Cheshire v Jennings (No 2) - [2019] SADC 106

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
CHESHIRE & ANOR v JENNINGS & ANOR (No 2)
[2019] SADC 106
Decision of His Honour Judge O'Sullivan
16 August 2019
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS - OTHER MATTERS
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 - WHAT CONSTITUTES VALID OFFER
Defendant makes application for costs.
On 28 February 2019 the Plaintiffs commenced proceedings by way of Summons and elected for the Fast Track Stream.
On 20 June 2019 the Court dismissed the Plaintiffs’ claim.
On 27 June 2019 the Court heard argument on an application for costs by the Defendant.
The issues for the Court to consider in relation to costs included:
1.       Should the Court act in accordance with FTR r 31(4) and order that Pts 1-2 of Ch 12 of the DCR apply to a proceeding in the Fast Track Stream in lieu of FTR rr 33-35 and FTSR Sch1?
2.       Did the Defendants make a formal offer of settlement on 5 April 2019, and what was the effect of that offer?
3.       If yes to Issue 1, what is the appropriate costs order?
4.       If no to Issue 1, what scale of costs is to apply?
Held:
1.       The Plaintiffs are to pay the Defendants professional costs, as that term is defined in cl 3 of Sch 1 to the Fast Track Supplementary Rules 2014 (SA) in the sum of $29,250.00.
2.       Any disbursements within the meaning of cl 4 to Sch 1 to the Fast Track Supplementary Rules 2014 (SA) are not included in the expression ‘professional costs’. The Defendant is entitled to recover from the Plaintiff its disbursements reasonably incurred in the proceedings including court fees, witness fees and other (non-counsel) external disbursements.
Fast Track Rules 2014 rr 3, 6, 7, 17, 24, 27, 31, 32, 33, 34, 35; Fast Track Supplementary Rules 2014 rr 10, 15; District Court Civil Rules 2006 rr 10, 187, 188, 188A, 188F, 188G, 188I; Supreme Court Civil Rules 2006 rr 188F, 188G, 188I, referred to.
Messagemate Australia Pty Ltd v NCI (No.2) [2002] SASC 377; Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353; Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358; ACCC v Universal Music Australia Pty Ltd (No 2) (2002) 201 ALR 618; McKerlie v New South Wales (No 2) [2000] NSWSC 1159, discussed.

CHESHIRE & ANOR v JENNINGS & ANOR (No 2)
[2019] SADC 106
Introduction

On 20 June 2019 I delivered judgment in this matter in which I dismissed the Plaintiff’s claim.
The Defendant applies for costs. I heard argument on that application on 27 June 2019 at which time I reserved my decision.
The proceedings were commenced by Summons filed 28 February 2019 in this Court. The Plaintiff elected for the Fast Track Stream.
The Fast Track Rules 2014 have as their objects:
3—Objects
The objects of these Rules are to—
(a)establish a Fast Track Stream in the Supreme and District Courts for the resolution of civil disputes in straight forward cases;
(b)provide an optional process for the resolution of civil disputes to ensure a more expeditious and less expensive determination of straight forward cases;
(c)encourage the resolution of civil disputes by agreement between the parties;
(d)facilitate the allocation and transfer of actions between Streams and courts to ensure that an action is heard in the most appropriate Stream and court;
(e)limit interlocutory steps and pre-trial hearings in fast track proceedings;
(f)facilitate the listing of fast track proceedings for trial at an early stage; and
(g)simplify the trial of fast track proceedings.
On 4 April 2019 a Judge of this Court made a series of orders. Those orders included orders with respect to the filing of pleadings by the parties, an order that the Plaintiff’s affidavits filed in lieu of pleadings be received as those witness’ evidence in chief and written outlines of opening submissions. The matter was set down for trial to commence on 15 April 2019 for three days.
Order 9 of those orders was in the following terms:
9.The parties may file and serve a formal offer to settle pursuant to Rule 187, with such rules modified as per this order as follows:
9.1.    Any formal offer to settle pursuant to this order must be filed and served by 4:00pm on 5 April 2019;
9.2.    For the purpose of any offer made pursuant to order 9.1 above, the time for the purpose of Rule 188(1) will be abridged to 2 Calendar days before trial;
9.3.    The time for any response pursuant to Rule 188A is abridged to 4:30pm on 9 April 2019; and
9.4.    The time by which the offer must be filed and served for the purpose of Rule 188F(1)(e) is 4:00pm on 5 April 2019.
