Procedure Rules 2005."
5. The amount in respect of the second offer was the sum of $95,000.00, and in respect of the third offer of compromise, was the sum of $105,000.00.

The defendant's submissions

1. The defendant submitted that each offer was invalid in that it failed to identify the proposed order (or indeed any method) for the disposal of the claim as required by r 20.26(2)(a)(ii) of the UCPR.
2. It was submitted that a high degree of strict compliance with r 20.26 is required before the cost consequences provided under r 42 are engaged, relying on McGlashan v QBE Insurance (Australia) Limited (No 4) [2014] NSWSC 882 per Campbell J at [13].
3. The defendant submitted that the covering letter with which each Offer of Compromise was sent, did not purport to supplement the offer of compromise so as to amount to substantial compliance. Therefore, on its terms, the offer in each case did not propose a judgment so as to dispose of the proceedings. Compliance with r 20.26(2)(a)(ii) of the UCPR was described as an essential characteristic, as without it, r 20.29 could not be engaged to enforce any accepted offer.
4. The defendant submitted that it could not be suggested that it must have been apparent that a judgment was being sought by the plaintiff, relying on Neville v Lam (No 4) [2014] NSWSC 1088 per Beech-Jones J at [15].
5. The failure by the plaintiff to comply with r 20.26 meant that the plaintiff had no entitlement to engage Pt 42 of the UCPR to seek payment of costs on an indemnity basis.

The plaintiff's submissions

1. The plaintiff relied on a decision of Wilson J in Dibbs v Emirates (No 2) [2015] NSWSC 1786. In that case, her Honour entered a verdict for the defendant following a trial. Prior to the trial, the defendant had offered, by way of an offer of compromise, the sum of $75,000.00 plus costs as agreed or assessed, on the basis that the plaintiff's claim against the defendant would be discontinued. The plaintiff argued that the offer was invalid on two bases: 1. "The offer did not bear a statement that it was made in accordance with 'these rules' as required by Rule 20.26(2)(d); and 2. The offer did not set out the proposed orders for the disposal of the claim as required by Rule 20.26(2)(a)(ii)."
2. Her Honour noted that the submission relied upon a "particularly narrow, even pedantic, construction of what is required by the Rules" ([14]). Her Honour went on to hold that as the accompanying correspondence referred to the enclosed offer of compromise made pursuant to Pt 20 of the UCPR, that was sufficient compliance with r 20.26. Further, her Honour held that the manner in which the defendant proposed to finalise the litigation was also clear, even without including a statement of the precise wording that proposed orders for disposal of the claim as required by r 20.26(2)(a)(ii). Her Honour said at [18]: "[18] Had the plaintiff responded to the offer of compromise, some acceptable form of words could have been readily agreed by which the matter could have been put before the court for consent orders to be made. [19] By that approach, the plaintiff would have received a more than adequate settlement, the parties would have spared the expense and personal stress of litigation, and the court's resources would have been conserved. [20] Offers of the type made by the defendant in October 2014 must be considered in the context in which litigants conduct civil litigation, that being a context requiring observance of s 56(3) of the Civil Procedure Act 2005, to assist the courts to facilitate the just, quick and cheap resolution of the real issues in the proceedings."
3. Wilson J went on to hold that even if there was some issue of non‑compliance with the rules, the defendant's Offer of Compromise could have been properly viewed as a Calderbank offer and therefore as binding.
4. In his supplementary note, counsel for the plaintiff advised that he had been unable to identify a decision on which the precise form of words, as set out in [16] above, had been either upheld or rejected as an invalid offer of compromise. The plaintiff disputed that on its terms the offer of compromise did not identify the proposed orders for disposal of the claim (including, if a monetary judgment is proposed, the amount of that monetary judgment). It was submitted that the brevity of the proposed order did not mean that it was either imprecise or incapable of acceptance. The clear intention of the offer was for a proposed order by agreement that the defendant pay the plaintiff the sum of money nominated to resolve the entire claim. The plaintiff referred to the definition of a "judgment" in s 3 of the Civil Procedure Act 2005, viz, "includes any order for the payment of money, including any order for the payment of costs." Thus it was submitted that the proposed order in the offer of compromise to pay money to resolve the proceedings "was a simple and valid order for disposal of the claim that when entered by agreement would have led to entry of a judgment for the plaintiff." The plaintiff further submitted that there was no requirement that other proposed orders such as time for payment had to be described in the offers.
5. Alternatively, the plaintiff submitted that notwithstanding that the correspondence serving the offer of compromise did not refer to the decision in Calderbank v Calderbank [1975] 3 All ER 333, each offer could be relied upon as a Calderbank offer. In Helm v Pel-Air Aviation Pty Limited (No 3) [2015] NSWSC 857 Schmidt J held in respect of an offer that did not contain an order for disposal of the proceedings as required by r 20.26(2)(a)(ii), that notwithstanding that there was no assertion that the offer could be relied on as a Calderbank offer, that "the settlement offered was, however, not unclear, it offered a real compromise, accompanied by a reasonable period for acceptance. In its terms the offer was capable of acceptance and admissible under s 131 of the Evidence Act 1995 (NSW), on a costs application" (at [16]). Her Honour therefore held that justice demanded a departure from the usual costs order and rejection of the argument that the offer was unreasonable.
6. The plaintiff also relied on Norris v Routley [2016] NSWSC 147 in which the defendant had made a detailed offer of compromise. The plaintiff argued, inter alia, that as liability remained in issue at the time when the offer of compromise was served, the judgment proposed by the offer of compromise did not determine all issues between the parties, and therefore on its terms the offer was invalid as it did not dispose of the whole of the proceedings, as required by r 20.26(2)(a)(ii). Harrison J rejected that argument on the basis that if the plaintiff had accepted the offer of compromise it would have put an end to the proceedings completely. There was nothing ambiguous or uncertain about that result. Further, despite the defendant failing to indicate that the offer could be relied upon as a Calderbank offer in the event that the offer of compromise was found to be non-compliant, Harrison J found that the plaintiff's "rejection of the offer of compromise, operating as a Calderbank offer, was also unreasonable" (at [70]).
7. Thus, the plaintiff submitted that if each of the offers of compromise were found to be non-compliant with r 20.26, then each could be an admissible offer for the purpose of a costs hearing, without specific reference to the offer being a Calderbank offer. Accordingly, the plaintiff's application for indemnity costs should succeed on either basis.

