SMA v John XXIII College (No 3)
[2020] ACTSC 236
•4 September 2020
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | SMA v John XXIII College (No 3) |
Citation: | [2020] ACTSC 236 |
Hearing Dates: | 3 September 2020 |
DecisionDate: | 4 September 2020 |
Before: | Elkaim J |
Decision: | See [29] |
Catchwords: | CIVIL LAW – APPLICATION – Costs – Offers of compromise – acceptance period – reasonable in the circumstances – stay pending appeal |
Legislation Cited: | Court Procedures Rules 2006 (ACT) rr 1002, 1010 |
Cases Cited: | Forge v Rewers (No 2) [2017] ACTSC 273 |
Parties: | SMA (Plaintiff) John XXIII College (First Defendant) |
Representation: | Counsel A Bartley SC with J Ronald (Plaintiff) J Chapman (First Defendant) |
| Solicitors Shine Lawyers (Plaintiff) Sparke Helmore Lawyers (First Defendant) | |
File Number: | SC 354 of 2018 |
ELKAIM J:
The primary judgment in this matter was delivered on 7 August 2020 (SMA v John XXIII College (No 2) [2020] ACTSC 211). The result was a verdict for the plaintiff against the first defendant in the sum of $420,201.57 plus costs. I gave leave to the parties to apply if any alternative costs order was sought.
The plaintiff has applied for such an order. The first defendant has requested a stay of the judgment. I will deal with the stay first.
Consistent with my primary judgment, I will refer to the first defendant as the defendant.
The stay application
The stay was initially sought by the defendant immediately after I published the judgment. The request was made notwithstanding that the lawyer present had not yet had an opportunity to read my reasons. Presumably those instructing her took the view that my simply finding in favour of the plaintiff was enough to justify a stay.
The appropriate manner of seeking a stay was summarised by Judge Levy in Jaijeh v Woolworths Ltd (No 2) [2010] NSWDC 253, from [19]:
19.The onus is on the defendant to establish grounds for ordering a stay so as to justify a departure from the general rule that the plaintiff is entitled to the benefit of a judgment: Alexander v Cambridge Credit Corporation Ltd [1985] NSWLR 685 at [694E].
20.The onus on the defendant is discharged if the defendant can show first, that there is no reasonable probability of retrieving the damages paid pursuant to a judgment in the event of a successful appeal, and secondly, that there should be reasonably arguable grounds of appeal : Andrews v John Fairfax & Sons [1979] 2 NSWLR 184, per Maxwell J at 189B, citing the remarks of Sugerman P, in Bridges v Consolidated Press Ltd, NSW Court of Appeal, unreported, 16 June 1970. These principles have been more recently confirmed in Adeels Palace Pty Ltd v Moubarack; Adeels Palace Pty Ltd v Najem (No 2) [2009] NSWCA 130 per Hodgson JA at [2].
At the commencement of the hearing yesterday, the defendant came closer to meeting the requirements set out in the preceding paragraph. An Application in Proceeding was filed seeking a stay and referring to matters concerning the plaintiff’s financial position. However no draft Notice of Appeal was attached nor was any statement made referring to the merits of an appeal. I was informed that senior counsel was drafting a Notice of Appeal which would be ready to be filed within the 28 day period.
Ultimately, after some discussion, an agreed position was reached in which a stay would be granted on condition that a Notice of Appeal was filed by 4:00pm on 7 September 2020 and an amount of $20,000 was paid to the plaintiff within seven days. The appropriate orders are set out below. It is implicit that any extension of time required for the filing of the Notice of Appeal is granted.
The costs application
The specific order sought by the plaintiff is as follows:
In lieu of the costs order made on 7 August 2020, the first defendant is to pay the plaintiff’s costs of the whole of the proceedings on a solicitor and client basis.
The entitlement to the order arises from an Offer of Compromise made by the plaintiff on 28 July 2020 informing the defendant that she would settle her claim on the basis of a verdict and judgment against the (first) defendant in the sum of $400,000 plus costs to be agreed or assessed.
The order was made in accordance with r 1002 of the Court Procedures Rules 2006 (ACT). This rule is in the following terms:
1002Making offer
(1)A party may, by written notice, make an offer to another party to compromise any claim in proceedings, either in whole or in part, on stated terms.
(2)An offer under this rule must—
(a) identify—
(i) the claim or part of the claim to which it relates; and
(ii) the proposed orders for disposal of the claim or part of the claim including, if a monetary judgment is proposed, the amount of the judgment; and
(b) if the offer relates only to part of the proceedings, include a statement—
(i) for an offer by the plaintiff—stating whether the remainder of the proceedings will be abandoned or pursued; or
(ii) for an offer by a defendant—stating whether the remainder of the proceedings will be defended or conceded; and
(c) not include an amount for costs or state that it is inclusive of costs; and
(d) state that the offer has been made in accordance with this part; and
(e) state the period of acceptance.