Fast Track Rules
The Fast Track Rules (“FTR”) take precedence over the General Civil Rules insofar as the Fast Track Rules operate.[1]
[1] FTR r 5(8).
FTR r 6 contemplates the Court making supplementary rules as necessary or convenient for the regulation of proceedings in and institution and transfer of proceedings into or out of the Fast Track Stream. Those Rules known as the Fast Track Supplementary Rules 2014, (“FTSR”) came into operation on 1 October 2014 and were varied on 9 November 2015 and 4 August 2016.
FTR r 7 provides for the establishment of the Fast Track Stream and provides in FTR r 7(3):
(3)It is intended that proceedings which are straight forward and which are suited to Fast Track Stream processes without causing unfairness to a party will proceed in the Fast Track Stream of the appropriate court.
FTR Ch 3 deals with election into the Fast Track Stream. There is no dispute that this matter was entered into the Fast Track Stream by the Plaintiff when the proceedings were commenced.
FTR Ch 5, Pt 2 concerns the initial hearing.
After proceedings have been initiated in the Fast Track Stream, an initial hearing is to be held at which a number of matters are to be considered. Those matters are set out in FTR r 17(3):
17—Initial Hearing
(1)…
(2)…
(3)The principal matters to be considered at the Initial Hearing are—
(a)     settlement;
(b)     identification of the real issues in dispute;
(c)     determination whether there should be split trials (dividing liability from quantum, issue from issue, or claim from counterclaim or third party claim);
(d)     transfer to a different stream or a different court;
(e)     any application that the Low, Mid or High Fast Track Scale of costs apply to the proceeding instead of the otherwise applicable Fast Track Scale;
(f)    directions for interlocutory steps and evidence at trial;
(g)     hearing or fixing a date for hearing any interlocutory application or other pre-trial matter;
(h)     fixing the date of the Pre-Trial Hearing; and
(i)    fixing the trial week for a proceeding in the District or Supreme Courts or a trial date for a proceeding in the Magistrates Court.
Chapter 6 concerns settlement offers. Pursuant to FTR r 24, Supreme Court Civil Rules 2006 (“SCR”) and District Court Civil Rules 2006 (“DCR”) 188F, 188G and 188I do not apply to a proceeding in the Fast Track Stream.
These rules deal with costs when a complying offer is not accepted, costs in other cases and costs on adjudication of costs, respectively.
FTR r 27 addresses what it refers to as the ‘unreasonable rejection of formal offer of settlement’. It is important in the context of this matter and I set it out below:
27—Unreasonable rejection of formal offer of settlement
(1)Subject to the residual discretion of the Court, when a party unreasonably rejects a formal offer of settlement—
(a)     the costs incurred in the proceeding up to the Relevant Stage which has been reached 14 days after service of the formal offer of settlement are unaffected by the unreasonable rejection; but
(b)     thereafter that party will not be entitled to costs and the offeror will be entitled to costs for subsequent Relevant Stages on the appropriate Fast Track Elevated Scale in accordance with the Fast Track Supplementary Rules.
(2)For the purpose of this Rule—
(a)     a plaintiff unreasonably rejects a judgment offer by a defendant if the Court determines the proceeding on terms not more favourable than 90 per cent of the monetary value of the defendant’s offer and the plaintiff does not accept the offer;
(b)     a defendant unreasonably rejects a judgment offer by a plaintiff if the Court determines the proceeding on terms not less than 10 per cent more favourable to the plaintiff than the monetary value of the plaintiff’s offer and the defendant does not accept the offer;
(c)     a plaintiff unreasonably rejects a formal offer of settlement by a defendant if the defendant is successful at trial and the trial Judge or Magistrate considers that in all the circumstances the plaintiff unreasonably rejected the formal offer of settlement;
(d)     a co-defendant or co-defendants unreasonably reject a formal offer of settlement by another defendant to contribute a specified dollar figure or a specified percentage of the quantum awarded to the plaintiff if the defendants are found to be jointly and severally liable to the plaintiff and the trial Judge or Magistrate considers that in all the circumstances the co-defendant or co-defendants unreasonably rejected the formal offer of settlement.
