Western Freight Management Pty Ltd v Toll Transport Pty Ltd (No 2)

[2023] NSWDC 575

District Court

New South Wales

Medium Neutral Citation:

Western Freight Management Pty Ltd v Toll Transport Pty Ltd (No 2) [2023] NSWDC 575

Hearing dates:

8 December 2023

Date of orders:

8 December 2023

Decision date:

08 December 2023

Jurisdiction:

Civil

Before:

Montgomery DCJ

Decision:

(1)   Vacate all prior costs orders.

(2)   The Plaintiff/Cross Defendant/Respondent (Western Freight Management Pty Ltd) to pay the Defendant/Cross Claimant/Applicant’s (Toll Transport Pty Ltd) costs of the proceedings on an indemnity basis save as for provided in Order 3 below.

(3)   The Plaintiff/Cross Defendant/Respondent (Western Freight Management Pty Ltd) to pay Defendant/Cross Claimant/Applicant’s (Toll Transport Pty Ltd) costs of the Notice of Motion filed 8 June 2023, including the costs of 13 December 2023, on the ordinary basis.

*Note: Orders as amended on 13 December 2023 pursuant to UCPR r 36.17.

Catchwords:

COSTS – Indemnity costs – Calderbank offer made before proceedings commenced

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 36.17, 42.15A

Cases Cited:

Alves v Patel [2005] NSWSC 841

Babscay Pty Ltd v Pitcher Partners (No 3) [2021] FCA 156

Bahamad v Wong (No 2) [2020] NSWSC 1320

Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd; In the matter of Combined Projects (Arncliffe) Pty Ltd (No 3) [2021] NSWSC 1537

Brymount Pty Ltd v Cummins (No2) [2005] NSWCA 69

C&V Engineering Services Pty Ltd v Metropolitan Demolitions Pty Ltd (No 2) [2023] NSWCA 240

Calderbank v Calderbank [1976] Fam 93, [1975] 3 All ER 333

County Securities Pty Ltd v Challenger Group Holdings Pty Ltd (No 2) [2008] NSWCA 273

Craigcare Group Pty Ltd v Superkite Pty Ltd(No2) [2014] NSWSC 467

Davies v Whitehaven Coal Mining Ltd (No2) [2019] NSWSC 1292

Degiorgio v Dunn (No 2) [2005] 62 NSWLR 284; [2005] NSWSC 3

E Group Security Pty Ltd v Chief Commissioner of State Revenue (No2) [2021] NSWSC 1296

Fick v Groves (No 2) [2010] QSC 182

Hancock v Arnold (No 2) [2009] NSWCA 19

Igloo Homes Pty Ltd v Sammut Constructions Pty Ltd [2005] NSWSC 85

James v Royal Bank of Scotland [2015] NSWSC 970

Krolczyk v Winner trading as J Winner Building Services [2022] NSWCA 196

Lahoud v Lahoud [2006] NSWSC 126

Leichhardt Municipal Council v Green [2004] NSWCA 341

Miwa Pty Ltd v Siantan Properties Pte Ltd (No2) [2011] NSWCA 344

Rosie Ianelli v John Leslie Hancock trading as Hancocks Solicitors [2012] NSWSC 417

Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124

Tickel v Trifleska Pty Ltd (1990) 25 NSWLR 353

Western Freight Management Pty Ltd v Toll Transport Pty Ltd [2023] NSWDC 176

Winky Pop Pty Ltd v Mobil Refining Australia Pty Ltd [2015] VSC 580

Ziliotto v Hakim [2013] NSWCA 359

Category:

Costs

Parties:

Western Freight Management Pty Ltd, Plaintiff/Cross Defendant/Respondent
Toll Transport Pty Ltd, Defendant/Cross Claimant/Applicant

Representation:

Counsel:
Mr J Young, Counsel for the Plaintiff/Cross Defendant/Respondent
Mr D Stanton and Mr H Cooper, Counsel for the Defendant/Cross Claimant/Applicant

Solicitors:
TPS&Co, Solicitors for the Plaintiff/Cross Defendant/Respondent
Norton White, Solicitors for the Defendant/Cross Claimant/Applicant

File Number(s):

2020/00236136

JudgEment EX TEMPORE (REVISED)

INTRODUCTION

1. HIS HONOUR: Judgement on the Notice of Motion filed 8 June 2023 by the Defendant/Cross Claimant/Applicant, Toll. I will refer to the parties as WFM for the Plaintiff/Cross Defendant/Respondent and Toll for the Defendant/Cross Claimant/Applicant.

