100 PS Pty Ltd v Adelaide Equity Partners Ltd (No 2) - [2022] SADC 47

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
100 PS PTY LTD & ORS v ADELAIDE EQUITY
PARTNERS LTD (No 2)

[2022] SADC 47
Judgment of her Honour Judge Thomas
14 April 2022
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY
COURTS - COSTS - OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS - OFFER OF COMPROMISE OR OFFER TO SETTLE OR CONSENT TO JUDGMENT PURSUANT TO RULES

The applicants were successful in their contract claim and awarded judgment in the sum of $773,644,74 plus interest and seek costs on a higher than the standard basis by reason of the respondent’s non-acceptance of two written offers, a rule 33 pre-action offer and a formal contract offer.
The respondent resists such orders and submits the Court should order the respondent pay 70% of the applicants’ costs on a standard basis. First as to the pre-action offer, it was not unreasonable for the respondent to refuse the pre-action offer since the applicants’ claim for lost future rent had not crystallised, was hypothetical and depended on when a new tenant would be found which could not be known. The offer included an excessive amount for make good costs and a release in favour of the applicants when the respondent had made no claim against them. Secondly, the formal contract offer did not comply with rule 132.4 and therefore was not a relevant offer within the meaning of rule 132.10 so that rule 132.11 applied. In the circumstances it should be given no weight in exercising the discretion on costs. Thirdly, the applicants failed on the promissory estoppel claim and applying a broad axe the Applicants’ costs should be reduced by 30%.
Held:
(1)The respondent is to pay the applicants 95% of their costs of the proceeding on a standard costs basis up to and including 11 June 2019, on a solicitor/client basis from 12 June 2019 up to and including 1 September 2020 and on an indemnity basis thereafter.
(2)The pre-action offer was not hypothetical and difficult to assess and overall reflected a genuine compromise of the applicants’ contract claim despite the mutual releases and the excessive component for make good costs. The respondent’s failure to respond in any way and comply with the pre-action rules was an important factor and contrary to the objects of the rules.
(3)The contract offer was a relevant offer within the meaning of rule 132.4 and rule 132.10 applied. In the circumstances despite the broad mutual releases, the contract offer reflected a genuine compromise and the judgment obtained by the applicants was on no less favourable terms than the contract offer. Nor did the respondent establish any basis for disentitling the applicants to indemnity costs under rule 132.10(2)(e).
(4)The applicants’ costs should be reduced by 5% applying a broad axe by reason of their unsuccessful promissory estoppel claim.

District Court Act 1991 (SA) s 42; District Court Civil Rules 2006 (SA) r 3, r 33, r 187, r 188, r 188F; Uniform Civil Rules 2020 (SA) r 3.1, r 61.16, r 132.4, r 132.10, r 132.11, r 194.6, referred to.
Excelsior Land Holdings Pty Ltd v Alan Sheppard Constructions Pty Ltd [2012] SASCFC 119; Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435; Nominal Defendant v Dighton (No 2) [2012] SASCFC 97; O’Brien v Cowie & Anor (No 2) [2021] SASC 52; Roberts v Roberts (No 2) [2021] SASC 91, applied.
Calderbank v Calderbank [1975] 3 All ER 333; Director of Public Prosecutions v Disorganized Developments Pty Ltd [2020] SASC 202; Grbavac v Hart [1997] 1 VR 154; Public Trustee v Newman (2012) 112 SASR 299; Rapuano (Trading as Raps Electrical) v Karydis Frisan & Anor [2013] SASCFC 93; Stewart v Atco Controls Pty Ltd (in Liquidation) (No 2) (2014) 252 CLR 331, considered.

100 PS PTY LTD & ORS v ADELAIDE EQUITY PARTNERS LTD (No 2)
[2022] SADC 47
Civil
Overview

The Applicants seek orders that the Respondent pays their costs of this proceeding:
·on a standard costs basis from its commencement up to 10 June 2019 on a solicitor client/basis
·from 11 June 2019 to 1 September 2020, and
·thereafter on an indemnity basis
by reason of two settlement offers that were not accepted by the Respondent. The Applicants submit each offer involved a genuine compromise of the Applicants’ claims, that its terms were considerably less favourable to the Applicants than the judgment they ultimately obtained, and these matters should inform the Court’s discretion as to costs in their favour under the relevant costs rules.
The Respondent resists such costs orders and submits the Court should order that the Respondent pay 70% of the Applicants’ costs of the proceedings on a standard costs basis on the following grounds.