FTR Ch 8 deals with costs. FTR r 31 provides that Pts 1-2 of SCR and DCR Ch 12 respectively do not apply to a proceeding in the Fast Track Stream unless the parties agree in writing.[2] Those provisions deal with costs and the Court’s discretion on the question of costs.
[2] FTR r 31(3).
Apart from circumstances where the parties agree, the Court may, if it thinks fit, order that Pts 1-2 Ch 12 of the SCR or of the DCR apply to a proceeding in the Fast Track Stream in lieu of FTR rr 33 to 35.
FTR r 32 preserves the Court’s discretion as to costs and states that as a general rule costs follow the event. It also provides that the Court may make an order reflecting different results on discrete issues but only if there are exceptional circumstances.[3]
[3] FTR r 32(3).
FTR rr 33, 34 and 35 deal with costs scales and I set them out below:
33—Fast Track Ordinary Scale
Unless and to the extent that costs are to be on the Fast Track Elevated Scale in accordance with these Rules and the Fast Track Supplementary Rules or the Court otherwise orders in its residual discretion, when costs are awarded in favour of a party, the costs are to be determined in accordance with the Fast Track Ordinary Scale.
34—Levels of Ordinary Scale
(1)At any time before or at the Initial Hearing, any party may elect that the Fast Track Mid or High Scale applies to the proceeding by filing and serving a notice in the approved form. Otherwise the Fast Track Low Scale is applicable.
(2)If one party so elects, the Fast Track Mid or High Scale, as the case may be, will apply in lieu of the Fast Track Low Scale (for the purposes of both rules 33 and 35) unless the Court otherwise orders at the Initial Hearing.
(3)The criterion for determining whether the Low, Mid or High scale is to apply is whether the work required before and at trial is likely to be in the low, mid or high range for a Fast Track proceeding.
35—Fast Track Elevated Scale
The appropriate Fast Track Elevated Scale applies to Relevant Stages of a proceeding in accordance with rule 27.
The FTSR insofar as relevant to this matter, deal with the initial hearing in FTSR Ch 5, Pt 2, r 10. FTSR r 10(1) provides for an initial hearing to be held approximately four weeks after a defence or affidavits in lieu thereof, or after the date on which the proceeding was transferred into the Fast Track Stream.
FTSR r 10(4) identifies the matters to be dealt with at an initial hearing. I do not set them out because of its length but they include:
(h)on the application of any party, determining whether the Low, Mid or High Fast Track Scale of costs is to apply to the proceeding;
(ha)whether an order should be made under rule 31(4) that the costs of the action be determined in accordance with Parts 1 and 2 of Chapter 12 of the Supreme Court Civil Rules 2006 or of the District Court Civil Rules 2006 (as applicable).
FTSR Ch 8 deals with costs and the Court’s discretion as to costs. FTSR r 15 identifies the relevant stages of a proceeding for the purposes of costs. The Fast Track ordinary scale of costs is contained in Table 1 of Sch 1 to the FTSR and the elevated scale is contained in Table 2 of Sch 1.[4]
[4] FTSR r 16.
Schedule 1 cl 3 defines various terms. Clause 3 provides that for the purposes of the Schedule
…professional costs encompass costs on account of all professional fees charged by solicitors and counsel for work performed in connection with the proceedings together with all photocopying, communications and like charges.
Clause 4 provides for the recovery of disbursements reasonably incurred. Those disbursements do not include counsel fees. Self evidently, the intention behind cll 3 and 4 of Sch 1 to FTSR is that the costs set out in Sch 1 are to reflect the entirety of the solicitor and counsel fees recoverable from the other party. Such an approach is consistent with the objects set out in FTR r 3(b) which include:
(b)provide an optional process for the resolution of civil disputes to ensure a more expeditious and less expensive determination of straight forward cases;
Consideration of Sch 1 reveals Table 1 which has two parts, each of which sets out the ordinary scale and containing the same items but different amounts according to whether the recovered quantum is greater or less than $63,000 and whether there has been a low, mid, or high election in accordance with FTR r 17(3)(e) and FTR r 34.