2. The parties contracted trucks for carriage of goods on the Melbourne to Sydney route. Western Freight Management Pty Ltd v Toll Transport Pty Ltd [2023] NSWDC 176 (my “Principal Judgement”) describes the meaning of “Trip”. WFM claimed that Toll promised 1,440 Trips over the term of the Contract between 5 December 2017 and 4 December 2020, and sued for what is described in the proceedings as the “shortfall” in that promised provision. During the hearing, the parties agreed that mathematically, WFM claimed a shortfall of 44 Trips at $3,200 per Trip, totalling $137,901.89 (adjusted for overpayment by Toll). Toll denied all liability and cross-claimed for overpayment for what are described in the proceedings, as “cut runs”. WFM brought its claim in debt and breach of contract, for liquidated damages, and damages. WFM was not successful in those causes. Toll was successful in its Cross-Claim in the sum of $13,484.

3. By its Notice of Notion, Toll seeks an order varying order 3 of my Principal Judgement, such that WFM be ordered to pay its costs of and incidental to the proceedings on an indemnity basis. Toll seeks in the alternative that WFM is to pay its costs of the proceedings from 6 May 2022 on an indemnity basis, costs ordered to be paid by Gibson DCJ on 23 May 2022 on an indemnity basis, and all other costs incurred by Toll of the proceedings, on an ordinary basis. I will deal with Toll’s claims in the order of how they were put.

FIRST BASIS – OFFER OF 5 JUNE 2020

4. The First Basis was by way of Toll relying on a letter of offer dated 5 June 2020. It was Exhibit H in the Proceedings. On 20 February 2020, Mr Peters, Managing Director of WFM, by letter, made a claim on Toll for unpaid invoices and a shortfall of 70 Trips. That letter was Exhibit G in the proceedings. The claim for unpaid invoices was in the sum of $36,732.52. In relation to the claim alleging a shortfall of Trips, his letter referred to a document identified in the proceedings as “Attachment 2” of the Statement of Engagement of the Contract between the parties and made reference to its expression concerning “minimum committed quarterly” volumes of 120 Trips. He also referred to its expression “in the event that minimum committed quarterly volumes are not achieved, these will be rolled into the next quarter with agreement from WFM.”

5. It is significant, as I proceed in these reasons, to observe that those references to the Contract between the parties were at the very core of the dispute tried before me. Construction of the Contract and specifically of Attachment 2 were the subject of my Principal Judgement. Having provided in that letter a schedule showing his calculation of the shortfall total of 70 Trips, he concluded with a statement of WFM’s claim, that it sought on top of “unpaid run cut trips”, compensation for 70 Trips’ shortfall of the agreed volume “in the contract from January 2018 to February 2020. This would amount to $224,000, plus GST, ($3,200 by 70).” The Letter offered: “If you wish to discuss this matter further, please contact me...”.

6. By Exhibit H, its letter of 5 June 2020, and in response to Mr Peters’ letter, Exhibit G, Toll made a written offer to provide WFM with 70 additional Trips at the Contract rate of $3,200, excluding GST plus any applicable fuel levy. Toll’s letter denied liability for the claims, as they had been expressed by Mr Peters. Its reference to additional Trips was plainly an expression of an offer seeking resolution. Toll’s offer was open for 14 days, that is, to 19 June 2020. The offer expressed itself to be made in accordance with principles known as Calderbank v Calderbank [1976] Fam 93, [1975] 3 All ER 333 principles.

7. It is relevant for consideration of the contest on Toll’s Notice of Motion that its offer by Exhibit H preceded the commencement of proceedings by approximately two months and that Mr Peters’ Exhibit G, ‘demand’, preceded the commencement of proceedings by approximately six months. The Exhibit H letter joined issue with Mr Peters’ assertions, based on the Contract, by disputing them.

8. In the proceedings, as determined in my Principal Judgement, WFM was generally unsuccessful and did not achieve a result equal to or more advantageous to it than the offer made by Toll in its Exhibit H letter on 5 June 2020.

9. There is no presumption that a party that does not accept a Calderbank offer and does not obtain a more favourable judgement will pay indemnity costs from the date of the offer: C&V Engineering Services Pty Ltd v Metropolitan Demolitions Pty Ltd (No 2) [2023] NSWCA 240 at [29], citing Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19]; and Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124 at [9].