·It was not unreasonable for the Respondent to refuse the pre-action settlement offer because it was made at an early stage when the Applicants’ loss had not crystallised, was hypothetical and difficult to assess; one component was estimated at four times the amount awarded at trial and its terms included a broad release in favour of the Applicants when there was no claim ever made by the Respondent against the Applicants.
·The contract offer is not a relevant offer within the meaning of rule 132.10 of the Uniform Civil Rules 2020 (Current Rules) because it required a mutual release (even though no claim was made by the Respondent against the Applicants) that was broader than the subject matter of the proceeding and it should be given no weight on the question as to costs.
·The Applicants failed on their promissory estoppel claim and, applying a broad axe, the Applicants’ costs should be reduced by 30% to reflect the proportion of time taken up at trial by this claim.
Conclusion
For the following reasons, I order that the Respondent pay 95% of the Applicants’ costs of the proceeding on a standard costs basis up to and including 11 June 2019, on a solicitor/client basis from 12 June 2019 up to and including 1 September 2020, and on an indemnity basis thereafter.
The judgment
On 13 December 2021, I delivered reasons for judgment in which I upheld the Applicants’ claim in contract against the Respondent on the basis that the terms of an agreement to lease in letter form executed by the parties’ representatives constituted a legally binding lease of premises for a five-year term ending on 31 January 2021. I found the Applicants were entitled to damages for lost rent and outgoings from 1 November 2018 until 31 January 2021 in circumstances where the Respondent had vacated the premises in October 2018 and denied any binding lease beyond 31 October 2018, as well as contract debts for arrears of rent and outgoings due as at 31 October 2019, and for make good and reinstatement costs plus interest.
I found against the Applicants on their alternative claim in promissory estoppel. The proceeding did not involve any cross claim by the Respondent against the Applicants and there were no circumstances ventilated in the proceedings that might possibly give rise to any claim by the Respondent.
Accordingly, I gave judgment in favour of the Applicants against the Respondent for $773,644.74 comprising:[1]
·damages on account of the lost rent, lost recovery of outgoings and common area expenses and utilities, and GST for the period from 1 November 2018 to 31 January 2021, in the amount of $711,644.74
·$27,000 including GST but not interest, being the agreed amount of the contract debt for unpaid rent, outgoings and common area expenses and utilities and GST as at 31 October 2016
·$35,000 including interest and GST, being the agreed amount of the contract debt for make good and reinstatement costs
[1] Reasons for judgment [523].
The parties subsequently agreed the sum of $73,274.33 for pre-judgment interest up to 13 December 2021.
The settlement offers made
The history of the settlement offers made in this proceeding was set out in the affidavit of Lisa Adonis sworn on 4 February 2022,[2] which I received with the redactions as shown in the copy attached to the Applicants’ Written Submissions in Reply.[3] There was an unsuccessful mediation and the Applicants made two written settlement offers:
·an offer of settlement before action in the form of a letter dated 21 May 2019 from the Applicants’ solicitors to the Respondent (Pre-action Offer) that stated it was written pursuant to rule 33 of the Supreme Court Rules 2006 (the Former Rules)[4] and
·a formal contract offer dated 17 August 2020[5] (Applicants’ Contract Offer) in the prescribed form for a formal offer to be made under rule 132.4 of the Current Rules.
[2] FDN 72, the “Adonis Affidavit”.
[3] FDN 77. The redacted parts were not pressed following the Respondent’s objections as to their admissibility made under s 67C of the Evidence Act 1929.
[4] Rule 33 is in the same form in the District and Supreme Court Civil Rules 2006.
[5] FDN 24.
The Respondent filed a formal judgment offer on 6 January 2021[6] (Respondent’s Judgment Offer) 22 days before the trial in this proceeding commenced on 2 February 2021.
[6] FDN 37.
Pre-action Offer
The Applicants’ Pre-action Offer was served by post and email on 21 May 2019[7] and filed in a suppressed file when this proceeding was instituted on 3 October 2019.
[7] Adonis Affidavit, Exhibit LA1.
In a detailed letter setting out the basis of their contract claims, the Applicants offered to settle the entirety of all claims connected with the Respondent’s occupation of the “New” and “Old Premises”[8] on the basis that the Respondent pay the Applicants $416,853.43 (including GST) within seven days and on receipt of cleared funds, the parties provide mutual releases from all claims howsoever arising in connection with the lease arrangements and the Respondent’s occupation of the “New” and “Old Premises”. The Pre-action Offer was open for acceptance for 21 days, expiring on 11 June 2019.