Summary of cost scales
The position in relation to the recovery of costs in a Fast Track matter may be summarised as follows:
1The ordinary rule is that costs follow the event.[5]
2The costs of proceeding in the Fast Track Stream are in the discretion of the Court.[6]
3The Court may make an order reflecting different results on discrete issues but only in exceptional circumstances.[7]
4Subject to the Court ordering otherwise in its residual discretion, when costs are awarded in favour of a party the costs are to be determined in accordance with the Fast Track ordinary scale.[8] The Fast Track Ordinary Scale is found in the FTSR Sch 1.
5At any time before or at the initial hearing, any party may elect that the Fast Track mid or high scale apply to the proceeding by filing and serving a notice in the approved form otherwise the low scale is applicable.[9]
6Upon election, the Fast Track mid or high scale, as the case may be, will apply in lieu of the Fast Track low scale for the purposes of rr 33 and 35 unless the Court otherwise orders at the initial hearing.[10]
7The criterion for determining whether the low, mid or high scale is to apply is whether the work required before and at trial is likely to be in the low, mid or high range for a Fast Track proceeding.[11]
8The Fast Track elevated scale applies in accordance with r 27.[12]
9The provisions relating to settlement offers are set out in FTR Ch 6 specifically FTR rr 24 and 27.
Settlement Offers
[5]    FTR r 32(2).
[6]    FTR r 32(1).
[7]    FTR r 32(3).
[8]    FTR r 33.
[9]    FTR r 34(1).
[10] FTR r 34(2).
[11] FTR r 34(3).
[12] FTR r 35.
As I have noted, FTR r 24 excludes SCR/DCR rr 188F, 188G, 188I. Self-evidently, the exclusion of these three rules, the inclusion of FTR r 27 and the costs provisions in FTR Ch 8 and FTSR Ch 8, Sch 1 reveal an intention that costs be recovered in a fixed amount, such amount to be determined according to the FTSR Scale of Costs in FTSR Sch 1 subject to the question of offers and to the residual discretion of the Court.
FTR r 27 deals with what it terms the ‘unreasonable rejection of formal offer of settlement’.
FTR r 27(2) defines the circumstances in which a Plaintiff, Defendant, Co-Defendant, or Co-Defendants is taken to have unreasonably rejected a formal offer of settlement.
The consequences of an unreasonable rejection of a formal offer of settlement are dealt with in FTR r 27(1). It is only in circumstances where there has been an unreasonable rejection of a formal offer of settlement or the Court orders in the exercise of its residual discretion that the elevated scale applies.[13]
[13] FTR rr 27(1), 32, 33 and 35.
Procedural History
This matter was commenced by summons filed 28 February 2019 at which time the Plaintiffs also filed an election into the Fast Track stream.
Initial Hearing and Cost Scale Election
On 15 March 2019 the Defendants filed a Notice of Acting and Address for Service.
The matter came before the Court on 4 April 2019 and a number of orders were made that day including that the matter be listed for a trial to commence on 15 April 2019 for three days.
It appears that the hearing on 4 April 2019 was the first time the matter had been before the Court and as such was either a preliminary hearing or alternatively the initial hearing in accordance with FTSR rr 9 or 10. Given the matters that were considered at that hearing, it seems that the hearing was the initial hearing as contemplated by FTSR r 10 but as there was only the one pre-trial hearing in this particular case nothing turns on the name given to the hearing.
There is no dispute between the parties that at that hearing on 4 April 2019, there was no application made by any party for the mid or high scale of costs to apply to the proceeding as contemplated by FTSR r 10(4)(h), nor was there any consideration as to whether an order should be made under FTR r 31(4) that the costs of the action be determined in accordance with DCR Pts 1-2, Ch 12.
In making that observation, I direct no criticism at any of the parties. It is apparent from the way this matter proceeded that it went to trial extremely quickly. I was informed from the bar table, and I accept, that the solicitors and counsel for both parties were concentrating solely on getting the matter ready for hearing on 15 April 2019.