10. The questions are whether or not the offer was a genuine offer of compromise, and whether or not WFM acted unreasonably in refusing the offer, tested at the time of the offer, on 5 June 2020, and not with the benefit of hindsight following the judgement in favour of Toll: C&V v Metropolitan, citing Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8] and [11]; and Krolczyk v Winner trading as J Winner Building Services [2022] NSWCA 196 at [217].

11. Assessment of whether WFM’s rejection of the offer was unreasonable is assisted by the discussion of factors for consideration by Ward CJ in Equity (as her Honour then was) in C&V v Metropolitan, citing E Group Security Pty Ltd v Chief Commissioner of State Revenue (No 2) [2021] NSWSC 1296 at [59] – [60]. Applying her Honour’s approach, I make the following observations:

1. As to the stage of the proceedings at which the offer was received, the 5 June 2020 offer was made very close to, that is two months prior to, WFM filing its Statement of Claim on 13 August 2020. It is important to distinguish, however, between the commencement of proceedings and the commencement of the trial. At that stage, WFM may not yet have turned its mind to the drafting of pleadings. That does not of itself mean that it was not unreasonable for WFM to reject the offer. A Calderbank offer made prior to the commencement of proceedings cannot be safely ignored because the offeree’s case is not ready, nor is it a rare occurrence for indemnity costs to be awarded in those circumstances: Alves v Patel [2005] NSWSC 841 at [14].

As I have more specifically said, but now broadly state, the offer was made before commencement of the proceedings, but not before the substance of the dispute was broadly litigated in that correspondence, Exhibit G and Exhibit H. In my opinion, particularly because Toll’s offer was communicated by its corporate counsel to WFM’s solicitor - that is, it was a communication between lawyers engaging the contractual issues which characterised the dispute upon which WFM sued; Toll’s offer was responsibly made and at an early stage of the dispute when they understood WFM’s principal grievance to be the shortfall in Trips: see Brymount Pty Ltd v Cummins (No 2) [2005] NSWCA 69, per Beazley JA at [20]. Toll’s offer aimed to rectify that, and other grievances expressed in WFM’s earlier letter of claim, Exhibit G.

2. As to the time allowed to the offeree, WFM, to consider the offer, there is no set measure of the minimum time an offeree must have to consider a Calderbank offer. By implication, it is to be open for a reasonable period: Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) at [18]. The reasonableness varies upon particular circumstances, complexities of the proceedings, and the extent to which WFM might reasonably be thought to have understood the claims and evidence so as to make an informed decision: Bahamas v Wong (No 2) [2020] NSWSC 1320 at [25].

In my opinion, WFM would have had sufficient time to consider the offer and at least to request an extension of time to clarify the alleged “significant ambiguity” which was expressed in that exchange of communications (including Exhibit J): Winky Pop Pty Ltd v Mobil Refining Australia Pty Ltd [2015] VSC 580 at [72]. Again, Toll’s offer was a communication between lawyers in which Toll offered a compromise of claims expressed in WFM’s earlier correspondence (Exhibit G). WFM responded (Exhibit J) four days after the offer expired, seeking to clarify an “ambiguity”. But even if Toll’s response caused WFM confusion or ambiguity – that is, whether or not Toll was offering to settle the first or both of WFM’s claims, the unpaid invoices and/or the claims for shortfall of Trips; the offer was, in my opinion, unavoidably a reasonable one. This is because as WFM ultimately prosecuted its claim in the hearing, it was for 44 Trips at $3,200, and it was unsuccessful in that claim.

3. I now come to the extent of the compromise offered. Toll’s offer was not a response to pay money, it was a response offering performance: see [180] to [183] of my Principal Judgement. However, it expressed Toll’s denial of obligation to provide Trips, and was an offer to compromise the dispute by offering Trips in the number claimed by WFM to make up the shortfall WFM alleged in its letter, Exhibit G.

It is important that there must be a genuine compromise and not a merely token one: Hancock v Arnold (No 2) [2009] NSWCA 19 at [23]; Igloo Homes Pty Ltd v Sammut Constructions Pty Ltd [2005] NSWSC 85 at [2]. In circumstances where WFM’s grievance was the failure of Toll to provide Trips, an offer to make up that shortfall of Trips in a number, in excess of the number ultimately mathematically agreed to be the subject of WFM’s claim, it is my opinion that it offered a genuine compromise. In addition, I reject WFM’s argument that because it contained an offer of performance, the Exhibit H letter from Toll on 5 June 2020 was not also an offer to compromise.

