APPEALED FROM: Professional Health Partners Pty Ltd v Spiers [2009]TASSC 46

Procedure - Costs - Agreement as to costs - Acceptance of offer of compromise - Whether condition that action be discontinued required service of notice of discontinuance - Ambiguity in agreement construed against party which had control of its terms.

Heather v Vita Pacific Ltd [1999] TASSC 17; Woods v Gandini (unreported) BC9901627, Supreme Court of Queensland, 15 April 1999, referred to.

Procedure - Costs - Practice matters - Form, effect and settling of order - Whether entry of order that action be discontinued constitutes filing and service of notice of discontinuance.

Magistrates Court (Civil Division) Rules 1998 (Tas), r32.

Owners of the Cargo of the "Kronprinz" v Owners of the "Kronprinz" (the "Ardandhu") (1887) 12 App Cas 256; Fox v The Star Newspaper Company Ltd [1900] AC 19; Moon v Dickinson (1890) 63 LT 766; B and J Engineering v Darcozy (1984) 57 ALR 240, referred to.

Judgment Number: [2010] TASFC 1

PROFESSIONAL HEALTH PARTNERS PTY LTD v HELEN GILMORE SPIERS, ANDREW GLEN SPIERS, SPIZBIZ PTY LTD

1

Appeal allowed.

2

The orders made by the learned primary judge set aside.

3

The appeal from the learned magistrate upheld and the orders he made on 15 December 2008 set aside.

4

It is ordered that the third defendant pay the claimant's taxed costs of the proceedings before the magistrate and the proceedings before the primary judge.

PROFESSIONAL HEALTH PARTNERS PTY LTD v HELEN GILMORE SPIERS, ANDREW GLEN SPIERS, SPIZBIZ PTY LTD

1 The outcome of this appeal turns on the construction to be given to an agreement constituted by an offer of compromise made in a proceeding in the Magistrates Court (Civil Division) and the acceptance of that offer.

2 The offer of compromise was relevantly as follows:

"The Magistrates Court of Tasmania

Civil Division

Form 11

OFFER OF COMPROMISE

ACTION No B60042/07

At MAGISTRATES COURT

...

CLAIMANT: PROFESSIONAL HEALTH PARTNERS PTY LTD

FIRST NAMED DEFENDANT: HELEN GILMORE SPIERS

To: The Claimant

TAKE NOTICE that the First and Second named Defendants offer the sum of Five thousand dollars ($5,000.00) together with costs to be agreed or taxed in full and final settlement of the Claimant's claim to the Claimant in this action.

The amount stated does not include an amount in respect of costs.

This Offer is subject to the following conditions:

1 That the Claimant discontinue any claim action, suit or demand against the Third named Defendant, Spizbiz Pty Ltd, relating to the matters referred to in the Action B07 60042.

Filed by or on behalf of The Defendants, whose address for the service of documents is:

Bartletts Barristers and Solicitors

..."

3 In the hope of reducing confusion in these reasons, I will refer to the parties as they are described in the documents that constitute their agreement, rather than as they are described in the title to this appeal.

4 The offer was accepted by a letter from the claimant's solicitors to the defendants' solicitors, dated 14 January 2008, which, omitting formalities, was as follows:

RE: PROFESSIONAL HEALTH PARTNERS PTY LTD v HELEN SPIERS, ANDREW SPIERS AND SPIZBIz PTY LTD

We are instructed that our client will accept the Offer of Compromise dated 17 December 2007.

Could you please prepare a Deed of Release in relation to the matter.

We will forward our clients Bill of Costs shortly.

Yours faithfully,

McGRATH & CO"

5 It is to be noted that the footer to the offer of compromise stated that it was filed on behalf of the defendants. It has been accepted by all concerned that the offer of compromise was made on behalf of all of the defendants and that it was accepted by the claimant as such.

