Leadenhall Australia Pty Ltd v Doman
[2023] SADC 18
•28 February 2023
District Court of South Australia
(Civil: Interlocutory Application)
LEADENHALL AUSTRALIA PTY LTD v DOMAN & ORS
[2023] SADC 18
Judgment of his Honour Judge Slattery
28 February 2023
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS - OFFER OF COMPROMISE OR OFFER TO SETTLE OR CONSENT TO JUDGMENT PURSUANT TO RULES
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS - OFFER OF COMPROMISE OR OFFER TO SETTLE OR CONSENT TO JUDGMENT PURSUANT TO RULES - WHAT CONSTITUTES VALID OFFER
By action number DCCIV-16-672, Leadenhall Australia Pty Ltd (the applicant) sued the respondents to this application for unpaid fees payable to it upon the sale of the respondent’s business to an arms length purchaser and a lease back of a portion of that business. By judgment dated 30 November 2018, Judge Chivell of this Court held that the applicant was entitled to its claim in contract for its professional fees as well as an uplift fee called a ‘success fee’. His Honour also held that, similarly, the applicant was entitled to a claim on a quantum meruit for the same amount. After adjustments, Judge Chivell entered a judgment in favour of the applicant in the agreed amount of $706,019.40 on the contract claim. Agreement on the quantum of the claim of the applicant was achieved between the parties on the fourth day of trial. The learned Judge also ordered that the applicant was entitled to a judgment in the same amount under the quantum meruit.
The applicant initially sued to recover the amount of $995,318.07 which was due to have been paid at the settlement of the refinancing transaction negotiated by the applicant on behalf of the respondents but this amount was not paid. In October 2015, the applicant delivered to, inter alios, the respondents an invoice for the sum of $995,318.07. That invoice remained unpaid apart from a part payment of $200,000 made to the applicant.
The applicant now seeks an order that the first and second respondents pay its costs of the proceedings and including the cost of trial subsequent to the delivery of the offer on an indemnity basis under the operation of 15R 187, R188, R188A, R188C and R188F.
Prior to trial, the applicant filed an offer under 15R 187(6)(c) on 18 April 2018. Before the expiration of 14 days from that date, the respondents delivered to the applicant a notice that it did not accept the offer of the applicant. At no time in the future did the respondents inform the applicant that contrary to its initial position, it would accept the offer of the applicant.
The applicant seeks an order for indemnity costs of the action in the period after 14 days from the date of the delivery of its offer and an order for costs of the action prior to that time pursuant to R188F(1).
Held:
The applicant is entitled to an order for:
1.1 The costs of the action in the period up to 14 days after the service of the offer on a party-party basis;
1.2 The costs of the action on an indemnity basis in the period after 14 days from the making of the offer.
Supreme Court Civil Rules 2006 (SA); District Court Civil Rules 2006 (SA); Uniform Civil Rules 2020 (SA), referred to.
Director of Public Prosecutions (SA) v Disorganized Developments Pty Ltd [2020] SASC 202, considered.
LEADENHALL AUSTRALIA PTY LTD v DOMAN & ORS
[2023] SADC 18
In this action the applicant sued the respondents for payment of the sum of $995,318.07 which it alleged was due to be paid under a contract made in 2014. The respondents engaged the applicant to make arrangements to secure an ongoing interest in part or all of their entities or operations. The contract contained terms about what amounted to ‘success’ which justified the payment of a fee to the applicant and an uplift fee.
Before trial the respondents paid to the applicant the sum of $200,000. The respondents and the applicant agreed on the fourth day of trial that the claim of the applicants was agreed in the sum of $706,000.
The applicants obtained a judgment at trial before Judge Chivell for the sum of $706,019.40 and the court was to hear the parties further on interest, costs and any other orders.
Judge Chivell has now retired as a Judge of this Court. I am required to decide, inter alia, the issue of costs orders between the parties.
By interlocutory application dated 21 April 2021,[1] the applicant Leadenhall Australia Pty Ltd (Leadenhall) seeks, inter alia, an order that the first and second respondents pay the applicants costs of the proceedings including the costs of trial on an indemnity basis under rules 15R 187, R188, R188A, R188C and R188F.
[1] FDN 235.
In approaching my task, I am bound to apply the principles enunciated in UCR 194 which provides:
UCR 194 provides:-
Part 4—Order for costs
194.1—Costs may be ordered at any stage
(1)The Court may make an order for costs in favour of a party or non-party and against a party or non-party at any stage of a proceeding up to and after the final determination of the proceeding.
(2)If the Court determines that it does not have jurisdiction to hear and determine the substantive proceeding, the Court may nevertheless order that a party pay costs in relation to the proceeding.
194.2—Costs budget may be ordered
(1)The Court may make an order fixing the costs, or the maximum costs, that may be recovered between parties in relation to a proceeding, or a stage of or step in a proceeding.
(2)Unless the Court otherwise orders, an order made under subrule (1) will not include any costs—
(a) payable under rule 69.5, rule 74.3, rule 154.5, rule 154.6, rule 154.11, rule 154.12, rule 154.13, rule 194.4(2) or rule 194.4(3); or
(b) ordered to be paid because of a party’s failure to comply with these Rules or an order of the Court.
194.3—Costs orders
(1)The Court may order that costs be awarded—
(a) on the standard costs basis, solicitor/client basis, indemnity basis or another basis specified by the Court;
(b) in accordance with the Higher Courts costs scale, Magistrates Court costs scale, Minor Civil costs scale or Fast Track costs scale; or
(c) on a combination of different bases or scales for different components of costs.
(2)The Court may order that interest be payable on an award of costs in respect of a time before judgment is entered for the costs.
(3)The Court may order that costs (including any interest) be awarded on a lump sum or partial lump sum basis.
(4)The Court may order that costs awarded to a party be set-off against any liability of the party (including a liability for costs).
(5)The Court may refer any question about costs (including whether costs should be ordered, who should pay costs or the basis on which costs should be paid) for inquiry and report or determination by a taxing officer.
194.6—Discretionary factors
(1)In exercising its discretion as to costs, the Court may have regard to any factors it considers relevant.
(2)For example, the Court may have regard to the following factors—
(a) any misconduct or unreasonable conduct of a party in connection with a proceeding;
(b) any breach by a party of overarching obligations, these Rules or an order of the Court;
(c) any breach by a party of the pre-action obligations imposed by Chapter 7 Part 1;
(d) the making or not making of an offer by a party to resolve the proceeding;
(e) the non-acceptance by a party of an offer made by another party to resolve the proceeding;
(f) the value and importance of the relief sought or any relief obtained;
(g) any public interest in the subject matter of the proceeding or public benefit from the prosecution or defence of the proceeding; or
(h) whether costs awarded are to be met by a person or out of a fund.
