McLaughlin v State of New South Wales

Plaintiff's Offer of Compromise dated 20 July 2022

1. Twelve days after the letter dated 8 July 2022 referred to above (PX 22) the plaintiff served an Offer of Compromise upon the defendant. The offer was in the following terms (PX 24, p 26): "1 Judgment in favour of the Plaintiff in the sum of $10,000.00. 2 This offer of compromise is open to be accepted for 21 days. 3 This offer of compromise is made in accordance with rule 20.26 of the Uniform Civil Procedure Rules 2005."
2. The trial was due to commence on 22 August 2022. The Offer of Compromise was sent a little over four weeks before the first date for trial.
3. Rule 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) deals with the making of an offer of compromise. The Offer of Compromise dated 20 July 2022 appears to comply with the formal requirements for such an offer prescribed by r 20.26(2) UCPR. If an offer is made two months or more before the date set down for trial it must be open for no less than 28 days. However, in any other case (such as the present) the closing date for the acceptance of an offer must be "such date as is reasonable in the circumstances" - r 20.26(5)(b) UCPR.
4. Counsel for the plaintiff submitted that the 21 days allowed for the acceptance of the offer was reasonable in the circumstances. The trial was approaching. The final form of the plaintiff's claim had been pleaded some time before. The defendant knew about the importance and effect of finalising the CAN on the day after the arrest. There was no submission for the defendant that the time allowed for the offer was not reasonable.
5. The plaintiff relies upon r 42.14 UCPR which is in the following terms: "42.14 Where offer not accepted and judgment no less favourable to plaintiff (1) This rule applies if the offer is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim no less favourable to the plaintiff than the terms of the offer. (2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim - (a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and (b) 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. Section 98(1) of the Civil Procedure Act 2005 (NSW) provides that "subject to rules of court and to this or any other Act… costs are in the discretion of the court". Thus it is mandatory for the court to take into account offers of compromise made under the UCPR, as the discretionary power of the court is subject to the rules of the court.
7. In considering whether a court should order "otherwise", the starting point is that offers made in accordance with r 20.26 UCPR carry "a presumptive entitlement to indemnity costs": Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344 at [6].
8. In Maitland Hospital v Fisher (No. 2) (1992) 27 NSWLR 721 at 724 the Court of Appeal said that the objects of the rule include: "1. To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff's real claim which can be placed before its opponent without risk that its 'bottom line' will be revealed to the court; 2. To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and 3. To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances, that party should ordinarily bear the costs of litigation."
9. In Morgan v Johnson (1998) 44 NSWLR 578 at 581-2, the Court of Appeal stated the following principles applicable to offers of compromise: "(1) The purpose of the rule is to encourage the proper compromise of litigation, in the private interests of individual litigants and the public interest of the prompt and economical disposal of litigation: Maitland Hospital at 725-726; Hillier at 421, 431. (2) The aim is to oblige the offeree to give serious thought to the risk involved in non-acceptance: Maitland Hospital at 724. (3) The prima facie consequence of non-acceptance will be that the rule will be enforced against the non-accepting party: Reeve at 102; Hillier at 422. This is because, from the time of non-acceptance 'notionally the real cause and occasion of the litigation is the attitude adopted by [the party] which has rejected the compromise': Maitland Hospital at 724; see also Hillier at 420. (4) Lying behind the rule is the common knowledge that 'litigation is inescapably chancy': Maitland Hospital at 725. For this reason, the ordinary provision is expected to apply in the ordinary case: ibid Reeve at 102-3. The mere fact that it was reasonable for the litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule: Reeve at 102. As Clarke JA expressed it in Houatchanthara at 2-3: 'The rule lays down the general principle that should be applied, and the order provided for in that rule should only be departed from for proper reasons which, in general, only arise in an exceptional case. It is clear that if the rule operates, the plaintiff will be significantly disadvantaged, but that disadvantage flows naturally from the risks of litigation. The idea behind the rule is to encourage settlement or compromise of proceedings, and more specifically, to encourage litigants to give serious consideration to the settlement of proceedings. Where an offer is made by a defendant to a plaintiff, the latter is put on notice that unless he or she accepts that offer, there is a significant risk that the order provided for by the rule may follow. In declining to accept the offer, the plaintiff undertakes the risk and the consequences that flow naturally from that risk.' (5) The discretion to displace the rule is a judicial one, requiring the private and public purposes of the rule to be borne in mind: Maitland Hospital at 725-726. Reasons must be given for 'otherwise ordering': Hillier at 419; Quach."