[8] The Respondent occupied Tenancies 3B and 3C under the Registered Lease (Old Premises) and 3C under the terms of the Colliers Letter (New Premises).
The settlement sum in the Pre-action Offer was formulated on the basis of the rent and outgoings due to 30 April 2019 plus the total quoted make good costs and three months’ rent and outgoings (ie for May, June and July 2019) out of the balance of the then remaining lease term of 21 months. By the time for acceptance of the Pre-action Offer expired, a further two months of rent and outgoings had fallen due.
The basis of the Applicants’ claim was well known to the Respondent because the Applicants’ solicitors had written to the Respondent in September 2018 disputing the Respondent’s purported right to determine a monthly tenancy, asserting the Respondent was bound by the terms of the executed letter to a lease expiring on 31 January 2021.[9]
[9] Reasons for judgment [327]-[331].
The Respondent did not respond to the Pre-action Offer within 14 days or before the proceedings were instituted more than three months later and therefore did not comply with rule 33(4) of the Former Rules by providing the requisite written response.
Applicants’ Contract Offer
On 18 August 2020, after the proceeding was set down for trial,[10] the Contract Offer was filed and served by email[11] offering to enter into an agreement to settle the proceeding on terms including that:
·the Respondent pay the Applicants $500,000 within 28 days of acceptance of the offer and time was of the essence for this payment [clauses 5.1 and 5.3]
·mutual releases of claims etc howsoever arising connected in any way to the subject matter of the proceedings [clause 5.2]
·the Respondent pay costs on a party/party basis, either as agreed or taxed, for the period up until the earlier of acceptance of this offer or 21 days after its service [clause 6]
·if the settlement sum was not paid by the due date, that the Respondent consent to judgment being entered for the full amount of the Applicants’ claim and interest and legal costs, to be agreed or as determined by the court, save the costs of the Respondent’s default to be on an indemnity basis [clause 5.4]
[10] The parties’ solicitors signed the certificate for readiness (FDN 23) on 3 and 4 August 2020 respectively.
[11] Adonis Affidavit [18]; Exhibit LA9.
The Contract Offer expired 21 days from its service and set out in detail reasons as to why the Applicants contended their offer was reasonable and represented a genuine compromise of the damages claimed as a result of the Respondent’s breaches of contract.
The Respondent filed a Response to Formal Offer on 1 September 2021,[12] contending that it required a further seven days to decide whether to accept the offer because counsel had recently been engaged.
[12] FDN 26.
The time for acceptance of the Contract Offer expired on 8 September 2020 without the Respondent accepting or rejecting it. By this time rent and outgoings had fallen due for September 2020, leaving four months of the balance of the lease term as contingent on the Applicants obtaining an alternative tenant.
Respondent’s Judgment Offer
I mention the Respondent’s judgment offer for completeness. Ultimately, it has had no bearing on the exercise of my discretion on costs, save to observe it cannot be said that the Respondent made no efforts to resolve the proceeding.
The Respondent filed a formal judgment offer on 6 January 2021[13] (Respondent’s Judgment Offer) offering to settle the entire proceeding by consenting to a judgment in favour of the Applicants in the sum of $200,000 inclusive of interest on terms that the Respondent would pay the Applicants’ costs on a party/party basis from the commencement of the action until the date on which judgment was entered, to be agreed or taxed. It was filed and in its unsealed form emailed the same day it was filed. The sealed copy and covering letter were served on 11 January 2021.[14]
[13] FDN 37.
[14] Adonis Affidavit [25]; Exhibit LA14.
The Applicants filed a Response to Final Offer on 20 January 2021,[15] requiring a further five days to decide whether to accept the offer or not, and did not respond further.
[15] FDN 40.
The trial in this proceeding commenced on 2 February 2021, on the 22^nd day after the Respondent’s Judgment Offer was served.
Relevant legal principles and costs rules
This Court’s discretion as to costs as conferred by s 42 of the District Court Act 1991 and regulated by the applicable rules of the Court is a wide and unfettered discretion. It must be exercised judiciously. Each case must be considered on its own particular facts, having regard to the general principle that the usual award of costs to a successful party should be made on a “standard costs basis” unless there are special circumstances justifying a different order.[16]
It is common ground that the Current Rules govern the question of costs in this proceeding. Both parties accept that rules 132.10 and 132.11 of the Current Rules govern the Contract Offer as a formal offer and the primary controversy regarding it is whether it is a “relevant offer” and therefore which of rules 132.10 or 132.11 applies. The Applicants contend the Contract Offer was a complying formal offer within the meaning of rule 132.4 and therefore they are entitled to an order for their cost of action on an indemnity basis subject only to the Court’s overriding discretion as to costs. The Respondent submits rule 132.10 does not apply and rule 132.11 governs the question as to costs on the Contract Offer and in the relevant circumstances, the Contract Offer should be given no weight.