Note—
See also rule 61.16 in relation to pre-action steps and rule 132.11 and rule 132.12 in relation to formal offers.
For the purposes of the application, the applicant read the affidavit of Timothy Owen Lebbon sworn 19 May 2016 (FDN 4), affidavit of Gregory James Finlayson, Solicitor sworn 21 September 2022 (FDN 273), second affidavit of Gregory James Finlayson sworn 6 June 2016 (FDN 12) and, in part, the affidavit of Robert Francis Holland sworn 6 June 2016 (FDN 14). Those affidavits were read by the applicant without objection from the respondent. The respondent did not read any affidavit into evidence.
This trial commenced on 15 May 2018 and progressed over 16 May, 18 May 21 May, 25 May and 18 June 2018. There is no dispute that the applicable rules for the determination of this application were those in operation before the Uniform Civil Rules commenced. I have earlier made reference to one of the Uniform Civil Rules which commenced operation on 18 May 2020. The rules applicable in the determination of the issues before me are the predecessor rules to those rules, namely the 2006 rules as amended from time to time.
These amendments include the Civil Supplementary Rules 2014. Some of the rules to which I refer have a different prefix; as an example I refer to 15R 187 and 15R 188. These are the successor rules to the original 2006 rules which were described as 6R 187 (now repealed) and 6R 188 (now repealed). There was no dispute between the parties about the applicable rules that govern this application.
The applicant also relies upon a document entitled ‘Plaintiffs Formal Offer’ filed 18 April 2018. That document provides relevantly as follows:-
‘To: The Second and Third Defendants:
The Plaintiff, Leadenhall Australia Pty Ltd OFFERS pursuant to Rule 187 to settle each of the plaintiffs’ claims proceeding number 672 of 2012 as follows:
1.Judgment to enter to the plaintiff in the sum of $700,000. The offer is signed by the solicitor for Leadenhall.
There are five notes at the bottom of the page of the formal offer. They provide:-
Notes:
1.The offer must be either a judgment offer or a contract offer: see rule 187(2) and (3).
2.The offer may be expressed to lapse after the expiration of a stipulated time, being not less than 14 days after service of the offer, but if silent will be taken to remain open until it lapses or is withdrawn in accordance with rule 188: see rule 187(6)(c).
3.The offer may be expressed to be an open offer but if silent will be taken to be made on the basis that it is without prejudice, save as to costs: see rule 187(6)(a).
4.The offer may include any terms as to costs but if silent will be taken to include a term that the defendant to the relevant claim is to pay the plaintiffs costs of the relevant claim made party and party basis up to the time of acceptance: see rule 187(6)(b).
5.If the offer is intended to be a ‘complying offer’ within the meaning of rule 188 F(1), it must comply with the definition of that term contained therein: see rule 188F.
There was then an annexure to the respondent’s formal offer. It was marked as paragraph 4 and it comprised of a page of text and two pages of spreadsheets. Those pages provide:
- 4 -
Annexure to Plaintiff’s Formal Offer
Reasons why it would be unreasonable for the offer not to be accepted
1. The Plaintiff’s claims include the following:
a. A claim to be paid on the invoice tendered which is based upon a signed written agreement.
b. Interest at 10 % per annum;
c. Costs of recovery which amount to a claim in the nature of costs on an indemnity basis but including time of Leadenhall staff in instructing recovery.
2.Although the validity of the signed written agreement is disputed by the Defendants, there is nevertheless an equivalent claim in quantum meruit. Despite the pleading of the Defendants to the contrary, there is authority for the proposition that quantum meruit may properly include a success component. Additionally, during the engagement of Leadenhall by the respondents, Mr Lebbon provided monthly updates on time spent which included the hourly rates upon which success fees were based, none of which were disputed or agitated at any time by the Defendants until after they had obtained the benefit of the work and after having been released from their obligations to NAB (after informing NAB as a basis of that release that funds in the order of those in the Defendant’s claim were payable to Leadenhall).
3.The pleading of "void for uncertainty'' is a gambit previously employed by the Defendant’s solicitors in dealings with Beston. However, the respondents were happy to continue to engage the Plaintiff without raising any issue of uncertainty as to the arrangements for payment.
4.The Defendants themselves attributed a significant amount of value to the work performed by Leadenhall - so much so that they paid $200,000 out of gratitude to Mr Lebbon and according to their own evidence, not in satisfaction of any legal liability; and included a significantly greater amount in their calculations of damages when in litigation with NAB.
5.Furthermore, the quantum is supported by contemporaneous business records and two expert witnesses whose reports have not been criticised and in respect of which no complaint has been raised immediately about admissibility as is required when litigating in South Australia.
6.The Defendants have been put on notice in respect of costs early in proceedings in relation to specific issues outlined in the respondent’s first notice to admit filed in the proceedings. It is likely that the Plaintiff will be successful on the matters alleged in their notice to admit - putting the Defendants at real risk of indemnity costs in respect of many of the issues still unresolved at trial because of the approach to litigation being adopted through interstate solicitors which does not reflect the current approach emphasised in the Supreme and District Court Rules and the Supreme and District Court Supplementary Rules in South Australia which give significant weight to case management principles including efficiency, economy and a greater focus on narrowing issues so as to be confined to the real dispute.
7.The discount inherent in the figure offered by the Plaintiff is material and represents a real and genuine compromise warranting the avoidance of further ligation. It represents a discount of 32% against the invoiced amount and interest plus the material difference between solicitor-client or indemnity costs and parry-party costs.
8.If the Court upholds the validity of the signed written agreement and accepts the evidence of Mr Lebbon that he performed the work invoiced in pursuance of the object outlined in the letter of engagement, then the Plaintiff will do much better than this offer. The consequences of that for the Defendants will be governed in part by l88f(3)(b) of the rules of Court and to the effect that they may find themselves liable for indemnity costs from 14 days following the receipt of this offer.
Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Billing of 12 Oct 15 995,318.07 less provision for reduction-say 0.00% (-995,318.07) 995,318.07 Balance outstanding 995,318.07 Balance b/f 995,318.07 1,003,612.39 811,975.82 818,742.29 Interest on balance 10.00% 8,294.32 8,363.44 6,766.47 6,822.85 less paid on account (-200,000.00) Balance c/f 1,003,612.39 811,975.82 818,742.29 825,565.14
| Feb-16 | Mar-16 | Apr-16 | May-16 | Jun-16 | ||
| Billing of 12 Oct 15 | ||||||
| less provision for reduction-say | ||||||
| Balance outstanding | ||||||
| Balance b/f | 825,565.14 | 832,444.85 | 839,381.89 | 846,376.74 | 853,429.88 | |
| Interest on balance | 10.00% | 6,879.71 | 6,937.04 | 6,994.85 | 7,053.14 | 7,111.92 |
| less paid on account | ||||||
| Balance c/f | 832,444.85 | 839,381.89 | 846,376.74 | 853,429.88 | 860,541.80 | |
| Jul-16 | Aug-16 | Sep-16 | Oct-16 | Nov-16 | ||
| Billing of 12 Oct 15 | ||||||
| less provision for reduction-say | ||||||
| Balance outstanding | ||||||
| Balance b/f | 860,541.80 | 867,712.98 | 874,943.92 | 882,235.12 | 889,587.08 | |
| Interest on balance | 10.00% | 7,171.18 | 7,230.94 | 7,291.20 | 7,351.96 | 7,413.23 |
| less paid on account | ||||||
| Balance c/f | 867,712.98 | 874,943.92 | 882,235.12 | 889,587.08 | 897,000.30 | |
| Dec-16 | Jan-17 | Feb-17 | Mar-17 | Apr-17 | ||
| Billing of 12 Oct 15 | ||||||
| less provision for reduction-say | ||||||
| Balance outstanding | ||||||
| Balance b/f | 897,000.30 | 904,475.31 | 912,012.60 | 919,612.70 | 927,276.14 | |
| Interest on balance | 10.00% | 7,475.00 | 7,537.29 | 7,600.10 | 7,663.44 | 7,727.30 |
| less paid on account | ||||||
| Balance c/f | 904,475.31 | 912,012.60 | 919,612.70 | 927,276.14 | 935,003.45 | |
| May-17 | Jun-17 | Jul-17 | Aug-17 | Sep-17 | ||
| Billing of 12 Oct 15 | ||||||
| less provision for reduction-say | ||||||
| Balance outstanding | ||||||
| Balance b/f | 935,003.45 | 942,795.14 | 950,651.77 | 958,573.86 | 966,561.98 | |
| Interest on balance | 10.00% | 7,791.70 | 7,856.63 | 7,922.10 | 7,988.12 | 8,054.68 |
| less paid on account | ||||||
| Balance c/f | 942,795.14 | 950,651.77 | 958,573.86 | 966,561.98 | 974,616.66 |
| Oct-17 | Nov-17 | Dec-17 | Jan-18 | Feb-18 | ||||||||
| Billing of 12 Oct 15 | ||||||||||||
| less provision for reduction-say | ||||||||||||
| Balance outstanding | ||||||||||||
| Balance b/f | 974,616.66 | 982,738.47 | 990,927.96 | 999,185.69 | 1,007,512.24 | |||||||
| Interest on balance | 10.00% | 8,121.81 | 8,189.49 | 8,257.73 | 8,326.55 | 8,395.94 | ||||||
| less paid on account | ||||||||||||
| Balance c/f | 982,738.47 | 990,927.96 | 999,185.69 | 1,007,512.24 | 1,015,908.17 | |||||||
| Mar-18 | Apr-18 | May-18 | TOTAL | |||||||||
| Billing of 12 Oct 15 | ||||||||||||
| less provision for reduction-say | ||||||||||||
| Balance outstanding | ||||||||||||
| Balance b/f | 1,015,908.17 | 1,024,374.07 | 1,032,910.52 | |||||||||
| Interest on balance | 10.00% | 8,465.90 | 8,536.45 | 0.00 | 237,592.45 | |||||||
| less paid on account | ||||||||||||
| Balance c/f | 1,024,374.07 | 1,032,910.52 | 1,032,910.52 | |||||||||
There was a response filed to the respondent’s formal offer on 1st May 2018. It provides:-
RESPONSE TO FORMAL OFFER (OTHER THAN ACCEPTANCE)
The Second and Third respondents, Peter Doman and Jason Doman RESPONDS pursuant to rule 188A to the formal offer made by the Plaintiff, Leadenhall Australia Pty ltd filed on 19 April 2018 as follows.
The offer is not accepted.
The document is signed by the solicitor, as agent for the Second and Third Respondents’ solicitor.
I have earlier referred to a number of the rules under the Supreme and District Court Civil Rules 2006. The applicable rule at the time, namely 15R 187, provides:
[15R 187] 187 Making of a formal offer
(1)A party (the offeror) may, by notice in writing, make an offer to any other party (the offeree) to compromise any claim in the proceeding, either in whole or in part, on specified terms (a formal offer).
Note—
A claim is defined by rule 30. A single action may include multiple claims. A formal offer may be made by a plaintiff or defendant in the principal action or a plaintiff or defendant in a cross action (including a counterclaim or contribution claim) or a plaintiff or defendant in a third party action. A formal offer might relate to one or more but not all claims in an action or it might relate to all claims in the action. A formal offer might relate to one action only in a proceeding (eg a cross action but not to the principal action) or it might relate to all actions in the proceeding.
(2) A formal offer is to be expressed—
(a) in terms of a judgment to be entered upon acceptance (a judgment offer); or
(b) in terms of a contract to come into existence upon acceptance including terms for the disposition of the claim the subject of the offer (by discontinuance, judgment or otherwise) (a contract offer).
Note—
The judgment the subject of a judgment offer might be expressed as a money judgment; a judgment for or for a proportion of damages to be assessed; for declaratory, injunctive or other special relief; for costs in a fixed amount or to be adjudicated; for a combination of such matters or any other judgment which the Court could enter.
(3) A formal offer that does not comply with subrule (2) is incapable of acceptance for the purposes of this Part and is void for the purposes of this Part.
(4) A formal offer is to—
(a) be in an approved form;
(b) state that it is made in accordance with this rule;
(c) if there is more than one action in the proceeding, state the action to which it relates; and
(d) if it relates to some, but not all, claims in the action to which it relates — state to which claims it relates.
(5) A formal offer is to be—
(a) filed at Court in an envelope marked ‘formal offer — not to be opened except in accordance with an order of a Judge or Master’ unless it is expressed to be an open offer in which case it is to be filed in the usual way; and
(b) served on all other parties to the proceeding immediately upon being filed.
(6) A formal offer—
(a) may be expressed to be an open offer but if silent will be taken to be made on the basis that it is without prejudice save as to costs;
(b) may include any terms as to costs (including that the offer is inclusive of costs or that the parties will submit to any order the Court may make in the exercise of its discretion) but if silent will be taken to include a term that the defendant to the relevant claim is to pay the respondent’s costs of the relevant claim on a party and party basis up to the time of acceptance;
(c) may be expressed to lapse after the expiration of a stipulated time, being not less than 14 days after service of the offer, but if silent will be taken to remain open until it lapses or is withdrawn in accordance with rule 188;
(d) if a contract offer involving payment of money, may stipulate time for payment but if silent will be taken to include a term that payment be made within 28 days of acceptance;
(e) may include any terms as to principal relief whether or not sought or obtainable in the proceeding;
(f) may annex reasons why it would be unreasonable for the offer not to be accepted.
