Costs of appeal
16Judgment was delivered in the District Court on 8 December 2010. A notice of appeal was filed in this Court on 4 March 2011. On 21 March 2011 the first respondent filed a cross-appeal. On 2 May 2011 the appellant filed his written submissions on the appeal.
17On 6 June 2011, two days after the appeal was listed for directions, the appellant filed an offer of compromise in an amount of $180,000, the offer being open for acceptance for 28 days. The offer was stated to be made in accordance with UCPR, r 20.26.
18The first respondent disputed that the offer complied with the relevant rule for three reasons. First, it was said that the offer failed to state that it was "exclusive of costs", as it was required to be by UCPR 20.26. However, the rule does not require such a statement, but merely requires that the offer "must be exclusive of costs": r 20.26(2). The evident purpose of that requirement is that the effect of the offer, whether accepted or rejected, will be to engage the relevant costs rule in Pt 42. The offer did not purport to be inclusive of costs and there was no reason to infer that it was, so as to invalidate its operation under r 20.26, with which it purported to comply.
19The purpose of requiring an offer under the UCPR to be exclusive of costs is to allow the rules with respect to costs to operate according to their terms. Thus, where an offer is made by a plaintiff and not accepted by the defendant and the plaintiff obtains a judgment which betters the offer, the plaintiff is entitled to an award of costs assessed on the indemnity basis from the day following the day on which the offer was made, unless the Court otherwise orders: r 42.14. With respect to appeals, the rules merely pick up with appropriate modifications the provisions of Pt 20, Div 4: r 51.47. The costs rules in Pt 42, Div 3, are also subject to modifications: r 51.48.
20Secondly, the submission claimed that the offer "was asking the first respondent to give up the cross-appeal". That was not so: the cross-claim was against the Randwick Equine Centre partners and was defensive. The appellant made no claim on the appeal in respect of their liability. The offer was to compromise the appeal against the first respondent. It was open to the first respondent to protect his position with respect to the cross-appeal, if he were minded to accept the offer.
21A third objection was that the offer did not identify the orders which were to be made if it were accepted. In particular, it did not identify the fate of the costs order in favour of the first respondent in the trial court. In substance, this was a claim that the offer was uncertain.
22It may be accepted that lack of clarity in the terms of the offer is a relevant consideration in determining whether the rejection of a Calderbank offer is unreasonable: Hazeldene's Chicken Farm at [25], referred to by this Court in Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [12]. However, it would require a significant element of uncertainty to render the offer one which did not comply with r 20.26. The appeal being a distinct proceeding, an offer made in respect of the appeal should be understood as seeking to invoke the costs rules as applicable to the appeal. Accordingly, the formal offer of 6 June 2011 to settle the proceedings on condition that the first respondent pay the appellant $180,000 must be understood as a compromise of the appellant's claim for damages and challenge to the costs order made at the trial. There was no evidence that the first respondent understood it any other way.
23In some circumstances, evidence as to the costs or, if not assessed, the likely costs of the trial might need to be provided in order to know whether the appellant has bettered his offer in respect of an appeal. However, in the present case, that evidence is not required. The orders made on the appeal exceeded the offer by a considerable amount, disregarding the costs of the trial, to which he is also now entitled. It follows that, absent some basis upon which the Court should otherwise order, he is entitled to his costs of the appeal on an indemnity basis from 7 June 2011. (Although the notice of motion referred to the whole of the costs of the appeal, no submissions were directed to the period prior to 7 June 2011; absent reliance on an offer made prior to trial, no such justification is possible.)
24There is no reason why the Court should otherwise order. The issues were well understood by the parties, the amount in dispute having been determined by the trial judge, quite properly, despite giving judgment for the first respondent.
25If the offer were not to be treated as a formal offer under the rules, it would be necessary to consider whether the first respondent was unreasonable in failing to accept it as a Calderbank offer. As explained by the Court in Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 (Spigelman CJ, Beazley and McColl JJA) at [42], "[t]he fact that one party has won at first instance does not mean that efforts to compromise should cease". The first respondent and his lawyers no doubt assessed what was at stake and made an informed decision not to accept the fresh offer. The outcome either demonstrated that their assessment was erroneous or at least that they accepted a risk which materialised. There is no reason why the first respondent should not be held to the element of the risk which he accepted in not taking up the offer, namely that, thereafter, he was litigating at risk of an indemnity costs order.
26The appellant should have the costs of the appeal assessed on the ordinary basis up to and including 7 June 2011 and thereafter on an indemnity basis.
27The appellant has been partly successful and partly unsuccessful in relation to his motion. The issues, as to the costs of the trial and the costs of the appeal, were discrete. There should be no order as to the costs of the motion.