In the matter of Mediation and Online Dispute Resolution Operating Network Pty Ltd (No 2)

[2022] NSWSC 289

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Mediation & Online Dispute Resolution Operating Network Pty Ltd (No 2) [2022] NSWSC 289

Hearing dates:

On the papers

Decision date:

17 March 2022

Jurisdiction:

Equity - Corporations List

Before:

Rees J

Decision:

Indemnity costs order made.

Catchwords:

OFFER OF COMPROMISE – defendants represented by solicitors throughout proceedings –solicitor’s retainer terminated a month before trial – offer of compromise made 8 days before trial – offer open for 8 days – rule 20.26(5), UCPR – whether closing date for acceptance “reasonable in the circumstances” – more time may be needed where offeree is self-represented – relevant that defendants put themselves in the position of being unrepresented by terminating retainer – time sufficient – indemnity costs order made.

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Calderbank v Calderbank [1975] 3 All ER 333

In the matter of Mediation & Online Dispute Resolution Operating Network Pty Ltd [2022] NSWSC 5

Texts Cited:

Ritchie’s Uniform Civil Procedure (NSW)

Category:

Costs

Parties:

Nicols Super Pty Ltd (trustee for the Nicols Family Super Fund) (Second Plaintiff)
Brian Nicols (trustee for Nicols Family Trust) (Third Plaintiff)
Susan Nicols (trustee for Nicols Family Trust) (Fourth Plaintiff)
Rawlo International Pty Ltd (trustee for McCartney Family Super Fund (Fifth Plaintiff)
Shayne Gaynor (Sixth Plaintiff)
Naomi Rechter (Seventh Plaintiff)
John Brandon (Eight Plaintiff)
Nathan Polito (Second Defendant)
Intergalactic Federation Pty Ltd (Third Defendant)

Representation:

Solicitors:
Henry William Lawyers (Second to Eighth Plaintiffs)

File Number(s):

2019/400760

Judgment

1. HER HONOUR: On 23 February 2022, I made declarations as sought by the plaintiffs (that the defendants had engaged in misleading or deceptive conduct), awarded damages totalling $950,000 and ordered the defendants to pay the plaintiffs’ costs of the proceedings: In the matter of Mediation & Online Dispute Resolution Operating Network Pty Ltd [2022] NSWSC 5.

2. On 9 March 2022, the plaintiffs filed a motion pursuant to rule 36.16(3A) of the Uniform Civil Procedure Rules 2005 (NSW) (variation of judgment or orders) and rule 42.14(2) (costs where offer of compromise not accepted) seeking to vary the costs order such that the defendants be ordered to pay the plaintiffs’ costs on an ordinary basis up to 4 October 2021 and thereafter on an indemnity basis. In support of the application, the plaintiffs filed an affidavit by their solicitor, Stuart Blaxell, who deposed that an Offer of Compromise was served on 4 October 2021 but not accepted.

3. Also on 9 March 2022, the plaintiffs’ solicitors proposed, by email to my Associate copied to the first defendant Nathan Polito, that the motion be decided on the papers, “subject to anything Mr Polito may have to say in response”. My Associate emailed the parties as follows:

Mr Polito – Her Honour has asked me to seek a response from you to the below questions after you have considered the documents attached to Mr Blaxell’s email and, in any event, by 4pm, Wednesday 16 March 2022:

a)   Do you consent to the variation of the orders made by her Honour on 23 February 2022 sought by Mr Blaxell?

b)   If you do not consent to the variation sought, do you intend to file written submissions and/or any evidence in opposition to the plaintiff’s interlocutory process?

c)   If you do intend to file written submission and/or evidence, when do you estimate that you would be in a position to submit these to Chambers? I note her Honour is not minded to give you more than two weeks from today’s date.

d)   Are you content for her Honour to consider, as Mr Blaxell suggests, any evidence and submissions in Chambers (that is, without the need for a live or virtual hearing), or do you intend to seek a hearing?

4. There was no response from Mr Polito by 4pm on 16 March 2022 or at all, following which I made orders in Chambers that the motion be determined on the papers and reserved judgment in respect of the motion. The parties were informed of these orders by email. There was no further response from Mr Polito.

FACTS

5. These proceedings were commenced on 20 December 2019. The plaintiffs’ evidence in chief was served in December 2020. The defendants’ evidence was served in February 2021. On 5 March 2021, Black J referred the matter to mediation. The plaintiffs’ reply evidence was served in April 2021. On 18 June 2021, Black J listed the matter for final hearing with an estimate of seven days, commencing on 12 October 2021.

