Kemble v Gate Gourmet Services Pty Ltd
[2012] NSWDC 101
•20 July 2012
District Court
New South Wales
Medium Neutral Citation: Kemble v Gate Gourmet Services Pty Ltd [2012] NSWDC 101 Hearing dates: 21 June 2012; written submissions to 2 July 2012; 20 July 2012 Decision date: 20 July 2012 Jurisdiction: Civil Before: Gibson DCJ Decision: (1) First defendant's application for the plaintiff to pay the first defendant's costs in respect to the plaintiff's claim, assessed on an indemnity basis, from the beginning of 2 March 2012, dismissed.
(2) The first defendant is to pay the plaintiff's costs of this application.
Catchwords: COSTS - whether offer of compromise inconsistent with UCPR r20.26 - whether offer capable of acceptance - whether offer contravened legislation applicable to a work injury damages defendant - estoppel by convention - whether s 14 Civil Procedure Act applicable - whether exceptional circumstances existed - whether offer was in fact better than the result obtained by the plaintiff Legislation Cited: Civil Procedure Act 2005 (NSW), s 14
Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 42.14 and 42.15
Workers Compensation Act 1987 (NSW), s 151Z
Workplace Injury Management and Workers Compensation Act 1998 (NSW), ss 346 and 347Cases Cited: Barakat v Bazdarova [2012] NSWCA 140
Berowra Holdings Pty Ltd v Gordon (2006) 225 CLR 364; [2006] HCA 32
Bullock v London General Omnibus Company [1907] 1 KB 264
Chubs Constructions Pty Ltd v Chamma [2009] NSWCA 98
Chubs Constructions Pty Ltd v Chamma (No 2) (2010) 78 NSWLR 679; [2010] NSWCA 225
Clark v State of New South Wales [2012] NSWCA 139
Con-Stan Industries v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226
Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141
Hancock v Arnold (No 2) [2009] NSWCA 19
Kemble v Gate Gourmet Services Pty Ltd [2012] NSWDC 52
Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85
Leda v Weerden (No. 3) [2006] NSWSC 220
Masters v Cameron (1954) 91 CLR 353
Old v McInnes [2011] NSWCA 410
Palavi v Radio 2UE Sydney Pty Ltd [2011] NSWCA 264
Palavi v Queensland Newspapers Pty Ltd [2012] NSWCA 182
Pittorino v Yates [2009] NSWCA 87
Pritchard v Trius Constructions Pty Ltd (No 2) [2011] NSWSC 1114
Sanderson v Blyth Theatre Co [1903] 2 KB 533
Smith v Sydney West Area Health Service (No 2) [2009] NSWCA 62
Tuheta Pty Ltd v Ehrenfeld [2010] NSWSC 799
Vieira v O'Shea (No 2) [2012] NSWCA 121Texts Cited: Cameron and Liberman, in "Destruction of documents before proceedings commence: what is the court to do?" (2003) 27 Melbourne University Law Rev 273
The Hon Sir Anthony Mason, The Use and Abuse of Precedent (1988) 4 Aust Bar Rev 93Category: Costs Parties: Plaintiff: Harry John Kemble
First Defendant: Gate Gourmet Services Pty Ltd
Second Defendant: Blue Collar Airport Services Pty LtdRepresentation: Plaintiff: Mr D Campbell SC / Mr T Meakes
First Defendant: Mr D Grieve QC / Mr S Kettle
Second Defendant: Mr C Robertson
Plaintiff: Bryan Gorman & Co
First Defendant: Norton White Lawyers
Second Defendant: Stephen Lee Legal
File Number(s): 2010/99877 Publication restriction: None
Judgment
Introduction
These are proceedings brought by the plaintiff against the first defendant, Gate Gourmet Services Pty Ltd (hereafter "Gate Gourmet"), and Blue Collar Airport Services Pty Ltd (hereafter "Blue Collar"), a labor hire company. The plaintiff's claim was an action for negligence following an injury at Gate Gourmet's premises on 2 April 2007, when a trolley fell on him without warning. I found in favour of the plaintiff (Kemble v Gate Gourmet Services Pty Ltd [2012] NSWDC 52) and directed the parties to bring in short minutes of order reflecting the amounts payable in accordance with my findings as to apportionment of liability (90% against the first defendant and 10% against the second defendant), having regard to the provisions of s 151Z Workers Compensation Act 1987 (NSW). The adjusted sum to be awarded to the plaintiff is agreed as being $280,965.17. From this sum an amount of $168,599.43 is repayable to Blue Collar by the plaintiff for workers compensation payments and medical expenses.
The application before the court
The first defendant now brings an application for indemnity costs based upon an offer of compromise dated 1 March 2012 (annexure C to the affidavit of Keira Nelson dated 13 June 2012), which provided as follows:
"On without admission of liability basis, pursuant to Uniform Civil Procedure Rule 20.26, the First and Second Defendants make the following offer of compromise:
1. The First and Second Defendants pay the Plaintiff $240,000 plus costs as agreed or assessed (less a repayment to the Plaintiff's workers compensation insurer of $100,000);
2. The Plaintiff is to discontinue the whole of the proceeding and execute a Deed of Release in terms acceptable to the First and Second Defendants.
This offer will remain open until 6pm on Friday 2 March 2012 and can be accepted in writing in accordance with Uniform Civil Procedure Rule 20.27."
