Pirrotta v Citibank Ltd
[1998] SASC 6922
•4 November 1998
PIRROTTA v CITIBANK LIMITED & ORS
[1998] SASC 6922
Full Court: Millhouse, Olsson and Debelle JJ
MILLHOUSE J. I agree with the reasons of Debelle J and the order which he proposes.
OLSSON J. I agree with the conclusions arrived at by Debelle J and the order which he proposes.
DEBELLE J. This appeal arises out of proceedings brought by the appellants against Citibank Savings Limited (“Citibank”) and others. The issues in the appeal concern the effect of a Calderbank letter upon the determination of costs.
The appellants instituted proceedings against Citibank seeking to set aside a mortgage, written guarantee and indemnity (“the security documents”) given to the bank. There were four other defendants. They included the respondents, Olson & Co, a firm of solicitors, and an employee of that firm, Melissa Ballantyne. Arrangements had been made with Olson & Co for Ms Ballantyne to explain to the appellants and others the effect of the security to be executed in favour of Citibank. The appellants claimed damages against the respondents for negligence in failing properly to explain the terms and effect of the security documents. In addition, Citibank filed a third party claim against the respondents alleging that they had negligently certified that the appellants and others had understood the nature and effect of the security documents and the consequences of default. The trial began on 2 June 1997 and occupied 15 days.
The appellants failed as against Citibank but succeeded in their claim against the respondents. On 12 November 1997 the trial judge published his reasons for judgment. The trial judge found that the respondents were both liable for the negligent advice which Ms Ballantyne had given to the appellants. He also ordered that damages in favour of Citibank and the appellants be assessed and adjourned the hearing of the assessment of damages.
On 1 December 1997 the judge made orders as to the costs of the trial for liability. He ordered that the appellants pay the costs of Citibank to be taxed as between solicitor and client. He further ordered that the respondents pay the appellants’ costs of the action including the costs payable by the appellants to Citibank. In other words, he made a Bullock order as to costs.
The assessment of damages commenced on 12 January 1998 and occupied three days. On 19 March 1998 the trial judge published his reasons for judgment. The order is complex. As some of the elements could not be quantified at that stage, the trial judge published a formula for the calculation of damages. There is no need to recapitulate the formula. The effect of the order was that the appellants had to contribute $15,000 to the damages payable to Citibank.
On 19 March 1998 the appellants applied for an order that the solicitors should pay their costs of the assessment of damages on a solicitor and client basis. The application was grounded on a so-called “Calderbank letter” from the appellants’ solicitors to the solicitors for the respondents. The letter was dated 8 April 1997. It had been written about two months before the trial of the issues of liability. Shortly stated, the effect of the letter was that the appellants offered to pay or to contribute to an overall settlement in favour of Citibank in the sum of $30,000 on the basis that the respondents would indemnify them against whatever liability it was found they had to Citibank. The letter concluded:
“The offer to your client is in the nature of a Calderbank offer. The offer may be accepted in writing by a response to my office. The offer will remain open to be accepted for a period of 14 days from the date of this letter. The offer will lapse after 14 days from the date of this letter. We reserve the right to call for the production of this letter on the question of costs.”
Citibank rejected the offer. The respondents did not reply to the offer which, therefore, lapsed. Given that the trial judge had ordered the appellants to contribute $15,000 to Citibank and that the respondents indemnify the appellants against their liability to Citibank, the appellant’s offer exceeded their liability as found by the trial judge. The appellants, therefore, applied to have their costs taxed on a solicitor and client basis.
In the course of argument before the trial judge the appellants referred to the decision of Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 and, in particular, to the following passage at 451:
“In my opinion the proper approach to take to an offer of compromise, whether made under the rules or pursuant to a Calderbank letter is that there should be a prima facie presumption in the event of the offer not being accepted and in the event of the recipient of the offer not receiving a result more favourable than the offer, that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of the making of the offer.”
The judge thought that this reasoning placed the effect of a Calderbank letter too high and doubted whether it would give rise to the prima facie presumption identified by Rolfe J. However, for the purpose of the decision, he was prepared to proceed on the footing that the relevant principle had been correctly expressed in that passage. He then considered the facts and concluded that there was no basis for making an order for costs on other than a party and party basis.
On 24 June 1998 the question of costs of the trial on the issues of liability was argued. It is not clear how that was possible given that the judge had made an order as to those costs on 1 December 1997. However, there was no opposition to the application on that ground. The appellants again applied for costs on a solicitor and client basis relying on their Calderbank letter. The judge adhered to the views he had expressed on 19 March 1998. The appellants have appealed by leave from these orders as to costs. As this is an appeal against an exercise of discretion, the appellants will succeed only if they show that the judge has acted upon a wrong principle, that he has allowed extraneous or irrelevant matters to guide or affect him, that he has mistaken the facts, that he has failed to take into account some material consideration, or that upon the facts the decision is unreasonable or plainly unjust: House v The King (1936) 55 CLR 499 at 505.
The appellants first submitted that the trial judge had acted upon a wrong principle. They submitted that the principle was correctly expressed by Rolfe J in Multicon. This submission must fail because it overlooks the manner in which the trial judge approached his task. Although the judge questioned the manner in which Rolfe J expressed the principle, he nevertheless proceeded on the footing that the principle had been correctly expressed. The appellants failed, not because of the judge did not apply the reasoning in Multicon, but because there were factors which the trial judge believed pointed to the conclusion that the appellants should recover only party and party costs. Before examining that question, out of deference to the argument of counsel for the appellant and because the effect of Calderbank letters has not been examined in this court, I review some recent decisions on the effect of Calderbank letters.
Some Recent Decisions
The principles relating to awards of costs on an indemnity basis or solicitor and client basis (which for convenience I will call “indemnity costs”) were examined by Sheppard J in Colgate Palmolive Pty Ltd v Cussons Pty Ltd (1993) 46 FCR 225. The reasoning has been consistently followed and applied by courts in all jurisdictions in Australia. In Colgate Palmolive at 233 Sheppard J held that one of the circumstances which may justify an award of indemnity costs was an impudent refusal of an offer of compromise. This reflects a view common to all jurisdictions in Australia. Courts seek to encourage parties to examine carefully offers of compromise and frame Rules of Court to assist that process. So, in the Supreme Court of Victoria, Byrne J said in Mutual Community Ltd v Lorden Holdings Pty Ltd (unreported, 28 April 1993):
“The policy of the court is to encourage litigating parties to undertake genuine settlement negotiations and, for that purpose, to face up to serious offers of settlement.
The response of a litigant in receipt of an offer of settlement will always be affected by the prospect that the sum which the court might order including party and party costs may be less advantageous than the terms of the offer. Experience, however, shows that this prospect alone is not always sufficient to compel a litigant to face up to the offer. The further prospect of a super- added costs penalty if a reasonable offer be not accepted is a salutary inducement to an offeree to undertake this often painful task.”
To like effect are the observations of the Court of Appeal in New South Wales in Maitland Hospital v Fisher (No2) (1992) 27 NSWLR 721 at 724 where the court identified the purpose of Rules of Court providing for awards of indemnity costs where offers of compromise are not accepted. The court said:
“The obvious purpose of providing Pt 52, r 17 is to facilitate the proper compromise of litigation. This has been attempted by the twin measures of a “carrot” and “stick”. Relevantly, the “carrot” is the promise of indemnity costs to a plaintiff in the event that the defendant is found unreasonably to have refused an offer of compromise. The “stick” is the threat of the penalty of the imposition of an indemnity costs order against a defendant in such circumstances. It is the obvious intention of the rule to oblige a defendant, which has received an offer of compromise, to give serious thought to the risk which it may run of losing the proceedings and then being ordered to pay costs on an indemnity basis.
The objects of the rule include:
1. To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff’s real claim which can be placed before its opponent without risk that its “bottom line” will be revealed to the court;
2. To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and
3. To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances, that party should ordinarily bear the costs of litigation.”
Observations to like effect were made in this court in Whitehead v Maas (1991) 56 SASR 362 when commenting on the operation of Rule 41 of the Rules of this court. The court said:
“Any order for the payment of the costs of the whole action must be penal to some degree. The purpose is to encourage plaintiffs to make offers and to deter defendants from non-acceptance of offers which are commensurate with the defendant’s just liability.”
Offers of compromise contained in Calderbank letters are but one instance of how a party might make an offer which might be imprudently refused. In Calderbank v Calderbank [1976] Fam. 93 the Court of Appeal held that, where a written offer of compromise had been made and not accepted and the court had made an award as favourable or more favourable than the offer, costs would be awarded on the same basis as if there had been payment into court: see Cairns LJ at 105 to 106. The procedure was available where a party wished to make an offer of compromise but payment into court was not an appropriate method of achieving that end. The decision in Calderbank v Calderbank related to orders for costs in matrimonial proceedings. In Cutts v Head [1984] Ch 290, the Court of Appeal held that the procedure was not confined to matrimonial causes and a party could rely on a Calderbank letter in proceedings in all divisions of the High Court in England. However, the court added the proviso that the procedure could not be used where payment into court was appropriate. Oliver LJ, with whom Fox LJ agreed, said (at 312):
“I would add only one word of caution. The qualification imposed on the without prejudice nature of the Calderbank letter is, as I have held, sufficient to enable it to be taken into account on the question of costs; but it should not be thought that this involves the consequence that such a letter can now be used as a substitute for a payment into court, where a payment into court is appropriate. In the case of the simple money claim, a defendant who wishes to avail himself of the protection afforded by an offer must, in the ordinary way, back his offer with cash by making a payment in and, speaking for myself, I should not, as at present advised, be disposed in such a case to treat a Calderbank offer as carrying the same consequences as payment in.”
These propositions were affirmed in Corby District Council v Holst & Co Ltd [1985] 1 WLR 427. The Rules Committee in England has sanctioned the use of Calderbank offers with the qualification expressed by Oliver LJ.
The use of Caldlerbank letters has been adopted and approved in Australian courts but there is no unanimity as to the effect to be given to such letters. In Messiter v Hutchinson (1987) 10 NSWLR 525, Rogers J questioned the need for the qualification expressed in Cutts v Head. His reasoning was followed by Murray J in Dobb v Hacket (1993) 10 WAR 532. Those cases concerned offers by defendants to settle money claims where the plaintiff had recovered less than the offer. Such offers are the subject of Rule 40 of the Rules of this court. The offer made in this case is more similar to that provided in Rule 41. It is, therefore, unnecessary to stay with the issues raised by Rogers J in Messiter v Hutchinson.
Decisions in Australian courts on the effect of an offer in a Calderbank letter fall into two broad groups. Decisions in the first group hold that the letter can be taken into account for the purpose of determining whether a special order should be made displacing the ordinary rule that costs will follow the event and will be taxed on a party and party basis. The second group go further and hold that there should be a prima facie presumption that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of the making of the offer.
In Messiter v Hutchison Rogers J held that a court should be permitted to take account of a Calderbank letter when determining whether to make a special order displacing the ordinary rule that costs should follow the event and be taxed on a party and party basis. In that case the defendant had made an offer to settle for an amount in excess of the amount awarded so that the only question was whether the plaintiff was entitled to his costs after the date appointed for the acceptance of the offer. As that was a case of an offer by a defendant, it was not necessary to consider whether costs should be awarded on an indemnity basis.
The observations in Maitland Hospital v Fisher (No2) (supra) were adopted and applied to an offer of compromise contained in a Calderbank letter by Cole J in Macquarie Bank Ltd v National Mutual Life Association of Australasia Limited (27 July 1994, unreported) when he made an order for indemnity costs as from the time of the offer. In Wallace v Baulkham Hills Smash Repairs (No2) (SC(NSW), 21 August 1995, unreported), Young J reached the same conclusion noting:
“Notwithstanding that I think with respect that Mr Whittle is correct when he said that there is a general policy to encourage settlement and that general policy is far better served if the general message gets through to litigants and the profession that it is more likely than not that where there has been a Calderbank letter, and where there is a falling short by more than a minimal degree of the offer that is made in the Calderbank letter, that litigants should expect that after time has expired for complying with the Calderbank letter the costs will be on an indemnity basis. If some sort of general policy like that does not underlie this type of litigation then settlements will be discouraged and there will be more and more hearings and all sorts of orders would have to be made which again takes up more time and costs everybody more money.”
In Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 Rolfe J examined previous decisions in New South Wales as well as the decision of the Federal Court in John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201. Notwithstanding the decision in John S Hayes, Rolfe J concluded (at 451) that whether an offer of compromise be made either by way of a Calderbank letter or by way of an offer of compromise pursuant to the Rules of Court, there should be a prima facie presumption in the event of the offer not being accepted and in the event of the recipient of the offer no receiving a result more favourable than the offer, that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of the making of the offer. This decision represents the high water mark of decisions in Australian courts.
In Quirk v Bawden (1992) 111 FLR 115 the Full Court of the Supreme Court of the Australian Capital Territory held that, if a defendant unreasonably rejects an offer for settlement from the plaintiff, costs would be awarded on a more favourable basis than party and party costs. At 119, the court said that, in its view, that was “the only sanction to encourage serious consideration” of an offer of compromise by a plaintiff. The court was not, however, prepared to find that there was a prima facie presumption of the kind expressed by Rolfe J. Instead, it held that it was a matter for the discretion of the trial judge and that it must appear that the defendant had acted unreasonably. The court said (at 122):
“In the end, the matter is one for the discretion of the trial judge. The exercise of that discretion favourably to a successful plaintiff may well, prima facie, be indicated by a substantial difference between an offer made by the plaintiff and the verdict ultimately found. However, it must also appear that the defendant had failed to act reasonably in declining to accept the plaintiff’s final offer of compromise.”
In Victoria regard will be had to an offer reasonably made in a Calderbank letter but unreasonably ignored. However, the cases seem to establish no higher proposition than that a Calderbank letter will properly influence the exercise of the discretion as to costs: Azzopardi v Netin [1986] VR 593; Mideco Manufacturing Pty Ltd v Tate [1989] VR 50 and Grbavac v Hart [1997] 1 VR 154 at 160. In Queensland the position was discussed in Smith v Smith [1987] 2 Qd R 807. In that case the Full Court held that it was correct to regard the making of the offer and the result of the litigation as a powerful factor in the exercise of its discretion as to costs. It was not necessary in that case to consider whether indemnity costs should be ordered.
So far as I have been able to ascertain the effect to be given to an offer of settlement contained in a Calderbank letter has not been the subject of any reported decision in Tasmania or South Australia. In the Northern Territory, the relevance of Calderbank letters was considered in McAuliffe v Vogler (1992) 110 FLR 454 but then only in the context of a defendant’s offer to settle a money claim.
The issue has been considered on several occasions by the Federal Court of Australia. In Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97 Spender J followed the approach in Messiter v Hutchinson. Following that decision the Rules of Court of the Federal Court were amended and a new Order 23 was introduced. That order provides for a regime of offers of settlement by both parties to an action and is not limited to money claims. The new regime provided a broader scope for encouraging parties to settle than had existed in previous orders. Notwithstanding the width of the new order, it is not a code and does not exclude reliance on Calderbank letters: per Heerey J in Henderson v Amadio Pty Ltd (unreported, 22 March 1996); Mowie Fisheries Pty Ltd v Switzerland Insurance Australia Ltd (unreported, 30 October 1996, Tamberlin J). In the former case, costs were not awarded on an indemnity basis, but in the latter indemnity costs were ordered from a date after the Calderbank letter deemed to be a reasonable time for acceptance.
In John S Hayes (supra) Hill J reviewed the cases and held that there was no authority supporting the proposition that the mere writing of a Calderbank letter would justify an order for costs on a solicitor and client or indemnity basis. In his view (52 FCR at 206), the making of an offer of compromise was but one of the many factors which may be taken into account by the court in exercising its judicial discretion. It would be going too far, he said, to say that the mere making of an offer in a Calderbank letter and its rejection, with out more, provides grounds for an order for costs on an indemnity basis. That decision was followed by Lindgren J in MGICA (1992) v Kenny & Good Pty Ltd [No4] (1996) 140 ALR 707 in preference to the decision of Rolfe J in Multicon. In MGICA Lindgren J identified some factors which caused him to follow the decision in John S Hayes. The first was that the Calderbank letter in MGICA required an answer in a shorter time than that permitted by Order 23 of the Federal Court Rules. The other was that the offer to settle in that case was for an amount which included interest. The offer did not comply with Order 23 Rule 4(2) which requires an offer in respect of interest to show how it is calculated. His Honour took the view that a Calderbank letter should not be permitted to establish a regime which is more onerous than that required by the Rules of Court. In Re Wilcox (1996) 141 ALR 727 the Full Court of the Federal Court followed the decisions in Colgate Palmolive and John S Hayes but there was no Calderbank letter in that case. The court was concerned only with the question whether costs should have been awarded on an indemnity basis on the ground that the applicants, properly advised, should have known they had no prospects of success.
Given the approach of the trial judge, it is unnecessary for this court to determine whether it should follow the approach of the Supreme Court of New South Wales as exemplified in Multicon or follow the other line of cases to the effect that a Calderbank letter is but one of the factors to be considered when determining whether to order indemnity costs. In the result, there might not be a great deal of difference between the two approaches. As the matter was not fully canvassed in argument. It is better to defer any final decision until an occasion when the matter is fully argued. However, four matters can be mentioned until the matter is ventilated more fully.
First, although Rule 41 provides a regime for the making of offers by plaintiffs to compromise actions, it should not be regarded as the only means by which plaintiffs might make such offers. There will obviously be situations which do not fall precisely within the rule. Rule 41 is in terms addressed to litigation between one party and another and thus might not always apply in multi-party litigation or where the litigation is otherwise complex. Thus, regard should, in appropriate circumstances, be had to a Calderbank letter for the purpose of determining whether an order for indemnity costs should be made.
Secondly, it is undesirable to permit a regime which differs in important respects from that contemplated by the Rules of Court and imposes more onerous obligations. Thus, while recognising that the Rules do not provide for every occasion and that there are circumstances which justify the writing of a Calderbank letter, the terms in which such a letter are couched should, as a general rule and so far as is reasonably practicable, conform to the regime in Rule 41. I do not mean to suggest a slavish adherence to Rule 41 but a party who seeks to use a Calderbank letter as the basis for solicitor and client costs should frame the letter in terms which are consistent with the spirit and intent of the Rule 41.
Thirdly, given the terms of Rule 41.04, a Calderbank letter might result in an order as to costs on a basis similar to that provided in Rule 41.04. One question to be determined is whether a plaintiff should have his costs on a solicitor and client basis for the whole of the action or only from a reasonable time after the offer has been made. There is much to be said for the latter view but I do not express a concluded opinion. Another question is whether any presumption should operate in favour of a plaintiff who makes a Calderbank offer. The effect of Rule 41.04 is that costs will be ordered on a solicitor and client basis unless the court thinks it proper to order otherwise. To that extent, the Rule expresses a prima facie presumption that it will operate in favour of a plaintiff who has been awarded a monetary sum higher than he had been prepared to accept. As the Full Court observed in Whitehead v Maas, the intention of Rule 41 is penal and is to be applied as an incentive to settlements. But the proviso plainly recognises that there will be circumstances where the court will find that the full rigour of the rule should not apply.
Fourthly, until the matter is fully argued, I think the approach should be that the writing of a Calderbank letter should be one of the factors, albeit a significant factor, to be weighed by a court when considering whether to order indemnity costs. I do not think that the complexity of litigation standing alone should necessarily preclude the operation of the rule. The rule is designed to promote settlement of both complex and straightforward litigation and the court will have regard to all relevant circumstances in determining whether the penalty rule as to costs should apply.
The Factors in this Case
There are several factors which bear on the question whether the appellants are entitled to solicitor and client costs. The respondents rely on the fact that Citibank rejected the offer, thus preventing any acceptance by them. They submitted that they could not accept the appellants’ offer without exposing themselves to Citibank on its third party claim and contribution notice. I do not think that much weight can be placed on this contention. The fundamental question was whether the appellants and others could avoid their liability to Citibank under the security documents and, if not, whether they could recover against the respondents. The monetary settlement concerned Citibank. As between the appellants and the respondents the only question was whether Ms Ballantyne had properly explained to them the obligations under the guarantee and indemnity. If properly advised, the respondents should have known that, unless they could demonstrate that Ms Ballantyne had properly discharged the task of advising the appellants upon the terms and effect of the security documents, they would be liable either to the appellants for a breach of their duty to them as their solicitors or to Citibank for having wrongly certified that the documents had been explained to the respondents.
A second factor which points to an award of solicitor and client costs is that, properly advised, the respondents should have had a sufficient understanding of the strength of their case to know whether it was prudent to proceed with the litigation. The trial judge noted that Ms Ballantyne had “no specific recollection of what she might have said at the meeting”. That ought to have been sufficient to put the respondents or those advising them on notice that there was a real risk of failure, particularly if others present could recall what had occurred. The respondents sought to support this contention by relying on the decision of this court in Hall v Foong (1995) 65 SASR 281 where the plaintiff failed in an action against its solicitors for negligent advice because she had not proved that she would not have acted differently had she been properly advised. But that decision does not assist the respondents. The question whether solicitor and client costs would be awarded does not depend on the chance that a party might not prove his whole case. In this context, it is relevant to note the observations of Mahoney P speaking for the Court of Appeal in FAI Insurance Co Ltd v Burns (1997) 9 ANZ Insurance Cases 77213 at 77220 - 7722l:
“I do not mean by this that the parties and those who represent them should not pursue their own interests in the litigation; they may do so with vigour and by all the means available to them under the law. Litigation is not a game or a mere contest of professional skill. It is, perhaps, properly described as the continuation of the rigour of business by other means.
But there are limits. Pursuit of the parties’ interests is not inconsistent with the duties which they owe to the court in commercial litigation. Rights may be pressed vigorously provided they are pursued bona fide and within the limits of the effective, efficient, timeous and just determination of the real issues.” (Emphasis added)
There are, therefore, two factors pointing to an award of solicitor and client costs at least from a reasonable time after the Calderbank letter.
However, there are three other factors which, considered together, tell against the appellants’ contention. First, an examination of the Statement of Claim shows that the appellants relied on a number of causes of action against what was essentially three sets of defendants. For this purpose I treat the respondents as one defendant. They failed as against Citibank and succeeded against two defendants. They ought not be entitled to be paid costs on a solicitor and client basis from litigating issues on which they have failed. There is nothing before us which shows the extent to which the trial was occupied on issues on which the appellants failed.
Secondly, as the trial judge found, this was complex litigation. That resulted from the fact that there were several causes of action and several defendants. In addition, there were several cross-claims and this action was tried with another action involving other parties who had executed security documents. As already mentioned, the complexity of litigation is not, standing alone, a reason for refusing to order solicitor and client costs. But in this case, that fact must be weighed with the observation of the trial judge on 19 March 1998 that, even with the benefit of hindsight, this was litigation which the respondents were entitled to bring to trial. He expressed his reasons in these terms:
“However, I do not think that the matter can be approached so simply as that. Looked at from the point of view of Olson &Co and Ballantyne, it seems to me that this was a most complex piece of litigation which, with the benefit of hindsight, I think they were entitled to bring to trial. Their decision to do so was reasonable, notwithstanding the offers.
