DISPOSITION
6 The letter of 10 May 2004 was faxed and received on 10 May 2004 at 3.43pm. The offer was open for acceptance only to 5pm on 11 May 2004 (the day before the date fixed for hearing).
7 By UCPR Pt 42 r13, the consequences laid down for offers of compromise under the Rules require that the offer of compromise be made under UCPR Pt 20 r26. This offer of compromise was not so made as it was in each case inclusive of costs, contrary to UCPR Pt 20 r26.
8 UCPR Pt20 r26(7) also mandates that where an offer, as here, is limited as to the time it is open for acceptance it must, being an offer made less than two months before the date set down for trial, be left open for such time as is reasonable in the circumstances. The matter was listed for hearing on 12 May 2004. As it transpired, it was not reached that day so the matter was re-listed and heard on 28 to 30 July 2004.
9 The appellant's submissions in support of his application for indemnity costs can be summarised as follows:
(a) The letter containing the offer is admissible on the question of costs even though it was not in accordance with the UCPR: s131(2)(h), Evidence Act 1995; Calderbank v Calderbank [1975] 3 All ER 333.
(b) The offer made was inclusive of costs. As it was rejected, an award of costs on an indemnity basis is justified given that the final judgment is no more favourable than the terms of the offer: Singleton v Macquarie Broadcasting Holdings Limited (1991) 24 NSWLR 183. An indemnity costs order in such a case is to be made where rejection is unreasonable.
(c) The Court's discretion in situations of a Calderbank offer is not constrained by the UCPR. Relevant considerations include whether the time for acceptance of the offer is reasonable and the surrounding circumstances.
(d) The respondents acted unreasonably by rejecting the offer of 10 May 2004 without query. (I should here note that, as the respondents point out, there was no express rejection but simply no response.) The respondents were aware of the arbitral award, including the interest component that was running up until May 2004.
(e) It is relevant that the offer was made inclusive of costs: MT Associates Pty Ltd v Aqua-Max Pty Ltd [2000] VSC 163; ADSE (Holdings) Pty Ltd v InterTAN Inc (2004) 51 ACSR 555 at 561. The respondents were however aware of the costs incurred by the appellant for the two day arbitration and two day hearing, as of 12 May 2004. An inference can be drawn that they were aware of their own legal costs so as to be appraised generally of likely legal costs incurred by the appellant at that time.
(f) The offer made represented a true compromise. As regards the Second Respondent, the offer of $50,000 was made without requiring interest or costs: Manly Council v Byrne (No 2) [2004] NSWCA 227 at 20. This was prima facie a true compromise given the arbitral award of $65,000, plus interest. This represented a significant reduction.
(g) Cost orders should be made on an indemnity basis from the date the offer was rejected even though no further offer of settlement was made: Ettinghausen v Australian Consolidated Press Limited (1995) 38 NSWLR 404. Alternatively, the appellant should receive the costs of the District Court proceedings from 12 May 2004 to the date for the filing of the holding summons for leave to appeal on 23 August 2004 on an indemnity basis.
10 The respondents in response correctly pointed out that the offer did not conform to UCPR Pt 20 r26 being an "all up" offer inclusive of costs. The vice of such offers is that they force the offeree to make some assessment of the likely party and party costs of the party making the offer. However, here the appellant makes a plausible case for those costs being capable of reasonable estimation based on the known costs from the arbitration and the respondents' own costs in defending the District Court proceedings by way of likely comparison. It can be accepted too that the offer represented a true compromise.
11 The real issue is whether the respondents did indeed act unreasonably in failing to respond to the offer in circumstances where they had effectively one working day to do so before the listed hearing date. The respondents correctly submit that the state of the pleadings and the evidence in support of the appellant's claim at the time the offer was made must be relevant to determining whether the respondents were unreasonable in not accepting the offer.
12 The respondents point out, correctly, that Mr Tinyow's affidavit, at the time the offer expired, did not establish any damages in support of his claim as pleaded. The judgment of the Court of Appeal makes clear that Mr Tinyow relied on the oral evidence he gave at the District Court hearing after the offer had expired, rather than on his affidavit, in reaching its decision as to whether consideration had been given. In those circumstances, it was simply not reasonable to expect the appellant pre-trial to reach a conclusion as to whether or not to accept the offer. The Court of Appeal at [8] of its judgment observed that:
"… the claims were not well pleaded and damages were sought, not in terms, but for recovery of a debt. However the trial judge dealt with the matter on the basis that the measure of any recoverable damage was the amount of the debt … "
13 I therefore consider that it was not unreasonable for the respondents to let the offer expire without response; indeed it was in my view entirely reasonable. Accordingly the appellant should not receive costs on an indemnity basis.