This offer was served late in the afternoon of Thursday 1 March 2012. The parties agreed the plaintiff and his legal advisors had 24 hours to consider the offer on the last working day before the hearing. The hearing commenced on Monday 5 March 2012.
The first defendant submits that its offer to pay the plaintiff $240,000 plus costs as agreed or assessed (less a repayment to the workers compensation insurer of $100,000) is an offer greater than the sum awarded, namely $280,965.17 less the s 151Z repayment of $168,599.43. The first defendant's argument is that while the gross sum awarded was larger than the amount offered, the offer of workers compensation repayments of $100,000 was $68,599.43 less than the total actual disbursements. The first defendant asserts that the figure provided in the offer of compromise represented an offer to compromise these disbursements, and not a statement of what those disbursements actually were, or an offer to pay part only of those disbursements.
The second defendant does not join in the application for indemnity costs. The second defendant and the plaintiff agreed that, by reason of the provision under the Workplace Injury Management and Workers Compensation Act 1998 (NSW) ("the WIMAWCA Act"), the appropriate costs order as between the plaintiff and second defendant is that each party should pay his or its own costs, and a consent order to this effect has been entered.
The issues in dispute
The first defendant provided a written outline prior to the hearing on 21 June, identifying the following relevant features relied upon in relation to the validity of the offer of compromise:
(a) The offer was by notice in writing and was to compromise the plaintiff's whole claim in the proceedings on specified terms.
(b) The offer was exclusive of costs.
(c) The offer bore a statement to the effect that the offer was made in accordance with Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") r 20.26.
(d) The offer was expressed to be limited as to the time it was open for acceptance pursuant to UCPR r 20.26(6), relying on Leda v Weerden (No. 3) [2006] NSWSC 220 per Gzell J at [10] and [11].
(e) The offer was left open for such time as was reasonable in the circumstances; until 6.00pm Friday 2 March 2012. The trial commenced on Monday 5 March 2012. The offer was made following a telephone call from the solicitor for the plaintiff on 1 March 2012 when Ms Nelson, a solicitor employed by the firm representing the first defendant, was informed that the plaintiff's solicitor was meeting with his client at 11.00am the following day.
(f) The offer was made without prejudice save as to costs.
(g) The offer was not withdrawn during the period of acceptance.
(h) The notice of offer did not seek to exclude, modify or restrict the operation of UCPR r 42.14 (where offer not accepted and judgment no less favourable to plaintiff) or r 42.15 (where offer not accepted and judgment as or less favourable to plaintiff).
The first defendant submitted, during oral argument on 21 June 2012, that the use of the phrase "plus costs as agreed or assessed" does not contravene the principles discussed in Old v McInnes [2011] NSWCA 410 or, in the alternative, that Old v McInnes no longer reflects the law and the subsequent decisions of the New South Wales Court of Appeal in Vieira v O'Shea (No 2) [2012] NSWCA 121 and Barakat v Bazdarova [2012] NSWCA 140 should be preferred. As it became apparent, during oral argument on 21 June, that this was only one of a series of issues concerning the form and content of the offer of compromise, the parties provided further written submissions and the matter was stood over to today for any further oral submissions.
The issues for determination are therefore as follows:
(a) Whether the phrase "plus costs as agreed or assessed" is inconsistent with the provisions of UCPR r 20.26;
(b) Whether the offer of compromise complies with the requirements of UCPR r 20.26(3)(c) concerning the identification of interim payments (such as worker's compensation disbursements);
(c) The effect of an offer of compromise provision that the proceedings be discontinued upon terms "acceptable to the first and second defendants" (Hancock v Arnold (No 2) [2009] NSWCA 19 at [20]);
(d) Whether, as a result of one or more of the above, the offer of compromise was an offer capable of acceptance;
(e) Whether the offer contravenes provisions of the Workplace Injury Management and Workers Compensation Act 1998 (NSW), and whether Gate Gourmet was a "work injury damages defendant";
(f) Whether the fact that the plaintiff served a prior offer of compromise containing the words "plus costs as agreed or assessed" amounted to estoppel by convention;
(g) Whether, if the estoppel argument was rejected, the court should exercise its discretion pursuant to s 14 Civil Procedure Act 2005 (NSW);
(h) Whether, in the event the offer of compromise was valid, there were "exceptional circumstances"; and,
(i) Whether, if the offer of compromise was valid, it was in fact better than the result obtained by the plaintiff.
I shall first set out the provisions of UCPR rr 42.15 and 20.26.
The legislation
UCPR r 42.15 provides:
"42.15 Where offer not accepted and judgment as or less favourable to plaintiff
(1) This rule applies if the offer concerned is made by the defendant, but not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim concerned as favourable to the plaintiff, or less favourable to the plaintiff, than the terms of the offer.
(2) Unless the court orders otherwise:
(a) the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and
(b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis:
(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and
(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made."
UCPR r 20.26 provides:
"20.26 Making of offer
(1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms.
(2) An offer must be exclusive of costs, except where it states that it is a verdict for the defendant and that the parties are to bear their own costs.
(3) A notice of offer:
(a) must bear a statement to the effect that the offer is made in accordance with these rules, and
(b) if the offeror has made or been ordered to make an interim payment to the offeree, must state whether or not the offer is in addition to the payment so made or ordered.
(4) Despite subrule (1), a plaintiff may not make an offer unless the defendant has been given such particulars of the plaintiff's claim, and copies or originals of such documents available to the plaintiff, as are necessary to enable the defendant to fully consider the offer.