4. As to the offeree’s, that is WFM’s, prospects of success assessed as at the date of the offer; that the 5 June 2020 offer was made two months before commencement of the proceedings, is to be understood on one hand to have made it more difficult for WFM to assess its prospects of success. That is, for the purposes of this consideration, I will assume that difficulty: see County Securities Pty Ltd v Challenger Group Holdings Pty Ltd (No 2) [2008] NSWCA 273 at [35]. However, this consideration is much ameliorated by the fact that it was communicated between lawyers and was focused on the substantial issues between them ultimately tried, and in that way it dealt with the subject matter, which was WFM’s principal allegation of a shortfall in Trips.

5. In my view, there was no deficiency in the clarity of the offer which should be seen to impact upon the reasonableness of WFM’s failure to accept it, where WFM’s lawyers could have readily cured any ambiguity within the time available in the offer: see Craigcare Group Pty Ltd v Superkite Pty Ltd(No 2) [2014] NSWSC 467 at [77]. However, as I have said, I do not find a lack of clarity persuasive against the exercise of discretion for a special order as to costs.

I am not persuaded by WFM’s submission that paragraph (1) of the Exhibit H letter from Toll on 5 June 2020 was in fact ambiguous, or that if it was, then, that ambiguity affected the reasonableness of the offer. But as to whether or not it was; the conjunctive “and” conveyed that the offer covered both of WFM’s 20 February 2020 expressed grievances, that is the whole dispute. Otherwise, I repeat the observation I have already made, that performance of 70 Trips, viewed realistically, was a genuine and substantial offer of compromise, particularly given that the quantum of the unpaid invoices was only approximately $36,000, and that ultimately WFM sued for only 44 Trips in shortfall and, of course, it was unsuccessful in that claim.

6. As to whether or not the offer foreshadowed an application for indemnity costs in the event of WFM’s rejection of it; WFM raised this argument relying on Davies v Whitehaven Coal Mining Ltd (No 2) [2019] NSWSC 1292 at [12] to argue that the Exhibit H, 5 June 2020 offer from Toll did not satisfy Calderbank principles, because it did not expressly state the specific consequence of non-acceptance to be indemnity costs. However, that the offeror in Davies did not state in the offer that an application for indemnity costs would be pursued if the offer were rejected by the offeree was only one of the several factors the judge in that case considered. The judge also found the offeree’s prospects of success “were not poor” such that those factors combined meant that it was not unreasonable for the offeree to reject the offer. In any event, the Court’s general discretionary power to order indemnity costs remains: Leichhardt Municipal Council v Green at [47].

Toll cites Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd; In the matter of Combined Projects (Arncliffe) Pty Ltd (No 3) [2021] NSWSC 1537 at [87], where Ward CJ in Equity (as her Honour then was) stated a heading of “without prejudice, save as to costs” would be sufficient in the context of modern litigation to foreshadow an application for indemnity costs. Toll’s 5 June 2020 offer clearly states “without prejudice save as to costs” in the header. I respectfully adopt her Honour’s reasoning and observation.

12. In conclusion, and balancing all factors, WFM’s rejection of the offer made by Toll in its letter of 5 June 2020 was, in my opinion, unreasonable. The offer was one of genuine compromise by Toll in circumstances where Toll denied the obligation to provide or pay for the claimed shortfall of Trips yet attempted to satisfy WFM’s grievances. The offer of performance of 70 Trips at the Contract rate of $3,200, exclusive of GST plus any applicable fuel levy, mathematically amounted to WFM’s claim for $224,000, excluding GST, on account of its allegation of a shortfall in Trips Toll had ordered. Whilst that figure did not mathematically accommodate WFM’s separate $36,732.52 claim for unpaid invoices, in the whole of the circumstances, Toll’s offer was substantial and offered a real compromise of all WFM’s claims.

SECOND BASIS – ADJOURNMENT AND AMENDMENT

13. The Second Basis upon which Toll seeks indemnity costs is by reference to orders made by Gibson DCJ earlier in the proceedings.

14. Firstly, in its submission at [11] and [19], Toll argued that it was entitled to indemnity costs on the basis that WFM commenced proceedings without any reasonable prospect of success and acted unreasonably and delinquently. Today, during oral submissions, Mr D Stanton of Counsel, following my having offered some preliminary thoughts, withdrew that submission. In my opinion, that withdrawal was appropriate.

15. It is a serious matter, in my opinion, to submit that a party has commenced proceedings and conducted them, at the obvious expense of these proceedings, frivolously. And therefore, I propose to make comment on it.

