David and Kathryn West were defendants in proceedings brought by Dael Hage‑Fairbrother for damages after a dog owned by them attacked Mr Hage‑Fairbrother.
Judgment for a sum was awarded to Mr Hage‑Fairbrother but Mr and Mrs West seek a special order for costs because they offered to compromise the proceedings in an amount more than the judgment sum. They also seek a stay of the judgment so as to avoid having to pay out the judgment and be left to attempt to recover some of those funds back in costs.
Mr Hage‑Fairbrother, through his counsel, asks the Court to exercise its discretion not to make the orders sought because during an earlier separate hearing on liability Mr and Mrs West admitted liability and thereby caused the costs of that hearing to be needlessly wasted. That hearing was well before the offer of compromise. Mr Hage‑Fairbrother also opposes the stay.
Rule 42.15 of the Uniform Civil Procedure Rules 2005 ("UCPR") deals with the circumstance where an offer is made by the defendants, not accepted by the plaintiff and the plaintiff obtains an order no more favourable to the plaintiff than the terms of the offer. In that event, unless the court otherwise orders the plaintiff is entitled to an order for costs up to and including the date the offer was made and the defendant is entitled to an order for costs on an indemnity basis from the day after the offer was made.
There is no dispute that the offer is a complying offer of compromise under the UCPR. There is a minor technical difference between the formal offer of compromise and the covering letter: the covering letter makes a reference to costs. But no issue is taken about this possible difference. I am not persuaded that the possible difference makes any difference of substance to the offer or creates any uncertainty as to its meaning.
The discretion under r 42.15 of the UCPR is indicated by the words "Unless the court orders otherwise". However, the successful offeror has a right to a special costs order: Hillier v Sheather (1995) 36 NSWLR 414. The question that arises in the exercise of the discretion is whether the offeree has any basis for denying the apparent entitlement: Marsland v Andjelic (No 2) (1993) 32 NSWLR 649, AWA Ltd v Daniels t/as Deloitte Hoskins & Sells (unreported, NSWSC, Rogers CJ Comm D, 8 October 1992) or whether there are sufficient circumstances to justify a departure from the rule: Morgan v Johnson (1998) 44 NSWLR 578, 581‑2, Hillier at 422‑3. Although exceptional circumstances are not required (Barakat and others v Bazdarova [2012] NSWCA 140), there must nevertheless be a proper basis to order otherwise.
The circumstance that there are costs attributable to the offeror's unreasonable conduct, for example by contesting a particular issue, may be a reason for refusal of a special costs order (EDPI Pty Ltd v Rapdocs Pty Ltd [2007] NSWSC 195 at [76] ‑ [85]). However, the conduct of Mr and Mrs West in making an admission of liability in the earlier separate hearing cannot be so regarded for a number of reasons.
First, there is no evidence concerning that hearing, only of the admission recorded on the court file. I do not regard that as sufficient to establish unreasonable conduct by Mr and Mrs West.
Secondly, whatever costs may have been incurred or wasted at that hearing would be payable by Mr and Mrs West as a result of the offer of compromise and r 42.15. No argument was advanced before me by Mr Hage‑Fairbrother that a special costs order in respect of those earlier wasted costs of the separate hearing on liability should be made.
Thirdly, to hold that the earlier admission of liability would deprive Mr and Mrs West of the usual consequences of an applicable offer of compromise would be to deny effect to the offer of compromise procedure. The defendants, no matter how reasonable the offer, could not then protect themselves against future costs if past conduct would operate to deny them the benefit of the usual rule.
Accordingly, I am of the view that the defendants should receive the benefit of the usual rule. I am fortified in this decision by the absence of any evidence from Mr Hage‑Fairbrother or his solicitors as to the consideration, if any, that was given to the offer and why it was not accepted. There is not even any evidence of its rejection (other than the absence of evidence of its acceptance). Whether proper consideration was given to the offer and whether any lack of consideration might give rise to issues between Mr Hage‑Fairbrother and his solicitors under clause 5(4) of Schedule 1 of the Legal Profession Uniform Law Application Act 2014 are matters which remain unrevealed.
Accordingly, there should be orders in terms similar to the proposed orders 2 and 3 sought by the defendants, namely that the defendants pay the plaintiff's costs up to and including 12 September 2016, the date of the offer, and the plaintiff pay the defendant's costs on an indemnity basis from 13 September 2016, at least until the application today.
The second issue concerns the stay. The foundation of this argument is, the defendants submit, that a net amount of costs will be payable by the plaintiff. There is evidence of an estimate of the defendants' costs from 13 September 2016 to date of $27,000, although that evidence is without detail and in submissions the defendants conceded that it would be appropriate to discount this figure to some limited degree. The figure also appears to include the costs of the application the subject of this judgment.
