On 27 July 2018 the Court ordered:
"(1) Judgment for the plaintiff against the defendants in the sum of $290,123.96.
…
(3) Defendants pay the plaintiff's costs.
(4) Liberty to the parties to vary the costs order by a notice of motion filed by 3/8/18 returnable before P Taylor SC DCJ."
By notice of motion filed 3 August 2018, the plaintiff sought to amend the order to:
"instead order that the defendants pay the plaintiff's costs of the proceedings:
a. on an ordinary basis up to and including 2 August 2017, and
b. on an indemnity basis on and from 3 August 2017".
The plaintiff also sought an order "that the defendants pay interest on the assessed costs payable to the plaintiff, at the prescribed court rates, on and from the date that such costs were paid".
There was no issue about the application having been made in accordance with the leave granted.
[2]
Indemnity Costs
The plaintiff relies upon a letter dated 1 August 2017 sent by facsimile on that day at 5.06pm. It contained a "counter-offer pursuant to Calderbank v Calderbank" in the following terms:
"1 Verdict to be entered in favour of the plaintiff.
2 The parties execute a deed of settlement, to be drafted by us.
3 The defendants will pay the total amount of $375,000.00 inclusive of costs within 28 days of the defendants' written advice of their willingness to settle on this basis." (Emphasis in original and apostrophe corrected).
Ms Kirsty McLaren (in her capacity as executrix of the estate of Mr William... [2018] NSWDC 271 | Case summary | Zoe
The letter also provided that "it is not intended that there be a settlement agreement unless and until a deed is executed " and that the offer would "remain open for acceptance until 5pm on Wednesday 2 August 2017, after which it is withdrawn, unless the defendants advise in writing of their willingness to settle on this basis".
It might be thought that an offer requiring written acceptance in less than a day is not open for a reasonable period. That is not a point maintained by the defendants, perhaps because by 7.02pm on 1 August 2017, the offer had been rejected.
The defendants oppose the orders sought on two grounds: first, the offer was not capable of acceptance and secondly, because of the costs inclusive form of the offer. They also refer to some discretionary matters against such an order.
The discretion to award indemnity costs by reason of a Calderbank offer is enlivened if the offeree unreasonably rejected the offer. [1] This test requires that the offer be capable of acceptance. [2] Where the offer requires execution of a deed the terms of which have not been identified, it is not an offer capable of acceptance [3] so as to produce a valid agreement. Any asserted agreement would be void for uncertainty or incompleteness. [4] I do not regard the reference to the deed "to be drafted by us" as an offer embracing whatever deed the plaintiff drafted. If it did, it could not be unreasonable to reject an offer containing such a term.
To put the matter another way, the Calderbank letter did not contain an offer at all because it was not capable of acceptance so as to produce a binding agreement. The terms make it clear that the plaintiff did not intend to be immediately bound even if the defendants, in writing, manifested agreement with the proposal.
Further, the failure to identify the terms of the deed precluded comparison between the contents of the asserted offer and the judgment, [5] so it is impossible to say that the judgment is less favourable than the Calderbank proposal. That is a necessary pre‑requisite to a finding that rejection of the offer was unreasonable.
There is another reason why the plaintiff's offer was not established to be more favourable to the defendants and the judgment. The amount offered by the plaintiff was $375,000, substantially in excess of the judgment amount of $290,123.96, an amount which included interest for almost a year after the date of the offer, an amount of about $10,000. Thus, the judgment excluding costs is less favourable to the plaintiff by a sum of approximately $95,000.
The plaintiff argues that her offer included costs, which was the subject of a separate order in the judgment. That may be so, but it does not establish that the offer was more favourable than the judgment. The plaintiff submitted that the defendants admitted that the plaintiff's costs were $150,000 in a letter the following day. That letter made a Calderbank offer of $300,000 inclusive of costs in a form not dissimilar to the form of the plaintiff's letter. It said: "For the purpose of the offer, we allow $150,000 for the plaintiff's claim, and the balance for the plaintiff's costs".
The defendants' offer is admissible on the question of costs by reason of it being titled "Without Prejudice save as to costs" and because of the effect of s 131(2)(h) of the Evidence Act 1995. But as that offer was not accepted, it is no more than a proposal. I do not regard the inference that the defendants allowed $150,000 for costs in an offer as a concession that the party/party costs are that amount, especially in circumstances where the offer contained repeated references to not containing an admission.
Even if that allowance of $150,000 for costs was a concession of the amount of the plaintiff's costs, which I do not accept, there is no reason why it should be construed as a reference to party/party costs.
In the result, it is impossible to be satisfied at this stage that the sum proposed by the plaintiff is less than the sum awarded by reason of the orders in the judgment, or that such a fact was or should have been apparent to the defendants when they rejected the offer.
In Elite Protective Personnel Pty Ltd & Anor v Salmon, [6] the Court was concerned with an offer of $300,000 inclusive of costs compared to a judgment sum of $278,881.57. This difference of a little over $21,000 is far less than the adjusted difference (after a year of interest is deducted) in this case which, as I said, is about $95,000. Of course, the costs in Elite may well be very different and perhaps much less than in the present case, but the decision is instructive. The Court held that, "it is not appropriate to embark on an assessment of costs at the time the offer was made", [7] nor was the outcome such that the judgment result "clearly exceeded" the sum offered. An offer expressed inclusive of costs is not capable of ready comparison with the judgment. [8] It would be different if the costs inclusive figure was less than the judgment sum, and may be different if it was only a small amount more. [9]
The plaintiff referred to various passages in Sim Development Pty Ltd v Greenvale Property Group Pty Ltd, [10] a decision of the Court of Appeal in Victoria upholding an order of a trial judge to award indemnity costs where there was a costs inclusive offer and a proposed document to be executed. In that case, the Court of Appeal noted the importance of the offer explaining the content of the deed, [11] which was not a feature of the present case (despite the plaintiff's counsel's valiant attempt to rely on what the defendants, not the plaintiff, had said in their earlier offer about the content of a deed they would draft).
