Davies v State of Victoria (Costs)
[2012] VSC 537
•14 November 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. SCI 07068 of 2010
| ALAN DAVIES | Plaintiff |
| v | |
| STATE OF VICTORIA | Defendant |
---
JUDGE: | WILLIAMS J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 15 August 2012 | |
DATE OF RULING: | 14 November 2012 | |
CASE MAY BE CITED AS: | Davies v State of Victoria (Costs) | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 537 | |
---
PRACTICE AND PROCEDURE – Costs – Application for indemnity costs – Whether rejection of Calderbank offer unreasonable.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Bromley | Clemens Haskin |
| For the Defendant | Mr A Clements | Minter Ellison |
HER HONOUR:
The plaintiff brought this proceeding against the defendant claiming damages for wrongful dismissal. His claim was dismissed on 15 August 2012.[1] The defendant seeks an order for costs on a party/party basis up to and including 3 August 2011 and, thereafter, on an indemnity basis.
[1]Davies v State of Victoria [2012] VSC 343.
The defendant relies on the fact that it made the plaintiff a Calderbank offer on 3 August 2011 in the following terms:
(a)it would pay to the plaintiff the sum of $30,000 ‘all in’, less any applicable tax, within 21 days;
(b)the plaintiff would agree to discontinue the proceedings, with no order as to costs;
(c)the plaintiff would execute a release in favour of the defendant, including a confidentiality clause in relation to the terms of settlement;
(d)the defendant reserved its rights to seek indemnity costs from the date of the offer should it not be accepted by 18 August 2011 (referring to Calderbank v Calderbank[2] and other cases).
[2][1975] 3 All ER 333.
Legal principles
Costs are awarded at the discretion of the court.[3] The rejection of an offer of compromise will be taken into account by the court considering whether to order costs on an indemnity basis.[4] There is no presumption that an offeree who, having rejected an offer of compromise, subsequently receives a result less favourable than that contained in the offer, is liable to pay the offeror’s costs on an indemnity basis from the date of the expiry of the offer.[5] The critical question is whether the rejection of the offer was unreasonable in all the circumstances.[6] The onus is on the defendant, as the offeror, to demonstrate that it was.[7] If rejection of the offer was unreasonable, then the offeror may be entitled to indemnity costs from the date of the expiry of the offer.
[3] Supreme Court Act 1986 (Vic) s 24.
[4]Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435, 441 [20].
[5]Ibid, 440 [18]-[19].
[6]Ibid, 441 [23].
[7]Foster v Galea (No 2) [2008] VSC 331, [9] (Byrne J).
In Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2),[8] the Court of Appeal indicated that the following considerations will ordinarily be relevant to the assessment of the reasonableness of the rejection of a Calderbank offer:
[8](2005) 13 VR 435.
(a)the stage of the proceeding at which the offer was received;
(b)the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d)the offeree's prospects of success, assessed as at the date of the offer;
(e)the clarity with which the terms of the offer were expressed; and
(f)whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it.[9]
[9]Ibid 442, [25].
A party will be acting reasonably if it rejects a Calderbank offer which is unclear or imprecise.[10]
[10]BHPB Freight Pty Ltd v Costco Oceania Chartering Pty Ltd (formerly known as Braemar Australia Pty Ltd) and anor (No 4) (2009) 263 ALR 63, 66 [13] (Finkelstein J).
Stage of proceeding at which the offer was received
The defendant’s Calderbank offer was made on 3 August 2011, around 7 months after the proceeding was commenced. The defendant submits that the issues were clear by then. Both a statement of claim and a defence had been filed and served, general discovery had been completed and a mediation had taken place. The defendant’s reasoning for its position that the plaintiff’s case was without merit had been communicated to him in its letters of 20 April and 12 July 2010.