The formal offer of the applicant was made pursuant to this rule. It is therefore expressed to be in the terms of the judgment to be entered upon acceptance; this is a requirement of 15R 187(1) and (2) and it was for 15R 187(3), capable of acceptance. There is no challenge that the formal offer is in the approved form, that it states it is made in accordance with the rule, identifies the action to which it relates and the claim to which it relates. It therefore complies with the requirements of 15R 187. There is also no challenge that the formal offer has been filed at court and served. A response has also been filed. The offer does not state that it is an open offer and is therefore silent on that point. It will therefore be taken to be made on the basis that it is without prejudice save as to costs: (15R 187(6)(a)). It is silent as to costs, so it will be taken to include a term that the respondent pay the applicant’s costs of the relevant claim on a party-party basis up to the time of acceptance (rule 187(6)(e). The offer was not accepted by notice dated 1 May 2018. If the offer is not expressed to lapse after the expiration of a stipulated time after service of the offer, it is deemed to remain open until it lapsed or it is withdrawn in accordance with rule 15R 188 (15R 187(6)(c)). There is no date specified for the payment of the offer and so if accepted, there is an implied term that the payment would be made within 28 days of acceptance: (15R 187(6)(d)). Finally, the offer may annex reasons why it would be unreasonable for the offer to not be accepted 15R 187(6)(f). That has been done.
The annexure to the applicant’s formal offer identifies that the applicant’s claim is based upon delivered invoices plus interest and costs according to the terms of a contract. Notwithstanding the challenge to the efficacy of the contract, the applicant offeror identifies that there is an equivalent claim in quantum meruit. In support of that contention, the applicant offeror identifies that the applicant provided monthly updates on time costs being incurred and chargeable to the respondents. The content of the notice is self-evident. However, in paragraphs 7 and 8, the applicant also identifies that the discount is an amount of 32% against the invoiced amount and interest. It is said that if the court upholds the validity of the agreement and accepts the evidence of Mr Lebbon about the work he performed, then this (judgment) would do much better than the filed offer and there would be a liability, inter alia, for indemnity costs.
Implicitly at least, all of the matters referred to by the applicant in the annexure to the filed offer were taken into account by the second and third respondents at the time, on 1 May 2018 that they filed a response to the formal offer not accepting that offer.
Reference has been made to a number of other applicable rules, namely 15R 188, R188A, R188B, R188C, R188D and R188F. Reference will also be made to R188G. Those rules provide as follows:-
[15R 188] 188 Time for making, withdrawing and accepting a formal offer
(1) If no time for acceptance is stipulated and the offer has not been withdrawn, a formal offer cannot be accepted after 7 clear calendar days before the commencement of the trial of the claim to which it relates.
Note—
If the trial is vacated or adjourned without being part heard, the original trial date the subject of the vacation or adjournment order is to be ignored for the purpose of subrule (1).
(2) A party may make more than one formal offer.
(3) Provided that it has not been accepted, a party may withdraw a formal offer at any time by filing and serving on each party to the proceeding a notice of withdrawal in an approved form.
(4) If a party withdraws a formal offer within 14 days after it has been served, the formal offer is to be treated as if it never existed.
[R 188A] 188A Response to offer
(1) A party to whom a formal offer has been made is to respond to the offer within 14 days of service by a response (a formal response)—
(a) accepting the offer; or
(b) not accepting the offer; or
(c) contending that the offer does not comply with rule 187 and explaining why.
(2) An offeree who contends that the offeree cannot reasonably decide whether to accept the offer within 14 days is to include in the formal response a statement to that effect, identify how long the offeree reasonably needs to decide whether to accept the offer and explain why such additional time is required.
(3) The making of a formal response that does not accept the formal offer does not prevent later acceptance of the offer by the offeree.
(4) A formal response is to—
(a) be in an approved form;
(b) state that it is made in accordance with this rule;
(c) be filed at Court in an envelope marked ‘formal response — not to be opened except in accordance with an order of a Judge or Master’ unless it is expressed to be an open response and is in response to an open offer in which case it is to be filed in the usual way; and
(d) be served on all other parties to the proceeding immediately upon being filed.
(5) Unless the Court otherwise orders in exceptional circumstances, an offeree is not entitled on an application for costs under rule 188F, 188G, 188H or 188I to contend that an offer does not comply with rule 187 or did not give the offeree a reasonable time to decide whether to accept the offer other than on any grounds identified in a formal response served in compliance with subrule (1).
[R 188B] 188B Communication of offer and response
(1) Unless expressed to be an open offer and subject to subrule (3) —
(a) no reference to the terms of a formal offer is to be made in any pleading, affidavit or other document filed or lodged with the Court;
(b) a formal offer will be kept by the Court in a suppressed file and the terms of a formal offer are not to be disclosed to the trial Judge.
(2) Unless expressed to be an open response in response to an open offer and subject to subrule (3) —
(a) no reference to the terms of a formal response is to be made in any pleading, affidavit or other document filed or lodged with the Court;
(b) a formal response will be kept by the Court in a suppressed file and the terms of a formal response are not to be disclosed to the trial Judge.
(3)Subrules (1) and (2) do not apply—
(a) after the offer is accepted in accordance with rule 188C; or
(b) after all questions to which the offer is relevant have been determined; or
(c) if the Court permits or requires disclosure.
[R 188C] 188C Acceptance of offer
(1) A party to whom a formal offer has been made, which offer remains open for acceptance, may accept the offer or, where the offer contains alternatives, an alternative contained in the offer.
(2) A party may accept an offer which remains open for acceptance notwithstanding the existence of a concurrent offer by the offeror or offeree in different terms.
(3) The acceptance of a formal offer is to be in an approved form.
(4) When a judgment offer is accepted, judgment reflecting the terms of the offer may be entered by consent. The offeror is to—
(a) lodge with the Court for settling a draft judgment within 14 days of acceptance of the offer; or
(b) file a notice of discontinuance; or
(c) apply for an appropriate order.
(5)When a contract offer is accepted, either party may apply to the Court for appropriate orders in light of the terms of the contract constituted by the offer and acceptance.
(6)When a formal offer is accepted which is expressed to include payment of a party’s costs of action up to the time of acceptance or any other time specified in the offer, the party whose costs are to be paid is entitled to an adjudication of costs up to that time on the relevant basis.
[R 188D] 188D Party under disability
A person under disability may make or accept a formal offer, but no acceptance of an offer made by that person and no acceptance by that person of an offer is binding until the Court has approved the compromise.
