Rapuano T/A Raps Electrical v Karydis-Frisan (No 2) - [2012] SADC 177

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
RAPUANO T/A RAPS ELECTRICAL v KARYDIS-FRISAN & ANOR (No 2)
[2012] SADC 177
Ruling of His Honour Judge Stretton
7 December 2012
PROCEDURE - COSTS
Applications for costs by both the plaintiff and the defendants. Judgement had been given assessing the plaintiff's quantum meruit claim for electrical work on the defendants' house at $34,996 plus interest. No Rule 33 notice prior to action was filed by the plaintiff, although there were other communications concerning possible settlement. The defendants filed a series of offers, one purportedly for $45,000 plus $5000 costs which could only be accepted in toto, but which also foreshadowed a possible counterclaim and purported to vary the offer in the event such counterclaim was filed. The parties contested whether unfiled offers and communications were admissible in light of the prohibition in section 67C of the Evidence Act. The plaintiff also argued that the $45,000 plus $5000 offer was not an offer within the meaning of Rule 187 due to several peculiar features, and that the filing of a lower subsequent offer superseded and invalidated it.
Held: Unfiled pre-action offers made per Rule 33 and offers made pursuant to Rule 187 are admissible pursuant to section 67C(2)(g). Calderbank letters and other unfiled offers are only admissible on the question of costs so long as they contain a statement bringing them within section 67C(2)(d) to the effect that they are not confidential. None of the pre-action communications in this matter amounted to a Rule 33 notice, nor did they express themselves as not confidential, hence they are not admissible. The failure to file a Rule 33 notice was likely to in the totality of the circumstances of this case have significantly reduced the chance of the matter settling. The $45,000 plus $5000 offer was a valid offer per Rule 187. However, it purported to preserve a foreshadowed counterclaim and introduce contingencies in relation to the offer which introduced a level of uncertainty and lack of finality to the offer, although the offer it did contain was to resolve the filed claim and remained open at all times. A subsequent filed offer does not, and did not in this case, revoke an earlier filed offer.
The plaintiff's costs up to the date of the filed offer were taxed to ascertain whether the defendant's offer inclusive of costs was bettered by the judgement plus the plaintiff's costs to that point.
The plaintiff did not better the filed offer, either as to principal relief or as to costs.
Subject to all existing costs orders to date, the plaintiff is to have 70% of its taxed costs up to 14 days after the filed offer and the defendants are to have 85% of their taxed costs after 14 days after the filed offer.
Evidence Act 1929 s67C; Acts Interpretation Act 1915 s22, referred to.
Rapuano (trading as Raps Electrical) v Karydis-Frisan and Frisan [2011] SADC 22; State Bank of South Australia v Smoothdale (No 2) (1995) 184 LSJS 254; Mair v Mazzitti (No 1) [2003] SADC 164; Abigroup Contractors Pty Ltd v Hardesty & Hanover Int LLC [2008] SASC 337; Chapman v Allan 74 SASR 274; Pizmolas v Pizmolas (No 2) [2010] SASC 209; Rayner v Pethick [2006] SASC 70; Cutts v Head [1984] Ch. 290; Rule Chambers v Badge Constructions [2009] SASC 70; Cumper v Pothecary [1941] 2 KB 58; Heather v Vita Pacific Ltd [1996] TASSC 168; Davies v Chicago Boot Co Pty Ltd (No 2) [2011] SASC 197; Jones v Associated Newspapers Ltd [2008] 1 All ER 240; Hansard House of Assembly, 10 April 1996; Hansard House of Assembly, 26 March 1996, considered.

RAPUANO T/A RAPS ELECTRICAL v KARYDIS-FRISAN & ANOR (No 2)
[2012] SADC 177
The judgment

On 16 August 2011 I delivered judgment in this quantum meruit claim by the plaintiff electrician for electrical work done in the course of the construction of the defendants’ house.[1] The judgment determined hours worked and applicable hourly rates, and set out principles by which the arithmetic calculation of materials cost was to be determined, which such calculation was subsequently agreed,[2] and I subsequently determined interest.[3]
[1] Rapuano (trading as Raps Electrical) v Karydis-Frisan and Frisan [2011] SADC 22.
[2] See transcript p 2-3 of 31/8/11.
[3] See transcript p 24-26 of 31/8/11.
The judgment sum is $34,996 plus $3500 interest, totaling $38,496.
Applications for costs
The plaintiff and the defendants have each applied for costs of the action.
The plaintiff applies on the basis that he was successful in his claim and says costs should follow the event. He argues that the defendants have not established any basis for costs not to follow the event.
The defendants argue that they filed an offer on 2 December 2009 which they say the plaintiff has not bettered, and so the defendants should have their costs from two weeks after that date as provided by Rule 188.
The defendants also ask for their costs based on other unfiled offers and various written and verbal settlement negotiations that have passed between the parties. None of these offers or negotiations were expressed to waive privilege, or to constitute a Calderbank letter. The defendants argue that for various legal reasons settlement negotiations between the parties are admissible at this stage of the proceedings. Since that argument affects the scope of the materials relevant to the determination of the costs issue, it must be addressed at the outset.
Should the Court have regard to unfiled settlement offers and negotiations?
Firstly, the defendants argue that section 67C of the Evidence Act has altered the earlier common law position that rendered settlement negotiations inadmissible.
Whilst section 67C(1) states in clear language that evidence of a communication made in connection with an attempt to negotiate the settlement of a civil dispute is not admissible in any civil or criminal proceedings, the defendants argue that section 67C(2)(g) makes all such communications admissible on the issue of costs. Subsection (g) provides that settlement communications are admissible if “the making of the communication, or the preparation of the document, affects the rights of a party to the dispute”. The defendants argue that the rights of a party to the dispute include rights as to costs.
The theme of exception to inadmissibility apparent throughout the rest of section 67C(2) is twofold: firstly, where the party making the communication reserves the right to, agrees to or discloses the communication[4], i.e. where a party in particular ways specified by the section essentially elects to waive inadmissibility; secondly, where the admission of the communication is relevant to fairly resolve a substantive factual issue, whether between the parties to the action in the action[5] or over the settlement terms[6] or that is itself part of a substantive criminal, civil or administrative wrong.[7]
[4] Section 67C(2)(a), (b), (d).
[5] Section 67C(2)(c).
[6] Section 67C(2)(e).
[7] Section 67C(2)(h).
The context would indicate that the rights of a party to the dispute likely means substantive rights in relation to the dispute in question, or possibly in relation to some other substantive right capable of litigation.
The defendants argue that 67C(2)(g) also renders admissible on the issue of costs, all settlement communications and offers made at any time, as such material is relevant, if admitted, to the discretion to award costs.
The Full Court considered the meaning of an earlier iteration of section 67C in State Bank of South Australia v Smoothdale (No2) (1995) 184 LSJS 254. Doyle CJ said:
In my opinion, while s67C should be interpreted against the background of the common law, the common law on the point in question is not so clear as to give rise to a presumption that absent a clearly expressed intention it must be presumed that there was an intention not to alter the common law. In addition, the Second Reading Speech does not indicate an intention to preserve the common law, but simply an intention to make the law clear and ascertainable. Granted, the speech indicates an intention to encourage private dispute resolution, but in my opinion it is going too far to argue that each provision must be read as preserving privilege in aid of settlement as far as possible.
