Globaltech Pty Ltd v Pareek
[2006] WASC 30 (S)
•23 FEBRUARY 2006
GLOBALTECH PTY LTD -v- PAREEK [2006] WASC 30 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WASC 30 (S) | |
| Case No: | CIV:2686/2000 | 27 OCTOBER 2003 | |
| Coram: | JOHNSON J | 23/02/06 | |
| 18/05/06 | |||
| 15 | Judgment Part: | 1 of 1 | |
| Result: | Application for indemnity costs order refused | ||
| B | |||
| PDF Version |
| Parties: | GLOBALTECH PTY LTD (ACN 086 012 393) MAHAVEER PAREEK KHALED MUFID YOUSEF HEJLEH JOHAN ANWAR MICHAEL ALLAN KLASS |
Catchwords: | Indemnity costs Calderbank offer to compromise Requirement of offer to compromise When unreasonable to refuse offer |
Legislation: | Supreme Court Rules |
Case References: | Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (No 2) [2002] FCA 192 Brymount Pty Ltd t/a Watson Toyota v Cummins [2005] NSWCA 69 Calderbank v Calderbank [1975] 3 All ER 333 Colgate-Palmolive Company & Anor v Cussons Pty Limited (1993) 46 FCR 225 Cutts v Head [1984] Ch 290 Dobb v Hacket (1993) 10 WAR 532 Duvall v Godfrey Virtue & Co (a firm) [2001] WASCA 163 Flotilla Nominees Pty Ltd v Western Australian Land Authority & Anor [2003] WASC 122 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Ors (1988) 81 ALR 397 Fyna Foods Australia Pty Ltd v Cobannah Holdings Pty Ltd (No 2) [2004] FCA 1212 Grbavac v Hart [1997] 1 VR 154 Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 Jones & Anor v Millward & Anor [2005] QCA 76 Leichhardt Municipal Council v Green [2004] NSWCA 341 McKerlie v State of New South Wales (No 2) [2000] NSWSC 1159 Messiter v Hutchinson (1987) 10 NSWLR 525 MGICA (1992) Ltd v Kenny & Good Pty Ltd & Anor (No 4) (1996) 140 ALR 707 Quirk v Bawden (1992) 112 ACTR 1 Townsend & Ors v Collova & Ors (S) [2005] WASC 4 Vasram v AMP Life Ltd [2002] FCA 1286 Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
DECISION : 18 MAY 2006 FILE NO/S : CIV 2686 of 2000 BETWEEN : GLOBALTECH PTY LTD (ACN 086 012 393)
- Plaintiff
AND
MAHAVEER PAREEK
Defendant
(BY ORIGINAL ACTION)
MAHAVEER PAREEK
Plaintiff
AND
GLOBALTECH PTY LTD (ACN 086 012 393)
First Defendant
KHALED MUFID YOUSEF HEJLEH
Second Defendant
JOHAN ANWAR
Third Defendant
MICHAEL ALLAN KLASS
Fourth Defendant
(BY COUNTERCLAIM)
Catchwords:
Indemnity costs Calderbank offer to compromise Requirement of offer to compromise When unreasonable to refuse offer
Legislation:
Supreme Court Rules
Result:
Application for indemnity costs order refused
Category: B
Representation:
Original Action
Counsel:
Plaintiff : Mr T J Palmer
Defendant : Ms S J Monck
Solicitors:
Plaintiff : Clayton Utz
Defendant : Dwyer Durack
(Page 3)
Counterclaim
Counsel:
Plaintiff : Ms S J Monck
First Defendant : Mr T J Palmer
Second Defendant : Mr T J Palmer
Third Defendant : Mr T J Palmer
Fourth Defendant : Mr T J Palmer
Solicitors:
Plaintiff : Dwyer Durack
First Defendant : Clayton Utz
Second Defendant : Clayton Utz
Third Defendant : Clayton Utz
Fourth Defendant : Clayton Utz
Case(s) referred to in judgment(s):
Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (No 2) [2002] FCA 192
Brymount Pty Ltd t/a Watson Toyota v Cummins [2005] NSWCA 69
Calderbank v Calderbank [1975] 3 All ER 333
Colgate-Palmolive Company & Anor v Cussons Pty Limited (1993) 46 FCR 225
Cutts v Head [1984] Ch 290
Dobb v Hacket (1993) 10 WAR 532
Duvall v Godfrey Virtue & Co (a firm) [2001] WASCA 163
Flotilla Nominees Pty Ltd v Western Australian Land Authority & Anor [2003] WASC 122
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Ors (1988) 81 ALR 397
Fyna Foods Australia Pty Ltd v Cobannah Holdings Pty Ltd (No 2) [2004] FCA 1212
Grbavac v Hart [1997] 1 VR 154
Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358
Jones & Anor v Millward & Anor [2005] QCA 76
Leichhardt Municipal Council v Green [2004] NSWCA 341
McKerlie v State of New South Wales (No 2) [2000] NSWSC 1159
Messiter v Hutchinson (1987) 10 NSWLR 525
(Page 4)
MGICA (1992) Ltd v Kenny & Good Pty Ltd & Anor (No 4) (1996) 140 ALR 707
Quirk v Bawden (1992) 112 ACTR 1
Townsend & Ors v Collova & Ors (S) [2005] WASC 4
Vasram v AMP Life Ltd [2002] FCA 1286
Case(s) also cited:
Nil
(Page 5)