(5) If a plaintiff makes an offer, no order may be made in favour of the defendant on the ground that the plaintiff has not supplied particulars or documents, or has not supplied sufficient particulars or documents, unless:
(a) the defendant has informed the plaintiff in writing of that ground within 14 days after receiving the offer, or
(b) the court orders otherwise.
(6) An offer may be expressed to be limited as to the time it is open for acceptance.
(7) The following provisions apply if an offer is limited as to the time it is open for acceptance:
(a) the closing date for acceptance of the offer must not be less than 28 days after the date on which the offer is made, in the case of an offer made 2 months or more before the date set down for commencement of the trial,
(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 commencement of the trial.
(8) Unless the notice of offer otherwise provides, an offer providing for the payment of money, or the doing of any other act, is taken to provide for the payment of that money, or the doing of that act, within 28 days after acceptance of the offer.
(9) An offer is taken to have been made without prejudice, unless the notice of offer otherwise provides.
(10) A party may make more than one offer in relation to the same claim.
(11) Unless the court orders otherwise, an offer may not be withdrawn during the period of acceptance for the offer.
(12) A notice of offer that purports to exclude, modify or restrict the operation of rule 42.14 or 42.15 is of no effect for the purposes of this Division."
This brings me to the first issue for determination, namely whether the offer of compromise was invalid by reason of the inclusion of the phrase "plus costs as agreed or assessed".
"Plus costs as agreed or assessed"
In Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141 at [26] the court said:
"[26] The governing reasoning is inconsistency between an offer of compromise and the provisions of the rules with respect to costs. An offer of compromise involving costs will not necessarily be of no effect by force of r 20.26(12), because the costs will not necessarily be inconsistent with a plaintiff's (or defendant's) entitlement to an order for costs. But even in cases not involving payment of a money sum, such as the present case, there will be the inconsistency. And the language of the rule does not confine exclusivity to only some kinds of offers of compromise. The phrase "exclusive of" means "excluding, not compromising of"; "that excludes"; or "so as to exclude" (Colonial Mutual Life Assurance Society Ltd v Australian and Overseas Telecommunications Corporation Ltd (1993) ANZ Conv R 347). On a natural reading, the requirement that an offer of compromise be exclusive of costs means that it may not involve costs at all."
The problem identified in Dean v Stockland Property Management Pty Ltd (No 2) was that any reference to costs, including references of the kind made in the offers under consideration both there and here (i.e. offers "plus costs" or "exclusive of costs") fatally tainted the offer of compromise. An offer of compromise should not involve costs at all. This was subject to the caveat at [26] that this did not mean that the costs offer was necessarily "of no effect", in that the costs in question may not necessarily be inconsistent with a plaintiff's or defendant's entitlement to an order for costs.
In Tuheta Pty Ltd v Ehrenfeld [2010] NSWSC 799 Barrett J considered that an offer that was "exclusive of costs" was ineffective as an offer of compromise under UCPR r 20.26. However, in Pritchard v Trius Constructions Pty Ltd (No 2) [2011] NSWSC 1114 Hoeben J considered that an offer in this form was not so obscure as to be ineffective, and was therefore in accordance with UCPR r 20.26. This apparent conflict was resolved by the New South Wales Court of Appeal in Old v McInnes [2011] NSWCA 410, where the court held that an offer to pay costs "as agreed or assessed" was an offer which was not "exclusive" of costs and therefore not a valid offer for the purposes of UCPR r 20.26:
"[105] Mr McInnes relies upon the Offers of Compromise as offers in accordance with UCPR r 20.26 and alternatively as informal offers relevant to the exercise of the discretion as to costs: see Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) at [7], [27]; Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [7]-[8]. UCPR r 20.6(2) provides:
(2) An offer must be exclusive of costs, except where it states that it is a verdict for the defendant and that the parties are to bear their own costs.
Neither of the offers made on behalf of Mr McInnes was "exclusive" of costs or within the exception in r 20.6(2). Each provided that Mr McInnes should pay Mr Old's costs "as agreed or assessed". For that reason, neither was an offer in fact "made under rule 20.26" for the purposes of UCPR r 42.13 and accordingly each was of no effect for the purposes of the Offer of Compromise regime under the UCPR: Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) at [22]-[24]; Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141 at [16]-[29]."
The terms of the offer of compromise in these proceedings is similarly costs "as agreed or assessed". However, the first defendant submits that two more recent decisions of the Court of Appeal, Vieira v O'Shea (No 2) [2012] NSWCA 121 and Barakat v Bazdarova [2012] NSWCA 140, have effectively overruled Old v McInnes, a decision not referred to in either judgment.
In Vieira v O'Shea (No 2), the plaintiff conceded that the offer did not comply with the UCPR because it was not "exclusive of costs". This was, Mr Grieve QC submitted, an error on behalf of the plaintiff, who would otherwise have succeeded. More importantly, notwithstanding this concession, the Court of Appeal stated at [7]:
"[7] In written submissions in support of the motion, the appellant conceded that the offer did not comply with the UCPR because it was not "exclusive of costs". It is true that the offer was not stated to be exclusive of costs: the statement as to costs could have been understood as indicating that the offer was indeed not inclusive of costs, but was otherwise otiose as the same costs consequences followed from the application of the rules. (Somewhat opportunistically, the solicitors for the first respondent submitted that a later offer of compromise did not comply with the rules because it was not stated to be exclusive of costs and therefore should be presumed to be inclusive.) The UCPR are to be construed by reference to their apparent purpose. A mere reference to costs in an offer otherwise compliant with Pt 20, Div 4 will not take the offer outside the rules unless the reference operates inconsistently with the relevant costs rule: Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141, (Giles JA, Handley AJA, Whealy J) at [26]-[29]. The offer, if accepted, entitled the offeror to his costs: the offer did not seek to vary the effect of UCPR r 42.13 A."
