Smith v Jovanoska (No 2)

The respondents, Smith, brought proceedings against the applicants, Jovanoska, seeking damages for breach of contract. The matter was heard in the Supreme Court of New South Wales. The Smiths alleged that the Jovanoska's unreasonably failed to accept a reasonable offer of settlement. The applicants, Jovanoska, argued that the offer was not reasonable, and the Smiths were not entitled to indemnity costs. The central legal issue was whether the Smiths' offer of settlement was reasonable and whether the Jovanoska's unreasonably failed to accept it. The court examined the principles of determining whether an offer of settlement is reasonable and whether the party who makes the offer is entitled to indemnity costs if the other party unreasonably fails to accept it.

The court found that the Smiths' offer of settlement was reasonable and that the Jovanoska's unreasonably failed to accept it. The court considered the factors relevant to determining whether an offer of settlement is reasonable, such as the likelihood of success at trial, the strength of the evidence, and the potential costs and risks of proceeding to trial. The court also considered the conduct of the parties in making and responding to the offer. The court concluded that the Jovanoska's had unreasonably failed to accept the Smiths' offer of settlement and that the Smiths were entitled to indemnity costs under Rule 26 of the Supreme Court (General Civil Procedure) Rules 2005.

The court awarded the Smiths indemnity costs of the proceedings up to the date of the offer of settlement and ordered the Jovanoska's to pay those costs. The court noted that the amount of costs awarded should reflect the unreasonableness of the Jovanoska's conduct in failing to accept the offer of settlement. The court also noted that the award of indemnity costs was not automatic and that the court had discretion to order costs on another basis if it considered it just to do so. However, in this case, the court considered that an order for indemnity costs was appropriate.