Australian Defence Apparel Pty Limited v Graham

[2019] NSWSC 1162

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Australian Defence Apparel Pty Limited v Graham & Anor [2019] NSWSC 1162
Hearing dates:	27 August 2019
Decision date:	06 September 2019
Jurisdiction:	Equity - Expedition List
Before:	Sackar J
Decision:	See para [59] - Conclusion
Catchwords:	COSTS- costs in context of offer of compromise – r 20.27(3) Uniform Civil Procedure Rules 2005 (NSW)- r 42.13A Uniform Civil Procedure Rules 2005 (NSW)   CIVIL PROCEDURE- offer of compromise- offer and acceptance – terms of offer- proceedings be otherwise dismissed
Legislation Cited:	Uniform Civil Procedure Rules 2005 (NSW) Corporations Act 2001 (Cth) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Johnston v Johnston [2016] NSWCA 52
Texts Cited:	n/a
Category:	Costs
Parties:	Australian Defence Apparel Pty Limited (plaintiff) Matthew Graham (first defendant) Unisync Group Limited (second defendant)
Representation:	Counsel: Ms M Painter SC, Ms R White (plaintiff) T Brennan (first defendant) D Mahendra (second defendant)   Solicitors: Littler Mendleson PC (plaintiff) Kennedys (first defendant) Herbert Smith Freehills (second defendant)
File Number(s):	2019/157499

Judgment

Procedural background

1. Initially this matter concerned a claim by the plaintiff (Australian Defence Apparel) that the first defendant (Matthew Graham) had, in essence, breached various terms of his employment agreement by commencing work with the second defendant (Unisync Group).

2. The matter was set down for hearing before me on 9 August 2019.

3. On 6 August I was informed that the parties had settled the matter in principle.

4. Also on 6 August by way of notice of motion, the plaintiff requested that judgment be entered for the plaintiff in particular terms. The matter was relisted before me to determine whether judgment should be entered for the plaintiff or the defendants as well as the appropriate costs order.

5. The motion was heard on 27 August 2019.

Background Facts

6. On 27 May 2019, by way of Amended Summons the plaintiff sought various forms of final relief as against the first and second defendants, including:

1. A declaration that the employment agreement between the plaintiff and first defendant is valid and enforceable;

2. A declaration that the first defendant’s employment with the second defendant is in breach of the employment agreement;

3. An order that the first defendant be restrained up to and including 7 March 2020 from being involved with the second defendant;

4. An order that the first defendant be restrained up to and including 7 March 2020 from soliciting the customers or business of the plaintiff;

5. An order that the first defendant be restrained up to and including 7 March 2020 from soliciting the customers or business of Logistik Unicorp;

6. An order that the first defendant be restrained up to and including 7 March 2020 from interfering with the business of the plaintiff or any of its associated entities,

7. An order that the first defendant be restrained up to and including 8 March 2020 from soliciting employees of the plaintiff;

8. Damages and equitable compensation as against the first defendant;

9. Damages for interference with contract as against the second defendant;

10. Interest; and

11. Costs.

7. The first defendant had been employed as the CEO by the plaintiff and President International of its associated Canadian company (Logistik Unicorp). Mr Graham’s employment was terminated on 6 March 2019. Shortly after the termination, Mr Graham commenced employment with Unisync Group.

8. Broadly, the plaintiff’s case was that Mr Graham had breached his employment agreement by working for a competitor of Australian Defence Apparel or its broader corporate group within 12 months after the termination of his employment. The plaintiff’s case was essentially two pronged; first a restraint of trade in relation to Mr Graham’s employment with Unisync and secondly, a breach of contract in relation to certain conduct of Mr Graham while he was on sick leave. The defendants denied the employment with Unisync was in breach of the employment agreement and further that the restraints were unreasonable.

9. It became apparent during the litigation that of particular concern to all parties was a potential upcoming tender from the Canadian Department of Defence, and the ability of Mr Graham to work with the second defendant on that tender.

The various offers of compromise

10. On 29 June 2019, the defendants jointly made an offer of compromise to the plaintiff. The plaintiff did not accept the offer.

