AIG Australia Ltd v Jaques (No 2)

[2015] VSCA 3

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2014 0072

AIG AUSTRALIA LIMITED (ACN 004 727 753)	Appellant
v
KIM SAMUEL JAQUES	Respondent

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JUDGES:	WARREN CJ, NEAVE JA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	16 December 2014
DATE OF JUDGMENT:	6 February 2015
MEDIUM NEUTRAL CITATION:	AIG Australia Ltd v Jaques (No 2) [2015] VSCA 3
JUDGMENT APPEALED FROM:	[2014] VSC 269

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COSTS – Costs of appeal and of stay application – Indemnity costs – Discretion of appeal court – Where offer of compromise made prior to trial – Where costs of trial awarded on indemnity basis from the commencement of the trial – Where appeal dismissed – Costs awarded on a standard basis – Lower Murray Urban and Rural Water Corporation v Di Masi, Belbin and Marciano (No 2) [2014] VSCA 133 applied.

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APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr E A Gisonda	Lander & Rogers Lawyers
For the Respondent	Mr A Blakeman	Millens Pty Ltd

WARREN CJ
NEAVE JA:

1. On 16 December 2014, the Court of Appeal dismissed the appellant’s appeal.  The background to the proceeding is set out in the Court’s reasons for judgment.[1] At the time judgment was delivered, the respondent made an oral application that the appellant pay his costs of the appeal and of an application seeking a stay of the trial judge’s orders pending the hearing and determination of the appeal on an indemnity basis.

   [1]AIG Australia Ltd v Jaques [2014] VSCA 332.

1. At the time judgment was delivered, only two members of the Bench were present. Both parties consented to the application being decided by two judges. After hearing submissions from both parties on the question of costs, the Court refused the application and indicated that it would publish its reasons at a later time.

1. We turn then to the question of the nature of costs to be awarded against the appellant.  The respondent sought orders for costs on an indemnity basis in the exercise of the Court’s discretion under r 63.31 of the Rules. The appellant resisted the application for indemnity costs, contending that it should only be required to pay costs on the standard basis.

1. The respondent put two submissions in support of the application.  First, he relied on the fact that the judge at trial had awarded costs on an indemnity basis on the basis of a Calderbank offer made prior to trial.  That Calderbank offer, which expired at 10.00 am on the morning of the commencement of trial, offered to settle the proceeding on terms more favourable to the appellant than the judgment the respondent obtained. On the basis of that offer, the judge awarded costs to the respondent on an indemnity basis from the time of the commencement of the trial.[2] The respondent submitted that the costs of the appeal should also be awarded on an indemnity basis so as to ensure that the benefits he obtained as a result of the trial judge’s order were not undermined by the additional costs incurred in meeting the appeal.

   [2]The judgment in respect of the costs of the trial was not before this Court.

1. Secondly, he submitted that the degree of unreasonableness of the appellant’s rejection of the offer to compromise the trial and its subsequent decision to pursue the matter on appeal was a further basis that supported his application.  He relied on affidavit material before the Court that suggested that the respondent was having difficulty in funding his defence in associated proceedings in the Federal Court. These circumstances were said to make it more unreasonable for the appellant to reject the offer than it would otherwise have been.

1. The appellant submitted that an offer to compromise a trial is insufficient to warrant an order for the costs of an appeal on an indemnity basis.  It further submitted that, in so far as the existence of the Calderbank offer is relevant to the appeal, it falls to be considered with reference to the matters in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2).[3] When those matters are considered, it is apparent that the offer of compromise did not engage with the grounds of the appeal or the prospects of the success of any such appeal. Indeed, it could not, since an appeal had not been commenced at the time the decision whether to accept or reject the offer was called for.

   [3](2005) 13 VR 435.

1. The appellant further submitted that even if it were unsuccessful in resisting an order for indemnity costs in the appeal, indemnity costs should not be awarded against it in respect of the stay application. That application was heard on 24 July 2014 and was subsequently adjourned until the hearing of the appeal. At the hearing of the appeal, senior counsel for the respondent did not object to the granting of the stay until the time of judgment. The appellant submitted that in those circumstances, the Court should decline to exercise its discretion and make a special order in respect of the application.

Analysis

1. The Court was taken to the decision in Lower Murray Urban and Rural Water Corporation v Di Masi, Belbin and Marciano (No 2).[4] There the Court of Appeal held:

The fact that the appellant rejected the respondents’ offers of compromise and the respondents have now received awards of damages more favourable to them than their offers is a relevant consideration for this Court to take into account in its discretion in awarding the costs of these appeals. However, it is also relevant that at all times while these appeals were pending the Rules provided for offers of compromise to be made to compromise an appeal pursuant to Part 3 of O 26 (r 26.12).[5]

[4][2014] VSCA 133 (‘Lower Murray’) (Waren CJ, Tate and Beach JJA).

[5][13] (citing Rosa v Galbally & O’Bryan (No 3) [2013] VSCA 159 [10]).

1. Offers of compromise made pursuant to Pt 2 of Order 26 are confined to the compromise of the claim at trial.[6] As the Court observed in Lower Murray, it is relevant that the Rules now provide for offers of compromise to be made to compromise an appeal, pursuant to Pt 3 of Order 26 (r 26.12). It was not suggested that any such offer had been made by the respondent in this case.

   [6]Rosa v Galbally & O’Bryan (No 3) [2013] VSCA 159 [6].

1. In the result in Lower Murray, the respondents were not awarded their costs of the appeal on an indemnity basis, despite having obtained orders for costs on an indemnity basis at trial. It follows that a pre-trial offer of compromise is not, of itself, sufficient to found an order for indemnity costs in an appeal. Something more is needed before the costs of the appeal will be awarded on an indemnity basis.

1. It was not suggested that the grounds of appeal lacked merit, or that the appeal was otherwise conducted in a manner that brought it within the well- established principles governing the making of a special costs order.[7] The only additional factor offered in support of the application was the unreasonableness of the appellant in rejecting the offer to compromise the trial. Although counsel for the respondent referred to his difficulties in meeting the costs of his defence in associated proceedings there was no evidence to suggest that the unenviable position of the respondent at around the time of the trial was a factor that induced the appellant to reject the offer, or to continue with an appeal. As put by the respondent, the evidence of unreasonableness was insufficient to warrant departing from the usual order as to costs in respect of the appeal.  

   [7]See, eg Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, 233–234.

1. The respondent has not established that the normal order as to costs  of an appeal should be departed from. In all the circumstances, we consider that it is appropriate to order that the appellant pay the respondent’s costs on a standard basis.

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