The plaintiff notes that he had not, at this time, received the expert report of Associate Professor McVilly relied upon by the defendant at trial. Indeed, witness statements generally had not yet been exchanged. I agree that these are significant considerations in relation to the reasonableness of his rejection of the defendant’s offer.
Time allowed to the offeree to consider the offer
The offer was expressed to be open from 3 August til 18 August 2011, giving the plaintiff 15 days to respond. The plaintiff makes no comment as to the sufficiency of the time for response and I accept the defendant’s submission that this was an ‘ample amount of time’.
Extent of the compromise offered and the plaintiff’s chances of success as at 3 August 2011
The defendant offered to bear its own costs and to pay the plaintiff $30,000 ‘all in’, subject to any applicable tax.
The defendant submits that this represented a ‘significant’ compromise. The plaintiff’s claim ‘always had a high risk of failure’ as there was a high risk that the Court would view the plaintiff’s conduct in dragging a naked, disabled resident 1.5m along a hallway in a manner that resulted in injury as serious misconduct.
The plaintiff notes that his claim was for an amount in excess of $500,000. At the time of the offer, counsel for the plaintiff calculates that he was, on his case, owed $300,000 (comprising $240,000 in four years’ lost wages with the balance in interest and costs). The defendant’s offer of $30,000 therefore represented, on one view, an assessment that the plaintiff had around a 10% chance of success.
The plaintiff argues that this was not a reasonable assessment of his chances at that time. Further, he maintains that his party-party costs at the time were either approximately equal to or would have exceeded the amount offered. In the absence of a legal definition of ‘serious misconduct’, the central issue in the case was one upon which reasonable minds might differ. It was not unreasonable, then, for the plaintiff to consider that his chances of success were greater than 10%.
I do not consider that the force of the plaintiff’s submissions is reduced by the fact that, on 1 August 2011, he had offered to compromise the claim for $70,000 plus party-party costs. That is because the amount offered by the defendant was so small as to make the rejection of the offer entirely reasonable. Whilst it might be thought that the plaintiff’s prosects of success were low, the offer was essentially one that he should capitulate. Given the costs already accrued and the stage at which the offer was made mounted to little more than an ‘invitation to… capitulate’.[11]
[11] Berrigan Shire Council v Ballerini & Anor (No 2) [2006] VSCA 65 (23 March 2006) [20] (Chernov JA).
The clarity with which the terms of the offer were expressed
The defendant submits that the offer was expressed in clear terms. The plaintiff disagrees, arguing that it was never clear how much, if any, tax was to be deducted from the $30,000 sum offered. He submits that the amount could have been taxed at 31.5% (reducing the net payment to less than $20,000), if treated as an eligible termination payment, or at some other rate, if taxed as normal income. The defendant could have clarified the offer by stating the applicable tax, but chose not to do so.
In BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd,[12] Finkelstein J regarded it as reasonable to reject a Calderbank offer which promised payment of certain sums ‘plus interest and costs to be agreed or otherwise taxed’. Similarly, here, I consider that there is ambiguity introduced into the offer by the phrase ‘less any applicable tax’.
[12](2009) 263 ALR 63, 66 [13] (Finkelstein J).
Whether an application for indemnity costs was foreshadowed
The letter clearly foreshadowed an application for indemnity costs in the event that the offer was rejected.
Other considerations
The Calderbank offer included a confidentiality clause requiring the plaintiff to keep the terms of the settlement strictly confidential. The plaintiff submits that assurances of confidentiality of the type sought by the defendant could not have been achieved by a court order. Further, acceding to the request for confidentiality would have prejudiced his future employment prospects by limiting his ability to explain fully the circumstances of his departure from his employment with the defendant.
I accept that the confidentiality clause would have created not insignificant difficulties for the plaintiff, had he accepted the offer.
Conclusion and orders
In all the circumstances, I am satisfied that the plaintiff’s rejection of the defendant’s offer was reasonable.
I will order that he pay the defendant’s costs, taxed on a party-party basis.
0
6
0