However, there is no evidence that indicates the amount of Mr Hage‑Fairbrother's costs prior to 13 September 2016, whether on an ordinary basis or otherwise. In the course of submissions, the plaintiff's counsel submitted that he would not argue against an order that there be no order as to the costs of the proceedings, a submission which might be a concession that the assessable costs up to 12 September 2016 of the plaintiff were not more or not substantially more than $27,000.
On the other hand, Mr and Mrs West submitted that the plaintiff's costs up to 12 September 2016 would be a maximum of (and would be accepted by them to be) $16,500. This submission involved some conjecture as to the disbursements of the plaintiff. In the result, the defendants submitted that they would accept a gross sum costs order of $10,500 ($27,000 - $16,500) payable by the plaintiff.
Apart from the conjecture about the plaintiff's disbursements, the defendants' argument is founded on the proposition that the plaintiff's costs could not be more than $10,000 because the judgment sum was less than $50,000. This argument relies on the application of clause 2 of Schedule 1 of the Legal Profession Uniform Law Application Act 2014 which, if applicable, fixes in the circumstances of the judgment sum of this case, the "maximum costs for legal services provided to a party in connection with the claim" at $10,000 (see clause 2(1) of Schedule 1).
Clause 2(4) of Schedule 1 provides:
"(4) When the maximum costs for legal services provided to a party are fixed by this Schedule the following provisions apply (subject to clauses 4-6):
(a) a law practice is not entitled to be paid or recover for those legal services an amount that exceeds those maximum costs,
(b) a court or tribunal cannot order the payment by another party to the claim of costs in respect of those legal services in an amount that exceeds that maximum,
(c) in assessing the amount of those costs that is a fair and reasonable amount, a costs assessor cannot determine an amount that exceeds the maximum set by this clause."
Clause 4, to which subclause 2(4) is expressly made subject, provides that:
"4 Maximum costs do not affect solicitor-client costs under costs agreements
(1) This Schedule does not apply to the recovery of costs payable as between a law practice and the practice's client to the extent that recovery of those costs is provided for by a [complying] costs agreement …"
Although there was no evidence about a cost agreement, counsel for Mr and Mrs West advanced the argument on the basis that such an agreement should be presumed to exist. In the result, by clause 4, at least to some extent, "This Schedule does not apply". It must follow that, at least to some extent, "maximum costs for legal services provided to a party" are not fixed by the Schedule, contrary to the chapeau to clause 2(4) (and that clause 2(4)(a) has no application). In that event, it is less than clear that subclause 2(4) paragraphs (b) and (c), the foundation of the defendants' argument, apply. My attention was not drawn to any Explanatory Memorandum, other extrinsic material or other authority that might clarify that the statutory maximum to the recovery of party/party costs in clause 2(4)(b) would still apply notwithstanding that the statutory maximum, "for legal services provided to a party" (clause 2(1)) does not apply because of the application of clause 4.
Further, in any event, it is less than clear that clause 2(4) paragraphs (b) and (c) would apply in the present situation where the effect of the court orders is not to require the payment of any amount of costs to the plaintiff. As indicated earlier, it is effectively common ground that the plaintiff's entitlement to costs does not exceed the entitlement of the defendants. In that event, it may unfairly elevate form over substance to hold that the plaintiff's costs payable by the defendants are so limited even where no costs will be paid to the plaintiff.
Thirdly, r 42.15 provides for the plaintiff's costs up to and including the date of the offer to be payable by the defendants, without limitation. I am not satisfied that the defendants should have the benefit of r 42.15(b) without giving full credit for the plaintiff's costs as provided in r 42.15(a).
For these reasons, I also do not intend to refer to "regulated" costs in the order. Nor does r 42.35 (concerning small judgments in the District Court) have application when r 42.15 applies.
Because of the uncertainty in the amount of the plaintiff's costs and because of the uncertain application clause 2 will have on the present case, I am not satisfied that the effect of the order will necessarily result in a net amount of costs being payable to the defendants, still less the extent of that net amount. Therefore, the foundation of the defendants' argument for a stay is not present.
Further, there was no evidence before me of any risk to the defendants of the plaintiff being unable to meet a modest cost obligation of $10,500 after the judgment sum has been paid.
Even if there were evidence of a risk in the plaintiff being unable to meet the net costs payable to the defendants that could only justify a stay in respect of payment of part of the judgment sum (to a maximum of $10,500) not to the whole amount of the judgment.
I am not persuaded that any stay should be granted.
Although the primary matter before me on the application concerned the making of a special costs order rather than the stay, the plaintiff has had some success on the application in resisting the stay. That circumstance persuades me that the indemnity costs order should not extend to the application before me.
The orders of the Court therefore are:
1. The defendants to pay the plaintiff's costs up to and including 12 September 2016.
2. The plaintiff to pay the defendants' costs from and including 13 September 2016 up to and including the date of judgment of 29 November 2016 on the indemnity basis, and on the ordinary basis thereafter.
3. Application for stay refused.
[2]
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Decision last updated: 22 December 2016