Craft Printing Pty Limited v Dwyer (Costs)

[2009] NSWDC 191

Reported Decision:

District Court

CITATION:	Craft Printing Pty Limited v Dwyer (Costs) [2009] NSWDC 191
HEARING DATE(S):	The application for indemnity costs was conducted by way of written submissions
JUDGMENT DATE:	14 May 2009
JURISDICTION:	Civil jurisdiction
JUDGMENT OF:	Johnstone DCJ
DECISION:	1. The application is dismissed. 2. The plaintiff is to pay the defendant’s costs of the application, on the ordinary basis.
CATCHWORDS:	COSTS - offer of compromise left open for 67 hours before commencement of trial - whether period reasonable
LEGISLATION CITED:	Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005
CASES CITED:	Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 Pittorino v Yates [2009] NSWCA 87
PARTIES:	Craft Printing Pty Limited (Plaintiff) Paul Andrew Dwyer (Defendant)
FILE NUMBER(S):	1997/08
COUNSEL:	Mr G George (Plaintiff) Mr I Archibald (Defendant)
SOLICITORS:	David Purvis (Plaintiff) W Lawyers (Defendant)

JUDGMENT

The proceedings and the issues
1. The plaintiff has applied for an order for indemnity costs from 29 November 2008 on the basis that it obtained judgment for an amount no less favourable than the terms of an offer of compromise made under r 20.26 of the Uniform Civil Procedure Rules 2005 (UCPR) that the defendant failed to accept.

2. On 7 April 2009 I directed the entry of judgment in the substantive proceedings in favour of the plaintiff and ordered the defendant to pay the plaintiff’s costs, on the ordinary basis. I gave leave to apply within 7 days for some other order. The plaintiff then applied for that costs order to be vacated and replaced by the following orders:

(a) The defendant is to pay the plaintiff’s costs on the ordinary basis up until 28 November 2008.

(b) The defendant is to pay the plaintiff’s costs on an indemnity basis from 29 November 2008.

3. Judgment was in an amount of $416,592.39. The offer of compromise was for an amount of $340,451.02. The plaintiff seeks the order for indemnity costs under r 42.14(2)(b)(i) from the beginning of the day following the day on which the offer was made.

4. The defendant opposes the application on the basis that the offer was not left open for a time that was reasonable in the circumstances as required by r 20.26(7)(a).

Background
5. The dispute in the substantive proceedings concerned, in summary, a personal guarantee signed by the defendant in respect of any amount due or owing by Comsta Pty Ltd, a corporation of which he was the sole shareholder and director, to the plaintiff. The plaintiff claimed $340,451.02 plus interest in respect of printing services provided on the basis of the guarantee and misleading and deceptive conduct, or unconscionable conduct, on the part of the defendant.

6. The issues arising for determination were:
· Did Comsta Pty Ltd cease to be the contracting party for the debts incurred?
· Did the defendant engage in misleading and deceptive conduct, or in conduct that was unconscionable?
· Were the debts extinguished by the plaintiff’s appropriation?

7. I decided that there should therefore be a verdict for the plaintiff in the full amount claimed, plus interest under s 100 of the Civil Procedure Act 2005. The plaintiff claimed interest in the sum of $76,141.37. When added to the principal claim, the total claim was, therefore, $416,592.39, and I directed the entry of judgment in that amount in favour of the plaintiff.

8. The proceedings were commenced on 12 May 2008. In September 2008 a hearing date was appointed with an estimate for the hearing of 3 days. The date set down for the commencement of the trial was Monday 1 December 2008 at 10.00am.

9. At 2.33pm on 28 November 2008, the Friday before the hearing, the plaintiff’s solicitors faxed a letter and an Offer of Compromise to the defendant’s solicitors. The offer of compromise was for an amount of $340,451.02 and was expressed to be open for acceptance until 10.00am on Monday 1 December 2008. The letter said:

“As you are aware, we act for the plaintiff in these proceedings, which are listed for hearing commencing on Monday, 1 December 2008.

Our client alleges that Mr Dwyer is liable to pay it for printing services it provided in the amount of $340,451.02 in the period between December 2006 and September 2007. In addition, our client also claims interest on its claim which at the date of this letter totals $64,059.44. Our client’s total claim against Mr Dwyer is therefore $404,510.46.

Mr Dwyer has filed a defence in the proceedings. The central plank of this defence is that our client provided printing services to an entity called Paul’s retail Pty Ltd and therefore, Mr Dwyer is relived (sic) of liability. The evidence served indicates this is a risible (sic) proposition. Mr Dwyer executed a personal guarantee in our client’s favour and for his own reasons, failed to inform our client when Comsta Pty Ltd had been wound up by its creditors. That Comsta went into liquidation, does not, and cannot extinguish Mr Dwyer’s liability to our client. In essence, Mr Dwyer has no defence and when our client succeeds in the proceedings, it will make a claim for indemnity costs.