11. On 26 July 2019, the plaintiff issued an offer of compromise to the defendants. Later on the same day, the defendants jointly made a further offer of compromise to the plaintiff. The offer was stated to remain open until 4pm on 8 August 2019.

12. The terms of the offer of compromise were as follows:

The First and Second Defendant (together, the Defendants) offer to compromise the whole of the Plaintiff’s claims against them both on the following terms:

1.   The Court makes the orders set out in Schedule 1.

2.   Upon the Court making the orders referred to in paragraph 1, the Plaintiff agrees to forever release and discharge each of the Defendants from any claims it has or may have against them in connection with the subject matter of the proceedings herein and further agrees that it will not procure, encourage or assist any Associated Entity to bring any claim against either of the Defendants in connection with such subject matter. To remove any doubt, such release and discharge does not affect the enforceability of the orders referred to in paragraph 1.

3.   This offer is made without prejudice.

4.   This offer is made in accordance with the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), including rule 20.26.

5. If this offer is held to be ineffective under the UCPR, it is intended to be treated as a Calderbank offer in accordance with the principles set out in Calderbank v Calderbank [1975] 3 All ER 333.

6.    This offer is open for acceptance until 4pm on Thursday 8 August 2019.

13. Schedule 1, as attached to the offer of compromise, was in the following terms:

The Court orders that:

1.    The First Defendant undertakes to the Court that:

(a)   The First Defendant will not, at any time before 21 December 2019, either on his own behalf or on behalf of any other person, either directly or indirectly:

(i)   engage in, have a financial interest in, or otherwise be commercially involved in a business or enterprise that, in any ‘Territory’:

i.   solicits;

ii.   markets;

iii.   enters into a contract; or

iv.   otherwise competes with the Plaintiff

to supply Apparel Products to a customer; and

(ii)   canvass or solicit the business in Apparel Products of a Restricted Customer and Prospective Customer.

(b)   The First Defendant will not, at any time, use, divulge, diffuse, sell, transfer, give, publish, circulate or otherwise distribute to any person, or otherwise make public, any Confidential Information.

(c)   Notwithstanding anything in this undertaking:

(i)   disclosure of Confidential Information will not be precluded if such disclosure is required by law, provided that the First Defendant will, if reasonably possible, first have given notice to the Plaintiff and will, acting reasonably, fully cooperate in the Plaintiff’s attempt, if any, to obtain a ‘protective order’ from the appropriate tribunal or governmental body.

(ii)   the First Defendant is not precluded from discharging his responsibility to manage, on behalf of the Second Defendant, the operations of Peerless provided the First Defendant in the discharge of that responsibility does not engage in activity in breach of paragraph (1)(b)(ii) of this undertaking.

2.   The Second Defendant undertakes to the Court that:

The Second Defendant will not direct and/or require the First Defendant to do anything in his employment with the Second Defendant that would cause him to be in breach of the undertaking set out in paragraph 1 above.

3.    The proceedings be otherwise dismissed.

For the purposes of this order:

…

Business means the business conducted by the Plaintiff and its Associated Entities at any time from 27 July 2018 and 6 March 2019.

…

Restricted Customer means each of the customers listed in Annexure A

Territory means Australia, Germany, Saudi Arabia, New Zealand, the United Kingdom, Tunisia, Togo and Scandinavia (inclusive of Denmark, Norway and Sweden).

14. Annexure A lists many businesses across Australia and the US as well as, in particular, the Canadian Department of Defence.

15. It is worth noting that the offer essentially restrained the first defendant from working on the Department of Defence tender if it is released before 21 December 2019.

16. By written notice on 6 August 2019, the plaintiff accepted the offer.

17. It is accepted that the offer of compromise and the following acceptance were each made in compliance of r 20.26 of the UCPRs.

18. The plaintiff then by notice of motion also dated 6 August 2019, applied for judgment to be entered in its favour.

19. The defendants have proffered the undertakings to the Court in compliance with the offer of compromise (CB 129-136).

Legal principles

20. The Uniform Civil Procedure Rules 2005 (NSW) govern the making and accepting of offers:

20.25   Definitions

In this Division:

Judgment in favour of the defendant includes a dismissal of a summons or a statement of claim.