Settlement offer regime
Order 9 made on 4 April 2019 reads as follows:
9.The parties may file and serve a formal offer to settle pursuant to Rule 187, with such rules modified as per this order as follows:
9.1.    Any formal offer to settle pursuant to this order must be filed and served by 4:00pm on 5 April 2019;
9.2.    For the purpose of any offer made pursuant to order 9.1 above, the time for the purpose of Rule 188(1) will be abridged to 2 Calendar days before trial;
9.3.    The time for any response pursuant to Rule 188A is abridged to 4:30pm on 9 April 2019; and
9.4.    The time by which the offer must be filed and served for the purpose of Rule 188F(1)(e) is 4:00pm on 5 April 2019.
As I have noted, DCR rr 188F, 188G and 188I do not apply to proceedings in the Fast Track Stream.[14] Neither the FTR nor the FTSR set out a regime that applies to the filing of offers of settlement. It is in that context that on 4 April 2019, the Court made its order 9 in which it invoked DCR r 187 and modified the rules to take account of the time frame. DCR r 187 has not been excluded by the FTR or the FTSR and provides as follows:
[14] FTR r 24(2).
187—Making of a formal offer
(1) A party (the offeror) may, by notice in writing, make an offer to any other party (the offeree) to compromise any claim in the proceeding, either in whole or in part, on specified terms (a formal offer).
Note—
A claim is defined by rule 30. A single action may include multiple claims. A formal offer may be made by a plaintiff or defendant in the principal action or a plaintiff or defendant in a cross action (including a counterclaim or contribution claim) or a plaintiff or defendant in a third party action. A formal offer might relate to one or more but not all claims in an action or it might relate to all claims in the action. A formal offer might relate to one action only in a proceeding (eg a cross action but not to the principal action) or it might relate to all actions in the proceeding.
(2) A formal offer is to be expressed—
(a) in terms of a judgment to be entered upon acceptance (a judgment offer); or
(b) in terms of a contract to come into existence upon acceptance including terms for the disposition of the claim the subject of the offer (by discontinuance, judgment or otherwise) (a contract offer).
Note—
The judgment the subject of a judgment offer might be expressed as a money judgment; a judgment for or for a proportion of damages to be assessed; for declaratory, injunctive or other special relief; for costs in a fixed amount or to be adjudicated; for a combination of such matters or any other judgment which the Court could enter.
(3) A formal offer that does not comply with subrule (2) is incapable of acceptance for the purposes of this Part and is void for the purposes of this Part.
(4) A formal offer is to—
(a) be in an approved form;
(b) state that it is made in accordance with this rule;
(c) if there is more than one action in the proceeding, state the action to which it relates; and
(d) if it relates to some, but not all, claims in the action to which it relates – state to which claims it relates.
(5) A formal offer is to be—
(a) filed at Court in an envelope marked “formal offer – not to be opened except in accordance with an order of a Judge or Master” unless it is expressed to be an open offer in which case it is to be filed in the usual way; and
(b) served on all other parties to the proceeding immediately upon being filed.
(6) A formal offer—
(a) may be expressed to be an open offer but if silent will be taken to be made on the basis that it is without prejudice save as to costs;
(b) may include any terms as to costs (including that the offer is inclusive of costs or that the parties will submit to any order the Court may make in the exercise of its discretion) but if silent will be taken to include a term that the defendant to the relevant claim is to pay the plaintiff’s costs of the relevant claim on a party and party basis up to the time of acceptance;
(c) may be expressed to lapse after the expiration of a stipulated time, being not less than 14 days after service of the offer, but if silent will be taken to remain open until it lapses or is withdrawn in accordance with rule 188;
(d) if a contract offer involving payment of money, may stipulate time for payment but if silent will be taken to include a term that payment be made within 28 days of acceptance;
(e) may include any terms as to principal relief whether or not sought or obtainable in the proceeding;
(f) may annex reasons why it would be unreasonable for the offer not to be accepted.

Order 9.2 amends the times in DCR r 188(1) by abridging the time before trial that the offer can be accepted from 7 calendar days to 2 calendar days.
DCR r 188(1) provides:
(1) If no time for acceptance is stipulated and the offer has not been withdrawn, a formal offer cannot be accepted after 7 calendar days before the commencement of the trial of the claim to which it relates.
DCR r 188A is concerned with a response to the offer. The time prescribed in that rule has also been abridged this time by Order 9.3.
Order 9.4 refers to r 188F(1)(e), which has been excluded by FTR r 24(2).
