Sutton v State of South Australia - [2015] SADC 112

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Application)
SUTTON v STATE OF SOUTH AUSTRALIA & ORS
[2015] SADC 112
Ruling of His Honour Judge Millsteed
24 July 2015
PROCEDURE - COSTS
Application by defendants for an order for their costs of an action pursuant to Rule 188(6A) of the District Court Rules by reason of the plaintiff's late acceptance of a filed offer to settle the action - application opposed on basis that the filed offer was ambiguous in its terms and that the plaintiff's solicitor for various reasons had difficulty obtaining instructions from plaintiff - plaintiff's argument rejected - application granted.

SUTTON v STATE OF SOUTH AUSTRALIA & ORS
[2015] SADC 112
Introduction

This is an application by the second and fourth defendants seeking, inter alia, an order for their costs of the action between 23 March 2013 and 27 March 2013 (inclusive) pursuant to Rule 188(6A) of the District Court Rules (DCR) by reason of an allegedly late acceptance by the plaintiff of a filed offer to settle the action.
Background
On 18 October 2007 the plaintiff commenced in this Court an action for damages in relation to personal injuries said to have been suffered by him as a result of an accident at work. The action was brought against the State of South Australia (first defendant), the University of Adelaide (second defendant), Hansen Yuncken Pty Ltd (third defendant) and Bradbrook Constructions (fourth defendant). Proceedings against the third defendant were later discontinued.
Following numerous interlocutory proceedings, the trial of the action was listed to commence before me on 2 April 2013.
On 7 March 2013 the plaintiff filed an offer to settle the action on the basis of a payment of $900,000 plus the plaintiff’s cost of the action to be taxed or agreed.[1]
[1] Offer of Settlement attached as exhibit “KEW02” to the affidavit of Kristie Ellen Wilson sworn on 17 June 2013 (FDN 106].
The plaintiff’s solicitor, Mr M Byrne of Tindall Gask Bentley Lawyers, served on the second and fourth defendants’ solicitor, Mr C Lind of CKE Legal, a sealed copy of the filed offer under cover of letter dated 8 March 2013. On the same day a sealed copy of the order was served on the first defendant.
On 8 March 2013 the second and fourth defendants filed an offer in the following terms:[2]
The second and fourth defendants, University of Adelaide and Bradbrook Constructions Pty Ltd jointly OFFER pursuant to Rule 187 to settle the plaintiff’s action as follows:
1.   To pay the sum of $250,000.00, in full and final satisfaction of the plaintiff’s claim against all defendants to this action, which sum is inclusive of interest, outstanding special damages, and all statutory charges.
2.   To pay in addition to the sum in paragraph 1 the plaintiff’s party and party costs on the Supreme Court Costs Scale incurred up to 14 days after this Offer of Settlement is served upon him together with the costs of filing and serving his notice of acceptance and signing judgment to be adjudicated if not agreed.
3.   The plaintiff may only accept the offer in relation to the principal relief set out in this Offer of Settlement (paragraph 1) if he also accepts the offer in relation to costs set out in this Offer of Settlement (paragraph 2).
[2]    Offer of Settlement attached as exhibit “KEW03” to the affidavit of Kristie Ellen Wilson sworn on 17 June 2013.
On the same day, Mr Lind, by e-mail letter, served on the plaintiff’s solicitor a copy of the second and fourth defendants offer.[3] The letter stated:
….
We enclose a copy of our clients’ Offer of Settlement in this matter in the sum of $250,000 plus party and party costs.
This offer is made on behalf of the second and fourth defendants and contemplates that if accepted the plaintiff’s rights against all defendants will be extinguished upon entering judgment against the second and fourth defendants.
The second and fourth defendants will thereafter remain entitled to pursue contribution proceedings against the first defendant.
We anticipate that should your client elect to accept the second and fourth defendants’ offer that the first defendant will agree to bear its own costs of the action. You should of course seek clarification from the first defendant. If the first defendant refuses can you please promptly let us know.
This letter should be read in conjunction with the lodged offer. If you say that any part of the offer or this letter is unclear or you require clarification in relation to any aspect of either please promptly let us know and we will address your queries.
[3] Copy letter attached as exhibit "KEW03" to the affidavit of Kristie Ellen Wilson sworn on 17 June 2013.
In an affidavit filed in these proceedings,[4] the plaintiff’s solicitor, Mr Byrne, deposed that when he received the offer on 8 April 2013 he interpreted it as an offer of settlement by the second and fourth defendants only and anticipated being served with a filed offer on behalf of the first defendant noting that the time for service of the plaintiff with the filed offer of settlement under the Court Rules was due to expire by close of business on 12 March 2013.