Offer means an offer of compromise referred to in rule 20.26

Period of acceptance for an offer means the period of time during which the offer is open for acceptance

20.26   Making of offer

(1)   In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms.

(2)     An offer under this rule:

(a)   must identify:

(i)   the claim or part of the claim to which it relates, and

(ii)   the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment, and

(b)   if the offer relates only to part of a claim in the proceedings, must include a statement:

(i)   in the case of an offer by the plaintiff, as to whether the balance of the proceedings is to be abandoned or pursued, or

(ii)   in the case of an offer by a defendant, as to whether the balance of the proceedings will be defended or conceded, and

(c)   must not include an amount for costs and must not be expressed to be inclusive of costs, and

(d)   must bear a statement to the effect that the offer is made in accordance with these rules, and

(e)   if the offeror has made or been ordered to make an interim payment to the offeree, must state whether or not the offer is in addition to that interim payment, and

(f)   must specify the period of time within which the offer is open for acceptance.

(3)   An offer under this rule may propose:

(a)   a judgment in favour of the defendant:

(i)   with no order as to costs, or

(ii)   despite subrule (2) (c), with a term of the offer that the defendant will pay to the plaintiff a specified sum in respect of the plaintiff’s costs, or

(b)   that the costs as agreed or assessed up to the time the offer was made will be paid by the offeror, or

(c)   that the costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer.

(4)   If the offeror makes an offer before the offeree has been given such particulars of the offeror’s claim, and copies or originals of such documents available to the offeror, as are necessary to enable the offeree to fully consider the offer, the offeree may, within 14 days of receiving the offer, give notice to the offeror that:

(a)   the offeree is unable to assess the reasonableness of the offer because of the lack of particulars or documents, and

(b)   in the event that rule 42.14 applies to the proceedings, the offeree will seek an order of the court under rule 42.14 (2).

(5)   The closing date for acceptance of an offer:

(a)   in the case of an offer made two months or more before the date set down for commencement of the trial—is to be no less than 28 days after the date on which the offer is made, and

(b)   in any other case—is to be such date as is reasonable in the circumstances.

(6), (7)    (Repealed)

(8)   Unless the notice of offer otherwise provides, an offer providing for the payment of money, or the doing of any other act, is taken to provide for the payment of that money, or the doing of that act, within 28 days after acceptance of the offer.

(9)   An offer is taken to have been made without prejudice, unless the notice of offer otherwise provides.

(10)   A party may make more than one offer in relation to the same claim.

(11)   Unless the court orders otherwise, an offer may not be withdrawn during the period of acceptance for the offer.

(12)   A notice of offer that purports to exclude, modify or restrict the operation of rule 42.14 or 42.15 is of no effect for the purposes of this Division.

20.27 Acceptance of offer

(1)   A party may accept an offer by serving written notice of acceptance on the offeror at any time during the period of acceptance for the offer.

(2)   An offer may be accepted even if a further offer is made during the period of acceptance for the first offer.

(3)   If an offer is accepted in accordance with this rule, any party to the compromise may apply for judgment to be entered accordingly.

20.28   Withdrawal of acceptance

(1)   A party who accepts an offer may withdraw the acceptance in any of the following circumstances by serving written notice of withdrawal on the offeror:

(a)   if the offer provides for payment of money, or the doing of any other act, and the sum is not paid to the offeree or into court, or the act is not done, within 28 days after acceptance of the offer or within such other time as the offer provides, or

(b)   if the court grants the party leave to withdraw the acceptance.

(2)   If acceptance of an offer is withdrawn:

(a)   except as provided by paragraph (b), all steps in the proceedings that have been taken as a consequence of the offer having been accepted cease to have effect, and

(b)   the court may give directions:

(i)   to restore the parties as nearly as may be to their positions at the time of the acceptance, and

(ii)   to give effect to any steps in the proceedings that have been taken as a consequence of the offer having been accepted, and

(iii)   to provide for the further conduct of the proceedings,

and may do so either after the offer is withdrawn or when granting leave to withdraw the offer.