Rules 132.10 and 132.11 relevantly provide:
132.10—Relevant offer not accepted
(1)In this rule—
relevant offer means a formal offer in compliance with rule 132.4 that—
(a)     was filed and served on the offeree at least 21 days before the commencement of the trial or final hearing of the proceeding or such later date as the Court orders on an application made before the expiration of that period;
(b)     was and remained open for acceptance at least 14 days after service;
(c)     relates to an entire action and not merely to part of it;
(d)     involves genuine compromise;
(e)     contains a term that the respondent to the action is to pay the costs of the applicant on the standard costs basis up to acceptance of the offer or 14 days after service of the offer (whichever is earlier) or that the parties will submit to any order that the Court may make in the exercise of its discretion; and
(f)     if it is a contract offer—
(i)provides that the consideration payable by one party to the other (disregarding costs) is the payment of money; and
(ii)if made by the party who is to pay the money—provides that the money is payable under the terms of the offer within 28 days after acceptance and the party is ready, willing and able to pay the money in accordance with the terms of the offer.
(2)When—
(a)     a relevant offer is made by an applicant in an action;
(b)     the offer is not accepted by a respondent; and
(c)     the applicant obtains judgment that is no less favourable to the applicant than the terms of the offer,
then—
(d)     the costs incurred in respect of the action up to 14 days after service of the formal offer are unaffected by the making of the formal offer; and
(e)     subject to the overriding discretion of the Court, the applicant is entitled to an order against the respondent for the applicant’s costs of the action to which the relevant offer relates thereafter on an indemnity basis.[17]
[17] Emphasis supplied.
132.11—Costs in other cases
(1)This rule applies in cases when rule 132.10 does not apply.
(2)When—
(a)     a party has made a formal offer;
(b)     the offer was not accepted; and
(c)     judgment is granted in respect of the action or part of an action the subject of the offer on terms no less favourable to the offeror than the terms of the offer,
the Court is to take these matters into account on the question of costs.[18]
(3)Without affecting the generality of the discretion of the Court, in exercising its discretion as to costs under subrule (2), the Court may—
(a)     order that the offeree pay the costs of the offeror in respect of the action or the part the subject of the offer from 14 days after service of the formal offer on a specified basis;
(b)     order that the offeree bear its own costs in respect of the action or the part the subject of the offer from 14 days after service of the formal offer; or
(c)     make such other or further order as to costs as it thinks fit.
(4)Without affecting the generality of the discretion of the Court, in exercising its discretion as to costs, if the Court considers that a party unreasonably rejected a formal offer or failed to make a formal offer, the Court may—
(a)     order that that party pay the costs of the opposing party after the rejection or date when an offer should have been made on a specified basis;
(b)     order that that party bear its own costs after the rejection or date when an offer should have been made; or
(c)     make such other or further order as to costs as it thinks fit.
[18] Ibid.
A comparison of these rules shows that rule 132.10 essentially provides for an entitlement to indemnity costs after rejection of a complying formal offer subject to the Court’s overriding discretion. It is for the Respondent offeree to persuade the Court that the overriding discretion should be exercised in its favour in all the circumstances to disentitle the otherwise entitled Applicants to indemnity costs.[19]
[19] O’Brien v Cowie & Anor (No 2) [2021] SASC 52 at [45] and following considering the rule 188F of the Supreme Court Civil Rules 2006.

On the other hand, rule 132.11 effectively reflects the costs principles referred to in Calderbank v Calderbank.[20]In the recent decision of Roberts v Roberts (No 2),[21] Blue J accepted this proposition and identified the well-established matters ordinarily relevant to assessing the unreasonableness of a rejection of a Calderbank offer more favourable to the offeree than the ultimate judgment as follows:[22]
·the reasonableness of the offer and its rejection
·the stage of the proceedings when the offer is made
·the time allowed to consider the offer
·the extent of the compromise in the offer
·the prospects of success at the time of the offer
·the clarity of the terms of the offer
·whether the offer foreshadowed that indemnity costs would be sought if the offeree rejected it
[20] [1975] 3 All ER 333.
[21] [2021] SASC 91 at [19].
[22] As articulated in Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435 at [23] and [25] per Warren CJ, Maxwell P and Harper AJA; Nominal Defendant v Dighton (No 2) [2012] SASCFC 97 at [8] per Sulan, Anderson and David JJ.
