Leckie v Crockett & Ors

22 In oral submissions in relation to the offer of 24 January 2007, which were relied on at the hearing by the respondents, it was argued that particular account would be taken of the Court of Appeal's approach in Leichhardt Council, where it was observed at [23] and [36]:

23 It is clear that an offer with no real element of compromise in it, which is designed merely to trigger the costs sanctions, will not be treated as a genuine offer of compromise. Thus an offer by a plaintiff demanding the full amount claimed was held not to be an offer of compromise attracting costs penalties: Tickell v Trifleska Pty Ltd (1991) 25 NSWLR 353. Rogers CJ Comm D concluded that the test was: "... whether in the totality of the circumstances, the offer by the plaintiff represented any element of compromise or whether it was merely, yet another, formally stated demand for payment designed simply to trigger the entitlement to payment of costs on an indemnity basis." (at 355)

36 Clearly the trial judge was proceeding on the basis that the offer of compromise was a valid and genuine offer of compromise, but one which should fail in the exercise of discretion. The Court of Appeal declined to interfere with this discretionary decision on costs, as no appellable error had been shown. Thus, it evidently concluded that no error of legal principle exists in holding that a `walk-away' offer can in a particular case be a "genuine offer of compromise". There is no reason to doubt the correctness of that conclusion. It follows the approach of Dunford J should, if understood as stating a universal, non-discretionary rule to the contrary, not be followed.

23 As to whether a 'walk away' offer was a genuine offer of compromise in the circumstances there being considered, it was further observed at [47] to [48]: 47 The conclusion that indemnity costs should not be viewed as a necessary or automatic consequence of not accepting a defendants offer does not in any way deny the general discretionary power of the Court regarding costs in such circumstances. It merely recognizes that, influenced but not bound by the rules, a Court will be reticent to award such indemnity costs following defendant offers of settlement. It cannot be forgotten that the power to award indemnity costs is within the Court's general discretion in any event (see s148AB District Court Act 1973, s76(1)(c) Supreme Court Act 1970). It is preferable to consider applications for indemnity costs following unaccepted offers of compromise by defendants as being applications for a favourable exercise of the Court's general discretion to award indemnity costs. As far as Calderbank offers go there is very little difference, the costs consequences of these lying entirely within the Court's general inherent discretion on costs. Nothing said in GIO General Ltd v ABB Installation & Service Pty Ltd (supra) derogates from this conclusion. The Court there merely held that the trial judge's discretion not to award indemnity costs was not appellably erroneous. The decisions of Dunford J in Bishop (supra) and McKerlie (supra) can be regarded likewise. The authorities (especially Jones v Bradley ) emphasise the width of the discretion and the unusual nature of an award of indemnity costs in relation to Calderbank letters.

48 The circumstances warranting favourable exercise of the discretion were considered by Sheppard J in Colgate Palmolive v Cussons (1993) 118 ALR 248 to include: "(a) The making of allegations of fraud knowing them to be false, and the making of irrelevant allegations of fraud;

(b) Evidence of particular misconduct that causes loss of time to the court and the other parties;

(c) The fact that proceedings were commenced for some ulterior motive;

(d) The fact that the proceedings were commenced in wilful disregard of known facts or clearly established law;

(e) The making of allegations that ought never to have been made or the undue prolongation of a case by groundless contentions;

(f) An imprudent refusal of an offer of compromise;

(g) Am award of costs on an indemnity basis against a contemnor." 24 The Court of Appeal also considered the question of whether the plaintiff should have accepted the offer, because he should have known his claim would fail and because the offer was unreasonably refused. As to the second question, it was said at [55] to [57]: 55 As far as the second question is concerned, it is arguable that it was unreasonable for the plaintiff to refuse the offer of compromise in the circumstances. The plaintiff is under a duty to give careful consideration to any offers of compromise made by a defendant, but having done so may proceed to court nonetheless. The Council pointed out evidentiary deficiencies. It is true that some of these in fact proved (on appeal) to exist, and the plaintiff proceeded to trial without in any way seeking to rectify what was found on appeal to be the evidential problems. Thus the inference is open that the plaintiff did not give sufficient consideration to the offer made by the defendant in the circumstances of the case. Of course this is now in hindsight. The plaintiff, mistakenly may well quite genuinely have considered that the deficiencies indicated by the Council were more apparent than real. Moreover, it could not be said that the plaintiff's case was hopeless or that it must follow that the plaintiff failed genuinely to consider the offer of compromise. It was not simply rejected out of hand, though it appears the offer was simply left unaccepted.

56 In Multicon (supra) Rolfe J expressed the view that unreasonableness was prima facie found in the failure by the offeree to accept the offer which was not bettered on judgment. Rolfe J did emphasise, however, the primacy of the facts in the circumstances of each case. Subsequent decisions of this Court, principally Jones v Bradley (supra) have emphasised that these are all-important and that there is no presumption of indemnity costs in situations such as this (which the reasoning of Rolfe J seems to imply). The question of reasonableness in rejecting an offer is not answered by a presumption; it depends on the circumstances of each case.