1 JOHNSON J: The outcome of this action was that I found for the plaintiffs and made the declaration sought by them in the statement of claim. I was not persuaded that the agreement pleaded by the plaintiff on the counterclaim ever existed and, consequently, the counterclaim was dismissed. Having made the orders required by the terms of the judgment, the only remaining issue was that of costs. Counsel for the plaintiffs (the defendants on the counterclaim) sought indemnity costs, an application opposed by counsel for the defendant (the plaintiff on the counterclaim). Both parties sought, and were granted, time to file written submissions on the issue of indemnity costs. The submissions having been filed, I was advised by the solicitors for both parties that they were content for the issue of costs to be determined on the papers. For ease of expression I will refer to the parties in terms of their position in the primary action rather than also referring to their position on the counterclaim.
2 The basis of the application for indemnity costs is an offer to settle the action which was made by the plaintiffs in a letter of 26 March 2001. The letter was headed "without prejudice save as to costs" and was, relevantly, in the following terms:
"(a) indicating that Clayton Utz's instructions were that the allegations made in the Defence and Counterclaim were false and without merit;
(b) offering to settle both the main action and the counterclaim on the following terms:
(i) each party bears its own costs in commencing and defending all claims made in the course of these proceedings;
(ii) judgment be entered for the Plaintiffs in the Plaintiffs' claim against the Defendant;
(iii) the Defendant's counterclaim against each of the defendants to Counterclaim be dismissed; and
(iv) the Plaintiff provide the Defendant/Counterclaimant with a written release from liability."
(Page 6)
- [1975] 3 All ER 333. That term is commonly used to refer to any letter containing an offer to compromise as opposed to an offer to compromise made by notice under O 24A.
4 The plaintiffs' solicitors received no reply to this offer and on 10 April 2001 Clayton Utz again wrote to Dwyer Durack on a "without prejudice save as to costs" basis advising that the offer had now lapsed and was withdrawn. The defendant's solicitors were further advised that the plaintiffs would pursue their rights to recover all permissible costs were they to succeed at trial.
5 On 10 April 2001, Dwyer Durack informed Clayton Utz by email that they had not received the offer and requested a fresh copy of such, and then asked for an extension of time for it to be put to the defendant for consideration. Clayton Utz re-faxed a copy of the offer to Dwyer Durack.
6 On 17 April 2001, Dwyer Durack sent an email to Clayton Utz indicating that their client rejected the plaintiffs' "offer to settle on the basis that each party walk away and bear their own costs". The time within which the defendant could have availed himself of the offer was 15 days.
7 With one exception, the issue of costs is provided for in O 66 of the Supreme Court Rules. Order 66 r 1(1) sets down the well established proposition that "the Court will generally order that the successful party to any action or matter recover his costs". However, O 66 r 1(1) also makes it plain that the costs of and incidental to all proceedings shall be in the discretion of the Court. In the usual circumstances, the order made in favour of a successful party with respect to costs is that he will recover party/party costs to be taxed if not agreed by the parties.
8 Offers to compromise an action are dealt with in O 24A of the Rules. An offer made under O 24A must be in writing and bear a statement to the effect that the offer is made under the order: r 1. The offer may be made at any time before the Judge or Master begins to give his decision or reasons for decision: r 3(1). The offer may be expressed to be limited as to the time it is open to be accepted but the time expressed shall not be less than 28 days after it is made: r 3(3). The offer cannot be withdrawn within the time it is open to be accepted: r 3(6). Rule 10(4) identifies the consequences of failing to accept an offer which proves to be more favourable to the offeree than the outcome of the action. It states:
"Where an offer is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains judgment on the claim to
(Page 7)
- which the offer relates no less favourable to him than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled to an order against the defendant for his costs in respect of the claim from the date on which the offer was made, taxed on an indemnity basis in addition to his costs incurred before that date, taxed on a party and party basis."
