It should also be accepted that someone with authority to bind the client would have been available to give instructions based on legal advice as to the preferable response.
22 In seeking to demonstrate that the offer had not been left open for a reasonable time in all the circumstances, Primus sought to put before the Court evidence of how the offer was made and the circumstances of its own legal representatives at the time. However, that material was not relevant for this purpose. The question of reasonableness must be judged objectively, in the circumstances known, or which should reasonably have been anticipated, by both parties. In setting the time during which the offer is to remain open, the offeror must necessarily rely upon the circumstances as known to it, or which should reasonably be anticipated by it. The actual circumstances of the recipient, unknown to the offeror, may be relevant to an application that the Court otherwise order in relation to costs of a valid unaccepted offer, but so might evidence as to whether the recipient took any steps to bring such matters to the notice of the offeror.
23 In the present case, the time allowed was, on any view, a short period for the consideration of a global assessment of a reasonably complex dispute. It is Kooee which seeks to establish an entitlement to indemnity costs. To do that it must demonstrate that its offer was left open for a period which was reasonable in all the circumstances. Because the present case is truly borderline, it should be concluded that Kooee has failed to establish that its offer was left open for a reasonable time. Accordingly, the offer did not fall within UCPR r 20.26 and its non-acceptance did not engage the costs consequences in r 42.15.
24 If, contrary to the conclusion reached above, it were thought that the offer was open for a reasonable time, there would have been no obvious basis for the Court to make an order other than that which would flow from the operation of r 42.15. It was not suggested in the present case that any of the considerations which sometimes apply, such as inadequacy of information, or a change in the basis of a case, was relevant in the present circumstances. It would have followed that Primus would have been entitled to its costs of the trial on the usual basis up until 11.00am on 31 January 2007 and thereafter would have been required to pay Kooee's costs on an indemnity basis.
Payment of proportionate costs
25 As appears from the judgments of the primary judge and the judgment of this Court disposing of the substantive issues in the appeal, the amount of the judgment was calculated by the addition of various items involving entitlements of one or other party. That the final balance came out in favour of one party rather than another was not, of course, arbitrary or inconsequential. Nor was it arbitrary or inconsequential that some components fell on one side of the ledger rather than the other. Factors which were relevant, however, were the particular issues in dispute, the time taken in addressing particular issues and which party was successful with respect to those issues. Because there was no dissention from the assessment by the trial judge that, on the findings he made, Primus should recover 75% of its costs, it is appropriate to make an adjustment to that figure, on the basis of the lower level of success achieved by Primus as a result of the appeal: see generally on proportionate costs, Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 259; 26 IPR 261. Although Kooee contended that an assessment of the separate issues which were litigated resulted in a substantial degree of success for Kooee, despite the monetary balance in favour of Primus, I am not persuaded that that is a decisive consideration, even if the assessment were accepted. A proportion of the time at trial must have involved, as it did in this Court, a consideration of the circumstances and documentation giving rise to the litigation before focusing on the specific issues. In my view Primus should, as it contended in its further written submissions, have 50% of its costs of the proceedings.
Costs of the appeal
26 Kooee seeks to rely upon its offer of compromise of 30 January 2007 in relation to the costs of the appeal, although the offer was not repeated after the judgment in the Equity Division. Because the offer was not left open for a reasonable time, it cannot form a basis for seeking costs of the appeal assessed on an indemnity basis. If that factual assessment were thought to be wrong it would be necessary to consider the correctness of the premise, namely that the offer would have engaged r 42.15 in relation to the costs of the appeal.
27 There has been a level of uncertainty as to the effect of a pre-trial offer of compromise in relation to an appeal. Many of the cases in this Court have been concerned with offers made under the District Court Rules and their effect in relation to an appeal: the Court has held that it is not bound to apply the costs rules in the District Court in relation to such offers: see authorities referred to in Suresh v Jacon Industries Pty Ltd (No. 2) [2005] NSWCA 270 at [14]. On the other hand, the fact that an offer has been made remains a relevant consideration in relation to the costs of the appeal: see Suresh at [15]. The operation of pre-trial offers in relation to claims made in the Supreme Court is less clear. Further, before relying upon earlier authority, it is necessary to be sure that no relevant changes have been effected by the introduction of the Uniform Civil Procedure Rules in 2005.
28 In Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404, Gleeson CJ and Priestley JA noted that "the subject of an offer of compromise is a claim in proceedings": at p 408E. Their Honours continued:
"It is not a compromise of a hearing, or of one round in a bout of litigation. The appellant had only one claim, and it was that which he offered to compromise. The same claim was litigated at the second trial. That claim was only finally heard and determined at the conclusion of the second trial (and, still then, subject to the appeal process)."
29 After rejecting the argument that it would be "absurd and unjust" that a party should be adversely affected in costs of the second trial, by reference to an offer which was no longer open to be accepted, their Honours continued at p 409G-410B:
"There is nothing in [the rule] which either requires or justifies the conclusion that the consequences of an offer are 'exhausted' once the trial, prior to which the offer was made, comes to an end. As was noted, the offer is made, not in respect of a trial, but in respect of a claim. Depending upon the circumstances of a case, a claim may not be finally heard and determined until after there have been a number of appeals, and, perhaps, a number of trials. … In truth, this Court routinely reassesses damages on appeal, and is frequently asked to make, and makes, orders for indemnity costs based upon offers of compromise that were made before the original trial.