As for the reasonableness and the prospects of success, rejection of the offer is an important factor to be taken into account and where the offeree submits that its rejection was not unreasonable, “[i]f that be the test, it would appear to require at the least that the respondent point to a reason for not accepting the offer beyond the usual prospects of being successful in litigation.”[23]
[23] Stewart v Atco Controls Pty Ltd (in Liquidation) (No 2) (2014) 252 CLR 331 at [4] per Crennan, Kiefel, Bell, Gageler and Keane JJ.
The policy rationale underlying the costs rules is to encourage the resolution of litigation at the earliest practicable stage, including before the institution of proceedings. The policy imperatives are clear: to encourage the saving of private and public resources by avoiding the cost and uncertainty of litigation and to indemnify the party who made a reasonable offer of compromise against the costs thereafter incurred. The rationale for increasing the basis of the adverse costs order where there has been an unreasonable refusal of the offer has been explained as follows.[24]
This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances that party should ordinarily bear the costs of litigation.
[24] Grbavac v Hart [1997] 1 VR 154 at 164-5.
These policy objects are reflected in the costs rules and the objects of both the Former and Current Rules,[25] the latter rules including in the overarching obligations of the parties and their lawyers, fundamental obligations to use reasonable endeavours to resolve or narrow the scope of a dispute by agreement[26] and comply with the Rules.[27] These rules provide important guidance to the Court on the importance of the policy objectives of the costs rules and necessarily inform the Court’s consideration as to whether the rejection of an offer was unreasonable in the circumstances of the case.
[25] Rule 3 of the Former Rules and rule 3.1 of the Current Rules.
[26] Rule 3.1(g).
[27] Rule 3.1(i).
Whilst the Pre-action Offer was made under the Former Rules, the Current Rules maintain the significance of pre-action offers in substantially the same way as the Former Rules by operation of rules 61.16 (pre-action steps) and 194.6 (discretionary factors in exercising the Court’s discretion as to costs).
That is, for pre-action offers, rule 33(7) of the Former Rules provides that the Court may take into account in awarding the costs of a proceeding whether the parties complied with their pre-action obligations for making and responding to offers of settlement before action, the terms of any offer or response made and the extent to which it was reasonable or unreasonable in the circumstances.
Whereas rule 61.16 of the Current Rules provides that the Court when considering orders relating to costs of a proceeding, may take into account:
·any non-compliance with the rules as to pre-action exchanges, offers and meetings and the initiation of proceedings
·a comparison between the terms of the pre-action offer that is not accepted and the result of the proceeding
·any unreasonable failure to accept a pre-action offer or better a pre-action offer; or
·a party’s conduct otherwise in respect of a pre-action step.
Rule 194.6(1) provides that the Court may have regard to any factors it considers relevant in exercising its discretion as to costs including, for example, the making or not making of an offer by a party to resolve the proceeding[28] or the non-acceptance by a party of an offer made by another party to resolve the proceeding.[29]
[28] Rule 194.6(2)(d).
[29] Rule 194.6(2)(e).
Rule 132.11 of the Current Rules similarly provides that (where rule 132.10 does not apply) the Court is to take into account on the question of costs that a party has made a formal offer that has not been accepted and judgment is granted on terms no less favourable than the terms of the offer. The unreasonable rejection of a formal offer is expressly referenced in rule 132.11(4) and is one important factor to take into account.
In my view, the same well-established principles that apply to subrule 33(7) of the Former Rules will apply to rules 61.16 and 194.6(2)(d) and (e) and 132.11 of the Current Rules. They do not create any presumption about the costs consequences of any non-compliance with the terms or any pre-action provisions of formal offers where rule 132.10 does not apply. Their operation is intended to be beneficial in terms of encouraging settlement but not at the price of penalising unsuccessful litigants from bringing their dispute to court and they are not to be interpreted in an unduly technical or restrictive manner.[30]
[30] Public Trustee v Newman (2012) 112 SASR 299 at [18]-[20].
Consideration of the Pre-action Offer
The Applicants seek their costs on a solicitor/client basis from the date of expiry of their Pre-action Offer on the basis it was a genuine compromise of their claims and the Respondent’s failure to respond was unreasonable and in breach of the pre-action court rules.[31]
[31] Applicants’ written submissions (FDN 80) at [11]-[22].
The Respondent submits that the Pre-action Offer was made at an early stage of the proceeding when the Applicants’ loss for future rental had not crystallised and was hypothetical, and therefore difficult to assess[32] and therefore it was not unreasonable for the Respondent to refuse the offer. The Respondent further contends the excessive quantum of the make good costs claimed and the inclusion of requirement for mutual releases were circumstances that also made it not unreasonable for the Respondent to refuse it.