9 There is a reciprocal provision where, either in the primary action, or in a counterclaim as in this case, the defendant makes the offer, although the resulting costs order will differ if the plaintiff is the successful litigant: O 24 r 10(5). Significantly, the effect of r 10(4) is that there is a prima facie entitlement to a costs order on an indemnity basis if the remaining criteria are met. Similarly, under r 10(5) the defendant has a prima facie entitlement to its costs on a party/party basis after the date of the offer and prima facie protection from paying the plaintiff's costs after the date of the letter.
10 Without prejudice offers of compromise which are not made under O 24A may still affect the Court's discretion as to costs: Dobb v Hacket (1993) 10 WAR 532. The rationale behind that proposition is that the Court should preserve in the minds of litigants the conscious consideration that their behaviour may place them at risk as to costs if they refuse reasonable offers of settlement. The Court should be careful not to foster the propositionthat obstinacy and unreasonableness will not be punished by orders as to costs: Dobb v Hacket (at 540) per Murray J. As Rogers J observed in Messiter v Hutchinson (1987) 10 NSWLR 525 (at 528): "The purpose of a Calderbank letter is, after all, essentially the promotion of settlement of disputes". In Cutts v Head [1984] Ch 290 (at 306) Oliver LJ observed:
"… As a practical matter, a consciousness of a risk as to costs if reasonable offers are refused can only encourage settlement whilst, on the other hand, it is hard to imagine anything more calculated to encourage obstinacy and unreasonableness than the comfortable knowledge that a litigant can refuse with impunity whatever offer may be offered him even if it is as much as or more than everything to which he is entitled in the action."
11 In Messiter v Hutchinson, Rogers J also drew the following conclusion with respect to the effect of a Calderbank offer (at 529):
(Page 8)
- "In considering what weight should be given to an offer, the Court will no doubt pay regard to all relevant circumstances, including the reason why no payment in was made, the security of payment available to the plaintiff and the time at which the Calderbank letter was received by the plaintiff."
- The reference in that statement to "payment" is a reference to the practice replaced in this jurisdiction by an O 24A offer; the practice of payment into court. Consequently, the reason for not utilising O 24A is a relevant factor in considering the weight to be given to a Calderbank offer.
12 In this case, it is important to remember that the significant action was in fact the counterclaim on which the offerors were the defendants. The main action simply sought a declaration that the employment agreement pleaded by the defendant in his counterclaim did not in fact exist. Order 24A makes no provision for a plaintiff to pay indemnity costs to a defendant in circumstances where a plaintiff has rejected an offer from a defendant that is more favourable to the plaintiff than the outcome of the action. As I have indicated above, the defendant is entitled only to an order that the plaintiff pay the defendant's costs after the date of the offer. That, of course, is only of benefit in circumstances where the plaintiff is less successful than the terms of the offer, but is still successful. In this case, the plaintiff on the counterclaim was wholly unsuccessful. In those circumstances there is a sound reason for utilising a Calderbank offer.
13 In Townsend & Ors v Collova & Ors (S) [2005] WASC 4 the defendants' solicitors wrote two Calderbank letters to the plaintiff's solicitors one of which invited the plaintiffs to discontinue their action on the basis that the parties bear their own costs. The defendant's offers were more favourable to the plaintiff than the outcome of the action. Le Miere J relied on Dobb v Hacket (at 541) and Duvall v Godfrey Virtue & Co (a firm) [2001] WASCA 163 (at [7]) in concluding that without prejudice offers of compromise which are not made under O 24A may still affect the Court's discretion as to costs: (at [36]). With respect to the extent to which a Calderbank offer might affect the Court's discretion Le Miere J stated (at [42]):
"I consider that a Calderbank letter is but one factor relevant to the exercise of the discretion to award costs in favour of a successful defendant. A Calderbank offer is a significant factor in favour of indemnity costs but does not require an order for indemnity costs as a matter of routine."