10. Counsel for the plaintiff submitted (MFI 7, par 6) that the judgment for $10,000 is "no less favourable" to the plaintiff than the terms of the offer and that unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for his costs on the following bases: 1. Assessed on the ordinary basis up to 20 July 2022. 2. Assessed on the indemnity basis from 21 July 2022 onwards.
11. By the date of the plaintiff's Offer of Compromise, the defendant was aware that the CAN, which was necessary to put the plaintiff before a bail court, had not been brought into existence on 2 May 2020, and had not been effectively filed with the court until the morning of 3 May 2020. The consequence was that the plaintiff remained in custody at the Surry Hills Office of Corrective Services overnight on 2 May 2020. The primary judgment dealt with this second alleged period of false imprisonment at [129]-[146].
12. While the plaintiff succeeded for a modest figure, the Offer of Compromise dated 20 July 2022 proposed settlement for the same modest figure, coincidentally, as was found in the primary judgment.
13. In my view the defendant should have given serious thought to the risks involved in non-acceptance of that offer. This is particularly so, when the defendant knew, by the date of the offer, that the police had taken no steps between noon on 2 May 2020 and 10.35am on 3 May 2020, to print the CAN and thus give the opportunity to the plaintiff of making a bail application to a magistrate. The trial had not started, and if proper consideration had been given to the offer, one of the considerations would have been that there was an enormous potential saving in costs by acceptance of the offer.
14. This can be demonstrated by the defendant's evidence in DX 12, the affidavit of Ms Whittle dated 7 December 2022. By the time the trial started on 22 August 2022, the defendant had incurred legal costs of $99,253.21 excluding GST. There is no evidence as to the quantum of the plaintiff's legal costs at that point. That figure alone demonstrates that the proceedings were likely to be protracted and expensive. So they proved to be. The defendant's legal costs between the first day of the trial and the end of the nine days of hearing, were a further $207,346.76 excluding GST. As the Court of Appeal has said, consideration should be given to offers of compromise "in the private interests of individual litigants". Of course, in the present case, there was a public interest in the legal costs incurred by the defendant, being the State of NSW.
15. It goes without saying that "litigation is inescapably chancy". In relation to the arrest of the plaintiff at the Centennial Park apartment, part of the evidence was that a police officer had sprayed capsicum spray directly into the face of the plaintiff. That fact alone meant that there was no certainty of outcome in relation to the alleged first period of false imprisonment.
16. Further, given that the trial was initially estimated to take five days, there would have been a great saving of public costs involved in this litigation had the plaintiff's Offer of Compromise been properly considered and accepted. While the plaintiff put forward three possible causes of action (two allegations of false imprisonment and one allegation of assault and battery), the offer to settle for the modest figure of $10,000 should have been seriously considered by the defendant, and in my view should have been accepted. This is not to use the benefit of hindsight by applying the result in the primary judgment. Rather, it is looking at the position at the time of the Offer of Compromise, recognising that: 1. While a large amount of money had been incurred in legal costs, there was much more to come. 2. There were inherent risks and uncertainties in this litigation, including the view the court might take about the veracity of the witnesses. 3. The plaintiff would only need to have a small measure of success to obtain a result "no less favourable" than $10,000.
17. The non-acceptance of the offer involved public expenditure of over $200,000 on further legal costs for the defendant, a presumably large legal bill for the plaintiff, and court time and public expense being committed to a lengthy trial, which ran for almost twice the predicted duration.
18. I find that the Offer of Compromise should result in an indemnity costs order in favour of the plaintiff from the date of the offer onwards. I see no reason to order otherwise.

