Trajkovski v Commonwealth Insurance Ltd (No. 3)

[2020] NSWDC 752

District Court

New South Wales

Medium Neutral Citation:

Trajkovski v Commonwealth Insurance Ltd (No. 3) [2020] NSWDC 752

Hearing dates:

On the papers

Date of orders:

15 December 2020

Decision date:

15 December 2020

Jurisdiction:

Civil

Before:

Abadee DCJ

Decision:

See paragraph 32

Catchwords:

COSTS – successful defendant’s application to vary costs order – reliance on rules offer and, alternatively, Calderbank offer – whether unreasonable for plaintiff to reject offers

Legislation Cited:

Uniform Civil Procedure Rules (NSW), rr 20.26, 42.15A

Cases Cited:

Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd (No2) [2014] NSWCA 391

Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368

Category:

Costs

Parties:

Mr D Trajkovski (Plaintiff)
Commonwealth Insurance Ltd (Defendant)

Representation:

Counsel:
Mr R Perla for the defendant

Solicitors:
Plaintiff was unrepresented on the application
Turks Legal for the defendant

File Number(s):

2019/64733

Publication restriction:

Nil

Judgment

BACKGROUND

1. I delivered reasons for giving judgment for the defendant in this matter on 13 November 2020 when ordering, relevantly, that the plaintiff pay the defendant’s costs as agreed or assessed. I ordered that there by liberty to apply on 14 days’ notice for any application for a variation of that costs order.

2. By a Notice of Motion filed on 27 November 2020, the defendant (the ‘applicant’) applied for a variation of that costs order, seeking an order that the plaintiff (the ‘respondent’) pay its costs on an indemnity basis on and from 4 June 2019. An affidavit in support of that application was deposed by Ms Jane Yoo, a Senior Associate of the firm of solicitors representing the applicant. At paragraphs 7 and 8 of Ms Yoo’s affidavit, submissions were made in support of an application for indemnity costs in relation to a Calderbank letter, which was one of the two bases upon which the application for variation of the costs order was made.

RECENT DEVELOPMENTS REGARDING THE PLAINTIFF’S REPRESENTATION

3. On 24 November 2020, the respondent’s solicitor filed a Notice of Intention of Ceasing to Act. This fact was not disclosed to my Associate.

4. At 10:19am on 1 December 2020, and in ignorance of the document filed by the respondent’s solicitor on 24 November 2020, I directed my Associate to send an email to the solicitors for the parties (including the respondent’s then solicitor) providing a timetable for further evidence and submissions following the applicant’s filing of its application to vary the costs order.

5. On 1 December 2020, the respondent’s solicitor filed a Notice of Ceasing to Act. This fact was also not disclosed to my Associate.

6. On 9 December 2020, the applicant’s Counsel sent an email to my Associate, which email was relevantly copied to the respondent’s former solicitors, which attached the applicant’s submissions on costs. The email indicated that the submissions had been sent, in hard copy, to the respondent’s last known address at Monterey. It was only through the receipt of this email that my Associate received any indication that the respondent had become unrepresented.

7. As at 9 December 2020, I was satisfied in the circumstances that the respondent has been on notice of: (a) the possibility that an application to vary the costs order may be brought (this being foreshadowed in the reasons for judgment); and (b) the applicant’s application for variation of the costs order and the applicant’s supporting affidavit; and (c) the supporting affidavit containing submissions concerning the Calderbank letter (but not the rules offer).

8. It was not clear, however, whether the respondent had seen the written submissions prepared by the applicant’s Counsel, dated 9 December 2020. That being so, on 10 December 2020, I asked my Associate to inquire of the respondent’s former solicitors whether or not the submissions of Counsel for the applicant had been received and, if so, whether it understood that the respondent proposed to respond to those submissions; and to provide a response by close of business on 14 December 2020. The response of the respondent’s now former solicitor was to the effect that Counsel for applicant’s submissions had been passed on to the respondent, but they did not know what, if anything, the respondent would do.

9. I am satisfied that the respondent has received notice of the application and the supporting evidence and submissions and was on notice of his opportunity to respond to the application. It is appropriate to proceed to consider the merits of the application.

THE OFFERS

10. The applicant relies upon a rules offer dated 3 June 2019 and, alternatively, a Calderbank offer of the same date. The proceeding commenced on 27 February 2019.

11. The terms of the rules offer, dated 3 June 2019, were:

1. judgment in favour of the defendant; and

2. no order as to costs.

12. The offer was open for acceptance until 4:00pm on 2 July 2019.

13. Between the date of the rules offer and the expiry of the period for its acceptance, on 26 June 2019, the respondent had been directed to serve his evidence by 10 September 2019.

14. This offer of compromise was served under cover of a letter of the same date, sent by the applicant’s solicitors to the respondent’s former solicitors. That letter was also expressed to serve as a Calderbank offer. The letter contained several argumentative assertions advanced in support of the applicant’s position which may be summarised as:

1. the objective evidence did not support the respondent’s case on theft, including the manner in which the theft occurred;

2. the Financial Ombudsman Services responded to the respondent’s complaint to it by concluding that the respondent had not substantiated that the insured event of theft had occurred; and

3. despite (a) and (b), the plaintiff decided to commence this suit.

15. The applicant also noted that its position was supported by independent expert evidence. Further, the applicant noted that, to that point, the applicant had already incurred legal expenses in excess of $10,000 so that, in its view, its offer represented a significant compromise.

16. Another, separate letter, of the same date, was put in the same terms and indicated the applicant’s reliance upon Calderbank principles if the terms were not bettered by the respondent in the outcome.

THE RULES OFFER

17. The applicant relies upon r 42.15A of the Uniform Civil Procedure Rules (NSW) (the ‘UCPR’). That rule is engaged where, as here, a defendant obtains a result no less favourable than the terms of what was offered.

18. By r 20.26(3)(a)(i) of the UCPR, it is permissible, in terms of its validity, that an offer of compromise be expressed in terms, as it was here, that there be judgment for the defendant with no order as to costs.

19. Subsequent authorities construing the rule also accept that ‘walk away’ offers are potentially capable of triggering the operation of r 42.15A: Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd (No 2) [2014] NSWCA 391 at [50]-[51]. However, it is well-established that the offers of that character should not be used simply for the purpose of triggering the costs mechanisms, and there is also authority to indicate that for ‘walk-away’ offers to engage a rule like r 42.15A, the claim would ‘have to approach the character of being frivolous or vexatious for that to be the case’: Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [31]. There must be some real benefit to a plaintiff, which is more than an invitation to capitulation.

20. The letter which enclosed the rules offer featured an assertion that the applicant had, at the time of service of the offer, incurred “in excess of $10,000”. The offer to forego an entitlement to claim costs, estimated at that amount, was the only benefit offered to the plaintiff.

21. It is arguable whether the benefit is so derisory as to amount, effectively, to an offer to capitulate. The offer was made at an early point in the proceeding. At the time it was made, the plaintiff had not yet been directed to serve his evidence. It was too soon for the respondent to reasonably consider that he was unlikely to be able to prove his case. Yet, for the benefit of avoiding a detriment which, at that stage, had been quantified as a costs order in excess of $10,000, he was being invited to abandon a claim which later was quantified at over $300,000.

22. Accepting that the rules offer was valid, I would ‘otherwise’ order, within the terms of r 42.15A(2) of the UCPR on the basis that if the offer represented a genuine offer, it was not unreasonable for the respondent to reject it.

THE CALDERBANK OFFER

The applicant’s submissions

23. The applicant submits that what was offered in the Calderbank offer constituted a genuine offer of compromise and it was unreasonable for the respondent to reject it. It was a genuine offer since, although it was a ‘walk away’ offer in nature, the defendant was offering to forego its potential entitlement to obtain costs which, at the point the offer was made, was already calculated to be in excess of $10,000. That entitlement was valuable.

24. The applicant submits that it was unreasonable for the respondent to reject the offer since the letter pointed out the weakness in the respondent’s case (the absence of objective evidence), compounded by the strength in the applicant’s case (the expert opinion of Messrs Ziade and Targett) which were served well before the offer was made; and further, that the respondent had adequate opportunity to consider the offer.

Consideration

25. It should be apparent that the reasons I have advanced for rejecting the application for a special order under r 42.15A also apply in relation to the Calderbank offer. It is unnecessary to repeat them.

26. But with specific reference to the matters stated in Ms Yoo’s letter, it was premature for the offeree to have formed conclusions about what evidence, objective or otherwise, could be adduced to prove that the chattels were stolen. As events subsequently showed, the respondent could and did prove his possession of items and could and did advance a theory of how they were taken, supported by expert opinion evidence to compete for acceptance with the expert evidence of the applicant.

27. Although the applicant had compiled expert opinion evidence, which would have likely instilled a sense of confidence in its position, it was foreseeable that the respondent might obtain its own expert which supported his position. This possibility later materialised and a contest ensued in which the Court even ventured certain criticisms of the applicant’s expert witnesses.

28. It was not suggested in the Calderbank offer that the Financial Services Ombudsman’s opinion was based upon the evidentiary material that the Court ultimately had to consider to support the implied contention advanced in the letter that the result of the litigation was a foregone conclusion.

29. As with the rules offer, if the settlement terms offered could be regarded as reasonable, it was not unreasonable for the respondent to reject them having regard to the time that the offer was served and the content of the reasons advanced by the applicant as to why he should accept them.

SUMMARY

30. Accordingly, neither the rules offer nor the Calderbank offer afford grounds for the Court to vary the costs order made.

31. The applicant’s Notice of Motion dated 27 November 2020 should accordingly be dismissed. Ordinarily, it would follow that the applicant should pay the respondent’s costs of the motion but, as indicated, there is no evidence to any such costs have been occurred as a result of the respondent becoming recently unrepresented.

32. That being so, I simply order that the defendant’s Notice of Motion dated 27 November 2020 be dismissed and make no order as to costs of that motion.

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Decision last updated: 15 December 2020