6. The defendants were represented in these proceedings by Sparke Helmore Lawyers. However, on 8 September 2021, Mr Polito filed a Notice of Removal of Solicitor on behalf of himself and the second defendant, Intergalactic Federation Pty Ltd. According to the notice, the defendants had “terminated the authority of … Sparke Helmore Lawyers to act on the Defendants’ behalf in these proceedings.” The contact details for the defendants were given as Mr Polito’s email address and mobile phone. The trial was then little over a month away.

7. On 4 October 2021 at 2.54 pm, the plaintiffs’ solicitor sent an email to Mr Polito marked without prejudice save as to costs, attaching an Offer of Compromise. The cover email explained that the offer was based on 85% of the plaintiffs’ claims, together with their costs as agreed or assessed. The Offer of Compromise stated that it was open for acceptance until 10.00 am on 12 October 2021 (being when the trial was due to commence). The plaintiffs’ solicitor advised in the cover email that, in the event that the Offer of Compromise was not effective under rule 20.26 of the Uniform Civil Procedure Rules 2005 (NSW), it should be taken to have been made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333 and would be relied upon in any application for costs.

8. Within the hour, Mr Polito replied, “I do not need time to consider this offer [as it] is absolutely impossible to fulfill in any scenario.” In short, Mr Polito stated that the defendants did not have sufficient funds, or access to funds, to enable them to pay the offered amounts.

9. The trial commenced on 12 October 2021. Mr Polito was self-represented. At the commencement of the trial, I granted leave to Mr Polito to represent Intergalactic Federation. The trial occupied three days. The plaintiffs were wholly successful.

CONSIDERATION

10. An initial question is whether the Offer of Compromise complied with rule 20.26, UCPR, given the relatively short period of time during which it was open for acceptance. Rule 20.26(5) provides:

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.

11. As the offer was made less than two months before the date set down for commencement of the trial, the question is whether the offer was left open for such time as was “reasonable in the circumstances”. As the learned authors of Ritchie’s Uniform Civil Procedure (NSW) observe at [20.26.40]: (some citations omitted)

… The assessment of “reasonable time” depends on the circumstances when the offer is made … Those circumstances include the information available to the parties. They will also include awareness of the provisions of UCPR rr 42.13–42.15A — which permit indemnity costs orders in relation to costs incurred from the day following the date the offer was made. The mere fact that a late offer is only left open for a few days will not necessarily preclude compliance with the “reasonable time” requirement … On the other hand, if the offer is made very close to trial, and provides only a short time for acceptance, the competing practical exigencies of both completing final preparation for hearing, and giving prompt consideration to the offer may suffice to preclude characterization of the acceptance period as reasonable: Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 at [18]–[24] (offer day before trial – 22 hour acceptance period – not reasonable acceptance period).

12. In determining whether the eight days was “reasonable in the circumstances”, two matters have particular significance in this case.

13. First, the defendants did not have legal representation at the time that the offer was served. This would tend to suggest that more time may be required to enable Mr Polito to consider the offer – whether it was reasonable and to inform himself of the consequences of non-acceptance – than may be the case if the defendants could readily obtain advice from their legal representatives on the subject. In considering this matter, however, it is also relevant to have regard to how it was that the defendants came to be self-represented. This was not a case where the defendants’ solicitors filed a Notice of Ceasing to Act. Here, the defendants terminated the retainer of their solicitors shortly before trial. The defendants having put themselves in the position where they did not have ready access to legal advice, I am less minded to consider that the offer should be open for additional time than might otherwise be the case.

14. Second, the purpose of requiring an offer to be open for a reasonable time is to allow the offeree an adequate opportunity to assess the offer against the strengths and weaknesses of the parties’ respective positions, the risks of litigation and so on. Here, at the time at which the offer was made, these proceedings had been on foot for almost two years. The evidence had been served long ago; the reply evidence had been on for six months. The parties had already mediated at a time when the defendants were legally represented. Presumably, the defendants had been advised by Sparke Helmore Lawyers of the import of the plaintiffs’ evidence and the defendants’ prospects of successfully defending the matter. Mr Polito was in possession of all information necessary to assess the offer. This was put beyond doubt by his response to the offer, “I do not need time to consider this offer …”.

15. Having regard to these matters I consider that the Offer of Compromise was left open for a time that was reasonable in the circumstances. The offer was not accepted. The plaintiffs obtained a judgment no less favourable than the terms of the offer. The plaintiffs are entitled to their costs on an indemnity basis from the day after that on which the offer was made: rule 42.14(2), UCPR.

16. For these reasons, I make the following orders:

1. Pursuant to rule 36.16(3A) and rule 42.14(2) of the Uniform Civil Procedure Rules 2005 (NSW), vary Order 5 made on 23 February 2022 to provide:

Order the defendants to pay the plaintiffs’ costs of the proceedings on an ordinary basis up to 4 October 2021 and on an indemnity basis thereafter.

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Decision last updated: 18 March 2022