Koprivnjak v Koprivnjak

Consideration and determination of claim for indemnity costs

1. In support of her claim for indemnity costs, the respondent relies on a letter dated 21 September 2022, by which she offered to settle the appeal proceedings (Settlement Offer): DEFENDANT'S OFFER OF COMPROMISE The Respondent, Natalie Koprivnjak, makes the following offer: 1. Appeal Dismissed. 2. No order as to costs, with the intention that each party pay their own costs of the Appeal proceedings. This offer remains open to be accepted by the plaintiff until 5pm on Thursday, 20 October 2022. This offer is made in accordance with Part 20, Division 4 of the Uniform Civil Procedure Rules. In the event that this offer is deemed to be invalid for any reason it shall operate as an offer in accordance with the principles established in Calderbank v Calderbank [1975] 3 All ER 333.
2. Evidently, the offer was not accepted.
3. Rule 51.47(1) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) provides for the making of offers of compromise in proceedings in the Court of Appeal. In particular, r 51.47(2) provides that the provisions of Pt 20 Div 4 apply to any offer of compromise made under r 51.47(1), subject to various modifications. Rule 51.48(1) similarly operates to pick up and apply to appeal proceedings the general principles governing offers of compromise under Pt 42 Div 3 of the UCPR, subject to some modifications.
4. Rules 20.26(2) and (3) of the UCPR, which sits within Pt 20 Div 4 of the UCPR, provide: 20.26 Making of offer … (2) An offer under this rule - (a) must identify - (i) the claim or part of the claim to which it relates, and (ii) the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment, and (b) if the offer relates only to part of a claim in the proceedings, must include a statement - (i) in the case of an offer by the plaintiff, as to whether the balance of the proceedings is to be abandoned or pursued, or (ii) in the case of an offer by a defendant, as to whether the balance of the proceedings will be defended or conceded, and (c) must not include an amount for costs and must not be expressed to be inclusive of costs, and (d) must bear a statement to the effect that the offer is made in accordance with these rules, and (e) if the offeror has made or been ordered to make an interim payment to the offeree, must state whether or not the offer is in addition to that interim payment, and (f) must specify the period of time within which the offer is open for acceptance. (3) An offer under this rule may propose - (a) a judgment in favour of the defendant - (i) with no order as to costs, or (ii) despite subrule (2)(c), with a term of the offer that the defendant will pay to the plaintiff a specified sum in respect of the plaintiff's costs, or (b) that the costs as agreed or assessed up to the time the offer was made will be paid by the offeror, or (c) that the costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer.
5. Rule 42.15A(2), which sits within Pt 42 Div 3 of the UCPR, specifies the ordinary costs consequences which flow from the making of an offer under r 20.26 by a defendant which is not accepted by the plaintiff where the defendant goes on to obtain an order or judgment on the claim no less favourable to the defendant than the terms of the offer (noting that the definitions of "plaintiff" and "defendant" are specified in r 51.48(1)(d) for the purpose of offers of compromise made under the UCPR in appeal proceedings): (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, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.
6. The respondent seeks this Court to make the usual order under r 42.15A because, as matters have eventuated, she has obtained a judgment no less favourable to her than under the terms of the Settlement Offer.
7. The appellant opposes the respondent's claim. He contends that the Settlement Offer is non-compliant with r 20.26 of the UCPR, that it did not constitute a genuine compromise and that it was not unreasonable for him not to accept it. The latter two issues are also relevant to the principles relating to a Calderbank letter. For the reasons which follow, and on the basis of my finding that the Settlement Offer was validly made under the UCPR, I have also taken these issues into account in considering whether to exercise the Court's discretion not to make the usual order under r 42.15A.

Was the Settlement Offer non-compliant with r 20.26 of the UCPR?

1. The appellant alleges in support of this claim that the Settlement Offer did not meet the threshold requirements for making a valid offer under rr 20.26(2)(a)(i) and 20.26(2)(d). The Settlement Offer is otherwise taken to be compliant with r 20.26(2). For the reasons which follow, I consider that the Settlement Offer was compliant with r 20.26 of the UCPR.