(Page 9)
14 Of course, the benefit of making an offer under O 24A, as opposed to a Calderbank offer, is that the former approach carries with it a prima facie entitlement to indemnity costs: O 24A r 10(4) and r 10(5); MGICA (1992) Ltd v Kenny & Good Pty Ltd & Anor (No 4) (1996) 140 ALR 707 (at 711); Leichhardt Municipal Council v Green [2004] NSWCA 341 (at [19]). In MGICA (1992) Ltd v Kenny & Good Pty Ltd (at 710), Lindgren J, citing a number of authorities, said:
"It is important, however, to appreciate that the mere making of an offer by a 'Calderbank letter' and its non-acceptance followed by a result more favourable to the offeror (less favourable to the offeree) than that represented by the offer will not automatically lead to the making of an order for payment of costs on an indemnity basis."
15 Where the offer, as in this case, is to consent to judgment in favour of the plaintiff/defendant in the counterclaim, in both the primary action and the counterclaim, with parties bearing their own costs, it is necessary to consider whether that is indeed an offer to compromise. In Jones & Anor v Millward & Anor [2005] QCA 76 it was held that a demand which demands nothing less than the final relief sought in the claim plus costs is not a true offer of compromise: ((at [13]) per Holmes J with whom McMurdo P and Jerrard JA agreed). In Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 Giles J observed that compromise "connotes that a party gives something away": (at 368). In Fyna Foods Australia Pty Ltd v Cobannah Holdings Pty Ltd (No 2) [2004] FCA 1212 Kenny J referred to a number of authorities in support of the proposition that an offer to a plaintiff to discontinue with no order as to costs was not an offer to compromise and did not carry with it the consequences of a Calderbank letter: see Vasram v AMP Life Ltd [2002] FCA 1286 per Stone J (at [12]); Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (No 2) [2002] FCA 192 per Hill J (at [59] - [60]); McKerlie v State of New South Wales (No 2) [2000] NSWSC 1159. Although Kenny did not form a concluded opinion on the issue, he expressed doubt that an offer of that type amounted to a genuine offer of compromise: (at [10]). However, in Leichhardt Municipal Council v Green (at [37], [39]) the NSW Court of Appeal held that an offer will not be a demand for capitulation merely because the offer is made on the basis that judgment be entered against the offeree and that each party bear its own costs. In my view, an offer for judgment to be entered for the offeree and each party bear its own costs can properly be described as an offer to compromise, because the offeror is giving something away, the costs to which it would otherwise be
(Page 10)
- entitled. However, whether it is an offer which would justify an order for indemnity costs is an entirely different matter.
16 In terms of the legal framework to apply in determining this application, the remaining issue is the circumstances in which the refusal of a Calderbank offer will lead to an order for indemnity costs against the party that refuses the offer and is then faced with a less favourable outcome. In MGICA (1992) Ltd v Kenny & Good Pty Ltd, Lindgren J said (at 711):
"Clearly, the circumstances must take a case out of the 'ordinary' or 'usual' category if an order for indemnity costs is to be made, since, as noted earlier, the rules evince an intention that in that category of case, an order for costs signifies an order for costs on a 'party and party' basis. Perhaps the various 'tests' which have been suggested are classifiable as 'abuse of process', 'ulterior or extraneous purpose' and 'unreasonableness' tests."
17 The plaintiffs' written submissions refer to a number of cases which have identified circumstances justifying an award of indemnity costs. One example is where the applicant, properly advised, "should have known that he had no chance of success": Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Ors (1988) 81 ALR 397 (at 410) per Woodward J. Another circumstance was an "imprudent refusal of an offer of compromise": Colgate-Palmolive Company & Anor v Cussons Pty Limited (1993) 46 FCR 225 per Sheppard J (at 233). In Dobb v Hacket (at 540 – 541) Murray J relied on the fact that the plaintiff "behaved unreasonably" in ordering that the plaintiff pay the defendant's costs even where the plaintiff succeeded at trial, in circumstances where the usual order would have been that costs be paid from the estate. In Quirk v Bawden (1992) 112 ACTR 1 (at 5), the Court considered that where a defendant "unreasonably rejected" an offer made by the plaintiff, it may be appropriate for a court to order that the defendant pay the plaintiff's costs on an indemnity basis. With respect to this issue, the defendant relies on the decision in Flotilla Nominees Pty Ltd v Western Australian Land Authority & Anor [2003] WASC 122 (at [8]) where the Court considered that there must be some special or unusual feature in the element of improper, or at least unreasonable, conduct on the part of the parties or their legal advisor to justify an award of indemnity costs. Pullin J's analysis of the relevant authorities resulted in a conclusion that "some element of improper or at least unreasonable conduct" must be established. However, in that case, the Court was determining an application for costs on an indemnity basis, unrelated to
(Page 11)
- the issue of offers to compromise. Based on these authorities, it would appear that "unreasonableness" in refusing the offer is the salient consideration. Of course, what is reasonable will very much depend on the circumstances of each case.