It seems to me that the focus of s67C(2) when it refers to "the dispute" is the dispute the settlement of which generated the communication or document. I appreciate that the absence of the definite article in subpara (e) is significant. But on balance I think that as a matter of consistency it makes sense to read subpara (e) as referring to that same dispute. As a matter of language the absence of the definite article does not prevent it being read in that manner. Secondly, in my opinion the shift of tense in subpara (e) is not significant. In my opinion either present or past tense was available for use, assuming the draftsman had in mind the meaning for which the defendants contend. Thirdly, I must say that to my mind it is simpler to read the provision as ending the bar to admissibility of evidence of a communication once the dispute which gave rise to the communication has come to an end. The natural focus of a limit upon a bar to admissibility is the ending of the dispute which gave rise to the communication in an attempt to settle the dispute. The natural focus is not an examination of the issues in dispute in litigation which later arises, and to which litigation the communication may be relevant. These considerations lead me to conclude that the reference in subpara (e) is to the dispute which gave rise to the communication as part of an attempt to negotiate settlement of the dispute.
I do not suggest that I regard the conclusion as an obvious one. In considering the matter there have been times at which I thought each of the rival arguments was correct. I am impressed by the good sense of what was said by Lord Griffiths in Rush and Tompkins Ltd v Greater London Council and Anor [1989] AC 1280, and I realise that the exclusion of the privilege in the situation to which he referred may have been inadvertent on the part of the draftsman of s67C. But, in the end, I consider that subpara (e) should be read as requiring a consideration of the status of the dispute which gave rise to the communication, not the status of the dispute in which it is later attempted to make use of the communication.
Section 67C(2)(e) has, however, been amended since the judgment in Smoothdale. Whilst the rest of the section has remained essentially the same, 67C(2)(e) which read “(e) the communication or document relates to an issue in dispute and the dispute, so far as it relates to that issue, has been settled or determined;” was amended in 1996[8] to read the proceeding in which the evidence is to be adduced is a proceeding to “enforce an agreement for the settlement of the dispute or a proceeding in which the making of such an agreement is in issue; or …”
[8] Per 26/1996 s2 which commenced on 2/5/96.
In debates subsequent to the Smoothdale decision the then Deputy Premier said:[9]
Whilst we (and I think everybody else) believe that section 67 of the Evidence Act provided for the protection of all the matters involved in the negotiation of a settlement on the basis that they could not be used in a subsequent Court case, the decision made by the Supreme Court put that issue at risk.
[9] Hansard, House of Assembly, 10 April 1996 at page 1440.
The Second Reading speech read:[10]
[10] Hansard, House of Assembly, 26 March 1996 at page 1237.
This bill amends Section 67C of the Evidence Act, 1929. Section 67C protects the confidentiality of private dispute resolution. It provides that evidence of a communication made in connection with an attempt to negotiate the settlement of a civil dispute, or of a document prepared in connection with such an attempt, is not admissible in any civil or criminal proceedings except in the circumstances set out in section 67C(2). Section 67C(2) provides that such evidence is admissible in a variety of circumstances, for example, where the parties consent to its being admitted, where the evidence has been disclosed with the consent of the parties or where the communication was made in the furtherance of the commission of an offence. Section 67C(2)(e) provides that such evidence is admissible where is (sic) relates to an issue in dispute and the dispute, so far as it relates to that issue, has been settled or determined. The rationale for the protection of evidence of communications made in connection with an attempt to negotiate the settlement of a dispute is founded on the public interest in encouraging those in dispute to settle their differences rather than litigate them to a finish. Settlement negotiations are encouraged by protecting a party from the use against the party of concessions made in the course of such negotiations. Disputing parties should not be discouraged from making concessions by the knowledge that anything said in the course of negotiations might be used to their prejudice. In the course of the State Bank of SA v Smoothdale No 2 Ltd & Anor litigation the scope of section 67C(2)(e) came into question. The question was whether the statutory protection survives the settlement of a dispute, so that things said and done in the course of successful negotiations must be revealed, and can be used as evidence, in proceedings involving parties other than, or additional to, the original disputing parties. The Supreme Court, in a judgment delivered on 13th December,1995, held that the effect of section 67C(2)(e) is that once a dispute has been settled any claim of privilege for communications or documents in connection with those successful negotiations ends.
This interpretation of section 67C(2)(e) is arguably narrower than the common law and may inhibit settlement negotiations. Frank negotiations will be discouraged if parties to the negotiations know that communications made in the course of settlement of a dispute may be used in any subsequent litigation connected with the same subject matter.
This bill repeals the existing section 67C(2)(e). It is to be noted that the New South Wales and Commonwealth Evidence Acts provisions, on which section 67C(2)(e) is based, do not have a provision similar to section 67C(2)(e).The opportunity has also been taken to include a provision which makes it clear that evidence of communications made in the course of settlement negotiations can be adduced in proceedings to enforce an agreement to settle a dispute or proceedings in which the making of such an agreement is in issue. Such a provision reflects the common law and needs to be included here for completeness. This new provision is inserted in place of the repealed section 67C(2)(e).
Explanation of Clauses
Clause 1: Short title
This clause is formal.
Clause 2: Amendment of s. 67C—Exclusion of evidence of
settlement negotiations
Clause 2 provides that evidence of settlement negotiations is admissible in proceedings to enforce a settlement agreement or proceedings in which the making of such an agreement is in issue. The previous paragraph under which evidence of settlement negotiations becomes generally admissible once settlement has been reached is removed.
Clause 3: Application of amendment
Clause 3 provides that the amendment applies to proceedings commenced before or after the commencement of the amending Act but does not affect any order made before the commencement of the amending Act.
The section now reads in its entirety:
Division 8—Evidence of settlement negotiations
67C—Exclusion of evidence of settlement negotiations
(1) Subject to this section, evidence of a communication made in connection with an attempt to negotiate the settlement of a civil dispute, or of a document prepared in connection with such an attempt, is not admissible in any civil or criminal proceedings.
(2)        Such evidence is, however, admissible if—
(a)     the parties to the dispute consent; or
(b) the substance of the evidence has been disclosed with the express or implied consent of the parties to the dispute; or
(c) the substance of the evidence has been partly disclosed with the express or implied consent of the parties to the dispute, and full disclosure of the evidence is reasonably necessary to—
(i) enable a proper understanding of the other evidence that has already been adduced; or
(ii)     avoid unfairness to any of the parties to the dispute; or
(d) the communication or document included a statement to the effect that it was not to be treated as confidential; or
(e)the proceeding in which the evidence is to be adduced is a proceeding to enforce an agreement for the settlement of the dispute or a proceeding in which the making of such an agreement is in issue; or
(f) the evidence tends to contradict or to qualify evidence that has already been admitted about the course of an attempt to settle the dispute; or
(g) the making of the communication, or the preparation of the document, affects the rights of a party to the dispute; or
(h) the communication was made, or the document was prepared, in furtherance of—
(i)      the commission of a fraud or an offence; or
(ii) the doing of an act that renders a person liable to a civil penalty; or
(iii)      the abuse of a statutory power.
