Judgments favouring defendants
14The provisions of UCPR Part 42 Division 3 are concerned with the consequences of Offers of Compromise. Rule 42.15A provides for a situation where an offer is not accepted and judgment as or more favourable to the defendant arises. Rule 42.15A provides:-
"(1)This rule applies if the offer concerned is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim concerned as favourable to the defendant or more favourable to the defendant, than the terms of the offer.
(2)Unless the Court orders otherwise:-
(a)the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and
(b)the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, 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
..."
15The claim by the defendants for an indemnity costs order in the present proceedings is one to be made having regard to the nature of the proceedings, the terms of the Offer of Compromise and the provisions of Part 42.15A. In other words, by virtue of the Offer of Compromise and the success of the defendants, prima facie, the defendants are entitled to indemnity costs from the date of the Offer of Compromise. The discretion, however, exists in the Court to make some other order, but in order for that discretion to be exercised, there would need to be exceptional circumstances established.
16In Macquarie Radio Network Pty Limited v Arthur Dent (No 2) [2007] NSWCA 339, the Court, in considering the provisions of Rule 42.14 of the UCPR stated that a Court would only deviate from the general rule provided by such a provision if it finds that there are exceptional circumstances for doing so. As I have stated, there would need, in my opinion, for there to be circumstances of that kind which would justify a departure from the general rule as to indemnity costs.
17The plaintiffs' claim against the defendant solicitors in the present proceedings was based upon the contention that the defendant solicitors had made a representation or warranty that they were authorised to bind Mrs Pallister as a contracting party. The issue of breach would, of course, not arise if no such representation or warranty was given (as was determined to have been the case).
18In Melchior & Ors v Sydney Adventist Hospital Limited & Anor (No 2) [2009] NSWSC 65, an Offer of Compromise was made by the second defendant in those proceedings (described as a "walk away" offer) which was not accepted by the plaintiff. The question in that case was whether exceptional circumstances had been established by the offerees.
19Hoeben J noted that the second defendant had served an Offer of Compromise in similar terms to that made in the present case, namely:-
"The second defendant offers to compromise the plaintiffs' claim in the following manner:-
1.Verdict for the second defendant; and
2.each party to bear their own costs of the proceedings.
..."
20The offer was not accepted by any of the plaintiffs. The second defendant relied upon the provisions of Part 42, UCPR, including in particular, 42.15A.
21The proceedings in Melchior (supra) had been on foot for some time. The second defendant submitted that by the date of the Offer of Compromise, the inherent weaknesses of the plaintiffs' case had been clearly exposed by the expert opinions that had been served on behalf of the second defendant.
22His Honour set out the relevant statements of principle in relation to equivalent rules of the UCPR, including the following statement:-
"15.A Court will only deviate from the general rule provided for by rule 42.14 of the UCPR and make a different order if it finds that there are exceptional circumstances for doing so ..."
23Hoeben J noted that:-
"17.It is always difficult to evaluate the genuineness of a 'walk away' offer. As the second defendant submitted, there was a real benefit for the plaintiffs contained in the offer, ie, they would if the offer were accepted have no liability for the second defendant's costs ..."
24His Honour noted at that time that the costs, as at the relevant date, had already been substantial. The conclusion was reached that, in the circumstances of the case, the second defendant's Offer of Compromise was genuine.
25Although there may have been said to have been a triable issue arising in respect of the issue of warranty or representation based on the letter written by Staunton & Thompson to Lander & Lander dated 19 January 2005, there were, as noted in the judgment delivered on 1 September 2010, significant inconsistencies in the terms of the letter which would have indicated that the contention that a warranty or representation had been made was, at the least, a doubtful one. There was no other evidence relied upon to support the alleged warranty or representation of authority. The judgment refers to the particular matters that pointed against the contentions made by the plaintiffs.
26It may be accepted that the costs incurred by the time the offer was made on 7 April 2010 would not have been insubstantial. Had the offer been accepted, there would have been a real benefit to the plaintiffs having regard to the costs incurred. In other words, the Offer of Compromise made on behalf of the third, fourth and fifth defendants was not one made on the basis of a capitulation with no real benefit to the plaintiffs. There are no "exceptional circumstances" , as discussed above, that would operate against making the order sought. In my assessment, the defendants are entitled to an indemnity costs order from the date specified for acceptance of the Offer.
27Accordingly, I order that the plaintiffs are to pay the costs of third, fourth and fifth defendants on the ordinary basis pursuant to UCPR 42.2 up until 7 April 2010 and thereafter are to pay the costs of those defendants on an indemnity basis, pursuant to UCPR 42.15A.
28The costs of the present application would normally be dealt with on a costs follow the event basis. The parties are to confer in this respect and, if there is any outstanding issue as to the costs of the application, then leave to apply is reserved to either party.
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Decision last updated: 13 September 2011