18 In Grbavac v Hart [1997] 1 VR 154 the Court of Appeal of Victoria was called upon to review an order that a successful plaintiff pay the defendant's costs after the date of an offer of compromise, an exercise requiring consideration of the adequacy of the offer. Winneke P concluded (at 155) that regard ought not to be paid to an offer of compromise unless the terms of the offer are such as to leave the offeree in no reasonable doubt as to the nature and extent of what is being offered: see also Tadgell JA (at 160 – 161). In Brymount Pty Ltd t/a Watson Toyota v Cummins [2005] NSWCA 69 Beazley JA (with whom Ipp JA and McColl JA agreed) identified a number of factors, distilled from various authorities, which may be significant in exercising the discretion as to costs where a Calderbank offer has been made and rejected:
(a) Whether the rejection of the compromise offer was reasonable in the circumstances: [14];
(b) The time frame which the offeree had to consider the offer. The relevance of this factor is that it provides a party's legal advisers sufficient time to weigh up the prospects of the case: [14];
(c) Whether the letter of compromise explicitly stated that the offer would be made in Calderbank terms, the exact conditions of the offer, and whether indemnity costs would be pursued of the offer was rejected: [14];
(d) Whether the letter of offer provided fair warning of the case that was to be run against the defendant on the counterclaim: [20].
19 It can be seen that the time frame is a relevant factor. In this case, the writ of summons in the originating claim was filed on 8 December 2000. The defence/counterclaim was filed on 13 February 2001. The offer was made by letter dated 26 March 2001 and was open for acceptance for a period of 15 days. At the time of the offer discovery had not been completed.
20 On that basis, counsel for the defendant submits that the fact that the defendant's defence and counterclaim did not have merit could not have been obvious or necessarily correct. It is also said that the element of compromise in the offer was modest and somewhat negligible given the
(Page 12)
- quantum of the defendant's claim. Therefore, it is submitted, it is not imprudent or unreasonable for the defendant to refuse the offer and there was no element of improper or unreasonable conduct on the part of the defendant to justify an award of indemnity costs. It is also submitted on behalf of the defendant that the offer made, in so far as it related to the defendant continuing to defend the plaintiff's claim, was made at an early stage in the proceedings when it would have been quite reasonable for the defendant to continue to defend without the risk of an indemnity costs order being made against him. Counsel for the defendant also identifies a number of deficiencies in the offer itself. They are:
(1) That the offer did not state the plaintiff's intention to seek indemnity costs. It merely informed the defendant that the plaintiff intended to pursue all permissible costs.
(2) The offer failed to give warning of the case to be put against the defendant.
(3) The offer failed to provide a reasonable time frame for acceptance.
21 Finally, it is said that there is nothing special or unusual in this case to warrant a departure from the usual rule of party/party costs.
22 On behalf of the plaintiffs it is said that the matters in issue turn on a relatively straightforward conflict of evidence. The plaintiffs submit that, properly advised by his solicitors, the defendant would have been in a position to have assessed the merits of his case at a very early stage of the proceedings. It is said that the factual issues in both the main action and the counterclaim are relatively straightforward and turn on the existence and content of a verbal employment agreement.
23 The plaintiffs also submit that it would have been evident to the defendant that, in order to succeed in his counterclaim and to successfully oppose the declaration sought by the plaintiff, it would be necessary for him to satisfy the Court that his version of events was true. I agree with that proposition because there was little written material to support the existence and terms of the agreement pleaded in the counterclaim.
24 Reliance is also placed by the plaintiff on the fact that, properly advised, the defendant would have understood that at trial the three director plaintiffs were likely to give evidence that contradicted his evidence and the trial would turn on whose evidence the trial Judge preferred. In this regard, reference is made to the adverse finding made by me with respect to the defendant's credibility. In my view, this is not a relevant factor. Until the judgment was delivered there was no way that
(Page 13)
- either party would know that the defendant would prove to be an entirely unsatisfactory witness nor how the conflict between the plaintiffs and the defendant would be resolved. Even if, during the course of the trial, it appeared that the defendant was not presenting well, by that stage the period of offer had expired. However, I do accept that, in view of my findings, the defendant must have been aware that his claim attracted a greater degree of risk than that of someone who held a sincere belief in the truth of his claim. However, I still consider that this factor is not such as to make the rejection of an offer of that type at such an early stage in the proceedings unreasonable.