The court went on to consider an offer of compromise for $180,000 which had been made concerning the costs of appeal. The validity of this offer was also disputed, as it failed to state that it was "exclusive of costs" as required by UCPR r 20.26. The court said at [17]-[19]:
"[17] On 6 June 2011, two days after the appeal was listed for directions, the appellant filed an offer of compromise in an amount of $180,000, the offer being open for acceptance for 28 days. The offer was stated to be made in accordance with UCPR, r 20.26.
[18] The first respondent disputed that the offer complied with the relevant rule for three reasons. First, it was said that the offer failed to state that it was "exclusive of costs", as it was required to be by UCPR 20.26. However, the rule does not require such a statement, but merely requires that the offer "must be exclusive of costs": r 20.26(2). The evident purpose of that requirement is that the effect of the offer, whether accepted or rejected, will be to engage the relevant costs rule in Pt 42. The offer did not purport to be inclusive of costs and there was no reason to infer that it was, so as to invalidate its operation under r 20.26, with which it purported to comply.
[19] The purpose of requiring an offer under the UCPR to be exclusive of costs is to allow the rules with respect to costs to operate according to their terms. Thus, where an offer is made by a plaintiff and not accepted by the defendant and the plaintiff obtains a judgment which betters the offer, the plaintiff is entitled to an award of costs assessed on the indemnity basis from the day following the day on which the offer was made, unless the court otherwise orders: r 42.14. With respect to appeals, the rules merely pick up with appropriate modifications the provisions of Pt 20, Div 4: r 51.47. The costs rules in Pt 42, Div 3, are also subject to modifications: r 51.48."
The court also considered the question of whether the offer was certain, noting that a significant element of uncertainty would be required for the offer not to comply with UCPR r 20.26:
"[22] It may be accepted that lack of clarity in the terms of the offer is a relevant consideration in determining whether the rejection of a Calderbank offer is unreasonable: Hazeldene's Chicken Farm at [25], referred to by this court in Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [12]. However, it would require a significant element of uncertainty to render the offer one which did not comply with r 20.26. The appeal being a distinct proceeding, an offer made in respect of the appeal should be understood as seeking to invoke the costs rules as applicable to the appeal. Accordingly, the formal offer of 6 June 2011 to settle the proceedings on condition that the first respondent pay the appellant $180,000 must be understood as a compromise of the appellant's claim for damages and challenge to the costs order made at the trial. There was no evidence that the first respondent understood it any other way."
I do not consider that the import of this decision is to overrule the decision in Old v McInnes. The plaintiff had conceded the Old v McInnes point in relation to the earlier offer, which may explain why Old v McInnes was not referred to. As to the offer concerning the costs of the appeal, the position was different. The offer in those circumstances said nothing about costs at all. The complaint was in fact that the offer did not expressly state that it was made "exclusive of costs". The effect of the court's statement at [18] is not that the Rules did not require such a statement, but merely that the offer needed to be exclusive of costs.
Taking the above into account, the decision of the Court of Appeal in Vieira v O'Shea (No 2) does not, explicitly or impliedly, overrule the decision in Old v McInnes, which is binding upon me for the reasons explained by the Hon Sir Anthony Mason, The Use and Abuse of Precedent (1988) 4 Aust Bar Rev 93.
The second case, Barakat v Bazdarova, required the Court of Appeal to answer the question it posed in its heading "Was the respondent's offer of compromise "exclusive of costs"?", a question Tobias AJA answered in the affirmative at [39] as follows:
"[39] In my opinion the answer to this question is in the affirmative. By the combined operation of UCPR rr 20.26(1) and 51.47(1) and (2), the relevant proceedings in respect of which the respondent offered to compromise her claim were the proceedings in the Court of Appeal. An offer is required to be "exclusive of costs" so as to preserve, and not impinge upon, the costs provisions provided, relevantly, in r 42.14(2)(b). Thus in Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141 at [26] this court (Giles JA, Handley AJA, Whealy J) observed that the governing reason why an offer of compromise cannot involve costs at all was to avoid inconsistency between an offer of compromise and the provisions of the rules with respect to costs when such an offer has been made but not accepted."
The offer of compromise was held to be valid. In Barakat v Bazdarova the words "exclusive of costs" were used for this purpose, namely to ensure there is no inconsistency with the costs rules. The principles discussed in Dean v Stockland Property Management Pty Ltd (No 2) were expressly endorsed by the court (at [39]).
In addition, in neither Vieira v O'Shea (No 2) nor Barakat v Bazdarova was there an offer of a compromised figure for disbursements (if indeed the sum of $100,000 was a compromised figure); the requirements of UCPR r 20.26(3)(b) are discussed in more detail below.