20.29   Failure to comply with accepted offer

(1)   If the plaintiff, being a party to an accepted offer, fails to comply with the terms of the offer, the defendant is entitled:

(a)   to such judgment or order as is appropriate to give effect to the terms of the accepted offer, or

(b)   to an order that the proceedings be dismissed, and to judgment accordingly,

as the defendant elects, unless the court orders otherwise.

(2)   If the defendant, being a party to an accepted offer, fails to comply with the terms of the offer, the plaintiff is entitled:

(a)    to such judgment or order as is appropriate to give effect to the terms of the accepted offer, or

(b)   to an order that the defence be struck out, and to judgment accordingly,

as the plaintiff elects, unless the court orders otherwise.

(3)   If a party to an accepted offer fails to comply with the terms of the offer, and a defendant in the proceedings has made a statement of cross-claim or cross-summons that is not the subject of the accepted offer, the court:

(a)   may make such order or give such judgment under this rule, and

(b)   may make such order as to the further conduct of proceedings on the statement of cross-claim or cross-summons,

as it thinks fit.

21. ‘Judgment’ is further defined in s 3 of the Civil Procedure Act 2005 (NSW) as; “judgment includes any order for the payment of money, including any order for the payment of costs.”

22. The UCPRs further provide for costs in circumstances where there has been an offer of compromise:

42.13   Application

This Division applies to proceedings in respect of which an offer of compromise (the offer) is made under rule 20.26 with respect to a plaintiff’s claim (the claim).

42.13A   Where offer accepted and no provision for costs

(1)   This rule applies if the offer:

(a)   is accepted by the offeree, and

(b)   does not make provision for costs in respect of the claim.

(2)   If the offer proposed a judgment in favour of the plaintiff in respect of the claim, the plaintiff is entitled to an order against the defendant for the plaintiff’s costs in respect of the claim, assessed on the ordinary basis up to the time when the offer was made.

(3)   If the offer proposed a judgment in favour of the defendant in respect of the claim (including a dismissal of a summons or a statement of claim), the defendant is entitled to an order against the plaintiff for the defendant’s costs in respect of the claim, assessed on the ordinary basis up to the time when the offer was made.

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

(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.

42.15   Where offer not accepted and judgment no more favourable to plaintiff

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

(2)   Unless the court orders otherwise:

(a)   the plaintiff is entitled to an order against the defendant for the plaintiff’s costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and

(b)   the defendant is entitled to an order against the plaintiff for the defendant’s costs in respect of the claim, 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.

...

42.20   Dismissal of proceedings etc

(1)   If the court makes an order for the dismissal of proceedings, either generally or in relation to a particular cause of action or in relation to the whole or part of any claim, then, unless the court orders otherwise, the plaintiff must pay the defendant’s costs of the proceedings to the extent to which they have been dismissed.

(2)   If the court makes an order striking out a defence, either generally or in relation to a particular cause of action or in relation to the whole or part of any claim, then, unless the court orders otherwise, the defendant must pay the plaintiff’s costs of the proceedings in relation to those matters in respect of which the defence has been struck out.

23. It is important to note the Court’s general discretion as to costs under s 98 of the CPA subject to any other rules of Court or any other Act.

24. Rule 20.27 and the interaction with r 42.13A was discussed by Ward JA in Johnston v Johnston [2016] NSWCA 52 (with Leeming and Simpson JJA agreeing), at [16]-[17]:

The first point to note is that r 42.13A UCPR in its terms prescribes the costs outcome that follows on acceptance of an offer of compromise made under r 20.26 with respect to a plaintiff’s claim (defined as “the claim” – see r 42.13).

The second point to note is that the present version of the rule, unlike that applicable before amendments to the rules in Division 3 Part 42 of the UCPR on 7 June 2013, in its terms preserves no discretion as to the costs consequences on acceptance of an offer complying with r 20.26 UCPR. The previous version of the rule provided that:

42.13A   Where offer accepted

(1)   This rule applies if the offer concerned:

(a)   is made by the plaintiff and accepted by the defendant, or

(b)   is made by the defendant and accepted by the plaintiff.

