Loulach Developments Pty Ltd v Roads and Maritime Services

Judgment (3 paragraphs)

[1]

Judgment

HIS HONOUR: On 18 April 2019, I caused judgment to be entered in favour of the defendant, RMS, following the failure of both causes of action for negligent misrepresentation advanced by the plaintiff, Loulach: Loulach Developments Pty Ltd v Roads and Maritime Services [2019] NSWSC 438. The dispositive reasoning was summarised at [266] as follows: "For those reasons I find RMS breached a duty it owed to Loulach to take reasonable care in making the first representation, but that the breach did not cause Loulach any loss, that Loulach's claim is statute-barred, and in any event Loulach has not made out its case for damages. I find that RMS did not owe a duty to Loulach to take reasonable care when making the second representation. If I am wrong about that, I would conclude that that duty was likewise breached, but that likewise it did not cause any loss, and that Loulach has not made out its case for damages."
Orders were made permitting an exchange of submissions going to costs. That has occurred, by submissions dated 2, 16 and 20 May 2019. It is common ground that on 26 July 2018 (some three months before the trial) RMS served what purported to be an offer of compromise under UCPR r 20.26, and a Calderbank offer, both of which proposed a compromise of the whole of the Loulach's claim on terms that judgment be entered in favour of RMS with RMS paying Loulach $100,000.
RMS submitted that UCPR r 42.15A - titled "Where offer not accepted and judgment no less favourable to defendant" - was engaged, that there were no circumstances which would justify the Court to "order otherwise", with the result that it is entitled to indemnity costs for the period from 27 July 2018 to date. It submitted that its offer involved a significant element of compromise, since it had offered to bear its own legal costs, which uncontroversial evidence establishes totalled some $260,000 at the time (which was stated in its correspondence) as well as offering to pay $100,000 towards the costs of Loulach. RMS submitted that its offer: " … involved an even greater element of compromise than 'walk away' offers made after substantial costs have been incurred, which have been held to involve a significant element of compromise to justify the Court refusing to 'order otherwise' under the relevant rule: see for example, Botany Bay City Council v Latham (No 2) [2013] NSWCA 450 at [13]; Gold & Copper Resources Pty Ltd v Hon Chris Hartcher, Minister for Resources and Energy (No 2) [2015] NSWCA 163 at [7]".

Consideration

If Loulach had accepted RMS's offer, then while the proceedings would still have been dismissed, not only would Loulach have received $100,000, but it would also have no obligation to pay the costs of RMS. The compromise reflected in the offer is not merely $100,000, it is the sum of $100,000 and the recoverable costs of RMS.
The reason that "walk away" offers, at least when made at a late stage in the preparation of a matter for trial, have been held to engage the rules, is that a defendant which foregoes the possibility of a favourable cost order is thereby foregoing a valuable entitlement and making a genuine offer of compromise. That is what occurred in Botany Bay City Council v Latham (No 2) [2013] NSWCA 450 and Gold & Copper Resources Pty Ltd v Hon Chris Hartcher, Minister for Resources and Energy (No 2) [2015] NSWCA 163, both of which were cited in RMS's submissions in chief, to which Loulach made no response. Both those decisions are a fortiori to the present case.
It is true that, as Loulach submits, there is authority that for a walk-away offer to successfully trigger the indemnity costs mechanisms under the rules, "the claim or defence would have approach something of the character of being frivolous or vexatious for that to be the case": Regency Media Pty Ltd v AAV Australia Pty Ltd at [31]. But that was a case where an offer of $10,000 was made at an early stage of the proceedings - indeed, before a defence had been filed: see at [30]. It is a world away from the substantial compromise offered by RMS, being not merely $100,000 but also its entitlement to a favourable costs order after some $260,000 of costs had actually been incurred.
Contrary to Loulach's submission, but in accordance with RMS's submission in reply, what was said in Miwa is presently inapplicable. Miwa addressed a different situation, namely, where a litigant failed to invoke the mechanisms under the rules. In that class of case it is not sufficient merely to conclude that the litigant who rejected an offer ended up with a less favourable result. The Court in Miwa was evidently conscious of the distinction. Basten JA stated (with the agreement of McColl and Campbell JJA) at [6], "The appellant did not make an offer in accordance with [UCPR] r 20.26, which would have carried with it a presumptive entitlement to indemnity costs if a judgment were obtained no less favourable than the terms of the offer."
RMS made an offer of compromise in accordance with the rules, engaging r 42.15A. It is entitled to indemnity costs on and from 27 July 2018, unless the Court orders otherwise. No basis has been made out to otherwise order. In particular, although some of the factual matters to which RMS pointed in its correspondence were not ultimately made out, causation (on which Loulach failed) was raised in the correspondence.
It follows that the appropriate exercise of the discretion as to costs is:
The plaintiff pay the defendant's costs of the proceedings up to 26 July 2018 on the ordinary basis.
The plaintiff pay the defendant's costs of the proceedings from 27 July 2018 on an indemnity basis. No separate order is required for the costs of the present application, which fall within order 2 above.

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Judgment (3 paragraphs)

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