The form of the offer of compromise, insofar as it contains the words "plus costs as agreed or assessed (less a repayment to the Plaintiff's workers compensation insurer of $100,000)" is framed in a manner that the Court of Appeal in both Dean v Stockland Property Management Pty Ltd (No 2) and Old v McInnes considered unacceptable.
However, this is only the first of a series of problems in relation to the formulation of the offer of compromise which purported to be put on behalf of both defendants. I shall deal with each of these in turn.
Were the terms of the offer clear?
The plaintiff points to two ambiguities in the offer of compromise:
(a) Independent of any question of the wording of the offer ("as agreed or assessed"), the offer was to discontinue upon terms "acceptable to the first and second defendants" in a deed of release, which was not provided and did not form part of the proposed offer.
(b) In addition, the offer included a statement that the sum of $100,000, described as "a repayment to the Plaintiff's workers compensation insurer" was to be deducted, but the full sum of the disbursements was not, contrary to UCPR r 20.26(3)(b), identified.
Was this an offer capable of acceptance?
Mr Grieve QC submitted that the terms of the offer were sufficiently precise so as to fall within the second category of agreements as outlined in Masters v Cameron (1954) 91 CLR 353 at 360, where the court identified three potential forms of agreement upon terms of a contractual nature where a formal contract is proposed:
"Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three cases. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract."
The problems as to whether the offer is capable of acceptance are:
(a) The costs of the second defendant: The offer refers to both parties' costs ("plus costs as agreed or assessed"). The plaintiff first submits that a Bullock (Bullock v London General Omnibus Company [1907] 1 KB 264) or Sanderson (Sanderson v Blyth Theatre Co [1903] 2 KB 533) order is required in relation to the costs of the action against the second defendant. The plaintiff secondly points to the agreed position of the second defendant and plaintiff concerning the WIMAWCA Act applicability to their costs.
(b) The offer is ambiguous: The reference to "less a repayment to the Plaintiff's workers compensation insurer of $100,000" is not only unclear but ambiguous. Is this a representation that these costs are only $100,000? The plaintiff at this time had no idea of the full amount payable, in that he had no information as to the costs of medical expenses, or any statement as to the full amount of workers compensation payments (I note that in fact this information was not available during the trial, and was one of the reasons why short minutes of order were required); the full amount payable was not provided until 4 May 2012 (annexure D to the affidavit of Kiera Nelson dated 13 June 2012).The requirements of r 20.26, namely that the offeror must state "whether or not the offer is in addition to the payment so made" would require a precise statement as to the full amount owing. The offer then needs to identify not simply an amount which is to be repaid, but a precise statement as to what adjustment, if any, is to be made in relation to this interim payment, or the plaintiff cannot know what compromise he is agreeing to.
(c) The offer requires discontinuance on unknown terms: This is not a case where the parties have completely agreed upon all the terms and intend no departure from, or addition to, those terms. The execution of the formal document is dependent upon the plaintiff agreeing to terms "acceptable to the first and second defendants", which are not identified, a defect considered fatal by the court in Hancock v Arnold(No 2) [2009] NSWCA 19 at [20].
In Hancock v Arnold (No 2) at [20], the Court of Appeal noted:
"[20] This offer suffered from two defects. First, it required the solicitors to enter into a "release and indemnity in relation to any liability our client has, had or may have arising directly or indirectly out of the subject matter of the proceedings", the precise terms of which were not identified. Secondly, it required acceptance by 10 am on the following morning."
While the nature of an offer of compromise is that of a contractual offer, it is "incorrect to analyse an offer of compromise made and accepted, pursuant to the Rules, in purely contractual terms": Berowra Holdings Pty Ltd v Gordon (2006) 225 CLR 364; [2006] HCA 32 at [55] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ. The offer of compromise must be viewed in the context of the litigation between the parties. As was the case in Hancock v Arnold(No 2), the terms of the offer were complex and essential elements not identified, and the time limit was very short.
Individually, each of the above would be sufficient to render the offer incapable of acceptance. The uncertainty about the terms of the deed, the failure to specify the total of interim payments and whether the offer was a compromise of those payments or only a part payment were significant omissions. Not only did the offer of compromise fail to comply with UCPR r 20.26, but the terms of the offer were such that, at best, it fell within the third Masters v Cameron category. For a plaintiff facing a hearing on the following Monday, the terms of the offer were also oppressive, in that the plaintiff could have lost the hearing date if the parties were unable to agree upon the terms of the deed referred to in the offer of compromise.
In addition, although the second defendant is identified in the offer of compromise as being a party to the offer, it would appear from the second defendant's stated position in this litigation, and the costs orders it has agreed with the plaintiff, that it does not regard the offer of compromise as being of relevance to its costs. I shall next consider the problem of offers of compromise where one party is a work injury damages defendant who has paid interim payments to the plaintiff.
The offer contravenes provisions of the Workplace Injury Management and Workers Compensation Act 1998 (NSW)
Part 42 UCPR, in the course of providing general rules as to costs, contains the proviso "unless it appears that some other order should be made". The UCPR is silent as to what should occur in circumstances where, for example, the court is required to make a finding such as whether costs are payable at all by reason of the smallness of the verdict. Where specific statutory provisions limit or exclude the payment of legal costs for some part of the proceedings, which the plaintiff submits is the case here by reason of the WIMAWCA Act, how should a party to litigation frame the offer of compromise?