[R 188F] 188F Costs where complying offer not accepted
(1) In this Part
complying offer means a formal offer that—
(a) complies with rule 187;
(b) involves a genuine compromise;
(c) contains a term either that the defendant on the relevant claim is to pay the costs of the plaintiff on the relevant claim on a party and party basis or that the parties will submit to any order the Court may make in the exercise of its discretion;
(d) if a contract offer—
(i)is a monetary offer; and
(ii)if made by the party who is to pay the money, the money is payable under the terms of the offer within not more than 28 days after acceptance of the offer and the party is ready, willing and able to pay the money in accordance with the terms of the offer; and
(e) was filed at least 21 clear calendar days before the commencement of the trial of the claim to which it relates or such later date as may be specified by the Court on application for an extension of time made before the formal offer is made.
Note—
If the trial is vacated or adjourned without being part heard, the original trial date the subject of the vacation or adjournment order is to be ignored for the purpose of paragraph (e).
monetary offer means a formal offer under which the principal consideration payable by one party to the other (disregarding costs) is the payment of money.
(2) The provisions of this rule are subject to the overriding discretion of the Court.
(3) When a complying offer is made by a plaintiff and not accepted by a defendant and the plaintiff obtains judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer—
(a) the costs incurred in respect of the claim up to 14 days after service of the formal offer are unaffected by the making of the formal offer;
(b) the plaintiff is entitled to an order against the defendant for the plaintiff’s costs of action in respect of the claim to which the complying offer relates thereafter on an indemnity basis.
(4) When a complying offer is made by a defendant and not accepted by a plaintiff and the defendant obtains judgment on the claim to which the offer relates—
(a) the costs incurred in respect of the claim up to 14 days after service of the formal offer are unaffected by the making of the formal offer;
(b) the defendant is entitled to an order against the plaintiff for the defendant’s costs of action in respect of the claim to which the complying offer relates thereafter on an indemnity basis.
(5) When a complying offer is made by a defendant and not accepted by a plaintiff and the plaintiff obtains judgment in respect of the claim to which the offer relates less favourable to the plaintiff than the terms of the offer—
(a) the costs incurred in the action up to 14 days after service of the formal offer are unaffected by the making of the formal offer;
(b) the defendant is entitled to an order against the plaintiff for the defendant’s costs of action in respect of the claim to which the complying offer relates thereafter on a party and party basis.
(6) When a party makes a complying offer for a proportion of damages to be assessed, the provisions of this rule do not apply to costs incurred in relation to the quantum of damages unless the Court specifically orders.
[R 188G] 188G Costs in other cases
(1) This rule applies in cases to which rule 188F does not apply.
(2) When—
(a) a party has made a formal offer;
(b) the offer was not accepted; and
(c) judgment is granted in respect of the claim the subject of the offer on terms no less favourable to the offeror than the terms of the offer—
the Court is to take those matters into account in determining what order for costs to make.
(3) Without affecting the generality of the discretion of the Court, in exercising its discretion as to costs in accordance with subrule (2), if the Court considers that a party unreasonably rejected a formal offer, the Court may—
(a) order that the offeree pay the costs of the offeror in respect of the claim the subject of the offer after 14 days after service of the formal offer on an party and party basis or some other basis; or
(b) order that the offeree bear its own costs in respect of the claim the subject of the offer after 14 days after service of the formal offer; or
(c) make such other order as to costs as it thinks appropriate.
There are a number of preliminary matters to which attention should be drawn. Under R188A there is an obligation to respond to the offer within 14 days of service by accepting, not accepting, or contending that the offer does not comply with 15R 187 and explaining why: (R188A(1)(a)(c)). As has been seen, the response to the formal offer did not accept the offer; this response did not contend that the offer was not compliant with the requirements of 15R 187. The failure to accept the formal offer does not prevent the second and third respondents from later accepting the offer by the offeree: (R188A(3)).
The breadth of arguments that may be put by an offeree are, to an extent circumscribed by R188A (an offeree is not entitled on an application for costs under R188F(G)(H) and (I) to contend the offer does not comply with 15R 187 or that it did not give a reasonable time to decide whether to accept the offer or that there are other grounds upon which it may be contended that the rule is not complied with). The ‘carve out’ provision under the subrule is that the court may otherwise order in exceptional circumstances. As has been seen, the response to the offer made no mention of any aspect of R188A. As the offer has not been accepted, R188C has no application and, in the circumstances of non-acceptance, R188E has no application also.
Attention then turns to R188(F), which introduces the concept of a complying offer. Such an offer must comply with 15R 187 and must involve a genuine compromise, must contain a term either that the respondent on the relevant claim is to pay the costs of the applicant on the relevant claim on a party-party basis, or that the parties will submit to any order the court may make in the exercise of its discretion. Under R188F(2) the provisions of the rule are subject to the overriding discretion of the court.
There is a factual background to which reference has been made and which Leadenhall asks be taken into account. It arises on the face of the material read into evidence. It is appropriate first that I identify that material. A question may arise about the use to which that material may be put and I am mindful of the possibility that some negotiations were without prejudice as so often occurs in this type of matter. By email of 22 September 2014, the judgment debtor Mr Peter Doman informed the respondents’ solicitor Mr Clayton Davis of their liability to make payment to the applicant in the amount of $240,000. This email was included with an attached spreadsheet of reinstatement of costs involved in a claim the parties sought to bring against the National Australia Bank (NAB).[2] Then by an email dated 4 June 2015, Mr Clayton Davis informed NAB that the amount of $800,000 was owing and was payable to the applicant.[3] On 1 September 2015, the judgment debtors were informed of the claim of the applicant. On that day, the applicant, by it is director Mr Tim Lebbon enclosed within an email a spreadsheet disclosing time and costs incurred up to 31 August 2015. The amount of the claim was $995,318.07 inclusive of GST.[4]
[2] Exhibit GFJ101 to the affidavit of Gregory James Finlayson sworn on 21 September 2022.
[3] Exhibit GFJ102 to the affidavit of Gregory James Finlayson sworn on 21 September 2022.
[4] Exhibit GFJ103 to the affidavit of Gregory James Finlayson sworn on 21 September 2022.
As earlier recorded, the refinance of the indebtedness of the respondents occurred at the time of settlement of the transaction called ‘the Beston Transaction’, which involved the refinance of some of the indebtedness of the respondents together with a sale of some of the assets owned by the respondents or their associated companies or entities. Within four days, the solicitor for the respondents informed the applicant by an email on 8 September 2015 of the intention of the respondents to pay the debt.[5] Within a further 14 days, and on 22 September 2015, the solicitors for the judgment debtor informed the applicant that over $1,000,000 was held in trust by the respondents, inferentially for the payment of the amount owed to the applicant.[6]
[5] Exhibit GFJ104 to the affidavit of Gregory James Finlayson sworn 21 September 2022.
[6] Exhibit TOL.16 to the affidavit of Timothy Owen Lebbon affirmed 19 May 2016 (FDN 4).