Offers Made by the Defendant

1. There were four offers made by the defendant to the plaintiff (DX 12, pars 11, 13, 14 and 16). The offers can be summarised as follows: 1. On 8 July 2021 the defendant made a Calderbank offer for a verdict for the defendant with the plaintiff to contribute $10,000 towards the defendant's costs. 2. On 29 July 2021 the defendant served the plaintiff with an Offer of Compromise for a verdict for the defendant with each party to pay their own costs. 3. On 12 May 2022 the defendant served a Calderbank offer on the plaintiff for a verdict for the defendant with each party to bear their own costs. 4. On 21 July 2022 the defendant served the plaintiff with a Calderbank offer for a verdict for the defendant with the defendant to contribute $15,000 towards the plaintiff's costs.
2. It can be seen straight away that none of these offers should result in any order for costs in favour of the defendant, and nor should any of them provide a reason to otherwise order in relation to the plaintiff's Offer of Compromise dated 20 July 2022. The plaintiff obtained a more favourable result than each offer. It was reasonable to reject each offer.

Separate Issues

1. The defendant submits that the plaintiff succeeded only on one of his three causes of action, and then only for a modest amount. I accept the submission made for the defendant that the bulk of the trial was taken up in relation to the events inside the Centennial Park apartment and the allegation about false imprisonment within that apartment for a few minutes. The defendant submits that, on its analysis, only about 11% of the time, and thus the costs, were spent in relation to the successful second false imprisonment claim.
2. In the absence of the plaintiff's Offer of Compromise dated 20 July 2022, these submissions would have some force. However, given that the parties could have ruled a line under all claims a month before the trial commenced, it seems artificial in the extreme to now engage in some analysis of separate issues in formulating a costs order. No-one would have had to incur any costs after July 2022 if the offer made by the plaintiff had been accepted.
3. The fact that the plaintiff won on one issue and the defendant won on two issues is merely an illustration of the risks and chances to be taken in litigation, but it does not provide a reason, in these circumstances, for ordering some of the costs of defendant against the plaintiff.
4. In rejecting the modest figure offered by the Offer of Compromise made in July 2022, the defendant made a choice to, in effect, bat on for an outright victory, and ignore the significant risks involved in that course.

Personal Costs Order

1. The plaintiff submitted that there should be a personal costs order against the solicitors for the defendant. This case does not even come close to engaging the criteria for such an order. The submission is rejected.

Costs of Interlocutory Steps

1. On 10 November 2021 Judge Smith SC made costs orders in relation to interlocutory Notices of Motion. Those costs orders still stand and are unaffected by the orders I propose to make.
2. On 23 August 2022, after rejecting the defendant's application brought by a Notice of Motion filed on 18 August 2022, I reserved the costs of that motion. Over one day at the start of the trial was spent on the defendant's application. The defendant was successful in obtaining leave to amend its Defence, although leave was refused for some of the proposed paragraphs of the pleading.
3. Because I have come to the view that the plaintiff should have indemnity costs after the date of the Offer of Compromise, and because the costs of this interlocutory motion relate to events after that date, the costs order that I propose to make will include the costs of that motion.

Conclusion and Orders

1. The orders of the court in relation to costs are as follows: 1. Confirm the costs orders made on 10 November 2021 by Judge Smith SC. 2. Order the defendant to pay the plaintiff's costs in relation to the defendant's Notice of Motion filed on 18 August 2022. 3. Subject to Order (1), order the defendant to pay the plaintiff's costs of the proceedings assessed on the ordinary basis up to 20 July 2022 and assessed on the indemnity basis from 21 July 2022 onwards. 4. Order that the costs of this costs determination be paid by the defendant to the plaintiff, and that such costs are to also be assessed on the indemnity basis.

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