Morris v Leaney (No 2)

[2021] NSWDC 370

District Court

New South Wales

Medium Neutral Citation:

Morris v Leaney (No 2) [2021] NSWDC 370

Hearing dates:

Determined on the papers

Date of orders:

5 August 2021

Decision date:

05 August 2021

Jurisdiction:

Civil

Before:

J Smith SC, DCJ

Decision:

The plaintiffs are to pay the defendant’s costs on an ordinary basis up to and including 18 August 2020 and on an indemnity basis from 19 August 2020.

Catchwords:

COSTS – Offer of compromise – costs on an ordinary or indemnity basis

Legislation Cited:

Uniform Civil Procedure Rules 2005

Cases Cited:

Fan v Han (No 2) [2016] NSWSC 1651

Leda v Weerden (No 3) [2006] NSWSC 220

Management Services Australia Pty Ltd v PM Works Pty Ltd (No 2) [2018] NSWSC 336

South Eastern Sydney Area Health Service v King [2006] NSWCA 2

Category:

Costs

Parties:

Alan Morris – First Plaintiff
Tania Morris – Second Plaintiff
Dustin Leaney - Defendant

Representation:

Counsel:
Mr A Ahmad (Defendant)

Solicitors:
Gilberts Legal (Plaintiff)
Holman Webb Lawyers (Defendant)

File Number(s):

2018/187937

Publication restriction:

Nil

Judgment

1. These proceedings were heard in late August 2020 and in February 2021. Written submissions were filed after the hearing and I delivered judgment on 10 June 2021.

2. In brief, I concluded that the plaintiffs had not succeeded in proving any loss that flowed from the conduct of the defendant, but gave judgment in their favour for $1,000 as nominal damages for the defendant’s breach of contract.

3. In my reasons I expressed the provisional view, at [160], that the appropriate order in respect of costs was that the plaintiffs pay the defendant’s costs. However, as the parties had not been heard on that question, I refrained from making any costs order and gave directions to allow the parties to be heard on the matter.

4. Both parties filed submissions and were content for orders to be made without any further oral hearing. The defendant submitted that the plaintiffs should pay his costs on an ordinary basis, up to and including 18 August 2020 and on an indemnity basis from 19 August 2020. The plaintiffs submitted that the defendant should be ordered to pay their costs. The plaintiffs’ submissions are inconsistent with the authorities concerning costs in judgments for nominal sums and do not grapple with that inconsistency.

5. In my view, the authorities referred to in my principal judgment support an order for costs in favour of the defendant. Further, for the reasons I set out below, those costs should be on an indemnity basis from 19 August 2020.

6. On 18 August 2020 the defendant served a notice of compromise in accordance with UCPR r 20.26 in terms that there be judgment for the plaintiffs for $50,000. The offer was open for acceptance until 4:00pm on 21 August 2020.

7. Rule 20.26 provides as follows:

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 under this rule:

(a)     must identify:

(i)     the claim or part of the claim to which it relates, and

(ii)     the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment, and

(b)     if the offer relates only to part of a claim in the proceedings, must include a statement:

(i)     in the case of an offer by the plaintiff, as to whether the balance of the proceedings is to be abandoned or pursued, or

(ii)     in the case of an offer by a defendant, as to whether the balance of the proceedings will be defended or conceded, and

(c)     must not include an amount for costs and must not be expressed to be inclusive of costs, and

(d)     must bear a statement to the effect that the offer is made in accordance with these rules, and

(e)     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 that interim payment, and

(f)     must specify the period of time within which the offer is open for acceptance.

(3)     An offer under this rule may propose:

(a)     a judgment in favour of the defendant:

(i)     with no order as to costs, or

(ii)     despite subrule (2) (c), with a term of the offer that the defendant will pay to the plaintiff a specified sum in respect of the plaintiff’s costs, or

(b)     that the costs as agreed or assessed up to the time the offer was made will be paid by the offeror, or

(c)     that the costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer.

(4)     If the offeror makes an offer before the offeree has been given such particulars of the offeror’s claim, and copies or originals of such documents available to the offeror, as are necessary to enable the offeree to fully consider the offer, the offeree may, within 14 days of receiving the offer, give notice to the offeror that:

(a)     the offeree is unable to assess the reasonableness of the offer because of the lack of particulars or documents, and

(b)     in the event that rule 42.14 applies to the proceedings, the offeree will seek an order of the court under rule 42.14 (2).

(5)     The closing date for acceptance of an offer:

(a)     in the case of an offer made two months or more before the date set down for commencement of the trial—is to be no less than 28 days after the date on which the offer is made, and

(b)     in any other case—is to be such date as is reasonable in the circumstances.

(6), (7)    (Repealed)

(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.

(Emphasis in original)

8. Rule 42.15 of the UCPR applies if an offer is made by the defendant but not accepted by the plaintiff and the plaintiff obtains an order for judgment on the claim no more favourable to the plaintiff than the terms of the offer. If the provision applies then r 42.15(2) provides:

(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.

9. The first question is whether the offer conformed to the requirements of r 20.26. The plaintiffs do not suggest that it did not. The only possible question is whether the time for acceptance of the offer was reasonable (r 20.26(5)(b)).

10. 18 August 2020 was a Tuesday and 21 August 2020 was a Friday. The trial was listed to commence on 24 August 2020, the following Monday. By the time of the offer, Counsel was briefed and the matter was ready for hearing. Experience suggests that the time at which a party will be best placed to assess the adequacy of an offer is shortly before trial: see Leda v Weerden (No 3) [2006] NSWSC 220 at [10] and Fan v Han (No 2) [2016] NSWSC 1651. The legal representatives of the parties are, at that stage well able to assess both the strengths and weaknesses of each party’s case. Given that the offer was open for three week days in the week prior to trial, I find that the period was reasonable.

11. The next question is whether the court should order otherwise in accordance with r 42.15(2).

12. The plaintiffs have the burden of persuading the court that indemnity costs should not be ordered: South Eastern Sydney Area Health Service v King [2006] NSWCA 2 at [83].

13. The general principle is that there must be exceptional circumstances to justify a departure from the prima facie provision provided for by r 42.15(2): Management Services Australia Pty Ltd v PM Works Pty Ltd (No 2) [2018] NSWSC 336 at [40].

14. The plaintiffs have not put forward any reason why there should not be indemnity costs ordered in accordance with r 42.15(2) and I can see none on the material before me.

15. For those reasons, in addition to order 1 made by me on 10 June 2021, there will be the following order made:

1. The plaintiffs are to pay the defendant’s costs on an ordinary basis up to and including 18 August 2020 and on an indemnity basis from 19 August 2020.

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Decision last updated: 05 August 2021