57 Furthermore, there is no apparent "general delinquency" ( Oshlack (supra)) on the part of the plaintiff sufficient to move the Court to displace the general rule on costs. Such costs orders should be reserved for the most unreasonable actions by unsuccessful plaintiffs. An instance would be peremptorily dismissing an offer of compromise (however small) such that an inference can be drawn that no bona fide consideration was given to early settlement of the claim. That was not the case here. This was a small offer by the defendant, albeit in a genuine effort to settle proceedings at an early stage. Given all the circumstances including the nature of the offer, I do not think it can be said that it was unreasonable for the plaintiff to have refused it. 25 In this case, it was argued that the question of who had brought the arrangement to an end, was an open issue in the proceedings. It was therefore not unreasonable for the applicant to have refused the offer, even though he did not succeed on that point. It was accepted that the applicant did not seriously press the anxiety claim, nor the claim to be set up in another farming operation, but it was submitted, that could not provide a basis for an indemnity costs order, otherwise such an order should be made in favour of the applicant in matter No 5036. 26 It was also argued that this was not a case such as that dealt with in Oshlack. It was not unreasonable for the applicant to have refused the 'walk away' offer in the circumstances and accordingly, there should be no departure from the usual costs order. 27 In reply, it was submitted that account would be taken of the approach of Gzell J in Atton v National Mutual Life Association of Australasia (No 2) [2007] NSWSC 348, where his Honour followed Leichhardt Council, but observed at [6] - [8]: 6 It was argued for the plaintiff that the principle is that it must be shown that the plaintiff's rejection of the offer was unreasonable under the general rule and that task is to be undertaken, notionally, at the time the offer was made and rejected. It was so held in Green .

7 The plaintiff submitted that at the time the offers were made, the evidence had not been put on and the issue should be determined on the pleadings. It was submitted that the relevant question is whether, if a strike-out application had been made at that time, it would have been successful. Because the case turned on evidentiary issues as indicated in paragraphs 21 to 23 of my reasons for judgment, a strike out application would not have been successful. Hence, it was submitted, it was not unreasonable for the plaintiff to reject the offers.

8 But the evidence had to come from the plaintiff. The question was whether he fell within the definition in the policy and whether the extended definition of "sickness" applied. The elements necessary to establish the plaintiff's claim were peculiarly within his knowledge and he was, in my view, able to assess his position by reference to the evidence that would be adduced by him at the time the offers were made.

28 Here, the applicant was aware of what the evidence would be at the hearing, when the offer was made. All of the affidavit material was then in and he knew what the position was in relation to the claimed loan; it was disavowed, when he and his father were cross examined. If the offer had been accepted, all of the costs of the hearing, which the respondents were reluctantly required to participate in, by the refusal of the offer, would have been entirely saved. It was also argued that it would be to fall into appellable error, to adopt the approach sought in relation to costs in matter No 5036, given the basis upon which leave to discontinue was granted. Consideration 29 The parties were agreed that the question of a departure from the usual costs order is a matter of discretion, to be decided in the particular circumstances of the case, when an offer of settlement is refused and where, at trial, the refusing party does not do better than the offer. This was again confirmed by the Court of Appeal in Leichhardt Council. It is also settled that a 'walk away' offer may form the basis of a genuine offer of compromise. 30 In this case there was a 'walk away' offer made by the respondents, several days before the hearing commenced. There had been offers from both sides to that point and an unsuccessful conciliation. Undoubtedly, the applicant would have been better off, had he accepted the offer, given that he had to amend his claim at the hearing and even then, it was later concluded that he had not met the onus which fell upon him to make out his case. By the time of the offer, it must have been apparent to the applicant that there were difficulties in his case, as the evidence given at the hearing in relation to the claimed $250,000 loan and the amendment of the claim soon revealed. No doubt this explains why he, too, also advanced a settlement offer to the respondents on 24 January. That alone, is not however, a proper basis for making the order sought. 31 The affidavit evidence showed that there was a real evidentiary contest between the parties as to who brought this arrangement to an end. When the hearing commenced, while it was accepted for the respondents that the claimed arrangement existed, its terms were, nevertheless, also in issue. A resolution of the questions raised by the applicant's summons depended therefore, on a consideration of the evidence as to what had occurred between the parties and Wendy Crockett, also as well as in relation to the claimed loan. What had been done by the applicant and Owen Crockett, which had the result of bringing about the termination of the arrangement, also had to be considered. 32 There can be no doubt about the difficulty of the evidence led in relation to the claimed loan. That evidence was taken into account at trial, in helping to resolve issues of credit. Unlike Atton, however, the elements necessary to establish the applicant's claim about this informal family farming arrangement and its termination were not only in his mind, but also in the mind of the respondents and Wendy Crockett. There was a real contest about those matters, which was resolved, in part, on the basis of an assessment of credit and in part, on the basis of what various words meant and were understood to mean, when they were uttered. It seems to me that in those circumstances, it cannot be justly concluded that it was unreasonable of the applicant to have rejected the 'walk away' offer made a few days before the hearing, on which the respondents now rely. 33 It follows that there should not be any departure from the usual costs order in relation to matter No 1188. That conclusion applies also to the hearing of the costs application. 34 As to matter No 5036, I accept the respondents' submissions in the alternative. Justice requires that there be a departure from the usual costs order in this case, given the basis upon which consent was given to the discontinuation of those proceedings. The respondents should have an order in their favour in relation to the preparation of the affidavits filed in those proceedings, which were tendered at the hearing of matter No 1188. Otherwise, the respondents should pay the applicant's costs of those proceedings. Again, that conclusion applies also to the costs application. Orders 35 For the reasons given, I order accordingly. Short minutes of the order may be brought in, if necessary.

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