(2)   The plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim, assessed on the ordinary basis up to the time when the offer was made, unless:

(a)   the offer states that it is a verdict for the defendant and the parties are to bear their own costs, or

(b)   the court otherwise orders. (my emphasis)

25. And later at [36]-[39]:

In my opinion this is a case where, perhaps because of the particular context in which the offer is made (probate proceedings), the offer is capable of being read as enlivening both limbs of r 42.13A. An offer requiring consent to the grant of probate in solemn form and the dismissal of the cross-claim seeking a grant of administration in favour of the respondents is an offer which, if accepted, secures to the applicants the very relief they sought in the proceedings (and the abandonment of an application for contrary relief) (within r 42.13A(2)). By the same token, however, the offer to pay a monetary sum to the respondents can be seen as an offer proposing judgment in their favour “in respect of” the applicants’ claim in the sense that it is the inducement for the agreement to consent to the grant of probate sought by the applicants. Rule 20.27(3) makes it clear that a party may apply for judgment to be entered on acceptance of an offer that complies with the rules. Hence it is not to the point that the offer in this case does not expressly propose entry of judgment for the monetary sum. It is an offer that, if accepted, would entitle the applicants to apply for judgment for the said sums. Moreover, the orders made by the primary judge did not merely note an agreement to pay. Rather, they imposed an obligation upon the applicants to pay the monetary sum within 28 days. Considered from that perspective, the offer enlivens r 42.13A(3).

It makes no sense for r 42.13A as a whole to apply in circumstances where there is a mixed offer of this kind, since if that were the case there would be opposing orders for each side to pay the other’s costs. While a set-off of that kind is not necessarily unworkable, it seems hardly consistent with the objective purpose of the cost rules in relation to offers of compromise – as identified quite some time ago in Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724. The object of the rules governing offers of compromise was there identified as being to facilitate the proper compromise of litigation, including the promotion of settlements, the saving of public costs and protection of the party who is not the real cause of the litigation. It is unlikely to be sensible or practicable to apply the costs rules separately to the discrete aspects of the offer in circumstances where there would be costs orders going either way for the whole of the proceedings and would no doubt give rise to the real potential for further costs in working out how those orders were to apply. Nor would such a construction be likely to achieve the overriding purpose of the rules as stated in s 56 of the Civil Procedure Act, since it would be likely as a practical matter to encourage further disputes.

The submission by the applicants that, on the construction adopted by the primary judge, it would have been impossible for them to formulate an offer of compromise under the rules attracting the operation of r 42.13A(2) (because an offer limited to the grant of probate of the will in solemn form would have involved no real and general element of compromise – referring to Prosperity Advisers Pty Ltd v Secure Enterprises Pty Ltd t/as Strathearn InsuranceBrokers [2012] NSWCA 192 at [108]-[109]) is of no assistance in the construction of the rule. There must be many occasions where a party is faced with an “all or nothing” claim or where the conditions it wishes to attach to an offer are such that it may not be possible to make (or may at least be doubtful whether they can make) an offer of compromise containing a genuine element of compromise as required under the rules and that party is then left (as the applicants seem in the present case also to have made provision for) to contemplate other avenues of settlement, such as the making of a Calderbank offer.

I consider that the better construction of r 42.13A is that where there is a “mixed offer” of the kind in the present case (i.e., an offer that proposes both judgment for the plaintiff and judgment for the defendant in respect of the plaintiff’s claim), the rule does not apply. That is because the rule contemplates two mutually exclusive situations. One is therefore left with the general discretion as to costs (informed as it would be in the present case by the particular context of this being litigation in the probate list).

26. Briefly, if the offer of compromise is deemed a ‘mixed offer’ then the costs rule in 14.13A will not apply.

Parties’ submissions

Plaintiff

27. The plaintiff submits that under r 20.27(3) of the UCPRs judgment should be entered for the plaintiff in respect of the claim, in the terms envisaged in the offer. The plaintiff states that the offer is a complying one, it secures the plaintiff in large part the relief it sought, and the offer represents a genuine compromise.

28. The plaintiff submits that the terms of r 20.27(3) allow either party to a compromise to apply for judgment to be entered accordingly. Further ‘accordingly’ is a reference back to the beginning of the section, ‘if an offer is accepted’. This therefore enables the offeree to apply to have the judgment entered (T8/7).