DCR r 188F(1)(e) provides for any formal offer of settlement to be filed at least 21 clear calendar days before the commencement of the trial. The effect of order 9.4 of the orders made 4 April 2019 is to abridge that time to 4pm on 5 April 2019. Insofar as order 9.4 made 4 April 2019 refers to r 188F(1)(e), the order is nonetheless capable of application by simply ignoring the reference to r 188F(1)(e) and treating the order as made by the Court in accordance with its general power to control its proceedings so that the order reads:
a.The time by which the offer must be filed and served is 4pm on 5 April 2019.
The fact that FTR r 27 contemplates a formal offer of settlement being made and rejected unreasonably clearly demonstrates that the Fast Track Stream contemplates the making of formal offers. Similarly, the fact that DCR r 187 has not been specifically excluded from the FTR or FTSR also demonstrates that the Rules contemplate the making of formal offers of settlement.
DCR r 10 gives the Court power to control its own procedure and remains applicable to a Fast Track matter. Accordingly, the orders abridging time in relation to formal offers of settlement that I have set out above were, subject to what I say below, properly made.[15]
[15] See FTR r 5(10).
The Issues
It is not disputed by the Plaintiff that costs should follow the event and the Defendant is entitled to its costs.
There are four issues:
1Should the Court act in accordance with FTR r 31(4) and order that Pts 1-2 of Ch 12 of the DCR apply to a proceeding in the Fast Track Stream in lieu of FTR rr 33- 35 and FTSR Sch 1?
2Did the defendants make a formal offer of settlement on 5 April 2019 and what was the effect of that offer?
3If yes to Issue 1, what is the appropriate costs order?
4If no to Issue 1, what scale of costs is to apply?
1. Should the Court act in accordance with r 31(4) of the FTR and order that Pts 1-2 Ch 12 of the DCR apply to a proceeding in the Fast Track Stream in lieu of rr 33- 35?
There are two avenues by which this might occur. The first is the parties agree in writing that the DCR Ch 12 rules are to apply in lieu of FTR rr 33-35. The second is if the Court, in the exercise of its discretion, thinks fit to order that Ch 12 of the DCR are to apply in lieu of FTR rr 33–35.[16]
[16] FTR rr 31(3) and 31(4).
The first point may be disposed of readily: there is no agreement in writing as contemplated by FTR r 31(3).
As to the exercise of the Court’s discretion, this matter was not factually complex, however, there were some aspects of the law which had not been decided in this state and which had a degree of complexity. The matter also took four days rather than the anticipated three, but the matter was dealt with by the parties in an efficient way and I level no criticism at the parties for exceeding the estimate.
In the exercise of the Court’s discretion, I consider the circumstances of the case do not warrant the Court ordering that DCR Pts 1-2 of Ch 12 are to apply to these proceedings in lieu of FTR rr 33–35.
2. Did the Defendants make a formal offer of settlement on 5 April 2019 and if so, what is the effect of that offer?
On 5 April 2019, the Defendants filed a formal offer pursuant to DCR r 187 in which the Defendants offered to settle the action on the basis that judgment be entered in the following terms:
1. The Plaintiffs’ action be dismissed;
2. Each party to bear their own costs of the action.
The offer was open for acceptance until 11 April 2019.
Was the offer a valid offer?
The offer was not accepted, however the Plaintiff says that the offer, in that form is not an offer capable of comprising a formal offer.
There has been a great deal of law on whether or not an offer in this form comes within the description of an offer.
In Messagemate Australia Pty Ltd v NCI (No.2),[17] Williams J observed that an offer by a Plaintiff to accept the whole of its claim for the principal debt together with interest was not an offer within the meaning of the then r 41.01 as the Rule ‘probably contemplated some degree of compromise in a case such as the present’.
[17] [2002] SASC 377.
In Tickell v Trifleska Pty Ltd,[18] Rogers CJ in Comm D of the New South Wales Supreme Court considered an offer of compromise by the Plaintiff in which the Plaintiff offered to settle for the whole of the amount claimed together with interest.
[18] (1990) 25 NSWLR 353.
His Honour considered the offer in terms of the then Supreme Court Rules which dealt with offers of settlement.[19] The Plaintiff sought an order for indemnity costs relying on the offer.
[19] Part 22, Part 52, r 17(4) Supreme Court Rules1970 (NSW).
