HIS HONOUR: Following publication of my judgment in the principal proceedings (Hobson v Northern Sydney Local Health District [2017] NSWSC 589) Mr Hobson sought an order for the payment of his costs on an indemnity basis. Several grounds were initially advanced in support of the claim. However, by the time oral argument had concluded, Mr Hobson's position had contracted to reliance upon an offer of compromise dated 2 November 2016, served on all defendants shortly before the hearing commenced. It was in the following relevant terms:
"1. The plaintiff offers to compromise the whole of the claim against the defendants on the following terms:-
(a) Judgment for the plaintiff against each defendant in the sum of $3.25 million.
(b) The defendants pay the plaintiff's costs as agreed or assessed.
2. This offer is open for acceptance until 9.00am on 7 November 2016.
3. This offer is made in accordance with Part 20 Division 4 of the Uniform Civil Procedure Rules."
The letter that accompanied the Offer of Compromise included the following paragraph:
"In the event there is some formal defect which would prevent the plaintiff relying on this offer as an offer of compromise under the court rules, please be advised that the plaintiff intends to rely on this correspondence as an offer also made in accordance with the principles of Calderbank v Calderbank [1975] All ER 333."
Mr Hobson submitted that he was entitled to a special order for costs having regard to the fact that his offer was not accepted and that he obtained judgment on his claim that was no less favourable than the terms of his offer. In such circumstances Mr Hobson contended that he was entitled to indemnity costs unless the Court otherwise ordered. Mr Hobson contended that the Court would not order otherwise.
The second and fourth defendants opposed the making of an indemnity costs order against them. That opposition distilled to the following propositions.
First, the defendants submitted that the offer did not comply with the rules. UCPR 20.26(1) provides, among other things, for the making of an offer by notice in writing by "any party…to any other party." The defendants contended that the offer offended this rule inasmuch as it was made to all defendants collectively rather than to each defendant individually. The defendants submitted that the offer as it was framed was incapable of acceptance except with the concurrence of all four defendants.
Hobson v Northern Sydney Local Health District [2017] NSWSC 704 | Case summary | Zoe
Secondly, and in a related sense, the defendants submitted that it would be unfair to expose them to the potential of an indemnity costs order in circumstances where they had been given no real opportunity to accept the offer. In other words, even assuming the offer were valid in form, its acceptance, in practical terms, required the agreement of all defendants, which no single defendant might be expected to have achieved in the time allowed for acceptance of the offer, even on the assumption that it could have been achieved at all.
Thirdly, and also in a related sense, the defendants contended that the offer could not be characterised as genuine. They submitted that Mr Hobson must have known that they would not have been able to accept, or to organise all of the defendants to accept, the offer in the time allowed by the offer. The defendants submitted that Mr Hobson could without difficulty have formulated separate offers directed to each defendant in a way that would have obviated the difficulty which the defendants say they have identified. They go further and submit that the awkward form of the offer must necessarily have resulted from a deliberate forensic decision taken by Mr Hobson at the time. Indeed, the defendants went as far as to characterise Mr Hobson's offer as "mischievous", having regard to the then existing different and competing interests and resources of the several defendants, which by implication meant that the offer was never capable of acceptance either in the time provided or at all.
[2]
Consideration
I agree that the form of Mr Hobson's offer of compromise was invalid. Despite the defendants' submissions indicating or suggesting otherwise, there is direct authority in support of the proposition for which they contend. In Vieira v O'Shea (No 2) [2012] NSWCA 121, the Court of Appeal said the following:
"9 The first respondent contended that he could not accept the offer because it proposed payment not only by him but also by the third to seventh defendants. There is some awkwardness in an offer to compromise on the basis that the defendants 'together' pay a specified sum to the plaintiff. The third to seventh defendants were not originally sued by the appellant, but were sued by the first respondent on a cross-claim. As a precaution against a finding that they, rather than the first respondent, were the parties responsible they were joined to the statement of claim on 12 June 2009. As the intent of the offer was to settle the whole of the claims against all defendants, the appellant had no obvious interest in which defendant, or how many of the defendants, made the payment.
10 The question is whether it was an offer 'capable of acceptance' by the first respondent: Grbavac v Hart [1997] VSC 37; [1997] 1 VR 154 at 164. The inquiry as to whether it was unreasonable for the unsuccessful offeree to have rejected a Calderbank offer assumes that the offer was capable of acceptance by the offeree: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37]; Jones v Bradley (No 2) [2003] NSWCA 258 at [8]-[9]; Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; 13 VR 435 at [20]; Commonwealth of Australia v Gretton [2008] NSWCA 117 at [43], [44], [117], [120].
11 The offer was sent under a covering letter addressed to the solicitors for the first respondent (as first defendant) and the solicitors for the third to seventh defendants. It was an offer to compromise 'this action in whole' on terms that those defendants "together" pay the sum of $215,600 and that those defendants pay the appellant's costs as assessed or agreed. In its terms the offer was made to those defendants jointly to resolve the whole of the proceedings. That offer was not capable of being accepted by the first respondent on behalf of the other defendants in the absence of authority to do so. As between the first and the other defendants, their interests were opposed.
12 Without the agreement and acceptance of the other defendants, all that the first respondent could do was to make a counter-offer, which may or may not have addressed the position of the third to seventh defendants. For example, he could have offered to indemnify the appellant for any liability to pay the costs of the third to seventh defendants in the event that he settled with the first respondent and discontinued against them. If the first respondent had paid the sum of $215,600 and the costs as assessed or agreed, his conduct would not have constituted an acceptance of the offer. Nor would it have resolved the 'action in whole'. There would have remained the question whether the appellant would proceed against the third to seventh defendants and, in the absence of his doing so, a further question as to the basis upon which the proceedings against them would be disposed of, particularly in relation to their costs.
13 As the offer was not capable of acceptance by the first respondent alone and as it is not suggested that the first respondent was able to bind the other defendants, it was not unreasonable for the first respondent not to accept the offer."
In the present case, there was no common interest among all of the defendants or between any two of them beyond successfully defending Mr Hobson's claim. Two of the defendants were released from the proceedings during the hearing, although on different terms. None of the defendants was ever able to bind the others in a settlement. There were no cross-claims filed by any defendant against any other defendant. There is no evidence to suggest, and Mr Hobson in any event did not submit, that any single defendant was able to bind the other defendants with respect to considering or accepting the offer of compromise or in any way at all. It follows in my view, in accordance with authority, that it was not unreasonable for the second and fourth defendants not to accept the offer.
There may be other reasons for this conclusion. The litigation was not without some complexity. The significant and competing expert opinions on the question of the defendants' respective liabilities all bear witness to this fact. The offer of compromise was also served only five days before the commencement of the trial and at a time when the parties' respective legal advisers might have been expected to be in the final stages of preparation for the case. The two defendants who were ultimately released from the proceedings were still parties at that stage. The offer was in terms open for acceptance by no later than the morning of the first day of the hearing, even though the letter accompanying the offer indicated that if more time were required, the solicitor for Mr Hobson would "seek instructions".
I consider that this is a case in which it was not unreasonable for the second and fourth defendants not to accept Mr Hobson's offer of compromise. It follows that Mr Hobson's application for indemnity costs should be rejected.
[3]
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Decision last updated: 05 June 2017