(3)Subsection (1) does not apply to parts of a document that do not concern attempts to negotiate a settlement of a dispute, if it would not be misleading to adduce evidence of only those parts of the document.
Unfiled pre-action offers made per Rule 33 are admissible on the issue of costs, as are offers filed pursuant to Rule 187
In Mair v Mazzitti (No 1) [2003] SADC 164 Judge Lunn observed that section 67C declares settlement negotiations inadmissible in any proceedings. He noted that it provides specific limited exceptions to inadmissibility. As a statutory provision it is not subject to delegated legislation such as Rules of Court. Accordingly, Rules of Court, in themselves, cannot render a settlement negotiation admissible. However, former Rule 6A, the predecessor to Rule 33, provided that certain pre-action settlement communications will be relevant to the discretion to order costs. But the issue of costs is not relevant until the stage, usually after the trial proper has concluded and judgment has been delivered, when the Court considers the costs issue. The contents of such a notice or letter cannot therefore be, for example, put to witnesses during the trial to affect their credit. However, at the stage when a person seeks costs on the basis of the Rule 6A notice, and by parity of reasoning compliance with the Rule 33 requirements for a pre-trial notice of offer of settlement and response by the defendants, the communications then do affect the rights to costs, and can be admitted per section 67(2)(g). As Judge Lunn said at [14]:
Subsection (g) makes communications under Rule 6A admissible where the giving of a Rule 6A notice affects the rights of a party to the dispute. As mentioned above, Rule 6A only affects rights in relation to costs. Hence at the point in an action where a party seeks some costs order in his or her favour by reason of the operation of Rule 6A, but not otherwise, subs (g) operates to make the Rule 6A notice admissible because it is the fact of its making which then affects the right to costs. When subs (g) so operates, but only at that point, and only on that issue in the action, s67C(1) no longer bars the admissibility of the Rule 6A notice.

Therefore, evidence of compliance or non-compliance with Rule 33, and the contents of communications pursuant to Rule 33, are admissible for the purpose of determining parties’ rights to costs. Accordingly, whether the rule was complied with is relevant, as is the making of and contents of any communications which fall within the description of Rule 33. The same reasoning applies to offers of settlement filed pursuant to Rule 187, as per Rule 188(6) there are significant costs consequences of not bettering the filed offer. Accordingly, the Court may have regard to all such communications. Hence pre-action offers and filed offers are admissible on the question of costs.
Calderbank letters and other unfiled offers which state that they are to be relied on as to costs are admissible on the question of costs per section 67C(2)(d)
Further, a Calderbank letter or any other offer which includes a statement that it is not to be treated as confidential on the issue of costs would in my view on balance be admissible on the question of costs per section 67C(2)(d), although I note that this question is yet to be definitively determined by the Supreme Court.[11]
[11] Abigroup Contractors Pty Ltd v Hardesty & Hanover Int LLC [2008] SASC 337.
When one analyses the rationale behind the section and the mischief to which it is directed, there is a strong argument that the subsection be interpreted so as to allow Calderbank letters and other communications reserving the right to be tendered on issues of costs, to be so tendered.
The expressed aim of the statutory prohibition contained in section 67C, made very clear by the second reading speech of the amending Act, is to preserve the freedom of parties to make offers to settle absent the fear that what they say in those offers may be used against them, whether in the case at hand or in any subsequent or other case. That freedom is indeed substantially curtailed if others may use the contents of an offer against a party in the current or some other trial, but allowing the offer to be tendered solely at the costs stage fully maintains the expressed protection against use during the trial proper or in other matters. Tendering the offer made by the tenderer at the costs stage can usually only potentially assist a tenderer, rather than penalise them.
Further, allowing the maker of the offer to elect to reserve the right to tender the offer in support of a later application for costs in the very matter at bar, is likely to positively encourage the making of such offers rather than inhibit the making of them. Further, if the recipient of such an offer knows that if they do not accept the offer then it may be tendered against them at the costs stage if the offer is not bettered, it is a strong incentive for the recipient to seriously consider accepting the offer. An interpretation of the law that encourages the making of reasonable offers to settle and encourages the recipients of those offers to seriously consider them is preferable to an interpretation that does not do so. Accordingly, an interpretation of section 67C(2)(d) that allows the party making the offer to, by complying with that subsection, render their offer admissible at the costs stage of an action, is strongly desirable from a policy perspective.
Unfiled offers that do not fall within Rule 33 and which are not “open” or otherwise do not expressly waive confidentiality as to costs are not admissible on the issue of costs
In this case the defendants have made several unfiled offers that do not fall within Rule 33 or Rule 187. Those offers did not at the time they were made waive confidentiality per section 67C(2)(d). There has been no mutual consent that would allow their tender per section 67C(2)(a).[12]
[12] Both parties’ consent is required, see Chapman v Allan 74 SASR 274 per Doyle CJ and Lander J at p 288-289, and it will normally be contemporaneous, see Pizmolas v Pizmolas (No 2) [2010] SASC 209 per Kourakis J at [13].
The defendants want to rely on those unfiled offers on the issue of costs. The defendants submit that such offers are admissible at the stage the Court is considering the issue of costs.
The issue is whether, in relation to such unfiled offers, “…the making of the communication, or the preparation of the document, affects the rights of a party to the dispute”, within the meaning of section 67C(2)(g).
The right concerned is the right to costs. Rule 188 provides that a plaintiff who betters a plaintiff’s offer is entitled to solicitor/client costs for the whole action, and that a defendant who has offered to settle on terms at least as favourable as the judgment is entitled to costs incurred since 14 days after the service of the filed offer on the plaintiff. In each case, whilst the Rule recognises the Court’s discretion remains, the Rules create an entitlement to costs in the specified circumstances. In light of the clear entitlement prescribed, it is unsurprising that this Court has held that compliance or non-compliance with Rules of Court which can so substantially regulate the exercise of the costs discretion, does affect the “rights” of a party to the dispute.[13]
[13] Mair v Mazzitti (No 1) [2003] SADC 164.
The issue is whether an unfiled offer that invokes no statutory or delegated legislation consequence but might merely affect the exercise of the Court’s overarching discretion affects the “right” of a party to costs.
I take as a starting point the words of the statute.
Firstly, does the making of an unfiled offer to settle affect the “right” of a person to costs? A litigant certainly has a right to apply for costs, and for that application to be determined according to the statutory framework and the common law principles which guide the exercise of the residual discretion, which in the case of costs is recognised to be wide. In that sense, every litigant has a right to costs determined in accordance with those statutory and common law principles.
Not bettering an offer to settle has traditionally been regarded, when admissible, as relevant to the exercise of the costs discretion. In that sense, the making of an offer and the response to it can affect the likely costs order a person may receive, and in that sense their right to costs.
Secondly, does the section as a whole or its wider statutory context inform the likely meaning of the provision? I return to the themes of exception to inadmissibility revealed in section 67C earlier mentioned. Section 67C constitutes a blanket prohibition on admissibility of settlement negotiations, subject to strictly defined exceptions. The other exceptions are where both parties agree, or the substance of the negotiations have been disclosed with both parties’ agreement, or partially disclosed with agreement such that fairness requires the disclosure of the rest, or if the party making it waived confidentiality at the time (including waiving confidentiality as to costs), or if it is necessary to fairly effect a settlement or evidence given about settlement negotiations, or if the document itself furthers a wrong in various ways.
Of some relevance is the absolute nature of the prohibition, and the requirement throughout the section for there to be either agreement, or a necessity relating to the just resolution of the settlement or significant other matters.
Further, section 67C does not exist in isolation. It is enacted against the power to order costs created by section 42 of the District Court Act, and there are also costs principles articulated by the Rules of Court. This all sets out a scheme for the making of pre-litigation offers and for the filing of offers once the litigation has commenced, with consequences that may flow from such conduct. There is also an ability per 67C(2)(d) for a person making an offer to plainly waive confidentiality at the time the offer is made, in relation to the issue of costs.
Would all of this suggest that all other informal offers, even if confidentiality is not waived at the time, are intended to be admissible as to costs? Why, for arguments sake, would 67(2)(d) be necessary, if all offers are admissible as to costs in any event without the need to exclude confidentiality as a path to admissibility as required by section 67C(2)(d)? I suppose a contrary argument might be that a section 67C(2)(d) waiver of confidentiality would still be necessary if the offer is sought to be admissible in that or another substantive trial without consent of the other parties.
Thirdly, I turn to consider the purpose of the statute and the mischief it is designed to address.[14] As earlier discussed, according to the second reading speech the aim of section 67C is to promote the making of offers by preventing those offers being used against the maker of them, whether in the matter itself or in any other matter.
[14] Acts Interpretation Act 1915 (SA), S 22.
Allowing the maker of the offer to tender their offer to support their costs application does not ostensibly offend the principle the section was designed to protect.
In Rayner v Pethick [2006] SASC 70 Bleby J briefly considered the proper construction of section 67C(2)(g). He said:
The defendants also argued that the (unfiled offer) correspondence was admissible under para.(67C(2))(g). I reject that argument. As there was no concluded agreement for settlement, the correspondence did not affect the rights of the parties to the dispute. Insofar as it is argued that the correspondence affects the defendants’ right to costs of the action, it appears from what follows that they do not, and the correspondence was not admissible under this paragraph.
Then Bleby J proceeded to consider, assuming the potential admissibility of an offer per section 67C as to the issue of costs, the offer in question, and what would be required for such an offer to be admissible. At [32]-[34] he said:
By way of contrast, the Court of Appeal in Cutts v Head[15] considered the effect of an offer of settlement contained in a “without prejudice” letter as part of a negotiation towards possible settlement. Importantly, however, as well as being “without prejudice”, the letter contained the statement:
We reserve the right to bring this letter to the notice of the Judge on the issue of costs.
In a comprehensive judgment considering a great number of authorities, Oliver LJ was at pains to preserve the sanctity of “without prejudice” correspondence, but held that where a reservation of that nature was incorporated and brought to the attention of the recipient, there was nothing to prevent the Court from relying on it in deciding the question of costs.
No such reservation was contained in any of the correspondence relied on by the defendants in this case, and I consider that the correspondence was therefore not admissible and could not be relied on by the Magistrate in determining the plaintiffs’ entitlement to costs. It is not difficult to understand why this should be so. In August 2004 the parties, through their solicitors, were attempting to settle the principal action. Apart from the quantification of the plaintiffs’ costs to that time as part of the settlement proposal, neither party directed their attention to the question of the consequences in costs should an offer not be accepted. The plaintiffs had no warning that the defendants would seek to rely on “without prejudice” offers on the question of costs. They had no reason to address their minds to the costs consequences of refusing a “without prejudice” offer. It was quite unlike the situation of the filing of an offer to consent to judgment under the Rules of Court or the payment of money into Court or the intimation of a Magistrate in the course of pre-trial processes whereby a plaintiff is on notice from the rules that failure to accept an offer or an amount paid into Court or to act on the intimation of a Magistrate in conciliation will put the plaintiff at risk as to costs. Without the defendants making an open offer or a “without prejudice” offer in which they reserved the right to bring the letter to the attention of the Magistrate on the issue of costs, they were not entitled to rely on the correspondence, and the Magistrate erred in doing so.
[15] [1984] Ch. 290.
Accordingly, the unfiled offers and negotiations may be admissible, but only where the offer is an “open offer” or where the party making the offer reserves the right to bring the letter to the attention of the Court on the issue of costs.
To determine this issue, it has therefore been necessary for me to review the material. The parties agreed I do this if I found it necessary to do so in determining the issues as to costs. I have accordingly perused the unfiled offers and negotiations which were annexed to an affidavit. None of those negotiations are expressed to be “open” nor do they at any time reserve the right to bring the correspondence to the attention of the Court. Accordingly, they are not admissible.
Was there a Rule 33 notice?
If correspondence amounted to a Rule 33 notice, it would be admissible for the reasons articulated earlier.
There is no ostensible Rule 33 notice from the plaintiff as required by that rule. The correspondence falls short of anything that would qualify as such a notice. In case I am wrong about that, the correspondence may be summarised as follows.
Some details of the claim are provided pursuant to a brief letter from the plaintiff’s solicitors seeking the entirety of the claim, dated 5 December 2008.
There are notes indicating and affidavit material to the effect that, verbal discussions occurred between the solicitor for the plaintiff and the defendants in person during January and February 2009.
Then a settlement deed reflecting a suggested settlement sum of $40,000 is simply sent by the plaintiff attached to a brief letter, for the defendants’ consideration. In reply to that, on 23 February the defendants proposed amendments which sought to preserve liability by the plaintiff to the defendants for the quality of the work per the Electricity Act, and the plaintiff refused to accept a settlement on that basis, but agreed to a term to the effect that they were not purporting to contract out of their responsibilities pursuant to the Electricity Act including their enforcement by the Office of the Technical Regulator. The defendants did not reply by 3 March 2009 when the plaintiff withdrew the $40,000 offer.
In effect, this represents an offer by the plaintiff to accept $40,000 in full and final settlement by letter dated 18 February 2009, which is rejected by the defendants’ counter-offer of 23 February to pay $40,000 while preserving their rights to claim pursuant to the Electricity Act, which is itself in turn rejected that same day by the plaintiffs. The plaintiff writes on 25 February, indicating it will settle (inferentially for the agreed sum of $40,000) if its obligations per the Electricity Act are phrased in a slightly different way but that otherwise the resolution is to be a full and final settlement between the parties. This constitutes another offer by the plaintiff to settle for $40,000, which is then not accepted by the defendants for a week, after which the plaintiffs withdraw their offer on 3 March 2009.
Overall, if I am wrong and this material were admissible and if I were to opine on the respective reasonableness of the parties’ offers in relation to this situation, it must first be observed that the quantum of the offer by each party was $5000 more than the judgment that the plaintiff ultimately received, and at a very early stage, before proceedings had commenced. (From a perusal of the accounts rendered to the plaintiff recently tendered, the plaintiff’s claimed costs had not amounted to $5000 at that stage). The plaintiff wanted the settlement to be in full and final settlement, and agreed that they would still be under their statutory obligations in respect of the work. It must be said that the offer was left open by the plaintiff for only a very brief period, and a period far less than that contemplated by Rule 33, and was withdrawn without notice. There was a degree of regrettable stubborn-ness on each part not to effect settlement at that time for that sum, in the bigger picture.
I find that this correspondence did not amount to a Rule 33 Notice and response, and it is accordingly not admissible on that basis.
And, also relevant is that the plaintiff simply did not file the required Rule 33 notice at all, which the Rules of Court plainly require it to do. Per Rule 33(7) the Court may take into account that the plaintiff did not comply with the rule. If, for example it had done so, and the offers it made were left open for the 60 days the rule allows for the defendant to reply, there would have been considerably more time for the contemplation and resolution envisaged and encouraged by the rule.
Accordingly, the only relevant material in this case is the filed offers.
The filed settlement offers
The defendants filed three Rule 187 offers.
1.   On 23 March 2009 the defendants offered $25,000 to settle the principal claim and $1000 in respect of costs. The offer noted that the plaintiff could accept the offer to settle the principal relief without accepting the offer for costs. (“the first offer”)
2.   On 2 December 2009 the defendants offered $45,000 to settle the claim and $5000 in respect of costs, but that the plaintiff could not accept the offer to settle the principal relief without accepting the offer for costs. (“the second offer”)
3.   On 7 July 2010 the defendants offered $30,000 to settle the claim and $10,000 in respect of costs but that the plaintiff could not accept the offer to settle the principal relief without accepting the offer for costs. (“the third offer”)
Rule 188 provides that if a (filed) formal offer of settlement by a defendant so far as it relates to principal relief is not accepted by the plaintiff and the Court determines the action or claim on terms (as to principal relief) that are no more favourable to the plaintiff than the terms of the offer, then subject to the Court’s overriding discretion, the plaintiff is not entitled to costs after the relevant date, and the defendant who made the offer is entitled to costs after the relevant date. The relevant date is 14 days after the service of the offer.
The plaintiff secured a judgment for $34,996. Interest at 4% from around the commencement of the action, as at the time of the second offer, would have been in very rough terms around $1000. If that is included in the concept of “principal relief”, the sum is around $36,000.
Whether or not interest is included, the plaintiff bettered the first and third offers. It did not better the second offer. There were however some unusual features about the second offer, to which I will refer later in these reasons. There is a threshold question however – did the filing of the third offer itself withdraw or supervene the second offer?
Did the filing of the third offer settlement operate to withdraw the second filed offer?
Per Rule 187(7) an offer may be withdrawn by filing and serving a notice of withdrawal of offer. I am told that none of these offers were withdrawn
The occurrence of the defendants’ third offer is potentially confusing. The higher second offer had not been withdrawn, yet a third but lower offer was filed.
For present purposes, it is sufficient to say that offers stay open until they are withdrawn by the filing of a notice of withdrawl pursuant to Rule 187(7). The scheme of statutory filed offers and filed acceptances does not operate nor should it be interpreted with reference to ordinary contractual offer and acceptance principles. Its operation was described by the Full Court in Rule Chambers v Badge Constructions [2009] SASC 70, per White J at [23]-[26]:
Rules 187 and 188 use the terminology of offer and acceptance familiar in the common law. However, in my opinion, reference to the common law concepts is of limited assistance in the construction of r 187(7).
The focus of rr 187 and 188 is not on the formation of contracts, but on the encouragement of litigants to make and accept reasonable offers of settlement. Rules 187 and 188 establish a regime for the filing and acceptance of offers and provide costs sanctions or costs benefits for doing so. The rules are not concerned with the bringing of a contract into existence. Instead, if a formal offer of settlement is accepted, the consequence is that judgment may be entered, by consent, determining the relevant action or claim on a basis which reflects the terms of the offer (r 188(5)). This does not mean that a contract may not be brought into existence by the process of filing an acceptance of an offer under rr 187 and 188, but simply that that is not the primary purpose or focus of the rules.
Furthermore, there are differences between the regime for offers and acceptances contained in rr 187 and 188 and the common law principles concerning contracts. I noted earlier that the 2006 Rules require offers of settlement and acceptances to be served on all parties to the litigation whether or not, in litigation involving several parties, the offer and acceptance concern two parties only. Further, unlike the common law position, a party is not regarded as having rejected an opponent’s offer by the later filing of its own formal offer of settlement .[16] Nor will a party be regarded as having rejected an offer by engaging in other conduct (such as taking further interlocutory steps) which would seemingly amount to a rejection of the offer. Parties who have expressly rejected a filed offer in the course of communications with the offeror may later change their minds and accept it. Further again, although it is not necessary to express a concluded view about this, the 2006 Rules do not appear to contemplate formal offers of settlement which are expressed to be open for a limited period only. Instead, offers should be able to be accepted at any time before the “relevant date” fixed by r 188(2).
My view that the common law principles of contract are of limited assistance presently is supported by a passage in the judgment of Goddard LJ in Cumper v Pothecary[17] concerning the analogous procedure of payment into Court. Goddard LJ said:
….there is nothing contractual about payment into Court. It is wholly a procedural matter and has no true analogy to a settlement arranged between the parties out of Court, which, of course, does constitute a contract.[18]
[16] Cf Heather v Vita Pacific Ltd [1996] TASSC 168 at [7]; (1996) 6 Tas R 120 at 124-25.
[17] [1941] 2 KB 58.
[18] Ibid at 67.

Hence the making of the third offer did not operate to withdraw the second offer, and each offer remained open as no notice of withdrawal was filed.
Did the plaintiff better the 2 December 2009 settlement offer?
As mentioned, the defendants’ liability to the plaintiff was assessed at trial to amount to $34,996. Interest as at the date of offer would have been, as mentioned, in the approximate region of around $1000.[19]
[19] In Davies v Chicago Boot Co Pty Ltd (No 2) [2011] SASC 197, Sulan J held at [30] that when considering an offer and its rejection, one should consider interest at the date of the offer not at the date of judgement. See also Jones v Associated Newspapers Ltd [2008] 1 All ER 240.
On 2 December 2009 the defendants offered $45,000 to settle the claim and $5000 in respect of costs, specifying that the plaintiff could not accept the offer to settle the claim without accepting the offer for costs.
From now on I will, simply for ease of reference, refer to this offer as “the offer”.
As the offer was not able to be accepted without accepting the offer as to costs, to make a full assessment of whether the plaintiff has bettered the offer it received on 2 December 2009, it seemed relevant to obtain an assessment of the plaintiff’s costs as at that date. If the judgment sum, the plaintiff’s then likely entitlement to interest, and its then reasonable costs did not exceed what the defendants offered, that will be highly relevant to the Court’s discretion as to costs,[20] particularly in light of Rule 188.
[20] Davies v Chicago Boot Co Pty Ltd (No 2) [2011] SASC 197.
Rule 188 provides that where a formal offer for settlement is made, if that formal offer of settlement so far as it relates to principal relief is not accepted by a party to whom the offer is made and the Court determines the relevant action or claim on terms (as to principal relief) that are no more favourable to the party than the terms of the offer, then, subject to the Court’s order to the contrary the party to who the offer was made is not to be entitled to costs referable to the period falling after the relevant date,[21] the relevant date being 14 days after the offer,[22] and if the offer was made by the defendant the defendant is entitled to costs referable to the period falling after the relevant date.[23]
[21] Rule 188(6).
[22] Rule 188(7).
[23] Rule 188(6)(b)(i).
Rule 188 places significant weight on whether the offer concerning the principal relief is or is not bettered. It does not deal with the situation where for example the offer for principal relief is or is not bettered but that offer could not in its terms be accepted without accepting, for example, a wholly inadequate award of costs. In those hypothetical circumstances, in my view the offeror should not necessarily receive the full benefit of an order for costs based on the principles articulated in Rule 188 without further consideration of the fact that the offer as to principal relief could not be accepted without accepting the inadequate costs offer. The fairest approach in those circumstances, depending on the circumstances, is to bear the provisions of Rule 188 in mind but also consider the totality of the offer, costs and estimated interest as at that time included, in determining the most appropriate exercise of the costs discretion.
In this matter, as mentioned, so that an assessment could be made of whether the plaintiff bettered the defendants’ 2 December 2009 offer, I directed that the plaintiff’s costs be taxed from the commencement of the action to the ‘relevant date’ as defined in Rule 188(7), of 16 December 2009. That order was made on 4 November 2011.
The master has now reported the outcome of the taxation.[24]
[24] Report of Master Norman dated 9 November 2012.
The report indicates that regrettably it took until 13 April 2012 for the plaintiff to file a schedule of claimed costs in taxable form. A taxation promptly listed for 23 April 2012 was vacated by the parties, and ultimately the taxation occurred on 16, 17 and 23 July 2012. The parties ventilated various other arguments to the master necessitating rulings by the master, including arguing previous costs issues which had been reserved at an earlier time by the master. The master ruled on some matters on 23 August 2012, on further matters on 23 October 2012, and some other matters were agreed by 7 November 2012. The master provided a report dated 9 November 2012. The matter came back before me and it was agreed that final written submissions would be provided by 30 November 2012, which indeed both parties have done.
The Master taxed the plaintiff’s costs for the period requested at $4,494.25, inclusive of all costs, disbursements, counsel fees, reserved items and multiplier increase.
The Court’s judgment was $34,996 which together with $1000 notional interest, totaled $35,996 of “principal relief” inclusive of interest as at December 2009. The defendant offered $45,000 principal relief. The plaintiff’s judgment fell well short of the defendants’ offer.
Accordingly the Court determined the claim “on terms (as to principal relief) that are no more favourable to the party than the terms of the offer”, such that Rule 188 would provide that subject to any order to the contrary the defendants should have their costs subsequent to 16 December 2009.
As the defendants’ offer could not be accepted without accepting the costs offer, it is relevant to look at that as well. The plaintiff’s taxed costs from the commencement of the action as at 16 December 2009 were $4,494.25. The defendant offered $5000 costs as at that date.
Hence the defendant bettered the plaintiff’s offer both as to principal relief and as to costs.
Looked at in toto, the defendant substantially bettered what it offered the plaintiff on 2 December 2009. It offered to pay $50,000. The plaintiff got judgment for $34,996, which plus $1000 notional interest as at December 2009 and $4,494.25 taxed costs as at December 2009, totals $40,490.25.
Was the 2 December 2009 settlement offer a valid formal offer of settlement within the meaning of Rule 187
The plaintiff submits that there were a range of aspects to the offer that render it not an effective or compliant Rule 187 offer. I set out the offer in full;
OFFER OF SETTLEMENT
The defendants, Antonia Karydis-Frisan OFFER pursuant to Rule 187 to settle the whole of the Plaintiff’s claim on the following terms:
1.The defendants will pay to the Plaintiff the sum of $50,000.00 in total inclusive of interest and costs (offer).
2.Of the total amount of the offer, $45,000.00 relates to the principal relief sought by the Plaintiff (including interest) and $5000.00 relates to costs.
3.The offer as to the principal relief may not be accepted without accepting the offer as to costs and vice versa (the offer as to costs cannot be accepted without accepting the offer in respect of the principal relief).
4.Subject to paragraphs 6 and 7, the parties will enter into a Deed of Release and Discharge releasing each other from any further claims in respect of works carried out by the Plaintiff at 28 Mellor Avenue Lockleys, South Australia.
5.The Plaintiff’s claim in action No. 300 of 2009 will be discontinued with no order as to costs.
6.The offer does not relate to the counterclaim which the defendants intend to bring against the Plaintiff, however if the Plaintiff accepts this offer before close of business on 18 December 2009, the defendants will not institute any counterclaim.
7.After the Defendants’ counterclaim has been filed and served, this offer may be accepted up until the relevant date as prescribed by the Rules (unless withdrawn pursuant to 6R.187(7) on the basis that the amount of the counterclaim plus $5,000 in respect of the Defendants’ costs is deducted from the total amount of the offer.
(Signed – solicitor for the defendants - dated 2/12/09)
Rule 187 prescribes very little concerning the contents of a Rule 187 offer. Plainly, it must be “an offer of settlement”[25], and may relate to some or all of the claims made in the proceedings[26], and may relate just to principle relief or to both principal relief and costs. Rule 187(3) sets out the only ostensible requirements for the content of a Rule 187 offer.
(3)The offer must-
be in an approved form; and
a.   if the offer relates to some, but not all claims involved in the proceedings – state to which claims it relates; and
b.   state whether the offer relates to costs and, if so, the amount of the offer so far as it relates to costs; and
c.   if the offer relates to both principal relief and costs – state whether the party to whom the offer is made may accept the offer of principal without also accepting the offer as to costs,
and a copy of the offer must be served on all other parties to the action.
[25] Rule 187(1).
[26] Rule 187(3)(b).
The offer is in the “approved form” as prescribed by Form 23 to the Rules, and ostensibly compliant with the terminology of Rule 187(3). Further, it purports to be and is per its own terms expressed to be an offer pursuant to Rule 187.
There are however some aspects of this offer which introduce elements of potential complication and uncertainty. The defendants’ offer was expressed to be for a full and final settlement of claims arising out of the building works the subject of the claim, subject however to the introduction of the concept of a foreshadowed counter claim which it said the defendants “intend to bring” against the plaintiffs, unless the offer were to be accepted within 16 days of the offer.[27]
[27] The offer being dated 2/12/09, stating that if it is accepted by 18/12/09 then the defendants would not institute a counterclaim.
As can be seen from its terms, the offer is phrased so that it purported to operate in more than one way, depending on when it was accepted and whether at the time it was accepted a counter claim had been filed and served.
On its terms however, the offer was ostensibly an offer of $45,000 plus $5000 costs in full and final settlement of all claims arising out of the works the subject of the claim, open to be accepted for a period of 16 days.
On its ostensible terms, on the expiration of that 16 days but prior to the instigation of any counterclaim, the offer could still be accepted by the plaintiff, but it would not operate as a resolution of any unspecified counterclaim, which if instigated would presumably proceed as a separate claim by the defendant against the plaintiff.
Despite the lack of finality in terms of related claims between parties not being resolved, it is plain that Rule 187(3)(a) contemplates that a Rule 187 offer does not need to relate to all the claims involved in the proceedings, and could accordingly exclude, for example, a foreshadowed counter claim. The Rule appears in this respect to reflect a philosophy that matters capable of settlement should be settled, even if there are some matters the parties cannot settle.