On 12 October 2015 the applicant issued an invoice to the respondents in the sum of $996,318.07 as a claim for monies due and owing under the terms of the retainer between, inter alia, the respondents and the other judgment debtors and the applicant. On 27 October 2015, the sum of $200,000 was remitted to the applicant from the trust account of Mr Clayton Davis the solicitor for the judgment debtors.
By email of 13 November 2015, the judgment debtor Mr Jason Doman informed the applicant of his willingness for a charge to be put in place for the invoiced amount due and owing to the applicant in the sum of $996,318.07.[7] On 18 November 2015, the respondent Mr Peter Doman sought an authority from the receivers for one of the Doman Companies to register a charge to secure the outstanding debt owed to the applicant.[8] Despite all of that, the debt to Leadenhall remained unpaid and the respondents eventually refused to make any further payment to Leadenhall.
[7] Exhibit GFJ105 to the affidavit of Gregory James Finlayson sworn 21 September 2022.
[8] Exhibit TOL21 to the affidavit of Timothy Owen Lebbon affirmed 19 May 2016 (FDN4).
During 2016, a mediation occurred between the applicant and the respondents and other judgment debtors. On 29 March 2016, Mr Clayton Davis, Solicitor for these judgment debtors, communicated to the applicant that the mediation was terminated. On 5 April 2016, the applicant made an informal offer to accept the sum of $450,000 from the judgment debtors in full and final settlement of its claim.[9]
[9] Exhibit CAD5 to the affidavit of Clayton Allen Davis being exhibit RFH2 to the affidavit of Robert Francis Hollands affirmed 6 June 2016; Exhibit CAD5 to the affidavit of Clayton Allen Davis being exhibit RFH2 to the affidavit of Robert Francis Holland sworn 6 June 2016.
On 18 May 2016, a rule 33 compliance notice was delivered and proceedings were commenced. On 27 January 2017, the applicant discontinued proceedings against the fourth to eighth respondents for reasons that are explained in a letter of 2 February 2017 sent by the applicant’s solicitors for the judgment debtors solicitors.[10] Nothing turns on that point.
[10] Exhibit GFJ106 to the affidavit of Gregory James Finlayson sworn 21 September 2022.
Between October 2016 and January 2018, the respondents, as the remaining members of the judgment debtors sued by the applicant, filed a number of lists of documents, including FDN105 which comprised of 1220 items. FDN 105 was filed and delivered very late in the action.
On 18 April 2018, the applicant filed and served its formal offer to accept judgment in the amount of $700,000. On 15 May 2018, the trial began before Judge Chivell in the District Court. The judgment debtors were represented by senior and junior counsel and instructing solicitors. On 30 November 2018, the applicant obtained judgment in the amount of $706,019.
Consideration
In the formal offer dated 18 April 2018, the form as prescribed by the rules was followed by the offeror, Leadenhall. At paragraph 4 of the notes on the primary page of that offer, the respondents are informed that the offer includes that the respondents are to pay the applicant’s costs on a party-party basis up to the time of acceptance (see 15R 187(6)(b)). Also annexed to the formal offer are eight reasons described by the applicant why it would be unreasonable for the offer not to be accepted. I have earlier set about these eight paragraphs in these reasons. I refer in particular to paragraph 6, which identifies that the applicant will be successful on the matters alleged in their notice to admit and the respondents are therefore at real risk of indemnity costs in respect of the unresolved issues at trial. Paragraph 7 of the same document emphasises the discount of the claim of Leadenhall reflected in the offer; and paragraph 8 emphasises the validity of the signed agreement existing between the parties.
The submissions before me on the topic of the efficacy of this offer is directed to the operation of R188F and the definition of complying offer (in R188F(1)). The principal contention is that even though the offer complies with 15R 187, it does not contain a term that the respondents on the relevant claim are to pay the costs of the applicant on a party-party basis. I am unable to accept that submission on at least two bases. The first is that note 4 to the formal offer, which complies with the published form of offer, identifies that the offer is taken to include a term that the respondent will pay the applicant’s costs of the relevant claim on a party-party basis up to the time of the acceptance of the offer. The question of the time for the acceptance of the offer is governed by note 2 and the operation of R187(6)(c). The offer is to remain open for not less than 14 days after service of the offer and in the absence of a 14 day period, will be taken, by operation of the rule, to remain open until it lapses or is withdrawn in accordance with 15R 188. Then, under the operation of R188F(3), the applicant is entitled to an order against the respondent for the applicants costs of action in respect to the claim to which the compliant offer relates on an indemnity basis.
The first submission of the respondents[11] is that ultimately, there was only so much money to go around and this was known by Mr Lebbon who was central to the process. I found it difficult to place any weight upon this argument. The issue informing my decision here is whether the applicant Leadenhall is entitled to an elevated costs order and, if so, on what basis. The issue of the wherewithal of the respondents was always a matter for them and that has consistently been the position. In my view, that argument carries no weight.
[11] T21.27.
The materials before the court show that the respondents instructed their solicitor to keep well over a million dollars in the solicitor’s trust account. That money was disbursed in accordance with the instructions of the respondents. There has been no or no adequate explanation about why these funds were not secured to pay the respondents’ creditors, Leadenhall. However, for the same reasons, those matters do not assist my task here.
The second argument of the respondents was that there was a mediation and money was released after the mediation. I am satisfied from the material before me that at the time of the mediation, an offer was made by Leadenhall to accept $450,000 in full and final settlement of its claim, which was rejected. I am unable to accept the submissions that inferentially at least, the offers and counter offers made at or after the mediation inform my decision here.
In relation to the operation of the rules, the respondents contend that notwithstanding the operation of 15R 187, the offer that has been made is not a complying offer as defined R188F. The respondents contend that a complying offer under that rule must contain a term either the respondent pay the costs of the applicant of the relevant claim on a party-party basis and so requires a positive term within the offer which engages the consequences of a complying offer.[12] It was contended that a complying offer must have an additional specified term which confirms with the requirement of R 188F(1)(c) if it is to be operational. Reliance was placed upon the decision of Blue J in Director of Public Prosecutions (SA) v Disorganized Developments Pty Ltd at [109].[13]
[12] T25.30.
[13] [2020] SASC 202.
I am unable to accept that submission. In the Disorganized Developments decision, Blue J affirmed the necessity for a complying offer to be delivered by one party to the other. In that case, his Honour found that the formal offer did not meet the prerequisites contained under 15R 187 and the forms as prescribed by the rules. In this case, both of those requirements have been followed and satisfied. I will address other aspects of the discussion of Blue J later in these reasons.