Rule 20.26(2)(a)(i): Identification of claim

1. Rule 20.26(2)(a)(i) of the UCPR requires that an offer must identify the claim or part of the claim to which it relates. The appellant submits that the offer did not specify the portion of the claim being compromised, whether in whole or in part.
2. The appellant referred to the respondent's submission that she would have foregone $6,510.25 in post-judgment interest that had accrued by 21 September 2022 on the basis of Order 3 made on 29 August 2022 (see further at [25] below). He contended that the Settlement Offer did not specify whether Natalie was abandoning her entitlement to that interest and, therefore, whether the Settlement Offer was inclusive or exclusive of that claimed interest.
3. I reject that submission. Fairly read, the Settlement Offer related to the whole of the proceedings, as is necessarily reflected in the proposed order that the appeal be dismissed.
4. As to the position regarding post-judgment interest, it was well open to the appellant to seek clarification of that matter if that were genuinely a matter of concern or uncertainty. The evidence discloses that there was an exchange of such correspondence between the parties regarding an earlier offer of compromise made by the appellant (see the letters dated 14 September 2022 from the appellant's solicitor and 15 September 2022 from the respondent's solicitor). It was open to the appellant to seek to do the same here.

Rule 20.26(2)(d): Offer made in accordance with the UCPR

1. Rule 20.26(2)(d) provides that an offer under r 20.26 must bear a statement to the effect that the offer is made in accordance with the UCPR. The appellant complains that the Settlement Offer did not meet this requirement.
2. This submission is rejected. The letter explicitly stated that the offer was made "in accordance with Part 20, Division 4 of the [UCPR]". This was a sufficient statement: see Uniting Church in Australia Property Trust (NSW) t/as Northaven Retirement Villages v Takacs (No 2) [2008] NSWCA 172 at [7] per Hodgson JA (with whom McColl JA agreed); and Leach v Nominal Defendant (QBE Insurance) (Australia) Ltd) (No 2) [2014] NSWCA 391 at [37]-[38] per McColl JA (with whom Gleeson JA and Sackville AJA agreed).
3. The appellant also complains that the offer was open for acceptance by the "plaintiff", and contends it is "not clear whom that reference is to, nor was that sought to be clarified at any point in time". As noted above, rr 51.47(1) and (2) of the UCPR provide that Pt 20 Div 4 applies to an offer of compromise made in appeal proceedings. Rule 51.47(2)(c) provides that a reference, in such an offer of compromise, to a "plaintiff" is a reference to an initiating party in the Court. Accordingly, this submission is also rejected.

Should the Court diverge from the ordinary orders indicated in r 42.15A(2) of the UCPR?

1. As noted above, the ordinary course in the circumstances of this case would be to award the respondent costs on the ordinary basis until 21 September 2022 and on the indemnity basis thereafter, as contemplated by r 42.15A of the UCPR. I see no reason to order otherwise, having regard to my reasons below in respect of the appellant's ancillary submissions that the Settlement Offer did not contain a genuine element of compromise and that it was not unreasonable for him not to have accepted the Settlement Offer.

Whether the Settlement Offer contained a genuine element of compromise

1. The respondent's offer of compromise can properly be described as a "walk away offer" (see UCPR r 20.26(3)) in circumstances where various costs had been incurred by the respondent relating to preparation for the appeal hearing and in taking various procedural steps, including in relation to the two motions described above. Mr Guttentag gave evidence that, as at 21 September 2022, the respondent's total professional fees and expenses on a solicitor-client basis were approximately $42,000 and counsel's fees of approximately $26,000 has also been incurred (some parts of which are attributable to the two motions).
2. Mr Guttentag also claimed that, as at the date of the Settlement Offer, the respondent had an accrued entitlement to interest pursuant to the consent orders dated 29 August 2022 in the amount of $6,510.25 for the period 9 June 2022 to 21 September 2022. He said that the entitlement to interest was a condition of another order made on 29 August 2022, namely the staying of certain orders made by Peden J on 9 June 2022 pending further order or the determination of the appeal.
3. Mr Guttentag calculated the accrued interest to which the respondent was entitled under the 29 August 2022 consent orders for the period 9 June 2022 to 2 February 2023 as $15,639.14.
4. Accordingly, the respondent submits that the offer was a genuine compromise of her costs incurred to date (even after deducting the costs of the interlocutory applications) and her entitlement to interest.
5. Mr Gutierrez deposed, on the other hand, to the following matters. He noted that two motions had been litigated in the appeal proceedings (ie those in relation to the stay of Peden J's orders and the respondent's claim for security for costs) and had been resolved by consent. He also noted that the appellant had incurred the cost of preparing the appeal books and that neither party had filed an outline of written submissions when the Settlement Offer was made. The appellant relied on these matters in making his submission that the respondent has been "unable to demonstrate a genuine element of compromise purely by reference to the asserted costs incurred as at the time of the making of the offer".
6. For the reasons which follow, I do not accept the appellant's submission that the Settlement Offer did not constitute a genuine compromise.
7. Whether there is a real element of compromise is determined objectively according to the circumstances of a particular case when viewed at the time the offer of compromise was made and not with the benefit of hindsight: Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) (2011) NSWCA 344 at [11]; Leach at [42]; and Krolczyk v Winner (t/as J Winner Building Services) [2022] NSWCA 196 at [212]-[213].
8. Respondents' offers to bear their own costs can constitute a compromise, but that will not be so where no significant costs have been incurred: Fabre v Lui (No 2) [2015] NSWCA 312 at [7].
9. Applying these principles, I am satisfied that the Settlement Offer constituted a genuine offer of compromise. Having regard to the history of the proceeding and the issues raised by the notice of appeal (see the principal judgment at [9]), realistically the only room for compromise from the respondent's perspective was in relation to costs. I am satisfied that, disregarding the costs of the two motions, the respondent had incurred costs in a not insignificant amount when the Settlement Offer was made.