… In our view, there is no justification for concluding that, once the claim to which it relates has been the subject of a complete trial, an offer of compromise made before the trial has no further significance for any appeal, or subsequent re-trial."
30 In Fotheringham v Fotheringham [No. 2] [1999] NSWCA 21; 46 NSWLR 194, a five judge Court considered whether a respondent should have his costs of the appeal on an indemnity basis because, although the appellant had been successful in reducing the amount of the judgment given at trial, the sum awarded by this Court exceeded the amount by which the respondent had offered to compromise the proceedings before trial. Both the judgment of Powell JA and the further comments of Stein JA (with both of whom Spigelman CJ, Mason P and Beazley JA agreed) were unclear as to the operation of the relevant rule, which was the predecessor of UCPR r 42.14. The Court appears to have accepted that the rule operated with respect to the costs of the appeal, but did not create an entitlement. Thus at [26] Powell JA stated:
"Let one accept that the respondent's offer continues to be of relevance when the question of the costs of the appeal comes to be considered, in my view the provisions of the Act and the Rules do not, in the present case, dictate that the respondent should have an order for her costs of the appeal, and still less that those costs should be assessed on an indemnity basis."
31 To similar effect, Stein JA stated at [33]:
"It seems to me that the starting point for consideration of the proper costs order in this appeal is to accept that the offer of compromise continues to have cost consequences for an appeal: Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 at 410. It follows that it is a relevant factor to consider on the question of costs. It was not an extraneous consideration."
32 Although both members of the Court who gave separate judgments referred to the rule as being "relevant", it would seem that each considered that its operation was engaged so that there was a relevant "entitlement", unless the Court thought it proper to order otherwise. However, Powell JA also noted that r 11, which stated that costs should generally follow the event was a rule "of general application and not one limited to cases in which no offer of compromise has been made": at 28.
33 In Stuart Pty Ltd v Condor Commercial Insulation Pty Ltd (No. 2) [2006] NSWCA 379 the Court considered whether costs should be awarded on an indemnity basis where an appeal had been dismissed, the respondent relying in part upon an offer of compromise made prior to the trial. The Court (Beazley, Ipp and Tobias JJA) repeated the Fotheringham language that such an offer was "a relevant factor" (at [6]) but also considered that the primary rule in relation to an appeal was that costs follow the event (at [8]) and that they should be allowed on a party and party basis unless there is "some good cause for an order to be made on some other basis": at [9] referring to Brymount Pty Ltd v Cummins (No. 2) [2005] NSWCA 69, dealing with Calderbank offers made prior to trial.
34 More recently, in Estate of Virgona v De Lautour (No. 2) [2007] NSWCA 323 Ipp JA (with whom Hodgson JA and Young CJ in Eq agreed) stated that an offer made before trial "can have costs consequences for an appeal …, but only as an element in the Court's general discretion": at [10]. His Honour referred to earlier comments made by him in Trustee for the Salvation Army (NSW) Property Trust v Becker (No. 2) [2007] NSWCA 194 at [9] where his Honour had said, in relation to a Calderbank offer that had not been renewed:
"As the offer had so lapsed (prior to the conclusion of the trial), it was not possible for the appellants to accept it thereafter. In particular, it could not have been accepted on the launching of the appeal or thereafter. On that basis alone, it seems to me, the offer could play no part in the exercise of the discretion to order indemnity costs in regard to the appeal."
35 It appears to follow from the judgment in Ettingshausen, which has not been expressly departed from and was not challenged in the present proceedings, that once an offer has been made, the relevant costs rule continues to operate for so long as the "claim" in relation to which it was made has not been finally determined. The fact that, once it has lapsed, it cannot be accepted, is not an objection to this conclusion, but flows directly from the operation of the rule, whether there is one trial or more. Further, once the rule is engaged, it would appear that, on an application for costs being made in terms of the rule, the Court must apply the principles stated in the rule. That does not mean that the application of the principles may not vary depending on the stage reached in the whole proceedings, but it would seem to mean that an order for indemnity costs would be appropriate, unless the Court otherwise ordered, so long as the precondition to the operation of the rule remains satisfied.
36 There will remain a pragmatic consideration, namely that a costs order will be able to reflect an offer of compromise where an appeal is finally determined by this Court but may not be able to do so where the matter is remitted for further consideration by the trial court. Unless this Court were to stay its hand in awarding costs in those cases where there is a remitter, the result may have an arbitrary quality as between those cases where a remitter occurs, and those where it does not. That is so in part because this Court has held that it should not stay its hand, but should deal with the costs of the appeal as the circumstances dictate upon conclusion of the appeal: see Suresh at [17], applied in State of New South Wales v Burton (No. 2) [2006] NSWCA 43 (Spigelman CJ, Basten JA and Hunt AJA). Further, in practice the extent of arbitrariness appears to be limited. As the judgment in Virgona and other authorities demonstrate, the fact of a judgment at trial and an appeal therefrom, are frequently treated as relevant considerations, militating in favour of the Court otherwise ordering where the only offer is one which was made and not accepted before the completion of the trial: see the order in Ettingshausen itself, as noted in Fotheringham, at [18].
Conclusions
37 I would propose the following orders: