O'Connor v O'Connor (No 2)

[2021] NSWSC 1173

Supreme Court

New South Wales

Medium Neutral Citation:

O’Connor v O’Connor (No 2) [2021] NSWSC 1173

Hearing dates:

On the papers

Decision date:

15 September 2021

Jurisdiction:

Equity - Commercial List

Before:

Hammerschlag J

Decision:

The plaintiffs are to pay the defendant’s costs of the proceedings on the ordinary basis

Catchwords:

COSTS – indemnity costs – Calderbank offer – whether plaintiffs’ non-acceptance of defendant’s offer was unreasonable – HELD – it was not

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Calderbank v Calderbank [1975] 3 All ER 333

O’Connor v O’Connor [2021] NSWSC 1056

Category:

Costs

Parties:

Morgan Benedict O’Connor – First Plaintiff
Michael Stack – Second Plaintiff
John Joseph O’Connor – Defendant

File Number(s):

2019/236226

JUDGMENT

1. HIS HONOUR:   On 24 August 2021, I gave judgment in the principal proceedings: O’Connor v O’Connor [2021] NSWSC 1056.

2. I made the following order with respect to costs:

I provisionally order that the plaintiffs are to pay the defendant’s costs of the proceedings. This order will solidify seven days after delivery of this judgment unless a party notifies my Associate and the other parties in writing that some other order is sought, identifies the terms of the order sought, and provides brief grounds for it. If such notice is received, I will make directions for the determination of any issues as to costs.

3. On 31 August 2021, the defendant gave notice that he seeks indemnity costs based on a Calderbank Letter dated 22 June 2021, in which he offered the plaintiffs a total of $100,000 in full and final settlement of their claim. The offer was open for acceptance until 5 July 2021. Directions were made for further written submissions. I received submissions from the plaintiffs and a further written submission from the defendant.

4. The plaintiffs oppose an indemnity costs order as sought by the defendant on the basis that it was not unreasonable for them not to accept the defendant’s offer because that offer:

1. was made only 5 weeks before the hearing was scheduled to commence and was open for acceptance only for a period of 13 days;

2. was made to both plaintiffs jointly, and was therefore not capable of acceptance by only one plaintiff, but only by both of them jointly;

3. did not contain any reasons on which the defendant claimed that it was unreasonable for the plaintiffs, either one or both of them, not to accept the offer, other than simply stating that “Your clients’ [ie the plaintiffs] Claim will fail”;

4. did not represent a genuine compromise having regard to the potential size of the plaintiffs’ claim and the significant amount of costs that they had incurred to that time; and

5. the plaintiffs ultimately failed on the basis of the alternative agreement which the defendant pleaded for the first time on the first day of the hearing.

5. It is often a matter for conjecture why a party does not take advantage of the formal offer of compromise procedure provided by the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) pt 20, read with UCPR pt 42, which creates a presumption in favour of an order for indemnity costs in favour of a plaintiff, where a plaintiff makes an offer which the defendant does not accept and the plaintiff does better than it offered[1] , and for an order for indemnity costs in favour of the defendant where the defendant makes an offer and the plaintiff does not do better than the defendant offered[2] , but relies rather on the practice of making a Calderbank offer[3] which justifies similar outcomes but only if, relevantly, rejection of the offer is unreasonable.

   1. UCPR r 42.14.

   2. UCPR r 42.15(a).

   3. Calderbank v Calderbank [1975] 3 All ER 333.

6. I do not consider that the plaintiffs’ non-acceptance of the defendant’s offer was unreasonable. I do not consider that this is so because of the timing of the offer, because it failed to articulate the reasons why the plaintiffs would fail or because the plaintiffs ultimately failed on the basis of the alternative agreement pleaded by the defendant.

7. The timing of the offer did not give the plaintiffs inadequate time properly to consider it. It was obvious that the case would turn largely on credit. The plaintiffs did not lose because of the defendant’s alternative agreement but because they failed to establish their own.

8. However, on the assumption that each of the plaintiffs could have accepted the offer for half, the offer was extremely modest in the context of the plaintiffs’ claim and the amount of costs they would plainly have incurred by then, and not sufficient to make their non-acceptance of it unreasonable. It is borderline whether the offer got to the barrier of being a true compromise rather than, in effect, calling for a capitulation. Additionally, it cannot be said that the proceedings were so lacking in merit that they were not responsibly prosecuted, even after the offer was made.

9. Accordingly, I do not consider that an indemnity costs order should be made. The plaintiffs do not suggest that the ordinary rule, that costs should follow the event, should not apply.

10. The plaintiffs are to pay the defendant’s costs of the proceedings on the ordinary basis.

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Endnotes