I note that this case involved an offer by a plaintiff which was not exceeded by the judgment, as was the case in Elite, but which was not the case in Sim where the relevant offer was made by the defendants. The latter decision in Sim did not reference the earlier decision in Elite.
Although the two intermediate appellate court decisions may emphasise different considerations, I am obliged by the principle of stare decisis to accord priority to Elite.
Finally, I refer to the passages in Elite at [111], [112] and [117], especially at [145] where Basten JA, apparently agreed to by the President at [7], said:
"Different considerations will arise if the plaintiff makes an inclusive offer, the matter proceeds to trial and the plaintiff obtains a judgment which is below the offer but arguably above the damages component. Again, applying the approach adopted in Smallacombe, the plaintiff will be unable to obtain a special order as to costs because he or she will be unable to establish (without an assessment of costs) that the offer has been bettered. On the other hand, if the plaintiff obtains a sum in excess of the offer, it is clear that the offer has been bettered and a special order for costs may be appropriate."
In circumstances where a costs-inclusive offer has been exceeded by the judgment sum, or so close that it cannot be argued that the judgment is less favourable to the offeror, the plaintiff may have an entitlement. This is not such a case. [12]
For all these reasons, I do not propose to award indemnity costs.
[3]
Interest on costs
Although there was no reference to interest on costs in the statement of claim, the defendants took no issue about the late application for interest on costs. They accepted that s 101 of the Civil Procedure Act 2005 now provides that if sought, interest on costs is usually awarded, but submitted that this rule was not applicable to the proceedings because an earlier form of the provision was in force at the time these proceedings were commenced. Even under the earlier rule, the defendants accepted that there was no impediment to the Court ordering interest on costs, and that although the order is discretionary, the circumstances for its refusal were rare. [13]
The defendants asserted that interest should be refused in this case because part of the plaintiff's claim was unsuccessful by reason of s 14 of the Limitation Act 1969, and also because the plaintiff does not establish the extent of time she has been out-of-pocket by reason of the payment of costs.
As to the first point, the defendants did not seek a reduction in the costs order because of one issue on which the plaintiff failed, nor do I think such a reduction would be appropriate. Even less is it a reason why the plaintiff should be denied interest on the costs ordered to be paid. [14]
As to the second point about the period the plaintiff has been out-of-pocket, the evidence indicates that the costs were paid on behalf of the plaintiff at an uncertain time but that as a result the plaintiff will have to pay a substantial amount more than the costs paid on her behalf. An order for interest on costs will have only a limited impact on that deficiency.
The order that the plaintiff seeks is interest from the date the assessed costs were paid. The date of payment will be apparent on any assessment and, in my view, is the appropriate start date for interest in accordance with Lahoud v Lahoud. [15] Interest should be payable on that percentage which the assessed costs bear to the total costs, calculated on each payment of costs from the date of that payment.
[4]
Costs of the application
As to the costs of the application, the plaintiff has only been partly successful and she has lost on a significant issue. Whilst I might have been minded to give the plaintiff some of these costs, the plaintiff submitted, and I accept, that the appropriate order should be that there be no order in respect of the costs of this application.
Accordingly, the Court makes the further orders that:
1. The defendants pay interest on the plaintiff's assessed costs on and from the date of payment of those costs.
2. For the purpose of calculating the amount of interest, the assessed costs of the plaintiff are the amount of those costs paid multiplied by the percentage the assessed costs bear to the total costs paid.
3. No order as to costs of this application.
[5]
Endnotes
Armstrong Strategic Management and Marketing Pty Limited v Expense Reduction Analysts Group Pty Ltd (No 10) [2017] NSWSC 16 at [48]; Commonwealth of Australia v Gretton [2008] NSWCA 117 at [113].
Armstrong at [49]; Vieira v O'Shea (No 2) [2012] NSWCA 121 at [10].
Armstrong at [50], [57].
Little v Saunders [2004] NSWSC 655 at [46], Feldman v GNM Australia Ltd [2017] NSWCA 107 at [60], [66].
Perry v Comcare [2006] FCA 33 at [55].
[2007] NSWCA 322.
At [150].
See Jojeni Investments Pty Ltd v Mosman Municipal Council (No 2) [2015] NSWCA 208 at [11].
As indicated in Elite at [150].
[2018] VSCA 201.
At [76].
See Elite at [145] and [150] per Basten JA.
See Outline of defendants' submissions dated 22 August 2018 at [58], Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 [80]-[81], Polias v Ryall (No 2) [2015] NSWSC 1 [22], see also Joseph Lahoud & Anor v Victor Lahoud & Ors [2006] NSWSC 126 at [82]-[83].
Galafassi v Kelly (No 2) [2014] NSWCA 239 at [22]-[23].
[2006] NSWSC 126 at [85].
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Decision last updated: 26 September 2018
Parties
Applicant/Plaintiff:
Ms Kirsty McLaren (in her capacity as executrix of the estate of Mr William George McLaren)
Respondent/Defendant:
Hugo White Pty Ltd trading as Sautelle White Lawyers