[32] Written Submissions FDN 76, [3].
Clearly, the state of knowledge of a party of its case and the case put against it evolves as the litigation progresses. However, the costs rules presume the parties are able to make and assess the reasonableness of settlement offers at every stage of the litigation, including before action. In this regard, subrule 33(2) of the Former Rules expressly required the Applicants in their pre-action notice to provide sufficient detail of their claim and supporting material so the Respondent would be able to assess the reasonableness of the settlement offer and make an informed response.
In this case, the Applicants’ Pre-action Offer was detailed and clearly set out the basis of their claim and the formulation of their claim and settlement offer. It was expressed as a rule 33 offer and an application for indemnity costs was foreshadowed if the proceedings were commenced and the Applicants ultimately successful in their contract claim. Its purpose was clear and the Respondent’s obligations under the rules as a proposed respondent also clear.
The Respondent submits it was not unreasonable to refuse the Pre-action Offer, which included three months rental of quantum claimed for the hypothetical claim for future rental. Further, the Respondent was unable to assess the time required for the Applicants to re-let the premises without speculating as to what their loss might be.[33]
[33] Written Submissions [12], [13] and [15].
These submissions overstate the difficulties. First, the Pre-action Offer was formulated on the basis of lost rental to the period ending 31 July 2019, which at the date of its expiry included just one month of future rent and outgoings compared to the balance of the lease term of 18 months. In pecuniary terms, the relative costs and benefits of accepting or rejecting the offer were objectively measurable and clearly reflected a substantial compromise on the assumption that the Applicants were unable to re-let the vacated tenancy. That risk of doing better or worse at trial was objectively quantifiable, bearing in mind that damages for lost future rent were accruing on a monthly basis.
The Respondent’s directors were sophisticated businessmen and entirely capable of assessing the reasonableness of the Applicants’ Pre-action Offer by reference to the risks and costs of litigating the Applicants’ claim. Their claim for damages was not “hypothetical” in the sense that the maximum loss for future rental was not known. It was. The expiry date of the lease contended by the Applicants of 31 January 2021 had been the subject of solicitors’ correspondence and demands since September 2018. The Respondent had no defence to the claim for arrears and liability for make good costs.
It is no answer in my view for the Respondent to submit that it was not unreasonable for it to reject the offer because it could not know when an alternative tenant would be found that might ultimately reduce the Respondent’s contingent liability. The Applicants’ claim exposed the Respondent to the risk that the Applicants would continue to be unsuccessful in re-letting the premises, despite their marketing efforts, and it would then be for the Respondent to prove the Applicants had acted unreasonably in re-letting the premises.
It is relevant here that the Respondent did not respond in writing as required by subrule 33(4) of the Former Rules by making a counter-offer or denying liability or communicating that it was unable to assess the reasonableness of the settlement offer made.
As to the Respondent’s second submission, I accept that the amount claimed for the make good costs was excessive and that it was not an insignificant component of the proposed settlement sum. However, whilst more than four times the amount ultimately awarded for the make good costs, in dollar terms it was equivalent to four or five months’ rent and outgoings and a comparatively less significant component than the total claim for future rent. Weighing the comparative components of the less favourable offer for quoted make good costs against the more favourable rent and outgoings component, I consider the Pre-action Offer for a payment of $416,853.43 (including GST) involved a genuine and substantial compromise overall by comparison to the ultimate judgment of $773,644.74 plus interest. The proposed settlement sum fell far below the amount I ultimately awarded against the Respondent and that is an important factor here.
The Respondent’s third submission is that the Pre-action Offer cannot be considered a valid offer of compromise because it contains a release beyond the scope of the subject matter of the proceeding. The proposed release was in the following terms:
2.upon receipt of cleared funds, the parties will provide mutual releases respectively releasing the other party from all claims, actions or demands howsoever arising in connection with the lease arrangements and the Lessee’s occupation of the New and Old Premises.
The Respondent relied on the reasoning of the Full Court of the Supreme Court in Rapuano (Trading as Raps Electrical) v Karydis Frisan & Anor[34] where it was found that an offer[35] under the Former Rules cannot purport to resolve claims not raised in the subject proceedings by the inclusion as a term of a release of claims or possible claims to the extant proceedings. It is, of course, a different question as to whether the inclusion of a release broader than the subject proceedings complied with the requirements for a formal offer in Rapuano as distinct from the question here as to whether it was unreasonable for the Respondent to reject the Pre-action Offer and such rejection justifies a higher award of costs than the standard costs basis in all the circumstances.