29. The plaintiff submits that under r 20.27(3), in the absence of a ‘judgment’ in the offer of compromise, the Court has discretion to enter a judgment for a particular party.

30. The plaintiff submits that in the circumstances of these proceedings, the offer delivers to the plaintiff the essence of its claim, because it delivers the first defendant’s compliance with his post-employment restraints. Given the strident denials contained in the pleadings, the undertaking proposed by the defendants represents a significant move away from their pleaded position. The plaintiff notes that looking at the whole of the offer, first the defendants offered up conduct-based undertakings and secondly, that an order be made that the proceedings be otherwise dismissed. A holistic review of the offer of compromise makes clear that the plaintiff has been substantially successful (T38/10).

31. The plaintiff contends that the undertakings offered by the defendants operate in substantially the same way as an order of court, and have a very real impact and effect. In particular, the plaintiff notes that it was successful in protecting its business interests in Australia, and that the first defendant is prevented from working on the C2 Contract from the Canadian Department of Defence in the event that contract is released before 21 December 2019. The plaintiff notes that given the maximum restraint was till 6 March 2020, the reduction of the restraint period of a number of weeks is of no practical significance.

32. Further it is no impediment to the plaintiff’s case that the judgment which the plaintiff seeks does not provide for a monetary sum. There is nothing in the text of r 20.27(3) that suggests judgment refers only to a money judgment, and further nothing in the definition of judgment in s 3 of the CPA.

33. The plaintiff submits that should a judgment be entered in its favour then pursuant to r 42.13A(2), it should be awarded a costs order in its favour on an ordinary basis until 26 July 2019 (T2/23), and then from 6 August for the motion (T2/39). The plaintiff submits that the offer could not be characterised as a ‘mixed offer’, as there is nothing to support a finding that there be judgment for the defendants or a requirement placed upon the plaintiff. Therefore there is no question that r 42.13A(2) would apply.

34. Alternatively, if no judgment is entered for the plaintiff under r 20.27(3), then s 98 of the CPA should govern the costs issue and the Court should undertake the same sort of enquiries as to whether it would award judgment or not (T22/47-49), that is, given the plaintiff has been substantially successful, costs should be awarded in favour of the plaintiff (T23/13).

First Defendant

35. The first defendant submits that no judgment should be entered for the plaintiff, instead and in accordance with the offer of compromise, the proceedings should simply be dismissed.

36. The first defendant submits that in particular r 20.27(3), and the analysis in Johnston, does not provide for a party to apply for judgment to be entered for that party. Rather it provides for a party to apply for judgment to be entered in accordance with the offer which has been accepted. He further notes that r 20.27(3) is engaged only where the offer provides for a party to consent to the Court doing something (T32/50-33/1). This is not the case here, and thus there is no discretion to enter judgment.

37. It is not necessary to determine whether r 20.27(3) extends to an order not being a money judgment. However, the first defendant notes, that reading r 20.28 with its counterpart in 20.29 (which distinguishes between a judgment and an order), the better construction is that 20.27 extends to money judgments. Rule 20.29 prescribes the rights of parties to obtain orders consequent upon an accepted offer, accordingly, the only appropriate order is to give effect to the offer and dismiss the summons.

38. He notes, the terms of the offer do not go anywhere near granting the final relief sought by the plaintiff, and therefore this is not a ‘mixed offer’ and r 42.13A applies. This is because the undertakings given by the defendant do not have any practical effect, particularly the first defendant remains employed by the second defendant. The non-competition undertaking offered only concerned competition in countries in which the second defendant was not alleged to operate.

39. The first defendant submits that the plaintiff could not be awarded costs under r 42.13A(2). They submit “judgment” in r 42.13A(2) refers to a money judgment, for several reasons:

1. That gives the word both its defined (as per s 3(1) of the CPA), and usual meaning;

2. There is nothing in the text to indicate a contrary intention; and

3. The context supports readings as ‘money judgment’, for example the distinction between ‘money judgment’ in 20.27 and ‘other orders’ in 20.26, as well as within various other rules such as within 20.29, 42.13A compared to 42.14 or 14.15.