(3)An offer under this rule may propose—
(a) a judgment in favour of the defendant—
(i) with no order as to costs; or
(ii) despite subrule (2) (c), with an order that the defendant will pay to the plaintiff a stated amount for the plaintiff’s costs; or
(b) that the costs as agreed or assessed up to the time of the offer will be paid by the person making the offer; or
(c) that the costs as agreed or assessed on a party and party basis or indemnity basis will be paid out of a stated estate or fund identified in the offer.
(4)If the offeror makes an offer before the offeree is given particulars of the offeror’s claim, and documents available to the offeror necessary for the offeree to properly consider the offer, the offeree may, within 14 days after receiving the offer give notice to the offeror that—
(a) the offeree is unable to assess the reasonableness of the offer because of the lack of particulars or documents; and
(b) if rule 1010 applies—the offeree will seek an order under rule 1010 (2).
(5)The end of a period of acceptance for an offer—
(a) for an offer made 2 months or more before the date set down for the start of the trial—must be not less than 28 days after the day the offer is made; and
(b) in any other case—must be after a period that is reasonable in the circumstances.
(6)Unless the notice of offer otherwise provides, an offer providing for the payment of money or doing of an act is taken to provide for the payment or doing of the act within 28 days after the offer is accepted.
(7)Unless the notice of offer otherwise provides, an offer is made without prejudice.
(8)A party may make more than 1 offer in relation to the same claim.
(9)Unless the court orders otherwise, an offer may not be withdrawn during the period of acceptance for the offer.
(10)A notice of offer purporting to exclude, modify or restrict rule 1010 or rule 1011 is invalid.
The sum expressed in the offer is less than the verdict sum that I awarded. Prima facie therefore the plaintiff is entitled to the order that she seeks.
The defendant accepted that the offer made by the plaintiff was compliant in form with the rule. The defendant however submitted that the requirement in subrule (5)(b), that the offer must have been open for acceptance for a period “that is reasonable in the circumstances”, had not been met.
In addition, in case I was against the defendant on the timing issue, the defendant submitted that I should order otherwise pursuant to r 1010(2).
It was agreed by the parties that the plaintiff’s offer was made at 5:20pm on 28 July 2020 and, as seen in the offer, was expressed to be open until 10:00am on 29 July 2020.
The hearing of the matter commenced on 13 July 2020 and concluded on 29 July 2020. The offer was therefore made on the penultimate day of the hearing. It was made after the close of business and remained open until the commencement of the hearing on the final day.
The plaintiff submitted that the period during which the offer remained open was “reasonable in the circumstances”. The circumstances were submitted to include the following:
(a)The defendant’s conduct both before and during the hearing in relation to its obligation to discover relevant documents.
(b)The history of the offers by the parties, leading up to the final offer on 28 July 2020. The various offers can be seen in the Annexure to these reasons.
(c)Specifically, as to the defendant’s offers, the limited time during which they were open.
There is no doubt that the defendant’s conduct in relation to discovery was lamentable. I do not attribute this to the legal representatives. It is clear that the instructions received from the defendant were such that the legal representatives were confined to what seemed to be a drip feed approach by the defendant. This is consistent with other matters that I referred to in the primary judgment. For example, at [19] of the primary judgment, I described the defendant’s use of a photograph to create an obviously misleading impression of the defendant’s approach to the drinking of alcohol by College residents.
An examination of the offers made by the defendant reveals that on some occasions the offer was open only for a limited time. The most obvious is the offer on 15 July 2020 which was made at 1:27pm and open until 5:00pm.
My initial reaction to the plaintiff’s submissions was that the conduct of the defendant and the limited time during which the defendant’s offers were open are not relevant to the reasonableness of the time during which the plaintiff’s offer was open. I was however referred to the decision of the ACT Court of Appeal in Koundouris v The Owners – Units Plan No 1917 (No 2) [2017] ACTCA 47 in which a similar issue arose. The Court stated at [25]:
It is difficult to understand how the cross-appellant could not have given reasonable notice if the notice is similar to, or longer than, the notice given by the cross-respondent.
The question of reasonableness was discussed by Mossop J in Forge v Rewers (No 2) [2017] ACTSC 273 from [25]:
25. Rule 1002(5) requires that an offer made less than two months before the date set down for the start of the trial must be open for a period “that is reasonable in the circumstances”. In Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 at [20], Basten JA (with whom Giles and Tobias JJA agreed) identified matters that needed to be considered in order to determine whether the time during which an offer of compromise was open was reasonable in the circumstances:
In considering whether the time allowed for acceptance is “reasonable in all the circumstances” once a trial commences, or indeed final preparation commences, three factors come into play. The first is that both parties may reasonably be expected to have a clear perception of the strengths and weaknesses of their positions, so that the reasonableness of a particular offer may be speedily assessed. Secondly, because significant costs will be accruing on a daily, even an hourly basis, there is a heightened incentive to respond within the time permitted. Thirdly, and counterbalancing the first factor, the need to address the terms of an offer, provide advice and obtain instructions will often be a significant distraction from final preparation.
26. His Honour’s judgment also identifies (at [22]) that the question of reasonableness:
must be judged objectively, in the circumstances known, all which should reasonably have been anticipated, by both parties. In setting the time during which the offer is to remain open, the offer or must necessarily rely upon the circumstances as known to it, or which should reasonably be anticipated by it.