Costs under the WIMAWCA Act
Sections 346 and 347 of the WIMAWCA Act are as follows:
"346 Costs
(1) This section applies to costs (including disbursements) payable by a party in or in relation to a claim for work injury damages, including court proceedings for work injury damages.
(2) The regulations may make provision for or with respect to the awarding of costs to which this section applies. The regulations may provide for the awarding of costs on a party and party basis, on a practitioner and client basis, or on any other basis.
(3) A party is not entitled to an award of costs to which this section applies, and a court may not award such costs, except as prescribed by the regulations under this Act or by the rules of the court concerned.
(4) In the event of any inconsistency between the provisions of the regulations under this section and rules of court, the provisions of the regulations prevail to the extent of the inconsistency.
347 Regulations for costs assessment
(1) The regulations may make provision for or with respect to:
(a) the assessment or taxation of costs payable to a legal practitioner or agent in connection with a claim for compensation or work injury damages, and
(b) matters associated with the assessment or taxation of those costs.
(2) In particular, the regulations may make provision for or with respect to any matter for or in connection with which provision is made by Division 11 of Part 3.2 of the Legal Profession Act 2004.
(3) Regulations for the purposes of this Division may adopt, with or without modification, any of the provisions of Division 11 of Part 3.2 of the Legal Profession Act 2004.
(4) Without limiting this section, the regulations may make provision for or with respect to the assessment of costs by the Commission.
(5) The regulations may make such modifications to the provisions of Part 3.2 of the Legal Profession Act 2004 as may be consequential on the assessment or taxation of costs payable to a legal practitioner being provided for by the regulations under this Division rather than under Division 11 of that Part."
Division 3 of the Regulations at paragraphs 89 to 93 and 104 to 109 contains specific provisions for costs "in or in relation to a claim for work injury damages, including court proceedings for work injury damages" as provided for by s 346.
The precise parameters of s 346 and the regulations have been dealt with in a series of Court of Appeal decisions: Smith v Sydney West Area Health Service (No 2) [2009] NSWCA 62; Chubs Constructions Pty Ltd v Chamma [2009] NSWCA 98 and Chubs Constructions Pty Ltd v Chamma (No 2) (2010) 78 NSWLR 679; [2010] NSWCA 225.
It is not necessary for me to determine, in this application, precisely how these rules impact on my discretion as to potential costs liability where more than one defendant is involved, where one of those defendants is a work injury damages defendant. This is in part because the issue of costs between the plaintiff and the work injury damages defendant has in fact been the subject of consent orders that each party should pay his or its own costs. However, it is fair to say, in relation to the application for indemnity costs brought by the first defendant, that the existence of these statutory provisions and regulations would require careful consideration by a court of any offer made under r 20.26 UCPR where there is a reference "plus costs", because, as is pointed out in the plaintiff's written submissions at page 7, this results in a position of uncertainty that may invalidate part of the offer, particularly where that offer is stated to include a liability, the extent of which is represented by an obviously compromised figure (such as $100,000), in relation to the both defendants. In addition, Division 4 of the regulations (to the extent that it concerns the assessment of costs in work injury damages matters) requires an application for assessment to be made to the Registrar (see clause 115) which appears to conflict with the provisions of UCPR Part 42.
The plaintiff's written submissions further draw my attention to the terms of clause 120, which require an assessment to be undertaken by reference, inter alia, to any orders of a court. The plaintiff submits that, in these circumstances, he would be deprived of the opportunity to have or even to seek any such orders, and that the offer of compromise should be framed so as to be consistent with this legislation. While I do not consider that it is necessary for the offer of compromise to identify clause 120 matters, I do consider it essential for the offer both to identify the full interim payment and to specify whether the sum in question is in addition to that full amount.
This does not mean that cases involving a work injury damages defendant cannot be the subject of a suitably framed offer of compromise. Where an offer is put by two defendants, one of whom is a work injury damages defendant, there needs to be specific identification of the interim payments made, not simply the compromise figure offered, as well as any costs which are excluded or unclaimed in relation to the second defendant who is also a party to the offer. That has not occurred in this case.
The claim that Gate Gourmet is not a "work injury damages defendant"
I also reject the first defendant's submission (written submissions paragraphs 8 and 9) that the claim in these proceedings against the first defendant was not a claim covered by the WIMAWCA Act because Gate Gourmet (as opposed to Blue Collar) is not a "work injury damages defendant". Proceedings which are incidental, subordinate or ancillary to work injury damages proceedings include proceedings where another defendant who is a work injury damages defendant: Chubs Constructions Pty Ltd v Chamma (No 2) at [25]-[38]. The purpose of an offer of compromise is for a resolution of the whole of the proceedings, and this includes a compromise with the work injury damages defendant. If the offer is put on terms inconsistent with a costs regime applicable to one of the defendants, the other defendant or defendants cannot then sever those portions of the offer which are not inconsistent with the statutory provisions.
I briefly note two further submissions by the first defendant in relation to the validity of the offer. The first of these is an estoppel argument, and the second is a submission that I should exercise by discretion to award indemnity costs pursuant to s 14 Civil Procedure Act 2005 (NSW) by reason of the plaintiff's legal advisors in sending an offer which is relied upon as an estoppel.
The estoppel argument
The plaintiff's solicitor served an offer of compromise on 24 February 2012 in the following terms:
"... 1. A Verdict and Judgment for the Plaintiff against the First and Second Defendants in the sum of $495,000 plus costs as agreed or assessed.This offer is made in accordance with Rule 20.26 of the Uniform Civil Procedure Rules 2005. It is open to be accepted within 7 days. It will be relied upon in respect of costs."