40. There is no question that the offer did not propose a money judgment in favour of the plaintiff and further no judgment in favour of the plaintiff and therefore 42.13A(2) does not apply.

41. The first defendant moreover submits that an order dismissing the summons is an order within the extended meaning of judgment in favour of the defendant within r 42.13A(3). Therefore the defendant should get his costs assessed on an ordinary basis up to the time when the order was made.

42. In the alternative, if the court concludes the offer was a mixed offer and r 42.13A(3) does not apply, costs fall to be determined in the Court’s general discretion. The starting point is r 42.20: the summons is to be dismissed and unless the Court orders otherwise the plaintiff is to pay the defendants’ costs. The first defendant further submits that there is no reason to depart from this starting point, given that the plaintiff has surrendered much of their initial claims and completely abandoned the claim related to the sick leave.

Second Defendant

43. The second defendant submits that orders should be made as set out in the offer of compromise that is, orders should be made that the proceedings be dismissed. The second defendant submits that on reading 42.13A(3), in conjunction with r 42.20, judgment in favour of the defendant, includes a dismissal of proceedings, and thus they should be awarded their costs (T25/13-42).

44. The second defendant submits that there is nothing in the offer of compromise that suggests judgment should be entered for the plaintiff, the plaintiff has not obtained the relief it sought against the defendants. Rather the defendants have been wholly successful in the proceedings by the plaintiff accepting the offer of compromise for the following reasons:

1. There are no orders against the defendants in the offer; rather there are undertakings which from a practical perspective do not interfere with the performance of the defendants duties;

2. Upon review of the statement of claim and the amended summons, it is clear that the plaintiff has entirely failed. The breaches alleged by the plaintiff do not relate to the offer of compromise. There is no requirement that the first defendant cease employment with the second defendant. There is no relief set out in respect of the following matters;

1. The alleged breach of duty of fidelity and duties under s 181 of the Corporations Act 2001 (Cth), of the first defendant,

2. The alleged breaches related to the first defendant’s conduct on sick leave,

3. The alleged unlawful interference with contract by the second defendant,

4. Any declaratory relief,

5. Any relief preventing the first defendant continuing his employment with the second defendant,

6. Any relief in respect of the first defendant interfering or attempting to interfere with the business of the plaintiff,

7. Any relief in respect of solicitation of employees of the plaintiff,

8. Damages or equitable compensation, or

9. Interest.

3. Even if the plaintiff had articulated a claim against the first defendant in respect of non-solicitation, the plaintiff has not obtained the full relief sought. Rather, the offer of compromise sets out a list of Australian clients that the defendants do not have dealings with in any event. Although the Canadian Department of Defence is captured by the offer of compromise, it is only in respect of a single tender; and

4. Significantly, the only relief sought against the second defendant was for damages or equitable compensation. The offer of compromise did not propose any relief against the second defendant.

45. Even if the offer of compromise was found to be a ‘mixed offer’ and r 42.13A did not apply, under s 98 of the CPA, the Court should exercise its discretion to award costs in favour of the defendants given that the plaintiff has failed in respect of its primary case (T30/42).

46. Further the second defendant submits it is entitled to costs associated with the first defendant’s defence of the proceedings by operation of r 42.13A or alternatively if the offer is considered a ‘mixed offer’, based on the Court’s general discretion.

Consideration

47. Parties are able always to compromise matters on their own terms. Parties are also able to invoke the framework of the Court’s protocol to structure their offers and/or counter offers in a way where absent complete agreement the rules of Court will govern the final disposal of claims. This may happen for a number of reasons. The parties given best efforts may not be able to agree on costs as an example. Nonetheless, it is convenient to progress resolution by the offer and/or acceptance of other important terms. Between sophisticated parties who are legally represented, parties must be taken to appreciate only too well the effect upon the final resolution of matters by invoking the Court’s rules.

48. The issues before me for determination are the particular terms of the appropriate orders, including the disposal of proceedings and/or costs in circumstances where there had been a valid offer of compromise which in turn had been validly accepted.