The respondents then argued that if the relevant party does not address costs in the offer, the party suffers the fate of not having delivered a complying offer. On the facts of the present case, I am unable to accept that submission. I am satisfied that the formal offer identifies to the respondents the default position as is applicable under 15R187(6)(b)(c) that the respondent is required to pay the applicant’s costs of the relevant claim on a party-party basis up to the time of acceptance (or rejection). Otherwise, parties will submit to any order the Court may make in the exercise of its discretion. The offer delivered by Leadenhall complied with the requirements of 15R 187(4)(5) and (6). I have considered these sub-rules earlier in these reasons. The operation of these rules recognise the form of the offer here by Leadenhall; the same sub-rules operate so that if this form of offer is silent as to costs, it implicitly and impliedly contains a term on costs to be paid by the respondent on a party-party basis up to the time of acceptance. By operation of the rule, this becomes a term of the offer. That term complies with the requirements of R188F(1)(c).
In this case it is known that under R188A(1)(b) notice was given that the offer was not accepted. No contention was or has been made under R188A(1)(c) that the offer of Leadenhall did not comply with 15R 187.
On the question of the exercise of the discretion,[14] the respondents submit that the applicant is not entitled to the benefit of the exercise of the court’s discretion. They complain of an extraordinary number of applications brought by Leadenhall against the respondents, costs orders made against Leadenhall and now the bankruptcy of the respondents. It is accepted that under the operation of the Bankruptcy Act 1966 (Cth) the liability of the respondents for the costs of this action does not fall into the bankruptcy of the respondents. Any extant costs orders against Leadenhall had not been assessed.[15] No lump sum calculation of costs has been made.[16] These matters are irrelevant and do not affect my discretion.
[14] R188F(2).
[15] T32.8.
[16] T32.11.
A second issue for consideration is the content of R188F(1)(b), that the formal offer involves a genuine compromise. At the time that the offer was made, there had earlier been an open offer for settlement in the amount of $450,000. This was made at the time of the mediation. This offer was constructed on the basis that $200,000 had already been paid by the respondents to Leadenhall. Leadenhall agreed to settle for a further $250,000. That offer was rejected.
Prior to trial, Leadenhall then filed its offer for $700,000. Its claim was in the amount of $926,000. That was based on the terms of the contract or alternatively an assessment under a quantum meruit. There was no evidence before me of any difficulty on the part of the respondents or their advisors in comprehending the offer, of any misunderstanding or uncertainty about the offer from the respondents’ point of view, or any inability of the respondents to give instructions or to receive advice about the offer. In argument, a concession was properly made by Mr Adams that no such evidence exists and none is before the Court. It was agreed that throughout the time of the preparation for trial and at trial, the respondents were represented by senior counsel, junior counsel, and a firm of solicitors in Adelaide as agents for a firm of interstate solicitors. No contention was made nor would I accept a contention that the respondents were not in a position to give a thorough consideration to the offer of Leadenhall.
The question of an assessment of whether or not the offer is reasonable is one of fact. I have earlier explained in some detail the judgment of Judge Chivell. At trial, Leadenhall obtained a judgment of slightly in excess of $706,000. The first observation to be made is that the offer made and the judgment was very proximate. Properly considered that is not the only relevant consideration. It may mean no more than that the offer is properly formulated and assessed by Leadenhall. Conversely, the non-acceptance of the offer indicates a largely fundamental failure of the respondents to properly comprehend and assess their position. A review of Judge Chivell’s judgment discloses that there were many contested issues in the case but few that greatly troubled his Honour. However, that is largely by and by in the context of the assessment of whether there was a genuine compromise.
I think that the common law on this topic is clear enough. The word compromise must be given its proper and ordinary meaning. An offer for the full amount of a claim is not a compromise in the usual course. The jurisprudential basis of the rule is to give encouragement to parties to consider the exigencies of litigation, what lies before them in a trial, including the strengths and weaknesses of their own case and the case of their opponent, and then to make an offer. Any offer must be one that reflects these considerations, the risks of proceedings, ongoing cost burdens and then contain a compromise offer that requires consideration. It is not a matter of measuring a specific percentage of a claim as the offer. It is necessary to review the whole of the circumstances of the case in order to make an assessment of reasonableness.
In this case it is known that the claim was for $926,000 and the calculation of the claim was disclosed to the respondents. Mr Lebbon had continuously provided to the respondents the breakdown of his time costings according to the contract between them. This was an obligation upon Leadenhall under the contract. Therefore, the respondents must have been acutely aware of the work being done by Mr Lebbon, Leadenhall’s chargeable cost for that work, the result of his efforts namely the resolution of the disputes with NAB and the realisation of the full value of the assets of the respondents. All of this is apparent from his Honour’s judgment and so none of this is an epiphany.
Also evident on the face of the judgment is that, at the time offer was made, the maximum amount of the Leadenhall claim was $726,000 plus interest on commercial rates. Applying a broad axe approach, the total claim including prejudgment interest at the usual rate was the amount of not less than $775,000 using a rate of 5% for a two-year period. In this calculation I have been demonstrably very conservative.
There is another important feature. His Honour records in his judgment that on the fourth day of trial, the parties agreed that after adjustments (but before interest) the claim of Leadenhall was $706,000. This reflected the agreement of the respondents advised as they were by senior and junior counsel and interstate solicitors. The offer of Leadenhall to accept $700,000 had been made some weeks earlier. Although it was not accepted it was still possible for that offer to be accepted at that time (R188A(3)). The relevant issue here is that the respondents bound themselves to the calculation of the claim of Leadenhall of $706,000. It is to be expected that there would then be a calculation of interest on the outstanding debt. These are peculiar factual circumstances and in my view once assessed together, I am satisfied that the offer was a genuine compromise.
It follows, in my view, that an offer to compromise a claim of $724,000[17] plus interest to accept $700,000 where they have obtained a judgment of $706,000 was a judgment which was no less favourable to the applicant than the terms of the offer.[18] It follows that the costs of Leadenhall incurred up to 14 days after the service of the formal offer are unaffected by the making of that offer. I am satisfied that therefore that Leadenhall is entitled to an order against the respondent for the applicant’s costs in the action in respect of the claim incurred 14 days after service of the offer on an indemnity basis.
[17] This calculation is the balance of $924,000 less the payment made of $200,000.
[18] R188F(3).
During argument, Mr Adams addressed the requirements of a Calderbank offer. As I am satisfied that there has been compliance with the rules, there has been a complying offer, the party making the complying offer obtained a judgment which was no less favourable to it than the terms of the offer, and so an order should be made for indemnity costs applicable from 14 days after the date of the offer.[19] I am also satisfied that contrary to the submission of Mr Adams, the decision of Blue J in the Director of Public Prosecutions (SA) v Disorganized Developments Pty Ltd[20] is not of assistance here except that it is instructive about the assessment of whether an offer is a genuine compromise. Blue J made an assessment of all of the relevant facts of the matter, which is the approach I have adopted. In that case in the filed offer, one of the terms was for each party to bear their own costs. His Honour considered the question of complying offer and the requisite aspects as to the term of costs from [108] as follows:
[19] R188F(3)(a)(b).
