Willis v Orange City Council (No 2)

File Number(s): 2023/00213330

JUDGMENT

Background

1. On 12 June 2025 I gave judgment for the plaintiff against the defendant for $133,751 and ordered the defendant pay the costs of the plaintiff: Willis v Orange City Council [2025] NSWDC 208 (the Primary Judgment).

2. The plaintiff has applied for a variation of that costs order based upon two Offers of Compromise, both dated 21 October 2024 (PX 10). The first Offer of Compromise offered to settle the proceedings on the basis of a judgment for the plaintiff, with damages to be assessed, but reduced by 20%. This form of an offer was recognised as a valid offer by the Court of Appeal in Curtis v Harden Shire Council (No 2) [2015] NSWCA 45. The second Offer of Compromise offered to settle the proceedings on the basis of judgment for the plaintiff in the sum of $100,001.

The Rule

3. The plaintiff relies upon r 42.14 of the Uniform Civil Procedure Rules 2005 (NSW) (the UCPR). That rule provides as follows:

42.14 Where offer not accepted and judgment no less favourable to plaintiff

(cf SCR Part 52A, rule 22; DCR Part 39A, rule 25)

(1) This rule applies if the offer is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim no less favourable to the plaintiff than the terms of the offer.

(2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff’s costs in respect of the claim—

(a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and

(b) assessed on an indemnity basis—

(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and

(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.

4. Rule 42.14(1) is satisfied, as both offers made by the plaintiff, which were not accepted by the defendant, were prior to the plaintiff obtaining judgment on his claim “no less favourable to the plaintiff than the terms of the offer”.

Submissions

5. The defendant provided a written submission as follows:

6. The Primary Judgment found at [160] that the defendant knew of the risk posed by the hole, because it knew of the fallen sign, having been informed of that by Mr Penhall.

7. The plaintiff did not notify the defendant of Mr Ostini’s evidence regarding Mr Penhall until 13 March 2025, less than a week prior to the commencement of the hearing on 19 March 2025. (Mr Penhall had died some years ago, but Mr Ostini, who worked with Mr Penhall, gave evidence of statements made by Mr Penhall to the effect that he had reported the problem with the sign to the Council. I accepted this evidence: Primary Judgment at [30] – [45]).

8. The evidence regarding Mr Penhall’s complaints significantly impacts the liability issues in the matter.

9. At the time the plaintiff’s offers were made the plaintiff did not make the defendant aware of that evidence.

10. The rejection of the plaintiff’s offers by the defendant was not unreasonable and the defendant was not fully informed of the case it would ultimately be asked to meet.

11. There was a significant change in the nature of the case presented at the time of the offers, to the case presented at the hearing. The evidence at the hearing was different from that known to the defendant at the time of the plaintiff’s offers.

12. The defendant referred to the decision of the Court of Appeal in South E**astern Area Health Service v King [2006] NSWCA 2. That case involved a Calderbank letter, rather than an Offer of Compromise made under the UCPR. At [99] the Court of Appeal said that the discretion to award indemnity costs following a Calderbank letter “must be considered having regard to all of the circumstances of the case, including the relevant strengths and weaknesses of each party’s case as they may have been apparent to the parties at the time the offer was made.”

13. Counsel for the plaintiff filed a written submission in reply. That submission is summarised as follows:

14. The defendant knew that the plaintiff intended to call lay evidence to establish actual knowledge. Counsel submitted that this information was passed onto the defendant at an informal settlement conference held on 11 September 2024, which was a date prior to the making of the offers.

15. The defendant requested no particulars of the plaintiff’s pleading as to actual knowledge nor did the defendant indicate any difficulty with its ability to consider the offers.

16. The plaintiff’s case as pleaded did not change since its inception and the Statement of Claim pleaded in par 25 that the defendant had actual knowledge of the relevant risk.

17. No notice of the evidence to be called was required. An examination of the court file shows that while directions were made in respect of the service of expert evidence, no direction was made regarding the service of affidavits or witness statements by lay witnesses.

18. There is nothing to justify departure from the order for indemnity costs which should be made in accordance with the UCPR.