25 Neither do I believe that the number of witnesses or plaintiffs who might give evidence in direct conflict to the defendant is a fact that would render unreasonable a refusal of an offer of this type. There are numerous cases where there is an imbalance in witness numbers but judgment is not in favour of the case with the greatest number of witnesses. However, I do accept that the defendant must have known that the witness Beale was a crucial witness because his position in the plaintiff company was the same as the defendant's. The difficulty is that, at the very early stage at which the offer was made, there is no direct evidence, or evidence from which an inference can be drawn, that the defendant had any knowledge of Beale's position on the relevant issues or that Beale was no longer working for the plaintiff company and was no longer connected with the other plaintiffs. Neither was the defendant aware of whether any documentation existed which either directly or inferentially supported his claim because discovery had not taken place.
26 There is no impropriety in preparing and filing a counterclaim based entirely on the instructions of the client when the evidence of the client, if accepted, is capable of establishing the counterclaim. Identifying supporting witnesses is something that can be done, following discovery, prior to filing witness statements. Neither would one expect that the necessary inquiries, response from the witness, advice to the client and instructions from the client could reasonably be obtained within a meagre 15 day time frame. In my view, it would not be unreasonable, even where there is knowledge that a number of witnesses will testify against him, for the defendant to refuse an offer made at the earliest stage of the proceedings merely to forego costs if the defendant abandoned his defence and counterclaim.
27 In making an offer of this type at an early stage of the proceedings, the prospects of successfully seeking an order for indemnity costs would be increased if the offer had set out the strength of the plaintiff's case so
(Page 14)
- that the defendant was informed of the degree of risk involved in proceeding. Indeed, if at this early stage the plaintiffs were aware of the proposed evidence of Beale, including the circumstances pertaining to him, it would have been prudent to include that information in the offer. In my view, if the plaintiff had been made aware of that evidence and the other strengths of the plaintiffs' case then the risks of proceeding would be substantially increased making it more likely that an order for indemnity costs would be made. An allegation that the defendant's case is without merit does not equate to identifying the strengths of the plaintiff's case.
28 There is another factor that causes me some concern. The offer did not precisely state that the plaintiff intended to seek an order for indemnity costs with respect to both actions. The statement that the plaintiffs would "pursue their rights to recover all permissible costs" is not a substitute for a statement that indemnity costs will be sought. Permissible costs are generally the party/party costs to be awarded to any successful litigant. I accept that if the statement was meant to convey that the plaintiffs, if successful, intended to recover their costs of both actions, it would be stating the obvious. However, the discretion conferred on the Court as to costs may well operate other than in the usual course of costs following the event. For example, O 66 r 1(2) provides that if the Court is of the opinion that the conduct of a party has resulted in costs being unnecessarily or unreasonably incurred it may deprive that party of costs wholly or in part, and may further order him to pay the costs of an unsuccessful party either wholly or in part. In those circumstances, I consider it important that a party who makes an offer of compromise with a view to seeking indemnity costs, if appropriate, should explicitly say so. The absence of that statement will not necessarily be fatal to the application if other circumstances are such as to constitute a strong claim to indemnity costs. However, in this case, because of my views with respect to the matters raised by the plaintiffs in support of an application for indemnity costs expressed above, I consider the absence of a clear statement of the intention to apply for indemnity costs to be one of the factors which has led me to conclude that the application should be refused. The other significant factors are the failure to outline the strength of the plaintiffs' case and the marginal benefit to the defendant provided by the terms of the offer. Not being required to pay the other party's costs is a somewhat meagre offer on a claim of significant quantum which, at such an early stage, could not be said to be so hopeless it would fail. That is particularly so in circumstances where the offeree has not provided any information which would suggest to the defendant that his case was either weak or hopeless.
(Page 15)
29 I should add that I consider it essential that the Court reinforces, by orders for indemnity costs if necessary, the need for litigants to give conscious consideration to the risks of proceeding with litigation and of failing to consider and accept fair and reasonable offers to compromise claims. If the timing and terms of this offer more closely met with the requirements set out in the authorities to which I have referred, I would have had no hesitation in making the order sought.
30 However, for the reasons to which I have referred, I consider the appropriate order to be that the defendant (plaintiff on the counterclaim) pay the plaintiffs' (defendants on the counterclaim) costs of both actions on a party/party basis to be taxed if not agreed.
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