6 On one reading of the letter accepting the offer, the acceptance was equivocal as it requested a deed of release. That request was not complied with or pursued, and since the letter of acceptance, the parties have proceeded on the basis that they were bound by the agreement constituted by the acceptance of the offer of compromise, albeit that they are not in accord about what that agreement means. This is demonstrated by correspondence between the solicitors for the parties that followed the acceptance of the offer. In purported furtherance of the agreement, the solicitors for the claimant requested the solicitors for the defendants to sign an application for the following consent orders:

"The Court Orders that:

1 Judgment be entered for the Claimant against the First and Second Named Defendants for the sum of $5,000.00 together with costs to be agreed or taxed.

2 The Claimant discontinue the claim against the Third Named Defendant with no orders as to costs."

7 The solicitors for the defendants responded to that request by altering order 2 to read as follows:

"2 The Claimant discontinue the claim against the Third Named Defendant and the Claimant pay the costs of the Third Defendant to be agreed or taxed."

8 This disagreement between the parties' solicitors about the payment of the third defendant's costs of the action was not resolved, and culminated in the solicitors for the claimant writing to the Registrar of the Court advising as follows:

"This matter settled pursuant to an Offer of Compromise filed by the Defendants on the 17th of December 2007 and accepted by the plaintiff by letter dated 14 January 2008. Copies of which are enclosed.

Pursuant to Rule 91 could you please file the enclosed Judgment."

9 The Magistrates Court (Civil Division) Rules 1998 ("the Rules"), r91, provides:

"(1) A party may file and serve a judgment in the terms of an accepted offer of compromise.

(2) A party may request a registrar to enter judgment in the terms of the accepted offer and the registrar is to enter it accordingly."

10 Consistent with the request of the solicitors for the claimant, the Registrar entered the judgment sought. Omitting formal parts, it was entered in the following terms:

1 The First Named Defendant and the Second Named Defendant pay to the Claimant the sum of $5,000.00 together with costs to be agreed or taxed.

2 The Claimant discontinue any claim, action, suit or demand against the Third Named Defendant, Spizbiz Pty Ltd, relating to the matters referred to in the Action B07 60042."

11 In order to better explain the dispute between the parties, it is necessary to set out the Rules r32 and r89, which are as follows:

"32 Discontinuance of action

(1) A party may discontinue an action commenced by that party at any stage of the proceedings by notice in writing filed and served on any other party.

(2) Unless the parties agree otherwise, costs of the action are to be paid by the party discontinuing the action.

...

89 Offer of compromise

(1) A party may file and serve on any other party an offer of compromise before final judgment.

(2) The offer may be made subject to any specified condition.

(3) The offer may relate to liability, quantum, matters in issue in the action or any order, remedy or relief sought.

(4) An offer of compromise is to specify -

(a) whether the offer includes costs and interest; or

(b) the amount offered for costs and interest up to the date of the offer.

(5) If the offer does not comply with subrule (4) -

(a) the offer is taken to refer only to the sum of money claimed in the action; and

(b) the party accepting the offer may apply for costs and interest in addition to the sum of money comprised in the offer."

12 As can be seen, r 89(2), expressly authorises the making of an offer "subject to any specified condition". The defendants' offer included a condition that the claimant discontinue any claim action, suit or demand against the third defendant, and this condition was agreed to by the claimant. The judgment which the claimant applied for and obtained, included that condition in the form of an order. In consequence of that order, in brief summary, it was contended on behalf of the third defendant that the claimant had discontinued its action against the third defendant, pursuant to r32(1), and that by reason of r32(2), the claimant was obliged to pay the third defendant's costs of the action. The third defendant successfully applied to a magistrate for an order to the effect of this contention, and the claimant unsuccessfully appealed to a judge of this Court against the magistrate's order. The learned magistrate, in effect, found that by applying for, and obtaining, the consent judgment, the claimant had discontinued the action against the third defendant, pursuant to r32(1), and that, in consequence, the claimant was obliged to pay the third defendant's costs pursuant to r32(2).