In spite of the strength of our client’s case, to avoid the costs of the litigation, our client is prepared to settle the proceedings. Enclosed please find an offer of compromise, which offer is open for acceptance until 10am Monday, 1 December 2008.”

10. The period for acceptance of the offer was, therefore, some 67 hours, with an intervening weekend, being the period immediately prior to the time set down for commencement of the trial.

11. In the event, the hearing did not commence on Monday 1 December 2008. The proceedings were then re-listed for hearing on 10 March 2009, but that hearing date was later vacated and a new hearing date appointed, namely 30 March 2009. The offer of compromise was not refreshed.

12. The trial commenced before me on 30 March 2009 and the hearing proceeded on that day and the following day, at the conclusion of which I reserved judgment. I delivered my judgment on 7 April 2009 and made orders including the order for costs. The plaintiff then applied for the orders now under consideration.

Consideration
13. A party may by notice in writing make an offer to another party to compromise any claim in the proceedings, either in whole or in part, on specified terms: r 20.26(1) of the UCPR.

14. If the plaintiff makes an offer under r 20.26 that is not accepted by the defendant and the plaintiff then obtains judgment on the claim concerned no less favourable than the terms of the offer, then unless the court orders otherwise, the plaintiff is entitled to an order for costs assessed on the ordinary basis up to the time when the offer was made and on an indemnity basis as from the beginning of the day following the day on which the offer was made, if the offer was made before the first day of the trial: r 42.14(2)(b)(i).

15. The defendant does not seek the exercise of the Court’s discretion to make some other order under r 42.14(2): see The Uniting Church v Takacs (No 2) [2008] NSWCA 172] per Basten JA at [33]. Rather it submits that the offer of compromise is inoperative because it did not comply with r 20.26(7)(b), which provides:

“The following provisions apply if an offer is limited as to the time it is open for acceptance:
(a) …..
(b) the offer must be left open for such time as is reasonable in the circumstances, in the case of an
offer made less than 2 months before the date set down for the commencement of the trial”

16. The offer was silent as to costs but the defendant does not appear to rely on
r 20.26(2), which requires that an offer is to be exclusive of costs.

17. The question of what is a reasonable time for an offer to be left open has been considered in recent decisions of the Court of Appeal.

18. In Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 Basten JA referred to three factors as relevant: The first is the extent to which the parties may reasonably be expected to have a clear perception as to the strengths and weaknesses of their positions, so that the reasonableness of a particular offer might be speedily assessed.

19. The second factor is the stage which the proceedings have reached and because at trial costs accrue daily, even on an hourly basis, there is a heightened incentive to respond within the time permitted. And, thirdly, counterbalancing the first factor, the distraction from preparing or running a trial caused by the need to address the terms of an offer, provide advice and obtain instructions. Also in that case, Giles JA and Tobias JA said that having regard to the seriousness of the consequences, the Court should not be ungenerous in determining the question of whether the time was reasonable.

20. In Pittorino v Yates [2009] NSWCA 87 Tobias JA said that the offeree should not be placed under undue and unfair pressure, and should have the opportunity to make an informed and reasoned judgment whether or not to accept the offer.

21. The plaintiff submitted that there was ample time for the defendant to accept its offer (see the written submissions at paragraphs 2 - 12). It contended that by 28 November 2008 the defendant ought to have been aware what the plaintiff’s case was and the range of likely outcomes in the proceedings. If minded to accept the offer there was ample time to do so. The offer was straightforward and uncomplicated. It was further submitted that the defendant simply elected not to accept the offer. It also argued that it was open to the defendant to request the plaintiff to extend the time during the course of the morning of 1 December 2008 while waiting for the case to be reached in the reserve list.

22. It is not to the point that the defendant did not seek an extension of time for acceptance. The plaintiff set the time. If it wanted to continue to negotiate, it could have extended the time, but didn’t. The only issue is whether the time allowed was reasonable in the circumstances that then obtained.

23. Minds will no doubt differ on what is reasonable in any given situation.

24. To my mind, however, an offer of compromise sent on a Friday afternoon and only left open till 10.00 on the following Monday when the trial was due to commence involves an unreasonable period. It is one thing perhaps for the solicitors to have notice of the offer, but another when one considers the need for those lawyers to then consult with counsel, speak to their client, explain the offer and the consequences of non-acceptance, advise on the merits, and for the client to reach a decision under pressure. Nor is the distraction factor from preparation to be underestimated. In my view, to require this defendant to make an election in that time frame would be ungenerous, and falls foul of the principle that the rule should operate fairly as between both parties.

25. For these reasons I find that the period for which the offer was left open was not reasonable in the circumstances.

26. The Offer of Compromise did not, therefore, comply with r 20.26(7)(b) and cannot be relied upon to trigger the operation of r 42.14(2)(b)(i).

27. The plaintiff’s application therefore fails, and the costs of this application should follow the event: r 42.1.

Disposition
28. The orders are:

1. The application is dismissed.

2. The plaintiff is to pay the defendant’s costs of the application, on the ordinary basis.