In order to perceive the complexity of the issues one needs only to have regard to the trial judgment published by me on 12 November 1997.
In my opinion, this is not a case which, in all the circumstances, I should order the costs in question to be paid other than on a party and party basis.” (Emphasis added)
The judge repeated that observation on 24 June and again referred to the complexity of the action. He said:
“Be that as it may, the question of the regard to be paid by the court to an out of court offer on the issue of costs, whether a Calderbank offer which is without prejudice except as to costs, or an open offer made informally, is entirely a matter for the discretion of the court. My sympathy for the plaintiffs in that respect must be balanced against the nature of the case from the perspective of the defendants Olson & Co and Ballantyne as it stood at the time the offer was made and in the intervening period before trial of the issue of liability.
In the reasons pronounced ex tempore by me on 19 March 1998, I held that, notwithstanding the Calderbank offer, it was reasonable for the defendants Olson & Co and Ballantyne to continue with the litigation. I drew attention to the reasons for judgment following the trial published by me on 12 November 1997 as an indication of the complexity of the issues raised in the proceedings.” (Emphasis added)
Although this court can look to the judge’s reasons for the purpose of assessing whether the judge was entitled to rely on the complexity of the action, it does not have the detailed knowledge of the trial judge of the course of the action or of the evidence. It does not have the benefit of having seen the witnesses give their evidence. It does not know the extent to which the demeanour of witnesses might have had a bearing on the ultimate result. These are not matters which can be gleaned from the reasons of the trial judge. Nothing has been put to demonstrate that this was not complex litigation. Indeed, in the course of his submissions, counsel for the appellant expressly mentioned its complexity. More significantly, nothing has been put to show that the trial judge had erred in deciding that the respondents were entitled to bring the action to trial.
An appellate court will usually be slow to interfere with the exercise of a discretion as to costs since the trial judge often has a greater familiarity with and a better understanding of the facts involved and of the manner in which the trial has been conducted. The appellants have not demonstrated any ground on which this court should not adopt that principle or on which this court should properly interfere with the decision of the trial judge.
Thirdly, the offer did not sufficiently accord with the terms of Rule 41 and, thus, imposed a more onerous obligation on the respondents. The offer was made in a letter dated 8 April 1997 sent almost two months before the date fixed for the commencement of the trial. The trial began on 2 June 1997. (Although the front sheet of the judgment stated the trial commenced on 2 May, it is agreed that is a typographical error.) The offer required an answer within 14 days. The regime in Rule 41 allows an offer to be made up to 21 days before the trial (Rule 41.01) and allows the defendant to accept the offer up to seven days before the trial (Rule 41.02). The letter complied with Rule 41.01 but not Rule 41.02. The intention of Rule 41 is to allow a reasonable time in which to consider an offer. This litigation had been proceeding for more than two years when the offer was made. The appellants’ solicitor did not in all the circumstances allow sufficient time in which to consider the offer. In other words, the letter was not sufficiently consistent with the regime in Rule 41. No reason has been given for the peremptory tone of that part of the letter limiting the time for acceptance. Offers of compromise are more likely to be accepted if a reasonable time is permitted for consideration of the offer. A period longer than 14 days would not have been unreasonable. Although I do not place a great deal of weight on this factor, it is nevertheless relevant.
Counsel for the appellants submitted that the respondents’ failure to accept the offer had the result that the appellants, as the successful parties, were being asked to underwrite the respondents who had chosen to litigate the issues. The submission is, on its face, attractive. However, on examination, that attractiveness fades. The submission overlooks the fact that the appellants are being compensated for their party and party costs for the whole of the trial of the action and that must include compensation for their costs incurred in litigating issues on which they had failed.
For all of these reasons, the appellants have not pointed to any respect in which the trial judge has erred in the exercise of his discretion. It follows that the appeal must be dismissed.
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