Smith v Jovanoska (No 2)
[2013] VSC 714
•18 December 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
COMMERCIAL COURT
S CI 2011 05718
| PETER GLEN SMITH | Plaintiff |
| v | |
| DRAGICA JOVANOSKA and HOCKING STUART (WILLIAMSTOWN) PTY LTD | First Defendant Second Defendant |
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JUDGE: | ZAMMIT AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 10 December 2013 | |
DATE OF JUDGMENT: | 18 December 2013 | |
CASE MAY BE CITED AS: | Smith v Jovanoska & Anor (No 2) | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 714 | |
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COSTS – Indemnity costs – Unreasonably fails to accept – Rule 26 of the Supreme Court (General Civil Procedure) Rules 2005.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R. Morrow | Slater & Gordon |
| For the Firstnamed Defendant | Mr C. Hanson | Turks Legal |
| For the Secondnamed Defendant | Mr S. Carson | Norris Coates |
HER HONOUR:
Introduction
The first defendant seeks an order for her costs on an indemnity basis from 2 October 2013.
The first defendant relies on an offer of compromise served on the plaintiff on 30 September 2013 in which the first defendant offered to compromise the proceeding in so far as it related to her by paying the plaintiff $40,000 inclusive of costs.
Pursuant to Rule 26.02(4) of the Supreme Court (General Civil Procedure) Rules 2005 (“the Rules”):
An offer of compromise must state either –
(a)that the offer is inclusive of costs; or
(b)that the costs are to be paid or received, as the case may be, in addition to the offer.
The terms of an offer of compromise must be stated clearly and precisely.
Counsel for the plaintiff submits that the terms of the first defendant’s offer of compromise are imprecise, in particular, “inclusive of costs”. Counsel for the plaintiff submits that given the imprecision in the terms of the offer of compromise, the offer does not constitute a proper offer of compromise.
Plaintiff’s counsel submits that the failure to specify whether the costs sought in the offer of compromise are on a party/party basis or some other basis, demonstrates the imprecision in the wording of the offer of compromise.
I do not agree with the plaintiff’s submission. Reference to cost can be easily understood in the offer, as costs under the Rules. Pursuant to Rule 63.28, costs are to be on a party/party basis up to 1 April 2013 and thereafter on a standard basis. Rule 63.90 is headed ‘Transitional Provisions’ and is in the following terms:
63.90Transitional provisions – Supreme Court (Chapter 1 New Scale of Costs and Other Costs Amendments) rules 2012
For the avoidance of doubt, these Rules, as amended by the Supreme Court (Chapter 1 New Scale of Costs and Other Costs Amendments) Rules 2012, apply to all things done or required to be done or omitted to be done on or after 1 April 2013, in, or in relation to, any proceeding in the Court, including the Costs Court (including all work and all amendments, applications and orders), regardless of the date of the commencement of the proceeding.
Rule 26.08 is the key provision in the procedure of offer of compromise.
Rule 26.08(4) is the relevant rule in relation to an offer of compromise made by the defendant. It states:
28.08(4)Where an offer of compromise is made by a defendant and the plaintiff unreasonably fails to accept the offer and the claim to which the offer relates is dismissed or judgment on the claim is entered in favour of the defendant, then unless the court otherwise orders –
(a) the defendant shall be entitled to an order against the plaintiff for the defendant’s costs in respect of the claim until 11.00am on the second business day after the offer was made, taxed on the ordinary applicable basis; and
(b) the defendant shall be entitled to an order against the plaintiff in respect of the defendant’s costs after the time referred to in paragraph (a) taxed on an indemnity basis.
In this case, the offer of compromise was served on 30 September 2013 and therefore indemnity costs are sought by the first defendant from the plaintiff from 2 October 2013.