[4] Affidavit of Malachy Byrne sworn on 21 October 2013 (FDN 111) at [3].
On 12 March 2013 the Crown Solicitor filed, and served on the plaintiff’s solicitor, the following offer from the first defendant:[5]
The first defendant, the State of South Australia, with a denial of liability OFFERS pursuant to Rule 187 to settle the plaintiff’s action as follows:
1. To pay the sum of $250,000, in full and final satisfaction of the plaintiff’s claim against all defendants to this action, which is inclusive of interest, outstanding special damages, and all statutory charges.
…
[5] Offer of Settlement attached as exhibit “KEW04” to the affidavit of Kristie Ellen Wilson sworn on 17 June 2013.
Mr Byrne deposed that he interpreted the first defendant’s offer as additional to the offer made by the second and fourth defendants. In other words, he understood that his client was being offered in total $500,000.00 plus payment of party-party legal costs and disbursements.[6]
[6] Affidavit of Malachy Byrne sworn on 21 October 2013 (FDN 111) at [4].
On 13 March 2013 I conducted a Directions Hearing to ensure that the parties were ready for trial. Prior to the commencement of the hearing, Mr Byrne and counsel for the plaintiff, Ms Kelly, had discussions with the solicitors acting for the first, second and fourth defendants. There is no dispute that during those discussions the defendants’ solicitors informed Mr Byrne that the plaintiff could accept either the second and fourth defendants’ offer or the first defendant’s offer but not both.
By e-mail letter sent the same day, Mr Lind confirmed the nature of the offer:[7]
We refer to our letter dated 8 March 2013 and the lodged offer enclosed therewith.
We also refer to our discussions this morning with your Mr Byrne and counsel Ms Kelly prior to the hearing before His Honour Judge Millsteed.
We confirm our oral advice to you and that of the first defendant’s counsel Mr Holland that your client cannot accept the offer filed by our clients and the offer filed by the first defendant. Your client may accept either, but not both.
Each offer, while filed by separate defendants, contemplates that upon acceptance judgment will be entered against all defendants regardless of the party that lodged it. This is evidenced by reference to the terms of our clients’ offer itself; see paragraph 1. See also paragraph 3 of our letter to you dated 8 March 2013.
We understand that this may have caused some confusion to you, but for reasons which relate to the contribution proceedings between the defendants, a joint offer cannot be filed. Nevertheless, the defendants do agree that a payment of $250,000 plus party and party costs is sufficient compensation for the plaintiff.
If you remain unclear about any aspect of our letter or offer, please promptly contact us and we will provide further clarification.
[7] Letter exhibited to the affidavit of Malachy Byrne sworn on 21 October 2011 as “MXB1”.
A letter in similar terms was sent on 14 March 2013 to Mr Byrne from the Crown Solicitor on behalf of the first defendant.[8] The letter stated in part:
For the avoidance of any doubt, I advise that an acceptance of the first defendant’s offer of 12 March 2013 would extinguish the plaintiff’s claim against all defendants, that is the first, second and third defendants. If this offer is accepted, the plaintiff would not have the opportunity to accept the offer of settlement made by the second and fourth defendants darted 8 March 2013 which is in similar terms.
[8] Letter exhibited to the affidavit of Malachy Byrne sworn on 21 October 2011 as “MXB2”.
By letter dated 18 March 2013 the plaintiff’s solicitor informed the second and fourth defendants’ solicitor that their filed offer of settlement had been rejected.[9] The letter stated:
I refer to our previous correspondence in this matter and in particular the offer of settlement filed on behalf of the first, second and fourth defendants.
Please note that my client has instructed me to reject the defendants’ filed offer of settlement, but has instructed me to put a counteroffer of settlement of $800,000 all inclusive of special damages including any monies owed to Medicare and the WorkCover Corporation, but in addition to costs and disbursements to be agreed or taxed.
[9] Copy letter attached as exhibit "KEW05" to the affidavit of Kristie Ellen Wilson sworn on 17 June 2013.
…
On 27 March 2013 the plaintiff’s solicitors filed, on behalf of the plaintiff, an Acceptance of Offer, expressed in the following terms:[10]
The plaintiff…ACCEPTS pursuant to Rule 188 the offer made by the second and fourth defendants filed on 8 March 2013 and the first defendant filed on 12 March 2013 and seeks judgment in terms of that offer.
[10] Acceptance of Offer attached as exhibit “KEW06” to the affidavit of Kristie Ellen Wilson sworn on 17 June 2013.
It should be observed that despite having been informed that the plaintiff could accept either the offer made on 8 March 2012 or the offer made on 12 March 2012 the Acceptance of Offer purported to accept both offers though contemplating judgment in the total amount of $250,000. It was not appropriate for the acceptance to be couched in that way. In my view, fairness dictates that the plaintiff’s acceptance should be construed as an acceptance of the first offer made i.e. that made by the second and fourth defendants.
On 28 March 2013 the solicitors for the first, second and fourth defendants informed the Court that the matter had settled between their clients and the plaintiff and that the trial date of 2 April 2013 should be preserved for contribution proceedings between the first defendant and the second and fourth defendants. For various reasons, the trial could not commence on the fixed date.
On 11 April 2013 the matter came on before me for as a directions hearing. Mr Byrne appeared for the plaintiff, the first defendant was represented by Mr Holland, and Mr Trim QC appeared for the second and fourth defendants. By consent judgment was entered in favour of the plaintiff in the amount of $250,000 against the first, second and fourth defendants with cost orders adjourned. Mr Trim QC flagged that an application would be made by his clients under DCR 188 (6A). The contribution proceedings were set down for trial but subsequently resolved following settlement between the first, second and fourth defendants.
In his affidavit, Mr Byrne suggested that there were difficulties in obtaining instructions from the plaintiff on the filed offers for the following reasons:[11]
6The plaintiff resides and was residing in Wallaroo as at 13 March 2013. Due to his psychiatric condition and given the significance of the matter, it was not appropriate to take instructions from him on the filed offers of settlement over the phone. The plaintiff’s psychiatric condition made getting instructions extremely difficult as he was reluctant to leave his home and travel to Adelaide. The plaintiff did not have a working motor vehicle. The earliest that counsel and I could meet with the plaintiff to obtain his instructions on the filed offers of settlement was 20 March 2013. The plaintiff’s former brother-in-law Robert Martino had to drive to Wallaroo and collect the plaintiff and bring him to our Adelaide office at 76 Light Square.
7When Counsel and I met with the plaintiff on the morning of 20 March 2013, the purpose of the meeting was to proof him for trial and to obtain his instructions on the filed offers. Due to his psychiatric condition the meeting was foreshortened before signed written instructions were obtained with the plaintiff returning to Wallaroo.
8.I subsequently contacted the plaintiff by phone later that evening on or around 7pm. I obtained verbal instructions from him that evening to accept the defendants’ filed offer of settlement. However, given the plaintiff’s psychiatric condition and the significance of the matter, I was not prepared to file an acceptance of the defendants’ filed offer in any event until such time as I had signed instructions from the plaintiff in those terms.
9.I was not able to obtain signed instructions from the plaintiff to accept the defendants’ filed offer of settlement until 26 March 2013 as I had to post the instruction sheet to him and wait for him to return it by post as he did not have a scanner or operating computer.
[11] Affidavit of Malachy Byrne sworn on 21 October 2011 [6]-[9].
Orders sought
By interlocutory application filed on 20 June 2014 (FDN 60), and heard on 26 November 2014, the second and fourth defendants applied for the following orders:
1.   That pursuant to DCR188(6A) the plaintiff pay the second and fourth defendants’ costs of the action between 23 March 2013 and 27 March 2013 (inclusive) on a party/party basis to be agreed or adjudicated.
2.   That the second and fourth defendants not be liable for the plaintiff’s costs after 22 March 2013, except the plaintiff’s costs of filing and serving his notice of acceptance and signing judgment if not agreed.
3.   …
4.   That the second and fourth defendants have their costs of and incidental to making this application on a solicitor client basis.
5.   Such further or other orders as this Honourable Court deems appropriate.
On the hearing of this application, Ms Kelly, counsel for the plaintiff, conceded that the second order should be made but opposed the first and fourth orders sought.
Rules of Court
At the relevant time DCR188 relevantly provided:
(6A)If, after the relevant date, a plaintiff accepts a formal offer of settlement insofar as it relates to principal relief, the Court may, on the application of any other party, order that the plaintiff pay the costs of action incurred by that other party during some or all of the period after the relevant date.
(7)In subrules (6) and (6A), the relevant date is the date falling 14 days after the date of service of the offer.
Plainly DCR188(6A) bestows upon the Court a discretion to order that a plaintiff pay the costs of an action incurred by another party for some or all of a period falling 14 days after the date upon which the plaintiff accepted a formal offer of settlement from the other party. A formal offer of acceptance must be in the approved form (DCR188(3)(a)) and takes effect on the filing of the acceptance in the Court (DCR188(3)(b)).
Arguments
Mr Cogan, counsel, for the second and fourth defendants submitted that DCR188(6A) applied because the plaintiff was served with the second and fourth defendants’ offer on 8 March 2013 but did not accept the offer until 27 March 2013, 18 days later.
Mr Cogan emphasized that the offer was clearly expressed to be “in full and final satisfaction of the plaintiff’s claim against all defendants to [the] action”. He further stressed that Mr Lind’s accompanying letter of 8 March 2013 invited enquiry from Mr Byrne should he require clarification of any aspect of the offer.
The letter further pointed out that the second fourth defendants anticipated that if the plaintiff accepted their offer that the first defendant would agree to bear its own costs of the action but suggested that Mr Byrne should seek clarification from the first defendant on that point and inform Mr Lind promptly if the first defendant took a different view. Apparently, no such enquiry was made of the first defendant by Mr Byrne.
Mr Cogan was also critical of Mr Byrne’s explanation as to his efforts in obtaining instructions from his client after the offer was made on 8 March 2013. He argued that Mr Byrne’s affidavit was vague and failed to adequately explain why instructions could not have been obtained before 22 May 2012 when the 14 day period expired. In particular, he failed to adequately explain:
·    the nature of the plaintiff’s psychiatric condition that made it difficult for him to provide instructions over the phone for the purpose of providing instructions;
·    why arrangements could not have been put in place before 20 April 2013 for the plaintiff to be driven to Adelaide to attend his office to provide instructions;
·    the nature of the plaintiffs condition at the meeting on 20 April 2013 that required the meeting to be conducted before signed instructions were obtained from him; and,
·    why written instructions were not given to the plaintiff on 20 April 2013 to take away to be read and signed given the difficulties in obtaining prompt instructions from him.
Ms Kelly, counsel for the plaintiff, submitted that it should be inferred that Mr Byrne was genuinely confused about the nature of the second and fourth defendants offer and that his confusion was reasonable. She emphasized that the offer made on 8 March 2013 was expressly made on behalf of the second and fourth defendants. Neither the offer, nor the letter from Mr Lind sent to Mr Byrne on the same day, indicated that it was made on behalf of all defendants.
Ms Kelly contended that in the circumstances it was reasonable for the plaintiff to wait for any offer from the first defendant in order to properly consider the offer made by the second and fourth defendants. She submitted that the 14 day period should be deemed to have run from 13 March 2013, the date upon which the defendants’ solicitors explained to Mr Byrne that his client could accept either offer but not both, and to have expired on 26 March 2014, the day before the plaintiff accepted the offer(s).
Consideration
In my view the application should be granted.
I accept that there may have been a degree of confusion in Mr Byrne’s mind as to whether the first defendant’s offer on 12 March 2013 was an additional offer in respect of quantum. But this is beside the point. The offer made by the second and fourth defendants was clear in its terms. The only possible ambiguity lay in whether the first defendant would bear their own costs of the action, as contemplated in the offer made by the second and fourth defendants. That ambiguity was soon resolved by the discussions that occurred on 13 March 2013.
I further accept that it was reasonable for the plaintiff to await any offer from the first defendant before deciding whether to accept or reject the second and fourth defendants offer. However, the nature of the offers were made perfectly clear to Mr Byrne on 13 March 2013. At that point he should have appreciated that if the plaintiff chose to accept the second and fourth defendants offer that it was necessary for him to treat the matter with a degree of urgency because the 14 day period under DCR188(6A) had been running since 8 March 2013.

However, Mr Byrne’s affidavit reveals no sense of urgency. It suggests that after his discussions with the defendants’ solicitors on 13 March 2013 that the earliest he could meet with the plaintiff to obtain instructions on the filed offers of settlement was 20 March 2013. But as Mr Cogan contended, the affidavit fails to adequately explain the points outlined above [26].
There is another matter that was not addressed by counsel, which appears to me to be in direct conflict with Mr Byrne’s affidavit. It has emerged that on 18 March 2013, Mr Byrne informed the second and fourth defendants’ solicitor by letter that: “my client has instructed me to reject the defendants’ filed offer of settlement, but has instructed me to put a counteroffer of settlement of $800,000…”. The letter indicates that Mr Byrne was able to obtain instructions from the plaintiff in relation to the filed offer prior to 22 March 2013 - his instructions at that time were to reject the offer.
Orders
I make the following orders:
1.     That the plaintiff pay the second and fourth defendants’ costs of the action between 23 March 2013 and 27 March 2013 (inclusive) on a party/party basis to be agreed or adjudicated.
2.     That the second and fourth defendants not be liable for the plaintiff’s costs after 22 March 2013, except the plaintiff’s costs of filing and serving his notice of acceptance and signing judgment if not agreed.
3.     That the second and fourth defendants have their costs of and incidental to making this application on a solicitor client basis.