[34] [2013] SASCFC 93.
[35] The offer was made under the form of rule 187 that was repealed from 1 December 2015.
The circumstances of the New South Wales authorities referred to in Rapuano are distinguishable in the case of the Pre-action Offer. Here the mutual releases were proposed in a pre-action notice, not a Calderbank letter, and were confined to present known claims on a natural construction of the words used. I do not construe the release as applying more broadly to unascertained, future or contingent claims in the absence of those express words. Further, the mutual releases were connected to “the lease arrangements and the Lessee’s occupation of the New and Old Premises”, in circumstances where there was no uncertainty as between the parties as to the nature and scope of the issues in dispute arising from their former relationship of lessor and lessee. The Respondent lessee had vacated the Old Premises in February 2016 and the New Premises in October 2018. From the time the dispute between them arose in September 2018, the essential dispute concerned when the lease ended and the Respondent’s consequential obligations to pay rent and outgoings and make good.
In my view, the Respondent was well-equipped to assess the scope of the release and the attendant risk of releasing a present known claim against the Applicants as part of the overall settlement offer proposed in the Pre-action Offer. This was not a case where the Respondent was unable to compare the terms of the Pre-action Offer with the likely prospects of the Applicants’ claims succeeding if litigated.
My assessment is that the Applicants made a genuine and reasonable offer to settle the proceedings in their Pre-action Offer. Not only was the Respondent’s refusal imprudent but it did not comply with the Former Rules by either responding to the Pre-action Offer as required by rule 33(4) or making any attempt to resolve the disputes between the parties by agreement to avoid the institution of proceedings and otherwise fulfil the objects of the Former Rules. These matters are strong factors in favour of exercising my discretion on costs in favour of the Applicants here.
Weighing all the circumstances, I will exercise my discretion on costs as regards the Respondent’s rejection of the Pre-action Offer by ordering that the Respondent pay the Applicants’ costs up to and including 11 June 2019 on a standard basis and from 12 June 2019 on a solicitor/client basis.
Consideration of the Contract Offer
The Applicants claim indemnity costs on and from 2 September 2020 on the basis that their Contract Offer complied with rule 132.4 of the Current Rules and is therefore a relevant offer within the meaning of rule 132.10. The Respondent contends otherwise.
The Contract Offer contained a term that the Respondent pay the Applicants’ costs on a party/party basis up to the earlier of acceptance or 21 days [36] after service. Since this was more generous to the Respondent than the 14 days specified in rule 132.10(1)(e), I do not consider it was disqualified from being a “relevant offer”.
[36] Emphasis supplied.
It is common ground the Contract Offer was a relevant offer and met the requirements of rule 132.10(a), (b) and (c). It was challenged by the Respondent as not involving a genuine compromise (rule 132.10(d)) and not only providing money as the consideration payable (rule 132.10(f)).
Monetary Consideration
I will address the Respondent’s second submission first, that in effect, the requirement in rule 132.10(f) is to be read as limiting relevant offers to contract offers that only involve monetary consideration. Therefore, the inclusion of a release, being a non-monetary term, is a disqualifying matter.
I do not accept this submission. This is not how I read the rule contextually, having regard to the corresponding requirements of rule 132.4(5)(d) that provides a contract offer involving payment of money may include any term as to time for payment but if silent includes an implied term that payment must be made within 28 days of acceptance. The rule makes clear that 28 days is considered the reasonable time for payment of monetary consideration and its purpose is not to limit relevant offers to contract offers involving only monetary consideration.
In my view, I read it as providing there is only a relevant offer where it is a contract offer involving monetary consideration (other than costs) if the payment terms meet the requirement specified in rule 132.10(f)(ii), that is, including payment terms within 28 days of acceptance.
Genuine Compromise
The Respondent submitted the Contract Offer was not a relevant offer within the meaning of rule 132.10 of the Current Rules because it did not involve a genuine compromise due to term for mutual releases (even though there was no claim by the Respondent against the Applicants) that were wider in scope than the subject matter of the proceedings that it offered to resolve, relying on the reasons outlined in Rapuano.
However, Rapuano involved the predecessor rules 187 and 188 that were confined to offers to resolve only claims involved in the proceedings, as Peek J found by their wording.[37] The successor rules 187 and 188F in the Former Rules considered by Blue J in Director of Public Prosecutions v Disorganized Developments Pty Ltd[38] were not so confined and expressly contemplated the parties making a contract that includes terms for the disposition of the claim and therefore other terms.[39] The reasoning in Rapuano is therefore to be distinguished and does not apply to rule 132 of the Current Rules because of their different wording and intended operation.