13 The learned primary judge did not find it necessary to reach a concluded view on the correctness of this finding made by the learned magistrate, as her Honour arrived at the same result as the learned magistrate on the basis of her construction of the agreement constituted by the acceptance of the offer of compromise.

14 In my view, her Honour was correct in focussing on the construction of that agreement. However, as I have reached a different conclusion to her Honour on that construction, it is necessary for me to address the learned magistrate's finding that the entry of judgment by the claimant constituted the filing and service of a notice of discontinuance for the purposes of r32. In the course of announcing his reasons for finding as he did, the learned magistrate said: "It could not be argued that the proceedings against the third-named Defendant have not been discontinued; it has been evidenced in writing and filed. It is assumed that service has been effected."

15 No form for a notice of discontinuance is prescribed by the Rules. In the absence of a prescribed form, and in the light of r10(b), r44(1) and r151(3), it would be prudent to adopt the form for a notice of discontinuance prescribed by the Supreme Court Form Rules 2000, Form 24. This course is not, however, necessary. What is required for the purpose of r32(1), where a party chooses to "discontinue an action commenced by that party" is:

•

a notice in writing from the discontinuing party to the other the party or parties that the discontinuing party discontinues that action;

•

the filing of that notice with the registry; and

•

the service of that notice on the other party or parties.

16 For a discontinuance to be said to be pursuant to r32(1), it is essential that the above elements be satisfied. In Fox v The Star Newspaper Company Ltd [1900] AC 19, the House of Lords in effect went so far as to treat a rule that provided for the delivery of a notice of discontinuance as if it was a code. See also Tamsett v Conditionaire Engineering Pty Ltd [1978] 2 NSWLR 511 at 513 - 514, Schipp v Herfords Pty Ltd [1975] 1 NSWLR 412 at 423 and Humphrey v Collier [1946] VicLawRp 60; [1946] VLR 391 at 404. It is to be remembered that there are some unique aspects to a discontinuance pursuant to r32. A bare discontinuance, of the nature that the rule provides for, is to be distinguished from an agreement to discontinue a proceeding, which involves agreeing not to pursue the proceeding or a similar proceeding now or in the future. In this context there are three distinguishing aspects to a discontinuance pursuant to r32(1). They are:

1 That the discontinuance only applies to the action commenced by the party who provides the notice.

2 That the discontinuance does not bar the discontinuing party from again taking proceedings for the same cause of action against the other party or parties served with the notice.

3 That the discontinuance renders the discontinuing party liable to pay the costs of the other party or parties.

17 The authority for the rule that a discontinuance does not bar further proceedings for the same cause of action is the decision of the House of Lords in the Owners of the Cargo of the "Kronprinz" v Owners of the "Kronprinz" (the "Ardandhu") (1887) 12 App Cas 256 at 259 - 260, 262. Similarly, the withdrawal of a proceeding, without more, does not bar fresh proceedings in relation to the same matter, Lawson v Wallace [1968] 3 NSWR 82 at 86. It is not uncommon for rules of court, which provide for the discontinuance of an action, to contain an express provision reiterating the rule from Kronprinz. See, for example, the Supreme Court Rules 2000, r379(1), which governs this Court, the Supreme Court (General Civil Procedure) Rules 2005 (Vic), r25.06 and the Uniform Civil Procedure Rules 2005 (NSW), r12.3(1).

