The defendant, Australian National Car Parks Pty Limited, makes an application under r 42.15A of the Uniform Civil Procedure Rules 2005 for an order for indemnity costs from 25 July 2014 on the basis of an offer of compromise made on 24 July 2014, which was not accepted by the plaintiff, Jacqueline Livsey.
The offer was, in terms, that there be a verdict for the defendant with no order as to costs. Subject to the question of whether the offer involves a genuine compromise, Ms Livsey did not contest that the offer fits within the terms of r 20.26, including in particular r 20.26(3)(a), although the term "verdict" rather than the term "judgment" (see r 20.26(3)(a)) was used. Ms Livsey also did not contest that the offer proposed a resolution which was more favourable to the plaintiff than that recorded in the judgment given on 8 December 2014 where the orders were judgment for the defendant and the plaintiff to pay the defendant's costs (see Livsey v Australian National Car Parks Pty Ltd [2014] NSWDC 232 at [35]).
The only question is whether those orders should be amended to allow indemnity costs from 25 July 2014.
Ms Livsey offers reasons why the costs order should not be varied. They all rest upon the undoubted discretion that r 42.15A grants to the Court in relation to the order. Rule 42.15A provides:
"42.15A Where offer not accepted and judgment no less favourable to defendant
(cf SCR Part 52A, rule 22; DCR Part 39A, rule 25; LCR Part 31A, rule 20)
(1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim no less favourable to the defendant than the terms of the offer.
(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."
Ms Livsey accepted that there was a presumption in favour of the order sought but says that the Court should not make the order for three reasons.
First, that the offer was not an offer of compromise. Secondly, that it was not unreasonable for Ms Livsey to reject it. Thirdly, that it was only open for an unreasonable period of time.
As to the first reason, it is said that the offer is not an offer of compromise but a capitulation. It is apparent from the terms of r 20.26(3)(a) that an offer in terms of a judgment for the defendant, with no order as to costs, can in certain circumstances amount to a proper offer of compromise. On the other hand, the courts have held that there is a need for the offer to be a real compromise. A question does arise in relation to an offer of this kind as to whether it is a genuine compromise of the defendant's entitlements.
In my view, the circumstance that Ms Livsey will receive nothing from the offer in terms of some financial payment does not preclude the offer from being a genuine compromise (see generally Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [43]-[56]). Any "walk away" offer will result in Ms Livsey not receiving something if it is accepted, but such an offer is expressly recognised as at least being a possible genuine offer of compromise under r 20.26(3)(a). In my view, the test of whether the offer is a genuine compromise depends on the position of the defendant, what it is giving up in order to resolve the proceedings. In the present case, the defendant is giving up a potential entitlement to costs in circumstances where the matter proceeds to judgment. An order for costs might commonly be made in favour of a defendant who is successful in resisting the claim (see r 42.1). On the other hand, if the matter does go to trial and the defendant is successful and receives an order for costs, it might also be expected that there would be irrecoverable costs incurred by the defendant. Some comparison might usefully be made of the defendant's position if the matter was settled according to the orders made in the present case where the judgment was for the defendant with costs, compared to the alternative circumstance where, on 25 July 2014 the defendant had to bear its own costs up to that date. This comparison is similar to the exercise mandated in r 42.15A of determining whether the result is "no less favourable" than the offer.
The defendant did have an opportunity, but did not avail itself of that opportunity, to put on evidence in respect of the costs it had incurred up to the date of the offer. It is the fact that the proceedings were commenced in 2013, and I am told without dispute from Ms Livsey that the defence was filed on 12 November 2013, so it must be assumed that some costs were incurred by 24 July 2014. However, I am in no position to assess the quantum of those costs, nor can I compare them with the irrecoverable costs of the defendant in circumstances where an ordinary order for party/party costs is made in its favour after the trial. In those circumstances, I hold a real concern that the offer does not represent a genuine compromise, because there is a real possibility that the amount of costs being foregone by the defendant as at 24 July 2014 would be trivial or in any event significantly less than the net amount of costs it outlaid in obtaining judgment.
