24 If the purpose of a Calderbank letter is to offer to bring litigation to an end it should be couched in such terms as enable the offeree to make a carefully considered comparison between the offer made and the ultimate relief it is seeking in all its aspects. An offer inclusive of costs confuses this issue as it puts the offeree in a position of not being able to determine the appropriate amount to attribute to the money sum it is seeking. Although an estimate can be made of what the offeree's taxed party and party costs might be at the time of the offer, the offeree is not being offered the opportunity to have those costs assessed by taxation in default of agreement, in addition to being made an offer to settle its claim. As a matter of principle, if a party is to be put at risk of losing its costs, even if ultimately successful, by not accepting an offer made to settle or compromise the proceeding at a point of time prior to trial, that risk should only be imposed if the party is given the opportunity, at the time of the offer, to obtain its taxed costs to date in addition to the offer made, knowing that it has been able to make a careful comparative assessment of the value of the offer as against the ultimate relief sought to be obtained.
10 There are two problems with the respondents' offer by letter dated 15 March 2001 which preclude me from relying upon it to displace a customary costs order in accordance with the Calderbank principles. First, this Court is not in a position to determine whether or not the offer has been bettered: it is effectively an offer to settle two sets of proceedings, and there is no evidence before this Court as to the outcome of the District Court proceedings; the costs incurred; or even the amount in dispute. It may be that an offer straddling unrelated proceedings in two jurisdictions is ipso facto ineffective as a Calderbank letter; neither party referred the court to any authority on this subject. In any event, the absence of evidence makes it impossible to assess whether or not the applicant has achieved a more or less favourable result than that contained in the offer.
11 Secondly, contrary to the principles enunciated by Goldberg J, the offer did not give the applicant the opportunity to obtain his taxed costs to date (in either proceedings) in addition to the amount being offered. In McKerlie v State of New South Wales (No2) [2000] NSWSC 1159 the Supreme Court of New South Wales held expressly that an offer to settle a case by dismissing it with no order as to costs did not enliven the consequences of a Calderbank letter. Whether an independent agreement to pay money (in the form of a proportion of the claim plus costs), to be noted by the Court but not to take the form of Court orders, is sufficient to distinguish the present offer from that considered by the Supreme Court in McKerlie v State of New South Wales (No2) need not be determined. I tend to the view that it would not.
12 For these reasons it is unnecessary for me to consider whether or not the applicant's failure to accept the offer was so unreasonable that the respondents should be entitled to their costs from the date of the offer. Indeed the lack of evidence which precludes an assessment of whether or not the applicant achieved a result more favourable than the offer also precludes an assessment of whether or not he acted reasonably in failing to accept it.
The Offer of Compromise
13 Rule 216(6) of the Industrial Relations Commission Rules 1996 provides:
(6) Where an offer is made by a respondent and not accepted by the applicant, and the applicant obtains an order on the claim to which the offer relates not more favourable than the terms of the offer, then, unless the Commission otherwise orders, the applicant shall be entitled to an order against the respondent for costs in respect of the claim up to and including the day the offer was made, assessed on a party and party basis, and the respondent shall be entitled to an order against the applicant for costs in respect of the claim thereafter, assessed on a party and party basis.
14 I do not accept the applicant's submissions that the judgment handed down was more favourable to him than the offer of compromise because, in essence, he considers that he has now been publicly vindicated and the respondents have not "had the last word". Acceptance of this argument would clearly undermine the public policy behind offers of compromise to encourage parties to give serious consideration to reasonable offers of settlement.
15 Authorities pertaining to offers of compromise in other jurisdictions were considered by the New South Wales Court of Appeal in Morgan v Johnson (1998) 44 NSWLR 578. Mason P extracted the following principles from the relevant case law at 581:
The leading cases on the Supreme Court rule are Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 and New South Wales Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100 (" Reeve "). The leading cases on the corresponding provision in the District Court rules are Hillier v Sheather (1995) 36 NSWLR 414, Quach v Mustafa (Court of Appeal, unreported, 15 June 1995) and Houatchanthara v Bednarczyk (Court of Appeal, unreported, 14 October 1996). The following principles can be extracted:
(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 725-6; 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 p4:
"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 725-6. Reasons must be given for "otherwise ordering": Hillier at 419; Quach .
16 Mason P further held in Morgan v Johnson that, generally, exceptional circumstances would be required to justify a departure from the rule.
17 A number of decisions have held that such a departure will not be justified on the basis that the judgment amount only marginally exceeds the amount of the offer: in Connor v Hatgis (No 2) (CA(NSW), Kirby P, Priestley and Powell JJA, 7 December 1995, unreported, BC9501810) the difference was $4000 and in Houatchanthara v Bednarczyk the difference was only $750. Accordingly, even if I accepted the applicant's submission that the offer should be measured against the judgment figure, incorporating as it does interest over an additional fifteen months, the fact that the offer was only $2,406.49 more than the judgment sum is insufficient to justify a departure from the rule. In fact, I accept the respondents' submission that interest should be calculated over the same period to yield a valid comparison, making the relevant difference $16,000.
18 The applicant has not persuaded me that his failure to accept the Offer of Compromise was reasonable, let alone persuaded me of any exceptional circumstances to justify a departure from the rule. The fact that the offer did not give him any security in relation to costs of proceedings in the Licensing Court is irrelevant: nor did the judgment handed down in this matter, nor could it have. It is difficult to see the relevance (far less the probative value) of the applicant's submission that the normal operation of Rule 216(6) should be displaced because the respondents consistently denied that an agreement had been reached at the Meeting.
19 Accordingly, I accept the respondents' submission that the applicant should pay the first and second respondents' party/party costs from 4 July 2001.
Apportionment
20 It remains to consider liability for costs incurred before 4 July 2001. The Court recently considered the principles governing apportionment of costs in Maurice Michael O'Sullivan v The Crown in the Right of the State of New South Wales (Department of Education and Training) [2003] NSWIRComm 303 at [198]:
However, costs may be apportioned in certain circumstances. The relevant general principles in that regard are contained in the judgment of Toohey J in Kimberley John Hughes v Western Australian Cricket Association (Inc) and Ors (1986) ATPR 48, subject to the qualifications in Cretazzo v Lombardi (1975) 13 SASR 4, namely:
(a) Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order;
(b) Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which it has failed;
(c) A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them. In this sense, "issue" does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law; and
(d) Notwithstanding the above, the interests of justice may not be served if parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case.