49. The plaintiff argued that when viewed in totality, it had been successful in its case and I should therefore exercise the Court’s discretion to enter judgment in its favour under r 20.27(3). The defendants together argued that no judgment was in fact offered; rather the offer of compromise specifically contemplated the proceedings being dismissed.

50. It is clear that the offer of compromise encompassed various undertakings on the part of the defendants before noting, ‘the proceedings be otherwise dismissed’. In my view, dismissed, clearly means, that the plaintiff’s statement of claim or summons is dismissed and therefore there is no case thereafter on foot.

51. In r 20.25, a judgment in favour of the defendant is specifically defined to include a dismissal of a statement of claim or summons. Further in r 42.13A, a judgment in favour of the defendant again specifically includes a dismissal of a statement of claim or summons. It is clear the effect of the rules is that, a dismissal of a claim, or a judgment carries, with it the same costs consequences.

52. Rule 20.29 again contemplates, that the defendant can have the ‘proceedings dismissed’ and ‘judgment entered accordingly’. The plaintiff on the other hand, can have ‘the defence struck out’ and ‘judgment entered accordingly’. There is an obvious important distinction, between dismissing a summons or statement of claim and striking out a defence, although both can lead to the end of proceedings. It all turns on what is offered and indeed what is accepted.

53. The offer of compromise here clearly and expressly contemplated a dismissal of proceedings, which is, in my view, antithetical to a judgment in favour of the plaintiff. It is indeed analogous to judgment in favour of the defendant.

54. In my view, once the plaintiff accepted the offer of compromise, it accepted that the appropriate order was that the proceedings be dismissed. In these circumstances, it seems to me, r 42.13A(3) applies. It seems to me therefore, the plaintiff must pay the defendants costs and r 20.27(3) simply does not apply. In particular, I am of the view that what r 20.27(3) does (as was submitted by the first defendant) allow for application for a judgment to be entered by reasons of the terms of the particular offer that was accepted. Indeed, in my view it would be nonsensical to permit the plaintiff to now apply for a judgment contrary to the effect of the offer they accepted.

55. A party must be held to its compromise and the obligations that lawfully flow. These were sophisticated, commercially minded parties. The purpose of the whole scheme provided for by the rules, is to provide certainty and finality to disputes in the context of offers of compromise. The rules provide for certain costs orders to be made following the particular way a dispute may resolve. It would be inappropriate, in my view, to make orders contrary to the clear outcome as contemplated by the parties.

56. Further, even if I were of the view that the Courts discretion was enlivened by r 20.27(3) beyond entering a judgment in accordance with what was offered, I would not enter judgment in favour of the plaintiff. In the circumstances of this case, contrary to the plaintiff’s argument, I am not satisfied that a judgment in favour of the plaintiff would be an accurate reflection of the offer of compromise accepted. No judgment was offered by the defendants, and significantly no judgment was requested by the plaintiff.

57. I am also not satisfied that the offer accepted reflected a substantial ‘win’ on the part of the plaintiff. It is clear to me that the restraint agreed in the undertakings of the first defendant in particular is far more restricted in both time and territory than what was claimed for by the plaintiff. In particular, the first defendant is still working for the second defendant. In addition no declaration or injunctive relief was offered, nor was any monetary compensation. It goes without saying, although I will briefly note, that I do not believe that this offer is a ‘mixed offer’ as per Johnston. I am not of the view that the offer accepted reflected a “win” for the plaintiff, and cannot accurately be characterised in any way as amounting to a ‘judgment for the plaintiff’.

47. There was some discussion from the parties as to whether the term ‘judgment’ in r 20.27(3) or r 42.13A(2) or (3) was restricted to a ‘money judgement’. In my view, there is nothing in the text or the rules as a whole to suggest such a confined meaning. Indeed it is common practice for this Court to make judgements where no monetary sum is awarded.

Conclusion

59. I would not enter judgment for the plaintiff under r 20.27(3). Rather the plaintiff should pay the defendants costs pursuant to r 42.13A(3). I invite the parties to prepare short minutes of order to reflect these reasons.

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Amendments

19 September 2019 - Initial of Counsel corrected

Decision last updated: 19 September 2019