[20] [2020] SASC 202 at [109] et seq.
Complying offer
108There are five prerequisites for an offer to comprise a “complying offer” as defined in subrule 188F(1). It must comprise a “formal offer” in compliance with rule 187, which is conceded by the Director in respect of the Formal Offer. It must involve a genuine compromise, which is disputed by the Director. It must contain a term as to costs in accordance with paragraph (c); it is conceded by Disorganized Developments that the Formal Offer does not contain such a term but it seeks dispensation in this respect. It must also meet the requirements of paragraphs (d) and (e), which is conceded by the Director in respect of the Formal Offer.
Requisite term as to costs
109The third requirement for an offer to comprise a “complying offer” is that it contain one of two alternative terms as to costs, being either a term:
1 that the defendant pay the costs of the plaintiff on a party and party basis; or
2 that the parties will submit to any order the Court may make in the exercise of its discretion.
110The rationale for the introduction of this requirement is that it was previously common for a party to include a term in a formal offer that each party bear their own costs and this rendered it difficult to compare the result with the offer or to determine whether the offer involved a genuine compromise.
111Rule 117(2)(a) empowered the Court to dispense with compliance with a rule and subrule 117(1) more generally empowered the Court to make any order it considers necessary in the interests of justice.
112Although there is no doubt that the Court has power to do so, it will be relatively rare for the Court to dispense with an element of a defined term (such as a “complying offer”) with the result that something falls within the definition when it would not otherwise do so.
113If a settlement offer falls within the definition of a “complying offer”, it has very substantial consequences because, subject to the Court’s overriding discretion, it may result in a costs order being on an indemnity basis rather than a standard costs basis (formerly party/party basis under the Former Rules). If a party making a settlement offer wishes to obtain this advantage, it is incumbent on the party to ensure that the offer meets the prerequisites to amount to a “complying offer”.
114In this case, the Formal Offer manifestly does not meet the prerequisite contained in paragraph (c) of subrule 188F(1). The fact that it did not do so renders it more difficult to determine whether the offer involves genuine compromise. No reason is advanced by Disorganized Developments why the Formal Offer did not contain a term as to costs required in order to amount to a “complying offer”. Taking into account all of the circumstances, this is not a case in which there should be dispensation from this requirement.
Requisite genuine compromise
115The second requirement for an offer to comprise a “complying offer” is that it involve a genuine compromise.
116In a case (such as the present) governed by subrule 188F(4), the offer must involve genuine compromise compared to the position if judgment had been entered in favour of the defendant on the date of the offer.
117The Formal Offer included a term that Disorganized Developments pay to the Director $10,000. This was a relatively small amount compared to the value of the Property, which had been valued by the Valuer-General at $138,000. The offer did not include any payment of or towards the costs of action of the Director. If the Director had obtained judgment for $10,000 on the date of the offer, it is likely that the judgement would have included some award of costs.
118When the Formal Offer was made on 20 January 2020, the Director must have incurred substantial costs, including drawing the summons, taking instructions for and drawing the affidavits filed in support, filing and serving the proceeding and attendance at the directions hearing on 12 December 2019. By contrast, as at 20 January 2020 Disorganized Developments would have incurred relatively few legal costs, involving principally perusing the documents issued by the Director and attendance at the directions hearing on 12 December 2019.
119The Formal Offer included a provision (clause 2 of the Deed) whereby the Director released Disorganized Developments not only in respect of the claim the subject of the action but also any future claim within the scope of the release. There is considerable doubt about the scope of the release.
120The release was expressed in terms of any claim “in relation to (directly or indirectly) the matters set out in the recitals hereto”. Recital A recited filing of an application by the Director seeking restraining and forfeiture orders in respect of the Property and recital B recited that Disorganized Developments disputed the factual and legal basis for the application in all respects.
121On the one hand, the release might be construed as broadly as applying to any application by the Director for a restraining or forfeiture order in respect of the Property, regardless of the factual basis. On the other hand, it might be construed as narrowly as only applying to the application by the Director based on the affidavits filed in support of the Summons. In view of the fact that the Summons did not identify the bases for the restraining or forfeiture orders sought, I am disposed to consider that the release would be construed broadly. In any event, if the Director had accepted the Formal Offer, he would have been exposed to the risk that the release would be construed broadly.
122If the Director’s application for a forfeiture order had been the subject of an order of dismissal on the merits made on 20 January 2020, the doctrine of res judicata (assuming that it applies to proceedings under the Act) would have precluded a future application by the Director on the same factual basis as the affidavits filed in support of the Summons but would not have precluded a future application on some other factual basis. In addition, section 49 of the Act dilutes the doctrine of res judicata by empowering a court to give permission to the Director to bring a fresh application for forfeiture after a previous application has been finally determined on the merits if necessary evidence becomes available only after the first application was determined or it is in the interests of justice to grant permission.
123If the Director’s application for a restraining order had been the subject of an order of dismissal on the merits on 20 January 2020, the doctrine of res judicata would not have precluded a subsequent application for a restraining order on the same or different facts (although an application on the same facts may have been considered to be an abuse of process).
124Accordingly, the release contained in clause 2 of the Deed provided a more favourable result to Disorganized Developments in respect of both any future restraining order application and any future forfeiture application than if the Director’s application for restraining and forfeiture orders had been dismissed on the merits on the date of the Formal Offer.
125Weighing the comparative advantage to Disorganized Developments by reason of the release against the relatively small monetary offer of $10,000 and the term of the offer that each party bear their own costs, the Formal Offer did not involve a genuine compromise within the meaning of rule 188F(1)(b).
In the Disorganized Developments case, the offer was that each party bear their own costs. His Honour held that historically, when a party makes an offer that each party bear their own costs, it is difficult to compare the result with the offer when the court determines whether the offer involved a genuine compromise. His Honour held that an offer that each party bear their own costs does not meet the prerequisites contained in paragraph (c) of subrule R188F(1).[21] That is not this case. In the offer that was made, the respondents were informed that they were to pay the applicant’s costs of the relevant claim on a party-party basis up to the time of acceptance. Within the 14 day period, the offer was not accepted by notice dated 1 May 2018, delivered in accordance with R188A(4).
[21] [At 114].
Under the operation of R188F (3) the applicant is entitled to an order for:
(1.1)the costs of the action in the period up to 14 days after the service of the offer; and
(1.2)the costs of the action on an indemnity basis in the period after 14 days from the making of that offer.
I will hear the parties as to final orders and other consequential orders.
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