18 Returning to the essential elements of a notice of discontinuance for the purposes of r32(1); the notice that the party discontinues the action must be just that. A letter stating that a party would discontinue an action and would send a notice to that effect is insufficient; Moon v Dickinson (1890) 63 LT 766. In this case the judgment is not, and does not purport to be, notice from the claimant to the third defendant that the claimant discontinues its action against that defendant. The relevant portion of the judgment is not a notice but an order, and an order in significantly wider terms than such a notice. The order is that the claimant discontinue any claim action, suit or demand against the third defendant relating to the matters referred to in action B07 60042. Even if the judgment contained a notice that satisfied r32(1), as acknowledged by counsel for the third defendant, there is no evidence that it was served. For the purposes of r32(1) it is not sufficient to simply file a notice of discontinuance; B and J Engineering v Darcozy (1984) 57 ALR 240. It is within my experience that a party who filed but did not serve a notice of discontinuance has, following a change of mind, successfully applied to the Court under the predecessor to the Supreme Court Rules 2000, r29(1), for leave to remove the notice from the registry. (Incidentally, leave to remove a notice has also been granted when a notice was filed and served in error, Fowler v Renmark and Paringa District Hospital Inc (1988) 51 SASR 506.) For these reasons I am satisfied that the learned magistrate erred in concluding that the entry of judgment, in the manner and in the terms in which it was entered in this case, amounted to the filing and service of a notice of discontinuance of the action pursuant to r32.

19 As mentioned, the learned primary judge did not find it necessary to determine whether or not the learned magistrate had erred in finding as above, as her Honour formed the view that the claimant was obliged to file a notice of discontinuance pursuant to the agreement constituted by its acceptance of the offer of compromise. With reference to her construction of the offer of compromise, her Honour said in Professional Health Partners Pty Ltd v Spiers [2009] TASSC 46, at par20:

"... in my view there is no ambiguity or uncertainty in the terms of the offer of compromise read as a whole. It is clear, particularly having regard to the lack of any properly pleaded cause of action against the third defendant, that the offer made was that the first and second defendants would pay the claimant $5,000, plus its costs, on condition that it discontinued the action against the third defendant. Given their connection to the third defendant, and given all defendants had the same solicitor, it is unlikely that the first and second defendants would, by an offer, seek to end the proceedings against themselves but not the third defendant. The term in the offer was 'discontinue', a term which has a particular meaning in the context of court proceedings. The offer did not say that the claimant was to release the third defendant from any claims it might have against it. The requirement was that the claimant 'discontinue'. That is clearly how the offer should be construed."

20 With respect, I do not agree. The relevant condition of the offer of compromise was: "That the Claimant discontinue any claim action, suit or demand against the Third named Defendant, Spizbiz Pty Ltd, relating to the matters referred to in the action BO7 60042". In the process (described as a Claim) that initiated the claimant's action against the defendants, the claimant pleaded that it had reached an agreement with the first and second defendants to provide locum services for them, and that they had breached that agreement. Although the third defendant was named as a defendant in the Claim and it included a plea that the first and second defendants were the directors of the third defendant, no cause of action was in fact pleaded in the Claim against the third defendant. The Claim concluded with a demand, apparently made against all three defendants, for the sum of $13,828.42, together with damages for breach of contract and costs. As I read the Claim, the claimant expected the defendants to deny any agreement between the claimant and the first and second defendants, and to assert that such agreement as was made, was made between the claimant and the third defendant. If so, that expectation was sound, as that is how the defence of each defendant was pleaded. The offer of compromise required the discontinuance of any "claim action, suit or demand ... relating to the matters referred to in the action". A matter referred to in the pleadings exchanged in the action was the agreement that the defendants alleged had been made between the claimant and the third defendant alone. The condition in the offer of compromise was drawn sufficiently widely to ensure that the claimant's obligation to discontinue related to both of the agreements referred to in the pleadings, that is, the agreement that the claimant alleged it had made with the first and second defendants, and the agreement the defendants alleged had been made between the claimant and the third defendant alone. Moreover, the condition was drawn so as to protect the third defendant from "any claim action, suit or demand" relating to the matters specified. Insofar as that protection is expressed to extend to processes other than the action, that is, any claim, suit or demand, it is clear that the condition is intended to protect the third defendant from any future claim, suit or demand. Counsel for the third defendant acknowledges that this is the scope of the protection provided by the condition. Its effect is to bar the claimant from pursuing the third defendant in relation to either of the pleaded agreements in the future. This bar bears no comparison with the benefit, essentially confined to costs, that the third named defendant would have obtained from a condition that the claimant discontinue the action by filing and serving a notice of discontinuance. As mentioned, such a discontinuance is no bar at all against proceedings for the same cause of action. Even if it was, it would not have served the interests of the third defendant. That defendant needed to be protected from a claim against it, based on the agreement that the defendants, by their defences, asserted had been made between the claimant and third defendant alone. Against this background it can be seen that the words "discontinue any" in the condition were intended to mean, and were understood to mean, "not now and in the future pursue any". On this basis there is no warrant for construing the term "discontinue" in the condition as requiring the filing and service of a notice of discontinuance. That requirement would not have provided the third defendant with the protection it needed and sought by the condition imposed, albeit that such a requirement would have entitled the third defendant to costs.