The plaintiff having made an offer which contained a provision "plus costs as agreed or assessed" the first defendant submits that the plaintiff is estopped by his conduct and by convention from submitting that the defendant's offer does not comply with the requirements of UCPR r 20.26, on the basis that the plaintiff and the defendants conducted themselves and corresponded on the basis of "a mutual assumption that the written offers complied with UCPR 20.26" (written submissions, 19 June 2012, paragraph 42).
The first defendant relied upon Con-Stan Industries v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226 at 244-245 as follows:
"The final question is whether the parties are bound by an estoppel by convention because their business relationships were conducted on the footing that the broker alone was liable to the insurer. If so, Norwich cannot maintain the present action. Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying. The existence of an estoppel based on a convention between the parties has often been recognized: Thompson v Palmer (1933) 49 CLR 507 at 547; Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 657, 675-7; Legione v Hateley (1983) 46 ALR 1; 152 CLR 406 at 430-1; Amalgamated Investment & Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1982] QB 84 at 121, 126, 130-1; Spencer Bower and Turner: Estoppel by Representation (1977) 3rd ed, at 157-77. But in our opinion the doctrine has no application to the present case for two reasons. First, there is no estoppel unless it can be shown that the alleged assumption has in fact been adopted by the parties as the conventional basis of their relationship: Dabbs v Seaman (1925) 36 CLR 538 at 549. In the absence of proof of custom, there is no evidence that the parties adopted the alleged assumption. Secondly, just as estoppel by representation requires a representation of fact, so too estoppel by convention requires the assumed state of affairs to be an assumed state of fact: Greer v Kettle [1938] AC 156 at 170; Spencer Bower and Turner: Estoppel by Representation (1977) 3rd ed, at 167-8. The state of affairs relied on by Con-Stan is that the parties conducted their business relationship on the basis that the broker was alone liable to the insurer for the premiums. That is clearly an assumption as to the legal effect of their conduct, and not an assumption of fact. The submission with respect to estoppel accordingly fails."
Firstly, I note that in Berowra Holdings Pty Ltd v Gordon at [38]-[40] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ and at [125] per Kirby J noted the undesirability of generally applying terms such as "waiver" or "estoppel" to conduct in the course of litigation in circumstances where the court's procedural rules had been engaged. The fact that the plaintiff's offer, as well as the defendant's, offended requirements of UCPR r 20.26, should not have the unintended benefit that an otherwise invalid offer should be considered valid.
Further, as is pointed out in the written submissions for the plaintiff, what is required is an assumption of fact, not an "assumption as to the legal effect of their conduct" (Con-Stan Industries v Norwich Winterthur Insurance (Aust) Ltd at 245). Accordingly, if I have erred in my finding that the conduct of the plaintiff could not give rise to any estoppel as asserted, the offer would still be invalid (as, for that matter, would have been the case for the offer made by the plaintiff, if the plaintiff had sought to rely upon it).
Section 14 Civil Procedure Act 2005 (NSW)
In the event that the estoppel argument is rejected, the first defendant submits that the court should nevertheless exercise its discretion pursuant to s 14 Civil Procedure Act 2005 (NSW) to dispense with the requirement that the offer be exclusive of costs. A similar request was considered, and rejected, in Old v McInnes at [107]. It is submitted that the present case is "readily distinguished" (written submissions, paragraph 34) by reason of the letter sent by the plaintiff's legal advisors making an offer "plus costs as agreed or assessed", in that all parties were proceeding on the basis that these offers were valid.
I do not accept this submission. Section 14 is limited to dispensations consistent with the overriding purpose in s 56, and does not authorise dispensation when non-compliance may operate to the detriment of another party. It is not to be used to circumvent limitations or restrictions in powers conferred by other rules and, in particular, should not be used to circumvent the offer of compromise regime, for the reasons explained by the Court of Appeal at [107] in Old v McInnes.
Conclusions concerning validity of the offer of compromise
I have found that the offer of compromise to be invalid by reason of the above defects. However, in the event that I have erred in so finding, I set out below my reasons for rejecting the application for indemnity costs notwithstanding the making of a valid offer of compromise. The first of these is by reason of the existence of exceptional circumstances.
Exceptional circumstances - The time for acceptance is limited and oppressive
It is not in dispute that the offer in question was transmitted shortly before the close of business on Thursday 1 March 2012 and that it was expressed to remain open for 24 hours, until the close of business on Friday. The trial was to commence on Monday 5 March 2012.
In Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 at [15]-[16], Basten JA stated:
"[15] Viewed in the abstract, an offer which is made less than 23 hours before the commencement of a hearing and requiring acceptance within that period, would not appear to have been left open for a reasonable time. Against that, there are practical considerations which might support a different conclusion. The first is that each of the parties had made prior offers, that of Kooee having been the subject of explanation as to the method of calculation of the component parts. Secondly, less than two weeks earlier Primus had made an assessment of its own position which led it to make an offer to settle for an amount of $2.5 million, an amount $1.25 million above the first Kooee offer. The second offer by Kooee reduced that gap by $300,000. Both the figures and the timing suggest that Primus could have been expected to assess the second offer with reasonable expedition.