The second reason raised by Ms Livsey is that it was not unreasonable for her to reject the offer. It is said that there is no indication that there was anything frivolous or vexatious about the claim. The claim raises the ordinary elements of a claim in negligence, but that says little about whether it is unreasonable for Ms Livsey to reject the offer. This assessment involves a consideration of her prospects of success compared with what was offered by the defendant. The defendant offered little to Ms Livsey, but whether it was unreasonable for Ms Livsey to reject it is tested not merely by asking whether the plaintiff's action was frivolous or vexatious, but whether the plaintiff was perceived to have prospects justifying the continuance of the proceedings (cf Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [31]). Nothing has been put to me about the plaintiff's prospects. Not only did Ms Livsey lose on liability, but the judgment indicated that even if she had succeeded on liability (apart from establishing damage) there would have been a nominal or nil amount of damages. I do not accept that the second ground is a proper basis to resist the claim for indemnity costs.
The third ground is that it is said that there was unreasonable time for Ms Livsey to accept the offer (see generally Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 at [12]). The offer was said to be open from the time the offer appears to have been received, just before 5pm on 24 July 2014, to the time it was said to be open for acceptance of 5pm on 1 August 2014, a period of eight full days. The rules contemplate that the day of the event is not taken into account, which would indicate that an offer open until 5pm on the eighth day was under the rules, open for something less than eight full days.
This was a case where the hearing commenced on 4 September 2014, so 1 August 2014 was some five weeks in advance of the trial date.
The rules contemplate under r 20.26(5) that up until the date two months or more from the day set down for commencement of the trial, the offer must be no less than 28 days.
"20.26 Making of offer
(cf SCR Part 22, rules 1A, 2, 3 and 4; DCR Part 19A, rules 1, 2, 2A, 3 and 4; LCR Part 17A, rules 2 and 5)
…
(5) The closing date for acceptance of an offer:
(a) in the case of an offer made two months or more before the date set down for commencement of the trial - is to be no less than 28 days after the date on which the offer is made, and
(b) in any other case - is to be such date as is reasonable in the circumstances.
…"
Thus, an offer made two months before the trial date, that is, an offer made on 4 July 2014, was required to be open for a period of 28 days. The calculation would not include the date of 4 July 2014, being the date of the event, but 28 days thereafter, which means that the offer of that date should be open for acceptance, as a minimum on 1 August 2014 and not only at 5pm on 1 August 2014.
Thus, the offer made on 24 July 2014 has imposed an earlier time for acceptance than would have been required, had an offer been made some three weeks earlier. There is an element of unreasonableness about that.
The period of 28 days might not be appropriate as a trial date approaches, and certainly in the 28 days before the trial date. In those circumstances, a reasonable period might be less, perhaps significantly less, than 28 days. However, I am not persuaded that it is reasonable to set a period for acceptance so short that it expires before the earliest expiry date that would have applied had the offer been made substantially earlier, at least not without some cogent reason being offered as to why the time period needed to be short. The only reason proffered for the short time period was that the trial was approaching. Yet the offer was required to be accepted on a date when the trial was still some five weeks away. In my view, seven to eight days for acceptance of an offer, when the trial is still some six weeks away from the date of the offer, does not allow a reasonable period for Ms Livsey to accept it, in the absence of some cogent reason.
Thus, for the reasons of the shortness of time allowed by the offer for acceptance, and that the defendant did not elicit any evidence of its costs and thus I was unpersuaded that the offer represented a genuine compromise by the defendant, I am not persuaded that the presumption in r 42.15A should apply and entitle the defendant to an order for indemnity costs from and including 25 July 2014.
Accordingly, the orders of the Court are:
1. Confirm the orders made in respect of costs in my judgment of 8 December 2014.
2. Dismiss the defendant's application for indemnity costs for the period after 24 July 2014.
[2]
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Decision last updated: 07 July 2015