Roads Corporation v Love [2010] VSC 581

Roads Corporation v Love [2010] VSC 581 - VSC 2010 case summary — Zoe

[44]

26.08 Costs consequences of failure to accept

(1) This Rule applies to an offer of compromise which has not been accepted at the time of verdict or judgment.

(2) Where an offer of compromise is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains a judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled -

(a) if the claim of the plaintiff is for damages for or arising out of death or bodily injury, to an order against the defendant for the plaintiff's costs in respect of the claim taxed on an indemnity basis;

(b) in the case of any other claim of the plaintiff, to an order against the defendant for the plaintiff's costs in respect of the claim up to and including the day the offer was served taxed on a party and party basis and for the plaintiff's costs thereafter taxed on an indemnity basis.

(3) Where an offer of compromise is made by a defendant and not accepted by the plaintiff, and the plaintiff obtains a judgment on the claim to which the offer relates not more favourable to the plaintiff than the terms of the offer, then, unless the Court otherwise orders -

(a) the plaintiff shall be entitled to an order against the defendant for the plaintiff's costs in respect of the claim up to and including the day the offer was served taxed on a party and party basis; and

(b) the defendant shall be entitled to an order against the plaintiff for the defendant's costs in respect of the claim thereafter taxed on a party and party basis.

(4) For the purpose of paragraph (3), where the offer of compromise was served on the first or a later day of the trial of the proceeding, then, unless the Court otherwise orders -

(a) the plaintiff shall be entitled to the plaintiff's costs in respect of the claim to the opening of the court next after the day on which the offer was served taxed on a party and party basis; and

(b) the defendant shall be entitled to the defendant's costs in respect of the claim thereafter taxed on a party and party basis.

(5) Where a plaintiff obtains judgment for the recovery of a debt or damages and -

(a) the amount for which the Court pronounces judgment includes an amount for interest or damages in the nature of interest; or

(b) by or under any Act the Court awards the plaintiff interest or damages in the nature of interest in respect of the judgment amount -

for the purpose of determining the consequences as to costs referred to in paragraphs (2) and (3) the Court shall disregard so much of the amount recovered by or awarded to the plaintiff for interest or damages in the nature of interest as relates to the period after the day the offer of compromise was served.

(6) For the purpose only of paragraph (5), the Court may be informed of the fact that the offer of compromise was served, and of the date of service, but shall not be informed of its terms.

(7) Paragraphs (2) and (3) shall not apply unless the Court is satisfied by the party serving the offer of compromise that that party was at all material times willing and able to carry out the party's part of what was proposed in the offer.

(8) Where the plaintiff obtains judgment for the recovery of a debt or damages, and the amount of the debt or the damages was not in dispute, but only the question of liability, paragraph (2) shall not apply unless the Court is satisfied that the plaintiff's offer was of a genuine compromise.[19]

[58]

The Court of Appeal in Hazeldene's Chicken Farm considered the operation of a Calderbank letter. It was not invited by the facts of the case to consider the operation of an offer of compromise made under Order 26.

A Calderbank offer to settle a proceeding is different from an offer of compromise served in accordance with Order 26. In Foster v Galea (No.2) ("Foster"), Byrne J [at 7] contrasted the "fairly mechanical regime of Rule 26.08" with the "more flexible one of discretion as to costs" which exists with an offer of the Calderbank type. Byrne J further observed in Foster, an offer of compromise which fails to satisfy the formal requirements of r.26.02 and r.26.03, may nevertheless be sufficient to be considered as an offer to the effect of a Calderbank offer, in which case the approach to its consideration will be governed by the principles of Hazeldene's Chicken Farm.

The more inflexible costs regime established by Order 26 is emphasised by r.63.16 which provides in relation to making a costs order following service of an offer of compromise:

Where an offer of compromise is served and the offer has not been accepted at the time of verdict or judgment, liability for costs shall be determined in accordance with Rule 26.08.

Rule 63.16 limits the discretion of the Court as to costs and imposes a mandatory requirement to apply r.26.08 in accordance with its terms where an offer of compromise is served and the offer has not been accepted at the time of verdict or judgment.

The essential differences between a Calderbank letter and an offer of compromise made under Order 26 are twofold.