16. As I have said, I reject Toll’s characterisation of WFM’s prospects. As I addressed Mr D Stanton today, my Principal Judgement found that neither party correctly construed the contractual provisions for the provision of Trips. That was a central issue. Counsel for Toll accepted that my construction of Contract was available on the evidence, but it was not within his instructions to concede an obligation to rollover any shortfall into the next quarter. See, for instance, [75] – [76], [87] and [146] of my Principal Judgement.

17. In Degiorgio v Dunn (No 2) [2005] 62 NSWLR 284; [2005] NSWSC 3 at [28], the Court stated that for proceedings to be “without reasonable prospects of success” they are to be “so lacking in merit or substance as to be not fairly arguable”, a concept well short of “likely to succeed.” I have been critical of the conduct of WFM’s case in my Principal Judgement. But in my opinion, the shortfall claim argued in the proceedings would not be considered as so lacking in merit or substance as to have been not fairly arguable. The mathematics of the shortfall claim was resolved between the parties, they having reviewed the Trip records. Otherwise, the case as run at hearing, was not so lacking as to be not fairly arguable.

18. Returning to the claim for costs on an indemnity basis following from the earlier orders of Gibson DCJ. WFM identified the distinction between the two costs events, of vacation of the hearing date, and of amendment of the Statement of Claim before her Honour. WFM argues that Gibson DCJ’s orders of 23 May 2022, permitting Toll leave to pursue a claim for indemnity costs, was limited to costs of the vacation of the hearing (adjournment) and not of the amendment. By her Honour’s 31 August 2022 order 2, her Honour widened the ambit to the costs of Toll having to prepare an Amended Defence to the Amended Statement of Claim. Toll’s submission that her Honour misspoke “defence” for “statement of claim” is something I do not accept.

13. In any event, as I understand submissions today, Mr D Stanton withdrew the argument that her Honour stood over, for assessment on the making of an application for costs on an indemnity basis, her orders for leave to amend.

14. In my opinion, and as I put to Mr D Stanton, to have ordered costs thrown away on the amendment on the ordinary basis, but to have left for the trial judge an application for indemnity costs thrown away on the occasion of the vacation of the hearing, was an entirely standard way to proceed. In my opinion, it would be an impediment to the efficient conduct of litigation if parties competently represented by solicitors and counsel were faced with an order of indemnity costs on account of amendment unless there be observed to be a particular delinquency associated. That is because amendment is a common function, particularly in commercial litigation, and rightly so, because it permits the expert lawyers, as instructions evolve, as evidence is revealed, as expert opinion is obtained, to, by amendment, better identify the real issues for dispute. Orders for costs are compensatory. They are not penal. It makes sense that the usual order for costs thrown away on an ordinary basis accompany an amendment.

15. But none of those observations are attached to assessment of costs thrown away on the vacation of the hearing. That is because the circumstances of the vacation require serious consideration as to how the party who lost the opportunity of the hearing for which they were prepared is to be properly compensated. The vacation was of a hearing to commence before Gibson DCJ on 23 May 2022.

16. On the Friday preceding that Monday fixture, WFM served a court book of additional documents on Toll. Mr D Stanton of Counsel for Toll, put before her Honour that he could not, for his client, be able to meet that evidence, it having been served so late. Counsel for WFM, Mr J Young, stated that he could not proceed in the interests of his client without reliance on that late evidence. Mr J Young has been very frank about those circumstances. He was at the trial, and he was again today at the hearing of this Notice of Motion. Both Counsel today put to me that what was said by her Honour at [17] of her judgement of 23 May 2022 concerning the vacation of the hearing is correct. It reads:

“Mr Stanton submits that, in circumstances where this is day one of a three day hearing, he cannot be ready by tomorrow, or indeed, probably for some weeks, in terms of meeting this substantial tranche of information, the importance of which is such that it has been indicated to me by counsel for the plaintiff that, if I refuse leave to rely upon the documentation in question, the hearing will have to be adjourned, as there is a significant risk that the plaintiff will lose the case.”

23. In those circumstances, the fault causing the vacation of the hearing plainly lay with WFM. In my opinion, reasonable compensation for Toll in those circumstances deserves an order for indemnity costs, but this is more so because, ultimately, WFM was unsuccessful. In my opinion, any order other than costs thrown away on the vacation of the hearing fixed to commence 23 May 2022, on an indemnity basis, would not provide compensation to Toll, to which it is entitled.