21 With respect, to my mind, there is no ambiguity about the construction of the condition in the offer of compromise. It provided the third defendant with a bar, now and in the future, against the claimant pursuing any claim action, suit or demand against the third defendant relating to the matters referred to in the action. If this condition was ambiguous I would construe the ambiguity against the third defendant and hold that the condition did not require the claimant to file a notice of discontinuance pursuant to r32. As explained in Heather v Vita Pacific Ltd [1999] TASSC 17, at par6, with reference to the offer of compromise that was the subject of that decision:

"If the defendant intended to restrict its exposure to costs to a date prior to the plaintiff's acceptance of its offer, it could easily have done so. The offer could have specified that the costs would only be paid to the date of the offer, the date of service of the offer, the date upon which the hearing of the action was due to start, or any other date. That the defendant did not specify a date, notwithstanding that it was well aware that the plaintiff's costs could increase substantially, suggests that the offer was intended to be an offer to pay costs to the date of its acceptance. I construe the agreement accordingly. In arriving at this construction, I take into account that it was the defendant who prepared the offer and had complete control over its terms. The terms of the agreement which resulted from the plaintiff's acceptance of the offer were not negotiated, they were the terms stipulated by the defendant. In such a situation it is not unreasonable to construe an ambiguity in the agreement against the party who had complete control over its terms."

See also: Woods v Gandini (unreported) BC9901627, Supreme Court of Queensland, 15 April 1999, per Jones J. In this case, if the third defendant had not required the bar against future proceedings that it obtained, but simply required the benefit of an order for costs, it would have been easy to have drawn a condition to that effect, for example, a condition:

•

that the claimant's action against the third defendant be dismissed with costs; or

•

that the claimant file and serve a notice pursuant to r32 discontinuing its action against the third defendant.

If the third defendant had required the benefit of both the bar it obtained and an order for costs, it would have been equally easy for it to have added a provision to the effect of either of the above provisions to the condition it sought.

22 For these reasons, I would allow this appeal. If the appeal is allowed, the orders made by the learned primary judge should be set aside, the appeal from the learned magistrate should be upheld, and the orders he made on 15 December 2008 should be set aside. In lieu of the costs orders set aside, it should be ordered that the third defendant pay the claimant's taxed costs of the proceedings before the magistrate and the proceedings before the primary judge.

PROFESSIONAL HEALTH PARTNERS PTY LTD v HELEN GILMORE SPIERS, ANDREW GLEN SPIERS, SPIZBIZ PTY LTD

23 I agree with the reasons for judgment of Evans J and with the orders which his Honour has proposed.

PROFESSIONAL HEALTH PARTNERS PTY LTD v HELEN GILMORE SPIERS, ANDREW GLEN SPIERS, SPIZBIZ PTY LTD

24 I agree with the reasons of Evans J and the conclusion he has reached that the appeal should be allowed. I also agree with the orders he proposes.