In considering that application, His Honour addressed the concepts which underlie the whole theory of compromise and of offers of compromise,[20] and in so doing, said:[21]
It is the primary aim of any judicial system to attempt to bring the parties to a point where, with fairness to themselves, they are able to dispose of the dispute between them by compromise. It is only in the last resort that a dispute should proceed to trial and to determination. That is for any number of reasons. It is in the interests of the community that scarce resources, such as the court, should not be over-taxed. It is in the interests of the community and of the parties themselves that they should not engage in the rancour which a dispute in court necessarily entails. It is in the interests of the parties themselves to save themselves the expenditure of time and energy necessarily entailed in participation in contested court proceedings.
[20] Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353, 354.
[21] Ibid p 354-355.
His Honour dealt with Parts 22 and 52 of the then Supreme Court Rules 1970 (NSW) in which he observed that amendments to those rules allowed for the possibility of an offer to compromise to be made both by defendant and by plaintiff and the consequences that flowed, where the party in question obtained a result no less favourable than the subject of compromise.
His Honour continued:[22]
Unless circumstances are wholly exceptional a demand for payment to the plaintiff of everything, to which it may possibly be entitled, hardly falls in the category of the compromise…
[22] Ibid p 355.
After referring to counsel’s submissions, His Honour held that in light of the circumstances of the Rules:
What the court is invited to do is to determine whether, in the totality of the circumstances, the offer by the plaintiff represented any element of compromise or whether it was merely, yet another, formally stated demand for payment designed simply to trigger the entitlement to payment of costs on an indemnity basis.
In Hobartville Stud Pty Ltd v Union Insurance Co Ltd,[23] Giles J considered an offer of compromise under the same Supreme Court Rules as Rogers CJ in Comm D considered in Tickell. The offer of compromise was on these terms:
all of the Plaintiff's claims in the amended Summons in these proceedings with the exception of the Plaintiff's claim for interest and the Plaintiff's claim for costs.
[23] (1991) 25 NSWLR 358.
The amount offered was one dollar less than the full claim, excluding interest and costs as it then stood. After referring to the reasons of Rogers CJ in Comm D in Tickell, Giles J observed that the scheme for offers to compromise and their costs consequences are intended to promote compromise, that is a party gives something away. By not in any real sense giving anything away, there is no compromise and His Honour was minded to think that under those circumstances the plaintiff cannot claim to have placed itself in a more favourable position in relation to costs unless it does offer compromise.[24]
[24] (1991) 25 NSWLR 358 pp 367-368.
In ACCC v Universal Music Australia Pty Ltd (No 2),[25] the Federal Court of Australia considered amongst other things the significance of a Calderbank letter that had been filed in the matter.
[25] (2002) 201 ALR 618.
The Calderbank offer in that matter was from one of the respondents to the applicant to settle the proceedings by dismissing the claim against her with no order as to costs.
Hill J considered the law surrounding Calderbank offers generally before determining that he would not, in the exercise of his discretion, take the view that an order for indemnity costs incurred after a reasonable time had elapsed from the making of the offer should be made. His Honour formed this view on the basis that he did not think the rejection of the offer was unreasonable.
His Honour observed the decision of the Supreme Court of New South Wales in McKerlie v New South Wales (No 2),[26] where the Court held that an offer to settle the case by dismissing it with no order as to costs did not carry with it the consequences of a Calderbank letter. His Honour referred to the comments by Dunford J in that case, expressing the view that an offer in relation only to costs was not really a genuine offer of compromise.[27]
[26] [2000] NSWSC 1159.
[27] Ibid at [60]-[64].
In light of the authorities to which I have referred, in my view, the Defendants offer that there be judgment whereby the Plaintiff’s action be dismissed and each party to bear their own cost of the action, particularly but not limited to the circumstances of a proceeding in the Fast Track Stream, does not amount to a genuine offer of compromise. True it is that the Defendants are seeking to forego their potential claim for costs however, they are in truth offering nothing by way of compromise in relation to the merits or otherwise of the plaintiff’s claim.
Was the rejection of the offer unreasonable?