Applying these factors to the present case, by the time the offer was made the defendant would have been acutely aware of the issues in the case and the implications of the evidence that had been placed before the Court. The offers made by the defendant seem to indicate a belief that its position was strong and victory was likely. However, even based on its own evidence, and in particular on the evidence of its only witness, Mr Johnston, the defendant should have been aware that its primary legal argument, concerning the extent of the duty of care they owed to the plaintiff, was doomed to failure. As I remarked during the case, the defendant’s assertion that it owed no greater a duty to the plaintiff than that of an occupier, was untenable. It was even a position rejected by Mr Johnston.
I appreciate that by the time of the plaintiff’s offer, the case was nearing completion. However an examination of the transcript reveals that the defendant’s submissions had been made the day before, and on the final day the defendant’s contribution was limited to, in the words of counsel:
If I could just tidy up a couple of matters from yesterday?
I am satisfied therefore that the end of the period of acceptance for the offer was reasonable in the circumstances.
The next issue is whether I should order otherwise. The defendant again highlighted the offer being at the very end of the case and pointed out the significant consequences of the order because its import would be felt all the way back to the commencement of the proceedings. In addition, the defendant submitted that the offer was exceeded by only about $20,000 and this included a component of aggravated and exemplary damages of $30,000. The latter figure was at large and would have been difficult to assess by the defendant.
The purpose of the cost rules is to promote settlement. The fact that an offer is exceeded by only a small amount is in my view of little relevance. Further the award for aggravated and exemplary damages was significantly less than the amount claimed by the plaintiff and should have been well in the contemplation of the defendant.
There is however one point on which I agree with the defendant, that is the overwhelming effect that an order would have because it is backdated to the beginning of the proceedings. I asked the defendant if my discretion to order otherwise allowed me to adjust the period during which the defendant was liable for costs on a solicitor and client basis. The defendant said I had that option. The plaintiff however said I did not; the rules did not permit such an intervention, either the Offer of Compromise applied to its full effect or it did not.
Costs are always ultimately at the discretion of the Court. That discretion should be exercised to achieve a just result. As stated by the High Court in Gray v Richards (No 2) [2014] HCA 47; 89 ALJR 113, at [2]:
The disposition of costs is within the general discretion of the Court. Ordinarily, that discretion will be exercised so that costs are awarded to the successful party, but other factors may have a significant claim on the discretion of the Court. The disposition which is ultimately to be made in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires.
(Citations omitted)
In my view justice requires that I should order otherwise by limiting the time during which costs are to be assessed on a solicitor and client basis. I think this time should commence on the first day of the hearing when the defendant would have begun to appreciate the strength of the case against it. I also think it is relevant to note that the plaintiff’s offer made on 15 July 2020 for $850,000 plus costs was significantly above the verdict sum and constituted an offer that the defendant could appropriately refuse.
The orders of the Court are as follows:
(a)In respect of the stay application, the judgment is stayed on the following conditions:
(i)
The defendant is to file and serve a Notice of Appeal before 4:00pm on
7 September 2020.
(ii)The defendant is to pay to the plaintiff’s solicitors, on behalf of the plaintiff, the sum of $20,000 within seven days from the date of these orders.
(b)In respect of the costs application, the following orders are made in lieu of the costs order made on 7 August 2020:
(i)Subject to Order (c), the defendant is to pay the plaintiff’s costs of the proceedings, those costs are to be assessed on a solicitor and client basis from, and including, 13 July 2020.
(c)Each party is to pay its own costs of the applications heard on 3 September 2020.
| I certify that the preceding twenty-nine [29] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Elkaim. Associate: Date: 4 September 2020 |
Annexure
| Offering party | Date (and time) made | Amount (and type of offer) | Offer valid until |
| Plaintiff | 4 September 2019 | $900,000 (Court Procedures Rules and alternatively, Calderbank) | 2 October 2019 |
| Defendant | 14 July 2020 (1:29pm) | Nil – discontinuance of proceedings with each party to bear their own costs | 15 July 2020 (9:00am) |
| Plaintiff | 15 July 2020 | $850,000 (Court Procedures Rules and alternatively, Calderbank) | 17 July 2020 (9:00am) |
| Defendant | 15 July 2020 (1:27pm) | Nil – discontinuance of proceedings with each party to bear their own costs | 15 July 2020 (5:00pm) |
| Defendant | 20 July 2020 (2:15pm) | Nil – discontinuance of proceedings with each party to bear their own costs | 21 July 2020 (9:00am) |
| Plaintiff | 21 July 2020 | $800,000 (Calderbank) | 22 July 2020 (9:00am) |
| Defendant | 21 July 2020 (1:41pm) | Nil – discontinuance of proceedings with each party to bear their own costs | 22 July 2020 (9:00am) |
| Plaintiff | 27 July 2020 | $500,000 (Court Procedures Rules and alternatively, Calderbank) | 28 July 2020 (2:00pm) |
| Plaintiff | 28 July 2020 (5:20pm) | $400,000 (Court Procedures Rules and alternatively, Calderbank) | 29 July 2020 (10:00am) |
Chronology of Offers
4
5
1