Whether it was unreasonable of the appellant not to accept the Settlement Offer

1. The appellant relies on the following factors in support of his contention that it was not unreasonable of him not to accept the Settlement Offer (noting that several of these factors overlap): 1. The Settlement Offer was served in "close proximity" following the filing of the notice of appeal. 2. The Settlement Offer was issued at "a very early stage" in the appeal proceedings, prior to the preparation of court books and significantly earlier than the filing and serving of submissions. 3. The compromise was limited when deducting the costs asserted against the interlocutory issues. 4. The Settlement Offer did not disclose what was being foregone. 5. The respondent engaged the same solicitor and counsel for the primary proceedings and the appeal proceedings. 6. The Settlement Offer was ambiguous. 7. There is no explanation of the benefit conferred on the appellant in accepting the offer. 8. The Settlement Offer did not foreshadow an application for indemnity costs if rejected.
2. For the following reasons, I reject these submissions. It is incorrect of the appellant to assert that the Settlement Offer was, in effect, served too early in the proceedings. In fact, it was served more than three months after the appeal was commenced on 14 June 2022. Directions hearings had been held on 20 July and 5 September 2022 and there were Court attendances on three separate occasions regarding the return of subpoena in respect of notices to produce issued by the parties. The parties had also prepared for the hearing of the two motions which were ultimately settled by consent. It is true that the offer was made prior to the parties filing submissions but the appellant had the benefit of reviewing the primary judge's detailed reasons for judgment and ought to have been sufficiently familiar with the case to assess the strength or weakness of the appeal. The appellant was also aware of the primary judge's findings that he was a "generally unimpressive witness" with an "evasive demeanour".
3. None of the other matters raised by the appellant has any force. Even if costs in relation to the interlocutory issues are deducted, the compromise offered was not insignificant. I have rejected above the appellant's criticisms of the wording of the Settlement Offer. The fact that the respondent retained the same legal team on the appeal carries little or no weight in assessing whether it was unreasonable for the appellant not to accept the offer. Finally, the criticism that the Settlement Offer did not foreshadow an application for indemnity costs if rejected gives insufficient attention to the final paragraph of the letter (and, in any event, is a matter relevant to offers of compromise contained in Calderbank letters, which is not the case here).

Calderbank letter

1. Although this issue does not strictly arise, had it been necessary, I would have held that the Settlement Offer constituted a Calderbank letter and, for the reasons given above, it contained a genuine element of compromise and it was unreasonable of the appellant not to accept it.

Consideration and determination of the respondent's claim in respect of interest payable

1. In the orders accompanying the principal judgment, this Court did not grant the respondent an opportunity to be heard on this matter. The appellant opposed any order regarding post-judgment interest being made for this reason, submitting that permitting the respondent to raise this issue now would be unfairly prejudicial.
2. It is not clear how the respondent would suffer any unfair prejudice, but there is another good reason why no order should be made by this Court regarding interest after judgment. That is because the position is governed by s 101 of the Civil Procedure Act. There is no basis for the Court making an order which would otherwise displace the operation of that provision. The parties should calculate the amount of interest payable in accordance with that provision.

Conclusion

1. For these reasons, I propose the following order: 1. Order (1) made by this Court on 2 February 2023 be varied such that the appellant pay the respondent's costs of the proceedings on the ordinary basis up to and including 21 September 2022, and thereafter on an indemnity basis.

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