Jurisich v Ralston

THE SECOND OFFER

The second offer of compromise offered to settle for an amount of $550,000, an amount approximately $160,000 less than the amount awarded taking into account the different amount of interest applicable at the time of the offer. Thus this represents a compromise of about 22%.
This offer was accompanied by a detailed letter explaining the amount of the compromise.
The defendants say in respect of the second offer that there were arguable defences on duty, breach and causation. The existence of arguable defences is insufficient to warrant a departure from the ordinary rule concerning the plaintiff's entitlement to indemnity costs. Were the second offer the only relevant matter I would award indemnity costs to the plaintiff from the day following the second offer in accordance with r 42.14 of the UCPR.

THE FIRST OFFER

The primary argument on this application concerns whether the plaintiff should be entitled to a special costs order by reason of the first offer. The first offer was for $630,000, approximately $13,000 less than the amount awarded on the plaintiff's claim existing at the time of the offer, again adjusted for the different interest period.
The defendants submit that three matters should be taken into account.
The first was that the offer was made at an early stage of the proceedings, less than two months after commencement and well before the filing of the defence and the service of evidence. The offer was not accompanied by any covering letter explaining the basis of the offer
The second matter is that the degree of compromise was small, indeed perhaps slight. The compromise of $13,000 of an amount awarded of $643,000 equated to approximately 2.1%. It represented about one-third of the interest awarded to the plaintiff
The third matter was the existence of arguable defences. I have already indicated above that this is not a sufficient basis to displace the ordinary rule.
There was also an amendment to the claim after the date of the offer.
I take all these matters into account.
The circumstance that the offer was made at an early stage of the proceedings is not a weighty matter against a special order. A purpose of the rules governing offers of compromise is to encourage settlement, including early settlement. An early offer should not be discouraged by any ruling that the earliness of the offer is a factor operating to displace the ordinary rule: see Elite Protective Personnel Pty Ltd and Anor v Salmon [2007] NSWCA 322 at [146]. An early offer might, in an appropriate case, justify a submission that the other party did not properly understand the case against them, but that submission was not made in this case, nor was there evidence to support it. The defendants did not respond at all to the offer, either to request further time to make a counter-offer or for any other purpose. Their failure to respond to the offer is not insignificant: see Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109 at [36].
There was no letter of explanation of the basis of the offer at the time of the offer, although the detail of the claim could be ascertained from the statement of claim and correspondence about a year before the commencement of proceedings.
In my view, neither the date of the offer (not long after the commencement of proceedings) nor the absence of a covering letter to the offer should preclude the plaintiff from her ordinary entitlement to indemnity costs.
The small amount of compromise, that it was only a compromise of effectively a part of the interest, was not relied on by the defendants to say that the offer was not a genuine compromise, but rather that the degree of compromise was so slight as to be a factor enlivening the Court's discretion to decline an indemnity costs order.
The efficacy of a small amount of compromise might find support in Connor v Hatgis (No 2) [1995] NSWCA 92 and Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721, where small compromises were sufficient to result in indemnity costs orders. Both of those cases involved unliquidated personal injury damages, whereas in this case the quantum of damages if the plaintiff succeeded was more certain.
This was an all or nothing case for the plaintiff where she was likely to succeed and receive a substantial amount of $608,000 plus interest, or fail entirely. If that operates at all as a factor in assessing whether the offer of compromise is genuine, it seems to me to operate in favour of the plaintiff as it indicates that any deduction from the sum certain is a real compromise rather than reflecting the uncertainty of the level of damages.
On the other hand, in Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 the Court of Appeal regarded rejection of an offer of about 2% less than the amount awarded as not unreasonable. The offer was not an offer of compromise in accordance with r 20.26. The question of whether the rejection was not unreasonable is a different question to whether the offer represented a genuine compromise, although questions of reasonableness may impact upon the residual discretion under Pt 42 of the UCPR. The reasonableness of the rejection has significant consequences in respect of a Calderbank letter, but the statutory offer of compromise procedure prescribes a test of whether the offer is at least as favourable as a judgment as the principal guide to whether rejection of an offer is unreasonable.
As to the compromise amounting to a component of interest, I accept that court rates may on occasion be higher than commercial rates, although that is offset by the circumstance that the interest is calculated on a simple interest basis rather than on a compounding basis. The significance of compound interest is lessened here where the interest has accrued over only a short period of approximately ten months. The circumstance that the extent of compromise involves only a portion of the interest that would be awarded makes more uncertain the question of whether the offer involves a genuine compromise.
I also note that the offer would, if accepted, relieve the plaintiff from all the unrecoverable costs of continuing the proceedings, another matter to consider in deciding if the offer involves a genuine compromise, see Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170 at [20]-[21].
Finally, there was an amendment to the statement of claim two weeks after the offer. That impacted on the period that the defendants had to consider the offer and, I suppose, the nature of the claim the defendants should consider. Thus, the amendment might have justified a request for a longer period in which to consider the offer: see the matters indicated in Elite Protective Personnel Pty Ltd at [147]. But the defendants made no response (see [13] above).
The amendment also impacted upon the extent of the compromise since the plaintiff in that amendment claimed an additional $37,000 approximately in accounting fees. The plaintiff was awarded the amount of $20,000 in respect of that aspect of the claim. Taking this into account the extent of compromise was greater.
I do not regard the circumstance of the later offer offering a lower amount as relevant to this question of whether the first offer involved a genuine compromise.
The application is finely balanced, but notwithstanding some doubt in my mind, I accept that the offer did involve a genuine compromise. The defendants, as I indicated, did not submit otherwise. Although the Court retains a residual discretion, there is no other point raised which justifies relieving the defendants of the ordinary consequences prescribed by r 42.14. I do not think that an offer involving a small but genuine compromise is a sufficient reason to warrant the exercise of my discretion against applying the usual rule.
The plaintiff should have an indemnity costs order as a result of the first offer. However, the indemnity should not extend to costs incurred in the period immediately following the offer because the plaintiff filed an amended claim during that period. Neither party disputed the Court's discretion to set a different date from that contemplated by Pt 42 if there were proper grounds to do so. In the circumstances, I propose to make the indemnity component of the costs order date from 1 July, a date about a month following the date of the filing of the amended statement of claim, which is about two weeks after the expiration of the offer.
The order of the Court will be that the defendants pay the plaintiff's costs of the proceedings, those costs to be assessed on an indemnity basis on and from 1 July 2014.

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Judgment (4 paragraphs)

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Cases Cited (7)