[16] The practical circumstances which must have existed at the time the offer was made may be said to tend in either direction. Thus, it appears to be common ground, as the Court might have assumed, that the legal representatives of Primus were conferring in preparation for the forthcoming trial, throughout the period that the offer was open. While that may have facilitated an immediate consideration of the offer by advisers who were focused on the relevant issues, it may also be said that the provision of an offer the day before trial provided an inconvenient distraction from preparation of the case for hearing."
Basten JA went on to note at [23]:
"[23] In the present case, the time allowed was, on any view, a short period for the consideration of a global assessment of a reasonably complex dispute. It is Kooee which seeks to establish an entitlement to indemnity costs. To do that it must demonstrate that its offer was left open for a period which was reasonable in all the circumstances. Because the present case is truly borderline, it should be concluded that Kooee has failed to establish that its offer was left open for a reasonable time. Accordingly, the offer did not fall within UCPR r 20.26 and its non-acceptance did not engage the costs consequences in r 42.15."
Mr Grieve QC placed weight upon the fact that the offer was made in response to a telephone call inviting an offer by the solicitor for the plaintiff, where the plaintiff had served an offer of compromise open for seven days on 21 February 2012, and where the first defendant had made an earlier, but invalid, offer of compromise, in that the offer was expressed to be on behalf of the first defendant only. It was submitted that these factors meant that the time for consideration of settlement was ideal, in that the parties were readying themselves for trial, and that the shortness of time was of little or no relevance, as the plaintiff's lawyers were expecting an offer and presumably had the relevant information available in order to respond to such an offer.
Questions of adequacy of time depend not merely on timing, but also upon the circumstances in which the offer is made: Pittorino v Yates [2009] NSWCA 87; Hancocks v Arnold (No 2) [2009] NSWCA 19. The principal problem with the offer was the $100,000 figure for disbursements, and what was to happen in relation to disbursements if any) falling outside this obviously rounded-down sum.
The first defendant in written submissions asserts that no evidence was proffered in support of the submission that the total of disbursements was not available to the plaintiff or his advisors in such exigent circumstances, and that 24 hours was ample time, given that the plaintiff's lawyers were meeting him that day to plan the conduct of the hearing. However, it was common ground during the trial that the parties had not determined the full sum and, as is clear from the affidavit of Ms Nelson, the full amount payable was only finalised and made known in May 2012, for the purpose of completing the short minutes of order following my judgment.
In addition to the short period of time, the terms of the offer were complex. Contrary to the usual practice in relation to offers of compromise, the plaintiff was not offered the security of a judgment, but required to discontinue the whole of the proceedings and execute a deed of release "in terms acceptable to the first and second defendants". Presumably, if the terms of the deed could not be agreed upon, settlement could not be effected.
The service of an offer of compromise in these terms on, what is effectively the day before the hearing, is oppressive, particularly since the proposed terms of the deed had not been provided and a discontinuance was required. The discontinuance would have had to be obtained on the first day of the hearing, which would mean loss of the hearing date, in the absence of information about the terms of the deed.
The first defendant is therefore unable to establish that it had left the offer open for acceptance for a reasonable time.
I briefly note another matter which arose for discussion in the course of oral submissions, but which was not relied upon by the plaintiff as being an exceptional circumstance, namely the failure of the first defendant to provide any documents in answer to a series of subpoenas issued both before and during these proceedings on issues relevant to liability.
The consequence for a party who has failed to comply with orders for production of documents on discovery has been dealt with by the New South Wales Court of Appeal in Palavi v Radio 2UE Sydney Pty Ltd [2011] NSWCA 264, Palavi v Queensland Newspapers Pty Ltd [2012] NSWCA 182 and Clark v State of New South Wales [2012] NSWCA 139 (see also Cameron and Liberman, in "Destruction of documents before proceedings commence: what is the court to do?" (2003) 27 Melbourne University Law Rev 273). It may appear inconsistent that one litigant who complies at least in part with discovery obligations can be penalised by the loss of part or all of the cause of action, while another litigant who totally fails to answer a subpoena in personal injury proceedings (where there is no discovery) should suffer no penalty at all, but the subpoena issue is not a factor which I have taken into account in any way in relation to this costs application.
The offer is no better than the result obtained by the plaintiff
Assuming the offer of compromise is valid, has the first defendant established that the plaintiff has in fact obtained an order or judgment on the claim less favourable than the terms of the offer of compromise?
The letter provides for payment by the defendants of $240,000 plus costs as agreed or assessed less a repayment to the worker's compensation insurer of $100,000, whereas the amount entered in favour of the plaintiff is in fact $294,453.93, which is adjusted, in accordance with the short minutes, to the sum of $280,965.17. The assertion that the judgment is "less favourable to the plaintiff" is based on the fact that the amount of money he receives in his hand, so to speak, is $27,916.24 less than the amount he would have received had he accepted the offer of compromise.
However, the size of the amount awarded, not the net sum payable to the plaintiff, is the trigger for r 42.15(1). The size of the amount awarded to the plaintiff was in fact $40,965.17 greater than the amount offered.
The first defendant has not established that an order or judgment on the claim less favourable than the terms of the offer has been made.
Orders
(1) First defendant's application for the plaintiff to pay the first defendant's costs in respect to the plaintiff's claim, assessed on an indemnity basis, from the beginning of 2 March 2012, dismissed.
(2) The first defendant is to pay the plaintiff's costs of this application.
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Decision last updated: 20 July 2012
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