If I am wrong in my characterisation of the defendant’s offer as not comprising a genuine offer of compromise, the question is whether there was an unreasonable rejection of the formal offer of settlement. FTR r 27(2) sets out the circumstances in which there is an unreasonable rejection of a formal offer of settlement by a Plaintiff or a Defendant and is in the following terms:
(c)a plaintiff unreasonably rejects a formal offer of settlement by a defendant if the defendant is successful at trial and the trial Judge or Magistrate considers that in all the circumstances the plaintiff unreasonably rejected the formal offer of settlement;
Since there was no quantum offered, the question becomes one of whether I consider that in all the circumstances the Plaintiff rejected unreasonably the formal offer of settlement.
The Orders made 4 April 2019 provided that the offer may be responded to within 4 days, shorter than that prescribed by DCR r 188A. I do not consider that to be a significant issue. The entire premise of the Fast Track proceedings necessarily involves the matter proceeding in an expeditious fashion. Although a shorter time within which to consider the offer, in this matter I consider 7 days[28] is a sufficient time. Even if it was not, the Court retains a general discretion on the question of costs and the short period from the first hearing to trial and the limited time available to accept an offer may be considered by the Court in the exercise of its overall discretion.
[28] If one does not count 5 April 2019 and 15 April 2019.
This matter was not factually complex but had some legal complexities. In particular, it involved the Court deciding an issue that had not been the subject of any direct judicial consideration in this state. In all the circumstances I am not satisfied that the Plaintiff rejected the formal offer of settlement unreasonably.
3. If yes to Issue 1, what is the appropriate costs order?
In view of my decision on Issue 1 above, Issue 3 does not arise.
4. If no to Issue 1, what scale of costs is to apply?
The question now falls to the scale of costs that is applicable.
FTR r 27(1)(b) provides for the application of the appropriate Fast Track elevated scale in circumstances where a party unreasonably rejects a formal offer of settlement. Subject to the Court’s discretion, this is the only circumstance in which the elevated scale is applicable.[29]
[29] See FTR rr 32 and 33.
I have decided that there was no formal offer of settlement or in the alternative, if there was, then in the exercise of my discretion the offer was not rejected unreasonably. On that basis and on the basis of the general exercise of my discretion, in accordance with FTR rr 32 and 33, the Defendants are not entitled to costs payable on the Fast Track elevated scale.
Mr Ross-Smith of counsel who appeared for the Plaintiffs accepted that the Defendants are entitled to an order for costs but submitted that the appropriate quantum of costs is that applicable to a quantum of more than $63,000 on the ordinary scale in the mid-range.
Mr Carragher, who appeared for the Defendants, seeks the Court exercise its discretion in accordance with FTR r 31(4). I have already indicated that I do not consider that appropriate in the circumstances, and in the exercise of my discretion I have declined to do so.
This matter proceeded for four days. I note that FTSR Sch 1 only allows for a third day of trial. Mr Carragher seeks to add items to the Table 1 and Table 2 items by inserting:
Fourth day of trial - $6,000
Preparation and attendance at Supplementary Hearing on 17 May 2019 - $3,000
Attending at Hearing 20 June 2019 to collect judgment and review decision - $500.00
There was no application made at any time by any party as to whether the low, mid or high range of costs in the Tables in the FTSR Sch 1 should apply. Nonetheless, as I have noted, Mr Ross-Smith for the plaintiffs, accepts that the mid-range is appropriate.
In the exercise of my discretion, notwithstanding there was no election made, I consider the ordinary scale of professional costs set out in Table 1 of the FTSR Sch 1 in the high range for claims greater than $63,000 is the appropriate scale of costs. To those items I would add the fourth day of trial in the further sum of $4,500.00.
I called this matter on for further submissions to address the question of whether there was an ambiguity in the relevant legislation. I consider it appropriate to allow a sum for the preparation and attendance at the Supplementary Hearing on 17 May 2019 equivalent to a half day which has a consequence that there will be a further sum of $2,250.00 to the amount claimed giving a total of $29,250.00. I refuse the application for a sum for attending to receive judgment or considering the judgment.
Order
Accordingly, the order will be that the Plaintiffs pay the Defendants professional costs, as that term is defined in cl 3 of Sch 1 to the FTSR in the sum of $29,250.00. Finally, and for the avoidance of any doubt, although Mr Roenfeldt, the auctioneer was called, I do not consider he was called as an expert witness.