Defendant's submissions in reply

1. In response to the plaintiff's written submissions, the defendant disputed the plaintiff's arguments that the offers of compromise were valid offers pursuant to Pt 20 r 26. The defendant denied that the offers were not "ambiguous" and further, that "it is apparent from the offers on their face that there was an intention that the offer was for a proposed order by agreement so as to comply with r 20.26(2)(a)(ii) of the UCPR."
2. The defendant submitted that the appellant's reliance on s 3 of the Civil Procedure Act 2005 as to the definition of judgment, was circular, and s 3 could only be relevant "if the offer was framed as an order for the payment of money."
3. The defendant submitted that the decision in Helm v Pel-Air Aviaition Ltd, supra, relied on by the plaintiff in relation to its claim for indemnity costs based upon the principles in Calderbank v Calderbank, was entirely supportive of the conclusion that the offers were invalid. It was therefore submitted that the Notice of Motion should be dismissed.
4. The defendant submitted that the further submissions relied on by the plaintiff seeking exercise of the Court's discretion pursuant to the principles in Calderbank, should be ignored because leave given to the plaintiff to file a written submission was restricted to the question of the validity of the offers. The plaintiff's Notice of Motion was not brought on the basis of a Calderbank offer, The defendant relied upon the High Court's decision in NT Power Generation Pty Limited v Power and Water Authority (2004) 219 CLR 90 where this practice was described as: "This is unsatisfactory. It is impermissible to file further submissions without leave, and this cannot be evaded by adding onto submissions filed with leave other material for which leave should have been obtained."
5. In the event that the Court, in the exercise of it's power pursuant to s 56 of the Civil Procedure Act 2005 did consider the plaintiff's submissions relying on Calderbank, the defendant submitted that in any event the plaintiff's application should be dismissed on the following bases: 1. There is no prima facie presumption in favour of indemnity costs if the offer is not bettered; 2. Whether an invalid offer of compromise can be deployed as a Calderbank offer depends upon the intent of the offeror as manifested in the offer made. The defendant cited numerous authorities against the submission implied by the plaintiff that an invalid offer of compromise is axiomatically "a Calderbank offer". 3. The omission by the plaintiff to rely on Calderbank confirmed that the offers of compromise were not intended to have some "secondary or alternative significance." The fact that no application for indemnity costs based on the principle in Calderbank was made until the plaintiff filed (without leave or notice) his further submissions, illustrates that the offers were never intended to operate outside Pt 20 r 26 of the UCPR. 4. An award for indemnity costs will not be made unless it was unreasonable for the offeree not to accept the offer and in this case the defendant, as submitted in its principle submissions, submitted that the plaintiff cannot discharge this onus given the way the case developed until December 2015.
6. On 9 September 2016, the plaintiff filed a further short written submission as to the argument raised by the defendant in [33] above. For the reasons outlined below, it is unnecessary to deal with that further submission.