[37] Op cit at [42]-[45].
[38] [2020] SASC 202.
[39] Emphasis supplied.
In my view, the issue here is whether the Contract Offer involves a genuine compromise in all the circumstances when it includes terms other than terms for the disposition of the proceeding that may lead the Court to conclude that it does not consider the Applicants’ judgment is no less favourable than the terms of the Contract Offer.
Put shortly, any term in a contract offer that is not readily comparable to the result from the ultimate judgment risks the Court concluding the contract offer was not more favourable so that the important consequences of rule 132.10(2) do not follow.
Therefore, the inclusion of mutual releases broader in scope than the result of the ultimate judgment is an important matter for the Court to consider in determining whether rule 132.10(2) is applicable or not. It is, however, only one matter to weigh in considering both whether the Contract Offer involved a genuine compromise and whether the judgment was on terms no less favourable than the terms of the contact offer.
Turning to the proposed mutual releases in the Contract Offer, they were in the following terms:
2.On receipt of payment of clear funds, the parties will forever release each other from all claims, actions, proceeding, demand, judgement, damage, loss, cost, expense or liability whatsoever incurred or suffered by, or brought or made or recovered against, any party and howsoever arising (whether or not presently ascertained, immediate, future or contingent) connected in any way to the subject matter of these proceedings.

As is apparent, the scope of the mutual releases was broader than those offered in the Pre-action Offer in two ways: that it expressly applied, first, to unascertained, future and contingent claims and, secondly, to claims etc connected in any way to the subject matter of the proceeding.
Despite the breadth of the mutual releases, in the circumstances of this case, I consider the terms of the Contract Offer overall involved a genuine compromise compared to the ultimate judgment. I consider the risks of a broader release in favour of the Applicants can in this case be weighed as against the benefit of the significant compromise in pecuniary terms by the settlement sum offered in the circumstances I have found, where the Respondent ceased occupation of the premises on 31 October 2018 and no claim was ever alleged or advanced against the Applicants by the Respondent despite proceedings that took two and half years to come to trial.
In the context of rule 132.10 I consider it was for the Respondent to persuade me that I should exercise the overriding discretion in its favour by presenting evidence as to the existence of other claims, rather than submitting that in the absence of such evidence I would be speculating impermissibly as to the commercial value of the mutual releases.[40]
[40] O’Brien v Cowie & Anor op cit at [45].
Again, weighing all the circumstances, I consider the Contract Offer involved a genuine compromise overall and therefore was a relevant offer within the meaning of rule 132.10(d). I am also persuaded that the Applicants obtained a judgment that is no less favourable than the terms of the Contract Offer in all the circumstances entitling the Applicants to indemnity costs under rule 132.10(2)(e).
In the circumstances of this case, I am not persuaded that there is any matter that should cause me to exercise my overriding discretion against the Applicants in favour of the Respondent and will order the Applicants are entitled to their costs of the proceeding on and from 2 September 2020 on an indemnity basis.
If I am wrong about the Contract Offer not being a relevant offer within the meaning of rule 132.10 such that rule 132.11 applies, taking into account the terms of the Contract Offer, I would make the same order because, having regard to the Hazeldene’s Chicken Farm criteria, I consider it involved a genuine and substantial compromise and it was imprudent and unreasonable for the Respondent not to accept it in all the circumstances. The Applicants’ Contract Offer overall was far more favourable to the Respondent than the outcome at trial.
Costs of the promissory estoppel claim
It is well established that there may be more than one event, and costs on separate issues will follow the event.[41]
[41] Excelsior Land Holdings Pty Ltd v Alan Sheppard Constructions Pty Ltd [2012] SASCFC 119 at [10].
I found the Applicants’ pleaded claim of promissory estoppel embarrassing in material respects and the case presented at trial failed on the evidence to establish an equitable estoppel.[42]
[42] Reasons for judgment [1460]-[487].
The claim was pleaded late and shortly before trial as a fallback position. Whilst it was not addressed in the Applicants’ opening, the Respondent anticipated and addressed potential arguments in favour of a promissory estoppel arising from the facts relied on for the Applicants’ claim in contract.
Having regard to the proportion of time taken by the Applicants’ promissory estoppel claim and the substantial overlap between the factual foundation between it and the Applicants’ contract claim, I consider the Applicants’ costs should be reduced by 5%, applying a broad axe.