Further, on its ostensible terms, upon the filing and serving of the foreshadowed counterclaim the offer would become potentially much less attractive. On its ostensible terms the offer by the defendants, upon the filing and service of a counterclaim, whenever that might be, could still be accepted “on the basis that the amount of the counterclaim plus $5,000 in respect of the Defendants’ costs is deducted from the total amount of the offer”. That aspect of the filed offer is more problematic, even on its own terms. It seems to be saying that the offer, after the filing of a foreshadowed counter claim, will at that time be for the $50,000 less whatever the claimed amount of the counterclaim might be per its terms and less a nominated $5000 in costs. That sum might in fact be nothing at all, if the counterclaim plus $5000 exceeded the filed offer.
On its terms however, all these uncertainties would not come into effect unless and until the counterclaim were indeed filed. Up to and until that filing, the plaintiff could seemingly accept the defendants’ offer in relation to the plaintiff’s claim and be paid it, without conceding any subsequent counter claim. If a claim or counterclaim were then filed after the offer was accepted, the counterclaim would not be deducted from the settlement, but would need to be litigated in the ordinary way. No counterclaim was ever filed, so the highly problematic consequences just discussed never came into play, and the offer to settle the plaintiff’s claim, albeit reserving the right to file a counterclaim, seemingly remained on the table.
I find that this is the way the 2 December 2009 offer operated.
For the first 16 days the offer could be accepted, and it would operate as a full and final settlement between the parties of all issues arising from the building work the subject of the claim. After 16 days, it could still be accepted as a settlement of the plaintiff’s filed claim, but not as a resolution of any other claim or counter claim that the defendants might subsequently make against the plaintiffs. If after the 16 days the defendants filed and served a counter claim, the offer was still to settle the plaintiff’s claim for $50,000, but less the amount specified in the counter claim and $5000 for costs.
As no counter claim was ever filed, the defendants’ offer to pay $50,000 for full and final settlement was open from 2 December 2009 to 18 December 2009, then the offer to settle the plaintiff’s filed claim for $50,000 but preserving a right to pursue a counterclaim remained open at all times. That right appears to be recognized in Rule 187(3)(b).
It must be said however, that being asked to pay out on a claim without the resolution of a foreshadowed yet unspecified counterclaim arising out of the same events is a potentially complicating factor. In that event the proposed settlement would not be a full and final settlement between the parties of all matters between them, but only of the filed claim at that time. Yet the resolution of some but not all claims between parties is plainly contemplated by the Rule.
A further aspect to Rule 187 is that per Rule 187(7) where a filed offer is withdrawn, subject to any Court order to the contrary, the offer will be treated as if it had never been made. No doubt this is to strongly encourage offers not to be withdrawn, by withdrawing the benefit to a party provided by a Rule 187 in its entirety should the offer be withdrawn. It would be a little incongruous, for example, if a Rule 187 offer expressed to be for a limited time could be filed and not withdrawn, enabling the filer to have the benefit of Rule 187 in circumstances where if an unqualified offer had been filed and withdrawn after exactly the same period, it would be treated per Rule 187(7) as if it had never been made. In that respect, Rule 187 provides that as a general rule parties should only have the benefit of a Rule 187 offer if the offer remains open until the time when costs are considered. The Rule does however recognize the court’s overarching costs discretion, in that the requirement that a withdrawn offer be treated as if it has never been made is expressly subject to the proviso “subject to any Court order to the contrary”. So, plainly the Court can still have regard to a Rule 187 offer that has been withdrawn, if it determines that it should do so.
In Rule Chambers Pty Ltd v Badge Constructions (SA) Pty Ltd [2009] SASC 70 (“Rule Chambers”) White J, with whom the other two members of the Full Court concurred, said that while it was not necessary in that case to express a concluded view about it, that the Rules did not appear to contemplate formal offers of settlement which are expressed to be open for a limited period only, as, instead, offers should be able to be accepted at any time before the “relevant date” fixed by Rule 188(2).
These are some of the matters which support differing interpretations of Rule 187.
Of course Rule 187 as delegated legislation can inform but not limit or diminish the clear and wide statutory discretion the Court has pursuant to section 42 of the District Court Act, although as earlier observed section 67 of the Evidence Act limits what materials the Court may consider on the issue of costs.
The occasional incongruities that might arise from a particular interpretation of the Rules are all accordingly subject to the Court’s overarching costs discretion which Rules 187 and 188 are careful not to purport to exclude. That overarching discretion allows the occasional incongruity to be managed appropriately in the interests of justice and a fair outcome.
In the final analysis in my view a document purporting to be an offer within the meaning of Rule 187 will constitute such an offer so long as it:
1.   Is in the prescribed form.[28]
2.   Offers to settle at least one of the claims made in the filed proceedings between the parties.[29]
3.   If the offer relates to some but not all of the claims involved in the proceedings - states to which claim it relates.[30]
4.   States whether the offer relates to costs and, if so, the amount of the offer so far as it relates to costs.[31]
5.   If the offer relates to both principal relief and costs – states whether the party to whom the offer is made may accept the principal without also accepting the offer as to costs.[32]
6.   Is not expressed to expire in its entirety at a specified time.[33]
[28] Rule 187(3)(a).
[29] Rule 187(3)(b).
[30] Rule 187(3)(b).
[31] Rule 187(3)(c).
[32] Rule 187(3)(d).
[33] Rule Chambers Pty Ltd v Badge Constructions (SA) Pty Ltd [2009] SASC 70 at [24].
Where an offer is filed in accordance with these requirements, in my view it will properly be characterized as a formal offer of settlement within the meaning of Rule 187.
Where the offer is an unconditional and unqualified offer to settle a claim, Rule 188 will constitute strong guidance as to the appropriate exercise of the District Court’s costs discretion. The more the offer contains further or other conditions and contingencies which render the offer less easily able to be accepted, or less able to be accepted without change or qualification for the full period from the date of filing of the offer, then the less guidance Rule 188 may well provide as to the ultimate exercise of the costs discretion.
Ultimately, the test is to determine whether the 2 December 2009 offer of settlement is properly characterized as a formal offer of settlement within the meaning of Rule 187. In my view, it offered to settle the plaintiff’s filed claim for $50,000 inclusive of costs. It conveyed the further information that the defendants would agree not to make a counter-claim against the plaintiff if the settlement were accepted within a set time. It also purported to say that the offer would be varied to deduct the amount of a filed counterclaim and $5000, if the offer was not accepted prior to such counterclaim being filed. In other words it purported to vary the offer subject to a future contingency, which may never have, and indeed never did, happen.
Ultimately, whilst in my view it did constitute a formal offer to settle within the meaning of the rules, it added other conditions and contingencies that had the potential to significantly affect the ease of acceptance of the offer over the full period between the filing of the offer and the ultimate costs application. No doubt those conditions and contingencies were added to strongly encourage the acceptance of the offer while it remained unconditional for the first 16 days. As no counterclaim was ever filed however, the $50,000 offer remained open and able to be accepted at all times. The offer that was open after the expiration of the 16 days was still an offer to settle the plaintiff’s claim in its entirety, but notified the plaintiff that the defendants reserved the right to pursue a counter-claim.
