On 30 June 2016 I gave judgment in favour of the plaintiff, Roger Whalebone, for $117,274.50 and reserved the question of costs. [1] Mr Whalebone seeks an order that the defendant, his brother, Derek Andrews, pay the costs of the proceedings on the basis that costs should follow the event. Mr Andrews seeks an order that Mr Whalebone pay the costs up to and including 7 August 2015 and, because of an offer of compromise dated 3 September 2015, that Mr Whalebone pay the costs on an indemnity basis from 4 September 2015. The submission did not refer to the costs in the period from 8 August 2015 to 3 September 2015.
Mr Andrews put an alternative submission in the event that the offer of compromise is not effective: that he pay Mr Whalebone the costs from 8 August 2015 and would, in that event, not speak against an order that there be no order as to costs on the basis that the costs prior to 2015 are approximately equal to or might marginally outweigh those costs from August 2015. Such an order would avoid the need for an assessment.
[2]
PROCEEDINGS
Mr Whalebone sought to amend his claim at the conclusion of the trial. That amendment at least clarified the claim in conversion with respect to the cattle, which was ultimately the successful component of the claim. The primary claim in the proceedings was also pursued and further evidence was allowed, but that claim failed.
The difference in the orders sought in respect of that period up to 7 August 2015 reflects the different views of the claim. Mr Whalebone says he always maintained the claim in respect of the conversion of cattle. This is true at least in a formal sense. Mr Andrews maintained that the contract claim which failed was the primary claim and that counsel for Mr Whalebone made submissions during the initial trial prior to 7 August indicating limited, if any, reliance upon an alternative or subsidiary claim. That is also true.
The defendant, Mr Andrews, was successful on the primary contractual claim. I do not think Mr Whalebone, even with ultimate success on the conversion claim, should be entitled to any costs for the period of the proceedings up to 7 August 2015. And because of the uncertain significance of the conversion claim in respect of the cattle until 7 August 2015, it may be appropriate for Mr Whalebone to meet some of those costs.
[3]
THE OFFER OF COMPROMISE
On 3 September 2013, after Mr Andrews had received an amended pleading from Mr Whalebone expressly referring to conversion, but also raising other matters outside the grant of leave, Mr Andrews served an offer of compromise. It is in the following terms:
"The Defendant offers to compromise these proceedings claims on the following terms:
1 Judgment for the Defendant.
2 The Defendant pay the plaintiff $74,625.75 in consideration of the Plaintiff transfering his three-quarter (3/4) interest in the livestock as detailed in the Statement of Claim.
3 The Defendant waives his rights to $56,904.40, being the amount the Plaintiff should have contributed, and which the Plaintiff has paid, since 18 November 2008 in relation to the property (as detailed in the Statement of Claim) (being council rates, LHPA fees, repairs and maintenance, insurance, Crown land acquisition fees, replacement of cattle crush and yards).
4 This is an offer made in accordance with Rule 20.26 of the Uniform Civil Procedure Rules 2005 (NSW).
5 The offer shall be open for a period of 6 days only." [2]
The form of the offer raised a number of questions about whether the offer was in accordance with r 20.26 of the Uniform Civil Procedure Rules 2005 and enlivens the cost consequences in r 42.15.
First, the offer was open for only six days. The Rules require an offer to be open for 28 days if made more than two months before the hearing date and a reasonable period if made thereafter. As at 3 September 2015, a new trial date was uncertain, both as to the date and as to whether it was required. The next date in the proceedings was for directions 28 days later on 1 October 2015. On the other hand, the trial had commenced.
I am inclined to the view that the 28-day rule was no longer applicable because a trial had commenced and thus r 20.26 mandated that the offer remain open for a reasonable period. One inference from the provision is that a 28-day period is a guide as to what is reasonable. Of course that period may be abridged, perhaps substantially if a trial is imminent or currently proceeding. Here the substantial reduction to six days is at a time when there was no particular progress being made in the matter, and the continuation of the trial was months away.
Mr Andrews was obliged by directions in August to file a defence and cross-claim in the subsequent week or two after the offer. However, he had determined not to do so because the amended claim went outside the grant of leave, a matter Mr Andrews argued successfully on 1 October 2015. These circumstances tend to reinforce that a period of six days should not be regarded as reasonable for the purposes of r 20.26.
Mr Whalebone made no complaint about the time, a relevant matter, but the offeror is nevertheless obliged to establish a reasonable period. Whilst parties were well aware of the issues, the changes contemplated by the amendment impacted upon the real issues remaining. I am satisfied that six days was not a reasonable period in the circumstances of this offer.