The first defendant submits that the plaintiff’s refusal to accept the offer of compromise was unreasonable. The general principles that apply when a party rejects a Calderbank offer, enlivening the issue of whether indemnity costs should be ordered, are set out in the Court of Appeal’s decision in Hazeldene’s Chicken Farm v Victorian WorkCover Authority (No 2).[1] Warren CJ, Maxwell P and Harper AJA stated in their joint judgment:
In our view, there is competing considerations that can be sufficiently accommodated by applying a test of (un)reasonableness. The critical question is whether the rejection of the offer was unreasonable in the circumstances. We see not justification for a more stringent test such as “manifestly” or “plainly” unreasonable.
Of course, deciding whether conduct is “reasonable” or “unreasonable” will always involve matters of judgment and impression. These are questions about which different judges might properly arrive at different conclusions. As Gleeson CJ said recently: “Unreasonableness is a protean concept”. But a test of reasonableness is, we think, entirely appropriate to the exercise of a discretion such as this.[2] (citations omitted)
[1][2005] VSCA 298; (2005) (13 December 2005).
[2]Ibid, [23] – [24].
Under the heading “Factors relevant to assessing reasonableness”, the Court of Appeal said:
The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard to at least the following matters:
(a)the stage of the proceeding at which the offer was received;
(b)the time allowed to the offeree to consider the offer;
(c)the extent of the offer of compromise;
(d)the offeree’s prospects of success as assessed as at the date of the offer;
(e)the clarity with which the terms of the offer were expressed;
(f)whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.[3]
[3]Ibid, [25].
I consider the principles set out in Hazeldene’s Chicken Farm to be applicable to an offer of compromise.
Counsel for the first defendant submitted that it was unreasonable for the plaintiff to reject the offer of compromise. While the check list in Hazeldene’s Chicken Farm provides for some of the matters that the Court may take into consideration, I am not precluded from considering any other matter I consider relevant, given that my discretion as to costs is unfettered.
Counsel for the first defendant conceded that the offer of compromise was served quite late in the proceeding. The offer of compromise was served on 30 September 2013 and the proceeding was fixed for trial on 23 October 2013. The first defendant submits that while the offer of compromise may have been served somewhat late in the proceeding, the utility of serving the offer of compromise at that stage is that the parties knew exactly what the issues were in the case and mediation had been completed.
By the time the offer of compromise was served by the first defendant on the plaintiff, the plaintiff’s interrogatories and the first defendant’s answers were filed and served. The first defendant said under oath in her answers that at no stage did she ever receive any complaints from the agents in relation to the pathway being slippery. It was understood by this stage that the only complaints, if any, made by the plaintiff in relation to the pathway being slippery had been made to the second defendant, not the first defendant.
In light of the pleadings and the first defendant’s answers to the plaintiff’s interrogatories, the plaintiff should have assessed his prospects against the first defendant as being weak.
Counsel for the first defendant submitted that the offer of $40,000 inclusive of costs was not illusory. It was a significant sum of money in circumstances where the plaintiff must have had real concerns about the prospect of success against the first defendant at the time the offer of compromise was made.
Counsel for the plaintiff submitted that given the offer was expressed as being inclusive of the plaintiff’s costs it is not an offer of compromise under the Rules. I do not accept this submission given the amendments to Order 26.02.
The real issues to my mind is the time at which the offer of compromise was served. The mediation took place on 18 September 2013 and the offer of compromise was served on 30 September 2013. The trial was fixed for hearing and commenced on 23 October 2013.
I consider it was unreasonable for the plaintiff not to accept the first defendant’s offer of compromise. The offer came at what I consider to be an appropriate stage of the proceeding. Mediation had taken place and the first plaintiff had time to respond to the offer of compromise well before the trial commenced.
The offer was more than simply an offer to walk away with each party bearing its own costs. It was an offer of $40,000 inclusive of costs and had it been accepted at the time, the plaintiff could still have pursued the claim against the second defendant.
The first defendant’s answers to the plaintiff’s interrogatories were filed with the Court on 4 July 2012. The first defendant’s position in relation to whether complaints were made and whether the pathway posed an unreasonable risk at the time the plaintiff entered into the lease agreement with the first defendant were known to the plaintiff well before the offer of compromise was served. In the circumstances, I consider it appropriate that the plaintiff pay the first defendant’s costs from 2 October 2013 on an indemnity basis.
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