At law, the defendants would have retained the right to pursue some other claim against the plaintiff in any event, if they had a viable other cause of action. However if that cause of action arose out of the plaintiff’s conduct in performance of the work he did, that would not necessarily be the case. Depending on what the counter claim related to, which was likely to be the degree to which the work was done badly (if the defendants’ evidence at trial is any guide, which of course it may not be), as the plaintiffs claim was a quantum meruit claim, and a settlement of that claim might amount to an agreement that the plaintiff’s work was worth the settlement sum, then it may not be open to in effect litigate in subsequent proceedings that it was not worth what the settlement agreed it was worth because it was done badly. The quality of the work was an issue at trial in the context of a quantum meruit claim about what the work was worth and whether remediation was required. Potential pleas of res iudicata or abuse of process may be available to prevent further litigation between the parties concerning the quality of the work. So, depending what the foreshadowed never-commenced counter claim was, and when it was made, once the plaintiff accepted the defendants’ offer to settle his quantum meruit claim offer concerning the work, it is possible that the defendants may have been barred from initiating a further claim after that time. Necessarily this discussion involves a high degree of speculation, as no claim was ever made.

The discussion itself does however highlight the potential uncertainty introduced by the qualifications and contingencies that were contained in the defendants’ 2 December 2009 offer.
Conclusion as to the effect of the 2 December 2009 settlement offer
The filed 2 December 2009 settlement offer was an offer within the meaning of Rule 187.
The offer to settle the plaintiffs filed claim for $50,000 ($45,000 as to principal relief and $5000 as to costs) in fact remained open at all times.
This offer was not bettered by the plaintiff within the meaning of Rule 188.
The offer did introduce an atmosphere of uncertainty by foreshadowing a (never filed or pursued) counterclaim but agreeing not to pursue it if the unqualified offer were accepted within 16 days.
The offer did purport to reduce, upon filing of a (never actually filed or pursued) counterclaim by the amount of that counterclaim and $5000 costs. This introduced a further atmosphere of uncertainty. However, as no counterclaim was ever filed, the $50,000 offer on its own terms never reduced and remained able to be accepted at all times.
If the $50,000 offer was accepted prior to the filing of a counterclaim, the filing of the counterclaim would have had no effect on the accepted offer, and the counterclaim would have had to be litigated the same as any other claim the defendant might elect to file and pursue against the plaintiff.
Accordingly, as mentioned, the $50,000 filed offer remained open at all times.
Discussion
I take into account everything put on the topic of costs, and the totality of the circumstances of the matter. I have not mentioned everything in this ruling, which I fear is already far too long, but I have considered everything, including all the matters argued orally and in the several written outlines and submissions provided. I have considered all the legal arguments raised in arriving at my conclusions generally, and about the meaning and application of the rules, and about the adequacy or otherwise of the filed offers, in particular the meaning and validity of the crucial 2 December 2009 offer.
I have considered on what basis any such order or orders should be made, whether on a party/party, solicitor/client or indemnity basis.
I take into account that no Rule 33 offer was served. I also take into account counsels’ submissions together with the materials referred to in relation to that issue. In short, the plaintiff’s position is that it did make attempts to settle the matter during the time when a Rule 33 offer would have been in operation if it had been served, however for the reasons previously foreshadowed little of that material is admissible.
I am of the view in all the circumstances that if a Rule 33 offer had been filed by the plaintiff which remained open for the time envisaged by the rules, that would have substantially increased the chance that this matter would have settled at the outset.
I take into account that the defendants filed a Rule 187 settlement offer on 2 December 2009, which the plaintiff did not better within the meaning of Rule 188. It was never withdrawn and the counterclaim foreshadowed therein was never filed. The offer of $50,000 therein remained open and able to be accepted at any time and was not withdrawn. Rule 188 suggests that the defendants be entitled to their costs from 14 days after this event.
A subsequent lesser filed offer did not operate to invalidate, supersede or withdraw the 2 December 2009 offer.
However the 2 December 2009 offer contained contingencies which brought with them an element of uncertainty, by threatening and preserving the risk of a future counter claim. This did not invalidate the Rule 187 offer, but rendered it less attractive as it meant that the settlement would not be a full and final settlement between the parties over the electrical work at the root of the plaintiff’s claim. It purported to vary the offer should such counterclaim be filed prior to the offer being accepted. No counterclaim was ever filed, so no purported variation to the offer ever purported to occur, so the full $50,000 offer remained open at all relevant times.
In relation to the claim itself, I take all aspects of the case into account. Notwithstanding that the plaintiff did on any analysis a very substantial amount of electrical work for the defendants, the defendants paid only a very small proportion of what it was worth, and when the proceedings had commenced and they had filed their defence did not pay even what on their case they said was owing.
I take into account that neither the plaintiff nor the defendants were credible witnesses in the trial and in particular that the plaintiff attempted to support his claim with claims as to his work, in particular his work sheets, that were simply not credible.[34]
[34] Rapuano (Trading as Raps Electrical) v Karydis-Frisan and Frisan [2011] SADC 122 at [394]-[397].
I cannot leave this case without observing with great regret, particularly in light of comments made from the bar table indicating that the overall costs charged by the parties’ legal representatives may together well exceed $300,000 in toto, that the lawyers’ fees for litigating this matter have far exceeded the sums realistically in dispute in the action. In light of the mutual expert evidence called in the case, the real compass of dispute about the value of the electrical work was realistically perhaps in the region of a tenth of that figure. In that event, in the absence of an order for full indemnity costs to one party, it was on the cards that neither party was likely to ultimately come out ahead in the action.
It is a matter of great disappointment that in those circumstances a commercial resolution was not agreed at an early stage, whether by more sensible attitudes from the parties or more realistic advice to the parties about the costs and risks of litigation by the legal representatives concerned.
In the final analysis I propose to take everything into account in making a simple overall ‘broad axe’ assessment of costs. Clarity and simplicity will I hope enable the resolution and payment of costs to occur with as little further legal cost to the parties as practicable.
Conclusion
In the final analysis, in the exercise of the Court’s discretion, I order that,
1.Subject to any other costs orders made to date,[35]
[35] I note that on 23 August 2012 Master Norman ordered that the defendants are to have their costs of and incidental to their successful application FDN5 for further and better particulars of claim made on 12 June 2009 and the argument following it and of the amendment of the statement of claim and subsequent amendment to the defence in any event. Further, that the defendants recover from the plaintiff in any event their costs occasioned of and incidental to their successful application FDN8 for an order relieving them of any obligation to respond to the notice to admit (to be assessed on a party/party basis) which is to also include their perusal and consideration of the plaintiff’s first notice to admit FDN7. Further, that the costs of and incidental to the argument before the master on 26 July 2012 relating to the costs of FDN 5 and FDN 8 be the defendants’ costs in any event. These and any other previous costs orders will stand.
2.The defendants pay 70% of the plaintiff’s costs up to and including 16 December 2009, on a party/party basis.
3.The plaintiff pay 85% of the defendants’ costs subsequent to 16 December 2009, on a party/party basis.[36]
[36] This order includes the costs of the enquiry before the master that were reserved by the master to me. I note that such costs and their basis were reserved to me. I have taken what happened before the master into account, and the outcome of the enquiry by the master into account in determining the ultimate orders, rather than making a separate order in relation to those costs. I have taken that course for clarity and simplicity’s sake.