Determination

1. Each of the three Offers of Compromise in the form outlined in [16] above, clearly engage the offer of compromise procedure set out in r 20.26 of the UCPR. Whilst each of the three offers did not include a statement of precise wording as to the proposed orders of disposal of the plaintiff's claim as required by r 20.26(2)(a)(ii) the judgment of Wilson J in Dibbs v Emirates (No 2), supra, set out in [24] above is apposite. Had the defendant responded to the offer of compromise by accepting it, some acceptable form of words could have been readily agreed by which the matter could have been disposed of by consent orders. The proceedings brought by the plaintiff were a claim for damages for personal injuries. Clearly an offer by the plaintiff to compromise his claim by way of payment of money, if accepted, would give rise to a consent order enforceable pursuant to r 20.29. The amount of the monetary judgment was clearly identified so as to comply with r 20.26(2)(a)(ii).
2. Further, as outlined by Wilson J, the parties would have been spared the expense and personal stress of the litigation and the Court's resources would have been conserved. This would have facilitated the just, quick and cheap resolution of the real issues in the proceedings so as to facilitate the overriding purpose of the Act outlined in s 56. Parties to civil proceedings should need no reminding that pursuant to s 56(3) they are under a duty to assist the Court to further that overriding purpose and, to that effect, to participate in the processes of the Court.
3. Analysis of appellate decisions and those of superior courts which dealt with Pt 20 r 26 in its various former iterations, such as Neville v Lam (No 4) as relied on by the defendant, may be distinguished. Provided there is substantial compliance with r 20.26 UCPR, as there is in this case, the Court is required to look at the substance of the dispute. Here, each of the three offers reflected a substantial compromise of the plaintiff's claim, and the plaintiff obtained a judgment more favourable so as to engage Pt 42 r 14 of the UCPR. The real question here is whether the Court should otherwise order pursuant to r 42.14(2), given the matters raised by the defendant.
4. Relevant to that question are the following: 1. The defendant's position was at all times during the litigation intransigent. It offered by way of offer of compromise a verdict for the defendant and at no time responded to the plaintiff's offers of compromise with an offer of payment of money. 2. At no time did the defendant rely on r 20.26(4) to assert that he was unable to assess the reasonableness of each of the three offers made by the plaintiff because of the lack of particulars or documents. 3. Nor did the defendant assert that the plaintiff's offers of compromise were invalid at the time they were served. 4. The defendant was represented by very experienced legal representatives. His solicitor had turned her mind to the quantum of the claim appropriately, and from November 2014 was aware of the ambit of the plaintiff's claim for economic loss. 5. The issue of the plaintiff's residential or migration status did loom large in the litigation. Whilst the defendant made out its contention on the evidence that there was some delay in the defendant being informed of the plaintiff's migration status at times, the defendant made tactical forensic decisions based on the difficulties the plaintiff was facing, rather than making an appropriate assessment of his claim for damages, whether he was to return to India to return to live or not; and 6. It is clear on the evidence that the plaintiff's claim was not fully particularised until November 2015, which was close to the commencement of the trial in February 2016.
5. Having regard to all of the above matters, I would exercise the Court's discretion to "order otherwise" pursuant to r 42.14(2) in respect of the plaintiff's offers of compromise served on 30 March 2015 and 4 September 2015. However, I would decline to do so in respect of the offer of compromise served on 2 December 2015. By that time, the defendant was fully appraised of the plaintiff's claim for damages.
6. The order I propose to make is that the defendant will pay the plaintiff's costs assessed on an ordinary basis up to and including 2 December 2015, and on an indemnity basis from 3 December 2015. Those orders would be subject to one exception referred to below.

The reserved costs of the defendant's Notice of Motion filed 4 December 2015

1. The fourth prayer for relief in the plaintiff's notice of motion concerned the reserved costs of the defendant's Notice of Motion filed on 4 December 2015, seeking inter alia to vacate the hearing date. The issues between the parties were resolved by Consent Orders being filed on 4 December 2015, those Consent Orders including an order that costs of the motion be reserved. The hearing date was not vacated, however the defendant submitted that the Notice of Motion was properly brought, having been directed by the Judicial Registrar. The prayers for relief included an order for amended particulars which were provided by the plaintiff by consent, and therefore the outcome was substantially in the defendant's favour. The matter had to be dealt with before the close of term in 2015 because of the matter being set down for trial early in the first term of 2016. On that basis the defendant sought an order that the plaintiff pay the defendant's costs of the motion, or alternatively that there be no order as to costs of the motion.
2. I accept that the Notice of Motion as filed by the defendant was properly brought, and was necessary to finalise the matters the subject of the Consent Order so that the hearing could proceed on the trial date allocated. To that extent, the defendant's hand had been forced in bringing the Notice of Motion, notwithstanding that ultimately the hearing date was not vacated. In those circumstances, I propose to order that there be no order as to the costs of the motion, which will form an exception to the order for indemnity costs to be made.

Conclusion and orders

1. For the above reasons I therefore make the following orders: 1. That the defendant is to pay the plaintiff's costs of the proceedings on an ordinary basis up to and including 2 December 2015; 2. That the defendant is to pay the plaintiff's costs on an indemnity basis from 3 December 2015; and 3. As an exception to orders 1 and 2 above, that there be no order as to costs of the defendant's Notice of Motion filed on 4 December 2015. 4. Each party is to bear his own costs of the defendant's Notice of Motion filed on 12 August 2016. 5. The defendant is to pay the plaintiff's costs on the plaintiff's Notice of Motion filed on 21 July 2016.

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: 15 September 2016