In the first place, unlike the position with a Calderbank letter, rejection by a defendant of an offer of compromise made by a plaintiff does not merely give rise to a matter to which the Court should have regard when considering whether to order indemnity costs. Provided the threshold elements are made out, namely: the service of an offer of compromise which complies with Order 26; the non-acceptance of the offer at the time of verdict or judgment; and the obtaining by the plaintiff of a judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer; the plaintiff becomes entitled under r.26.08(2) to a special order for costs pursuant to either r.26.08(2)(a) or (b), whichever is applicable. In other words, in making a claim for a special costs order under r.26.08(2), the plaintiff who is successful at trial in equalling or bettering the offer of compromise which has not been accepted by an unsuccessful defendant, starts from a position of an entitlement to costs on a special basis, once the threshold matters have been established.

In the second place, although as is made clear in Hazeldene's Chicken Farm, a Calderbank letter does not give rise to any presumption that the party rejecting the offer should pay the offeror's costs on an indemnity basis if the offeree receives a less favourable result at trial, the effect of r.26.08 is quite different. In particular r.26.08(2) gives rise to an entitlement to an award of costs in favour of a plaintiff on the special basis provided for, "unless the Court otherwise orders". This creates a regulatory presumption permitting costs to be awarded in this manner, subject to the Court being satisfied that special circumstances exist which justify the Court's discretion being exercised in a manner which departs from the Rule. Such circumstances may include, but are not necessarily limited to, considerations as to whether the rejection of the offer was reasonable.

[Footnotes omitted]

[87]

There are special considerations applying to indemnity cost orders against litigants in person, as the following authorities disclose.

In Bhagat v Royal and Sun Alliance Life Assurance Australia Ltd, Hodgson CJ in Eq observed:

"... I accept that a court does have to make allowances for the position of litigants in person, and to try to ensure that such a litigant does not lose out because of lack of expertise; although there is a limit to what the Court can do in that regard, while still remaining an impartial determinant of a dispute. The Court may in those circumstances refrain from making orders against litigants in person for conduct that might be considered as justifying orders for costs against represented litigants. By the same token, litigants in person can cause great hardship and expense to other parties, through making allegations and claims that lawyers would recognise as allegations and claims that could not reasonably or even properly be made, and through making proceedings much longer and much more expensive than they would otherwise be, by not focusing accurately on the real issues in the case. Conduct of that nature by legally represented parties would often lead to orders for indemnity costs. Litigants in person may escape the consequence of indemnity costs, but I do not think that the circumstance that a party is a litigant in person is a ground for displacing the ordinary result that costs follow the event."

In Bhagat v Global Custodians Ltd, the Full Court of the Federal Court (constituted by O'Loughlin, Whitlam and Marshall JJ) observed Hodgson CJ in Eq did not say that litigants in person always escape the consequence of indemnity costs and declined to interfere with the decision of the trial judge to order indemnity costs against the unrepresented litigant. These judgments were cited with approval by Kenny J in Ogawa v The University of Melbourne (No 2).

In Spalla v St George Motor Finance Ltd (No 8), Kenny J said:

"From time to time the courts overcome their reluctance to order indemnity costs against a self-represented litigant: see, for example, Bhagat v Global Custodians and Ogawa v The University of Melbourne (No 2)."

Further in Salfinger v Niugini Mining (Australia) Pty Ltd (No 4), Heerey J said as follows:

"In Spalla v St George Motor Finance Ltd (No 8), Kenny J recently noted that courts have from time to time overcome a reluctance to order indemnity costs against self-represented litigants: Bhagat v Global Custodians and Ogawa v The University of Melbourne (No 2). Kenny J considered the competing interests in determining whether to make an award of indemnity costs against a self-represented litigant. A lack of knowledge of the law, unfamiliarity with court practice and a lack of objectivity are common traits of unrepresented litigants. A person's ability to redress should not depend on lawyerly skills or an ability to pay for legal representation. However, the Court owes a duty to all parties to ensure that the trial is conducted in a fair and timely fashion and without significant difficulties and unnecessary expense for the parties against whom an unrepresented litigant proceeds: see Bhagat v Royal and Sun Alliance Life Assurance Australia. In this instance the expense, delay and difficulties caused by the applicant's fraudulent and unreasonable behaviour overshadow any limitations that arose from his status as self-represented."

At a glance

Court

Decision date

Before

Source

Judgment (226 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (4)