Neville v Lam

ex tempore Judgment 1On 21 May 2014 I published my principal judgment in these proceedings (Neville v Lam (No 3) [2014] NSWSC 607). 2I dismissed the proceedings and ordered the plaintiff to pay the defendant's costs. I drew the parties' attention to Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), r 36.16(3A), which enables the Court to set aside an order that has been entered provided that a notice of motion to that effect is filed within fourteen days after it is so entered (Neville v Lam (No 3) at [224]). 3Within the time contemplated by that rule the defendant filed a notice of motion seeking a variation of the order for costs, and substitution of an order that the plaintiff pay his costs on an indemnity basis from a certain date. 4The basis of the defendant's application was two offers he made to settle proceedings, each of which he contends constitutes an "offer of compromise" under the UCPR.

The First Offer 5The first offer relied upon was made on or about 7 February 2012. It was accompanied by a letter entitled "without prejudice other than as to costs". The letter stated that it enclosed an "offer of compromise", but did not refer to any particular provision of the UCPR. The offer was entitled "offer of compromise". It stated that the defendant offered to compromise the proceedings on terms comprising a verdict for the defendant with each party to pay their own costs. It also stated that the offer was open for acceptance for twenty-eight days. The offer did not make any reference to the UCPR, except for the words "UCPR 20.26" found in the top left hand corner of the document under the heading "Form 1". 6Senior Counsel for the plaintiff, Mr Bartley SC, submitted this was not an offer of compromise under the UCPR, and therefore did not give rise to any prima facie entitlement on the part of the defendant to be awarded indemnity costs under UCPR r 42.15A. 7In written submissions filed on behalf of the plaintiff a contention was made that it was not a valid offer of compromise because it included provision for each party to pay their own costs. 8As at the date the offer was made UCPR r 20.26 relevantly provided: "20.26 Making of offer (1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms. (2) An offer must be exclusive of costs, except where it states that it is a verdict for the defendant and that the parties are to bear their own costs. (3) A notice of offer: (a) must bear a statement to the effect that the offer is made in accordance with these rules, and (b) if the offeror has made or been ordered to make an interim payment to the offeree, must state whether or not the offer is in addition to the payment so made or ordered. ..." 9It follows from the terms of this rule that the contention advanced in written submissions is misconceived. The form of UCPR r 20.26(2) in existence as at February 2012 specifically contemplated an offer in the form of a verdict for the defendant with each party to pay their own costs. 10However Mr Bartley SC submitted that the offer did not comply with UCPR r 20.26(3)(a) in that it did not bear a statement to the effect that the offer was made "in accordance with these rules". 11In oral submissions Mr Bartley SC emphasised the mandatory words of UCPR r 20.26(3)(a). He pointed to the "strict" effect that a successful offer of compromise can have on a party's rights, namely that it can subject them to an order for indemnity costs, even perhaps in circumstances where their conduct in refusing the offer was not unreasonable. 12There is nothing in the offer that was made on or about 7 February 2012 or the accompanying letter which literally states that the offer was being made in accordance with the UCPR. However, in her written submissions counsel for the defendant, Ms Sandford, submitted that no such literal statement was required. Ms Sandford pointed to the following passage from the judgment of Ward JA in Jones v Trad (No 3) [2013] NSWCA 463 at [30]-[31] (with whom Emmett and Gleeson JJA agreed): "[30] Ms Nomchong submits that the 7 March letter was not a valid offer of compromise in accordance with the Rules because it did not state that it was an offer made pursuant to the Rules (referring to Uniting Church in Australia Property Trust (NSW) v Takacs (No 2) [2008] NSWCA 172 at [6]); because it did not involve a genuine offer of compromise; and because it was not more favourable than the ultimate result. [31] As to the formal requirements for a valid offer of compromise, there was no statement that this was an offer made pursuant to the Rules, though that would not necessarily preclude the application of the Rules. However, there is nothing in the letter to suggest that the appellants were there invoking the offer of compromise procedure under the Rules and it was not open for the mandatory 28 days so failed to comply strictly with the Rules." (emphasis added) 13Ms Sandford relied on the emphasised part of this passage. Her written submission suggested that this passage may represent a departure from the stricter view as to the need for compliance with r 20.26(3)(a) which seems to have prevailed at first instance in this Court (see for example Duncan-Strelec v Tate [2010] NSWSC 1256 at [8] per Nicholas J). 14The form of offer being addressed in Jones v Trad (No 3) was clearly non-compliant in that it was simply a Calderbank letter (see Jones v Trad (No 3) at [25]). Be that as it may, I consider it follows from the effect of this passage from the judgment of Ward J in Jones v Trad (No 3) that strict compliance with r 20.26(3)(a) is not necessary. However, this proposition is qualified by the next statement in the extract. It suggests that there is a need for at least a clear indication that the offeror is invoking the "offer of compromise procedure" being that found in that case in former Part 20 Division 4 of the UCPR (see also The Uniting Church v Takacs (No 2) [2008] NSWCA 172 at [7] per Hodgson JA). 15In my view the offer of 7 February 2012 lacked that quality. To simply invoke the phrase "offer of compromise" is not sufficient of itself to constitute substantial compliance with UCPR r 20.26(3)(a). The brief reference to the rule 20.26 in the top left hand corner under the heading "Form 1" may have hinted at reliance upon the procedure, but in my view that is not good enough. Of course experienced litigators may have understood what was sought to be conveyed, but that is not the test. Instead, on its face, the document must as a matter of substance indicate, in the words of Ward JA in Jones v Trad (No 3), that the "offer of compromise procedure" is being invoked. 16It follows that I do not accept that the offer of 7 February 2012 satisfied the UCPR requirements for a valid offer of compromise. Otherwise I note that the defendant did not rely on this offer as a form of Calderbank offer.