Maiden trading as MJM Excavations v Simmons (Civil Claims) [2011] VCAT 1828

1. The Tribunal orders that the respondent must pay the applicants the sum of $15,692.60.
2. The applicants' application for costs is refused.

1. I heard this case on 4 July 2011. The applicants had claimed $15,700.00 for timber sold and delivered to the respondent. The main issue turned out to be whether the respondent was entitled to reject, and had rejected, deliveries of timber. I found in favour of the applicants and ordered that the respondent pay them $15,692.60. Counsel for the applicants made an application for costs. I refused it. I gave oral reasons for the refusal.
2. The application for costs was based on the submission that the applicants had made an offer in writing on 5 May 2011 to settle the proceeding by accepting $12,000.00, that the offer complied with sections 112, 113 and 114 of the Victorian Civil and Administrative Tribunal Act 1998, that the respondent did not accept the offer within the time that it was open, and that in accordance with section 112(2) the Tribunal should order that the respondent pay the applicants' costs after that date. I did not accept the submission. I concluded that the offer did not comply with those sections, and that there was no reason to depart from the general rule that parties bear their own costs.
3. By a letter dated 8 July 2011, four days after the hearing, the applicants' solicitors requested written reasons for the decision not to award costs. The registry received the letter on 11 July 2011. Regrettably, it was not drawn to my attention until 13 September 2011. That is why these written reasons are so belated.
4. The offer in writing on 5 May 2011 relied upon was a letter from the applicants' solicitors to the respondent dated 5 May 2011 and headed "Without Prejudice". After asserting that their client had a strong case for recovery of $15,700.00 but their clients appreciated that legal costs and inconvenience would be incurred if the case went to a hearing, the letter went on to say (so far as is material):

Accordingly, in the interests of saving costs and time for both parties, our clients have instructed us to make a 'without prejudice' offer of settlement to you so as to resolve the present dispute without the need for a hearing.

Our clients instruct that they are prepared (on a 'without prejudice' basis) to accept the sum of $12,000.00 in full payment of their claim against you (including their claims for interest and costs).

If you wish to accept this offer, please provide us with this payment at any time within the next 14 days.

If we do not receive your payment by close of business on 20 May 2011, we shall assume that you have rejected our clients' offer. In that case, our clients reserve their right to produce this letter to the Tribunal on the issue of costs. Our clients will then seek costs against you on a full solicitor-client basis.

1. The applicants' Counsel told me, and the respondent's Counsel did not dispute, that the respondent had replied to that letter, and had rejected the offer, by a letter dated 17 May 2011.
2. Sections 112, 113 and 114, so far as they are material, provide:

112. Presumption of order for costs if settlement offer is rejected

(a) a party to a proceeding (other than a proceeding for review of a decision) gives another party an offer in writing to settle the proceeding; and

(b) the other party does not accept the offer within the time the offer is open; and

(c) the offer complies with sections 113 and 114; and

(d) in the opinion of the Tribunal, the orders made by the Tribunal in the proceeding are not more favourable to the other party than the offer.

(2) If this section applies and unless the Tribunal orders otherwise, a party who made an offer referred to in sub-section (1)(a) is entitled to an order that the party who did not accept the offer pay all costs incurred by the offering party after the offer was made.

(a) with prejudice, meaning that any party may refer to the offer, or to any terms of the offer, at any time during the proceeding; or

(b) without prejudice, meaning that the Tribunal is not able to be told of the making of the offer until after it has made its orders in respect of the matters in dispute in the proceeding (other than orders in respect of costs).

(2) If an offer does not specify whether it is made with or without prejudice, it is to be treated as if it had been made without prejudice.

(4) If an offer provides for the payment of money, the offer must specify when that money is to be paid.

114. Provisions concerning the acceptance of settlement offers

(1) An offer must be open for acceptance until immediately before the Tribunal makes its orders on the matters in dispute, or until the expiry of a specified period after the offer is made, whichever is the shorter period.

(2) The minimum period that can be specified is 14 days.

1. The consequence of an order made under section 112 is a departure from the general rule which section 109(1) imposes, that each party is to bear their own costs in a proceeding. For that reason a party who seeks an order under section 112 needs to demonstrate that there has been a strict compliance with the requirements of sections 112, 113 and 114.
2. In my experience of other cases in which a party has sought an order under section 112 the party has relied not upon a letter but upon a more formal document which is headed in the proceeding and which expressly states that the document contains an offer made under section 112. Sometimes that formal document has included an explicit warning of the possible consequences of non-acceptance of the offer, in terms of section 112(2). The letter relied upon in this case contained no such express statement and no such explicit warning. My immediate reaction to Counsel for the applicants' application for costs was to say - rather too peremptorily, I am afraid - that I thought that the letter could not be an offer that complied with sections 112, 113 and 114. But, as Counsel continued his submission, I realised that there is no requirement in those sections that the offer follow any particular form or specifically refer to all or any of those sections or give any warning of the possible consequences of non-acceptance. Provided that it contains wording which complies with sections 113 and 114, a letter of the kind sent to the respondent in this case is capable of being an offer for the purposes of section 112.
3. The letter was headed "without prejudice". That does not create any difficulty because section 113 entitles a party to rely upon an offer, made without prejudice, after the Tribunal has made its order in respect of the substantive dispute, as happened in this case.
4. There is no doubt that, within the terms of section 112(1)(d), the order I made on 4 July 2011 was not more favourable to the respondent than the offer made in the letter.
5. The reason why I decided that the offer expressed in the letter did not comply with sections 113 and 114, as section 112(1)(c) requires before the section is applicable and the offer can be relied upon successfully, is that the offer did not comply with section 113(4). The offer provided for the payment of money - $12,000.00, to be paid by the respondent to the applicants - but did not "specify when that money is to be paid." The letter stated: "If you wish to accept this offer, please provide us with this payment at any time within the next 14 days. If we do not receive your payment by close of business on 20 May 2011, we shall assume that you have rejected our clients' offer." It requested a payment within 14 days, but did not state that the payment had to be made within 14 days and no later, or by the close of business on 20 May 2011 and no later. It did not state that if payment was made after that deadline (for I assume for the moment that there was one deadline, differently expressed) it would not be accepted. It merely stated that the applicants would assume, once the deadline had passed, that the respondent had rejected the offer. In short, the letter was couched in words of request, not words of demand; it did not "specify" that $12,000.00 had to be paid by any particular deadline or on any particular date or at any particular time.
6. I ruled against Counsel for the applicants' application for costs without hearing from Counsel for the respondent. I had not been told exactly when and how the offer had been made, that is to say, when and how the letter had been communicated to the respondent. As I have said, there was no dispute that the respondent had replied to the letter and thereby had acknowledged receipt of it. But I do not know whether there was, or might have been, an issue as to whether "close of business on 20 May 2011" was the end of the "minimum period" of 14 days that "can be specified" in the offer: section 114(2). I gave my decision on the assumption that there was no such issue, but because I had not heard Counsel for the respondent the assumption might have been unwarranted. My decision was that no period, 14 days or otherwise, had been "specified".
7. No other reason was advanced why I should make an award of costs. As I said in my oral reasons, the dispute in the case was a purely factual one and while the presence of Counsel on both sides at the hearing achieved a great saving of time (and therefore saving of expense to the parties) through the orderly and economical presentation of the facts - the hearing was completed in one day, although three days had been allocated for it - their presence did not reflect any complexity in the proceeding.