Consideration

8. In Morgan v Johnson [1998] NSWSC 367; (1998) 44 NSWLR 578 the Supreme Court summarised the applicable principles in relation to offers of compromise as follows:

9. The purpose of the rule is to encourage the proper compromise of litigation, in the private interests of individual litigants and the public interest of the prompt and economical disposal of litigation.

10. The aim is to oblige the offeree to give serious thought to the risk involved in non-acceptance.

11. The prima facie consequence of non-acceptance will be that the rule will be enforced against the non-accepting party.

12. Lying behind the rule is the common knowledge that litigation is inescapably chancy. For this reason, the ordinary provision is expected to apply in the ordinary case. The mere fact that it was reasonable for the litigant to take the view that he or she did in rejecting the offering is not enough to displace the rule, but it is one relevant consideration.

13. The discretion to displace the rule is a judicial one, requiring the private and public purposes of the rule to be borne in mind.

14. In New South Wales Insur**ance Ministerial Corporation v Reeve (1993) 42 NSWLR 100 at [102] the Court of Appeal said that there are three broad categories of circumstances in which the presumption in favour of an award of indemnity costs might be displaced. The first is that the offer did not involve any compromise. The second is that the rejection of the offer was not unreasonable. The third basis is that the period for acceptance was unreasonable. The defendant raises the second reason only.

15. That case also held that it is not sufficient that it was reasonable to test the other party’s offer. However, it may be sufficient that the case changed significantly from the case at the time of the offer: Vale v Eggins (No 2) [2007] NSWCA 12. In Vale it was held that the discretion to award indemnity costs might be refused, where all the relevant evidence had not been served before the offer.

16. Cases such as Vale and King (cited in the written submissions for the defendant) involved litigation where there was an obligation on a party to serve the evidence, which ultimately affected the outcome, prior to the hearing. This is not such a case. While there were orders made for the service of expert evidence, there was no order made for the service of affidavits or witness statements by lay witnesses. There is no indication in the court file that the defendant ever sought such an order. As submitted by counsel for the plaintiff, there were no particulars sought of the specific pleading that the defendant had actual knowledge of the risk of harm.

17. The case for the plaintiff did not change from the time the Statement of Claim was filed, until the trial. It was always part of the plaintiff’s case that the defendant had actual knowledge. How this was going to be proved was not required to be telegraphed to the defendant, and nor did the defendant ask how the allegation of actual knowledge would be proved. In those circumstances, there was no change in the case of the plaintiff from the moment the Statement of Claim was filed. When the offer was made, the defendant had no knowledge of the evidence which would be called on the topic of actual knowledge, and until Mr Ostini gave his evidence, it had no detailed information about the evidence which would prove actual knowledge.

18. It is to be noted that during the running of a relatively short trial, the defendant was able to arrange for Ms McPherson to give evidence, on the topic of whether or not Mr Penhall spoke to her about the parking sign having been removed from the ground. The defendant was thus able to meet the case on actual knowledge put forward by the plaintiff, by calling a witness relevant to actual knowledge.

19. There was no obligation upon the defendant to inform the plaintiff that Ms McPherson would be called or what she would say, just as there was no obligation upon the plaintiff to inform the defendant about Mr Ostini. Both parties were willing to proceed to a common law trial on the usual basis: that lay evidence would be given viva voce.

20. Further, the defendant called evidence that there was no written record in the Council documents to record Mr Penhall’s complaint, or any other notice given to the Council, to the effect that the sign had been removed from the ground.

21. Thus the issue of actual knowledge was always on the table, and it cannot be said that the plaintiff’s case in this regard changed significantly from the case known to the defendant at the time the offers were made.

22. In the light of all these matters, I find that it is appropriate for the plaintiff to have an order for indemnity costs, in accordance with the rule, covering the period after the making of the offers.

Order

18. The further order of the court is:

19. Order that the costs payable by the defendant to the plaintiff be assessed on the ordinary basis up to and including 21 October 2024 and thereafter on the indemnity basis.

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Amendments

02 July 2025

correction to Coversheet (spelling of plaintiff's solicitor from Whitely to Whiteley)