Secondly, the offer contemplates a judgment for the defendant. In fact judgment was given for the plaintiff. Judgment for a party is not insignificant and is a reason why the actual result may be more favourable to the plaintiff than the offer.
Thirdly, the offer to pay $74,625.75 is, excluding the cents and interest, the precise amount of the successful claim and judgment. Although r 42.16 excludes consideration of interest after the date of the offer, it does not, either expressly or impliedly, exclude the significance of interest that accrued before the date of the offer. The judgment was on this basis more favourable to Mr Whalebone than the offer.
Fourthly, paragraph 3 of the offer speaks of a waiver of rights by the defendant. Mr Whalebone, by accepting the offer, would be conceding that he should have paid $56,904.40 to Mr Andrews. Mr Andrews says that is not really a concession of substance, notwithstanding the text. I am not persuaded of that. I think the concession, which is not reflected in the judgment, is real and, although its practical effect cannot perhaps accurately be predicted, it also operates to render the offer less favourable than the judgment.
For all these reasons, I do not think that r 42.15 has any application to the offer because the offer is not at least as favourable to the plaintiff as the judgment.
I note that paragraph 3 also mistakes the name of the defendant as "the Plaintiff" in the second line, but the meaning is clear enough and I would not reject the application of the offer for that reason alone.
I also note that, although there is a residual discretion in r 42.15(2), it does not operate in the circumstances of a non-complying offer. If 42.15(1) is not satisfied, the discretion in 42.15(2) is not enlivened.
[4]
COSTS AFTER 7 AUGUST 2015
Mr Whalebone was successful in the proceedings on the conversion claim and should have some costs after that date.
Mr Andrews, in this context of the inapplicable offer of compromise, concedes an order for costs from that date. However, Mr Andrews says Mr Whalebone's delay in bringing the proceedings, the costs of interlocutory matters, including amendments, the substantially greater amount claimed than that awarded (approximately $313,000 plus interest, as against $74,625 plus interest awarded), the greater attention paid to the contract claim, the existence of the non-complying offer of compromise, and the fact that the amount was within the Local Court's jurisdiction, are all, on Mr Andrews's submission, relevant.
On the question of costs, the delay in bringing the proceedings does not seem to me to be a significant factor. The delays in interlocutory matters, so far as they were attributable to Mr Whalebone, might be the subject of adverse cost orders, as in fact occurred in some instances in the proceedings.
I take into account the size of the claim relative to the amount awarded and the jurisdiction of the Local Court, although the latter matter seems to be of little significance once the amount of $40,000 is exceeded (see r 42.35 of the Uniform Civil Procedure Rules 2005).
The existence of a non-complying offer of compromise also does, in my view, not assist Mr Andrews. The submission that it could operate as a Calderbank letter was only faintly made, as the offer gives no reference to that case or that the offer would be used on costs (although it did mention it was without prejudice save as to costs). [3] In any event, it was not unreasonable for Mr Whalebone to reject that offer for the reasons already given as to why the offer was not at least as favourable to him as the judgment.
In my view, the evidence in the first part of the trial did have some relevance to the claim in respect of conversion of the cattle and so it would not be correct to totally separate the period before and after August. On the hand, had the amendment clarifying the conversion claim been made earlier, there seems to me to be a real prospect that the trial would have been substantially shortened, perhaps from the two days before 7 August and two days after 7 August taken in actual hearing time to something in the order of two days in total, perhaps two to three days.
In my view, Mr Andrews should have a limited costs order in his favour prior to 7 August and Mr Whalebone should have the costs thereafter. Given that there are existing costs orders in favour of Mr Andrews, that Mr Whalebone's estimated costs are around $80,000 to $100,000 and Mr Andrews' costs are said to be a little more, I am inclined to fix the amount of costs payable, and vacate existing cost orders.
Were Mr Andrews to receive 50% of recoverable costs of $40,000 prior to 7 August, or $20,000, and Mr Whalebone were to receive recoverable costs of $40,000 after 7 August, then the net result would be the sum of $20,000. The parties accepted that on this basis after the vacation of existing costs orders an order for Mr Andrews to pay $10,000 costs would be appropriate.
In view of my findings here and in the previous judgment, the parties consented to an order that all previous cost orders be vacated and the defendant pay the plaintiff the sum of $10,000 in respect of the costs of the proceedings.
[5]
Endnotes
Whalebone v Andrews [2016] NSWDC 149.
Exhibit 1.
Whitney v Dream Developments Pty Ltd (2013) 84 NSWLR 311; [2013] NSWCA 188 at [42]-[43].
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Decision last updated: 15 June 2020