24. It seems to me that during argument today the parties engaged in points of lesser importance than those with which I have dealt in the consideration of the questions before me on the Notice of Motion concerning this Second Basis advanced by Toll. But I comment that Toll’s response submission that, “the Court should be satisfied that the claims abandoned by WFM were commenced without adequate investigation”, which seems to be a reference only to the cut run and unpaid fee claims, is such an issue of lesser importance, as I have said.

25. The 5 June 2020 offer, was, in a real-world sense, a true offer of compromise, advanced between lawyers, the substance of the litigation already in play through correspondence between them, and whilst before the commencement of proceedings, nevertheless at a stage close enough that the joinder of real issues was being engaged. In my opinion, this means Toll ought to be entitled to the indemnity costs. It does not seem to me to advance the matter much to be moving to the lesser considerations, albeit validly made, that WFM abandoned claims. I repeat, if that reference was in relation to amendment of the pleadings, then abandoning claims and abandonment of claims in the trial concerned the lesser considerations, given the overall consequence of the offer in the end result of the litigation.

26. WFM abandoning parts of its claims also saved the cost of litigation of those matters. WFM should not be punished for abandonment: see Fick v Groves (No 2) [2010] QSC 182 at [6]; Babscay Pty Ltd v Pitcher Partners (No 3) [2021] FCA 156 at [38]; Rosie Ianelli v John Leslie Hancock trading as Hancocks Solicitors [2012] NSWSC 417; and Lahoud v Lahoud [2006] NSWSC 126 at [43] – [69].

27. I do recognise, as did her Honour Gibson DCJ, that a relevant circumstance in these considerations is that WFM was affected by the death of its legal representative, Mr King, solicitor, and by the effects of the COVID pandemic. I recall that at one point in the hearing, Counsel for WFM conceded that his instructions did not permit him to understand a position taken by the prior solicitor, Mr King, on certain aspects of WFM’s position. He did not say that in criticism of Mr King, but simply that, as he had passed away, those instructions were not available.

28. In my opinion, costs thrown away consequent of amendment of the Statement of Claim should be assessed on the ordinary basis, and costs thrown away on the vacation of the hearing fixed to commence 23 May 2022 on the indemnity basis.

THIRD BASIS – OFFER OF 6 MAY 2022

29. The Third Basis upon which Toll seeks indemnity costs is by reliance on its Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) r 20.26 formal offer of compromise made 6 May 2022. Toll relies on costs entitlements pursuant to UCPR r 42.15A. Toll does not seek costs of the proceedings, on an indemnity basis, but only as it would be entitled to from non-acceptance of that offer. Toll’s offer expressed itself to be made pursuant to UCPR r 20.26. It internally expressed that the offer was available for acceptance for 7 calendar days, that is, to 13 May 2022. The offer was made 17 calendar days before the trial was listed to commence before Gibson DCJ on 23 May 2022.

30. The offer sought to resolve the proceedings with judgement in favour of Toll, no order as to costs, and the cross-claim to be discontinued. The parties to bear their own costs.

31. WFM’s first denial of this offer forming the basis for an entitlement to an award of indemnity costs is that the offer does not separate its claim from Toll’s cross-claim, and therefore did not allow WFM to accept the offer for one claim and reject it for the other.

32. In James v Royal Bank of Scotland [2015] NSWSC 970, the plaintiff argued that the defendant’s offer pursuant to UCPR r 20.26 “was one to settle all his claims against the defendants (whatever they may be), not merely those pleaded, and was thus not an offer, in accordance with UCPR 20.26(1), ‘To compromise any claim in the proceedings’.” McDougall J accepted the defendant’s submission that offers of compromise should not be construed in an overly technical fashion, so as to undermine the purpose they were intended to serve. McDougall J found, when reading the offer as a whole and in context, that it could not be found as anything other than an offer to settle the claims by the plaintiff against the defendant in the proceedings. His Honour cited Ziliotto v Hakim [2013] NSWCA 359 per Basten JA. In that case Basten JA stated (at [11] and [12]):

“It used to be that the facility to make a ‘without prejudice’ offer to settle proceedings, with the incentive of a costs sanction in the event of refusal of a reasonable offer, was accepted as an important element in discouraging litigation. Thus, in Tickel v Trifleska Pty Ltd (1990) 25 NSWLR 353 at 354 Rogers CJ Comm D stated:

It is the primary aim of any judicial system to attempt to bring the parties to a point where, with fairness to themselves, they are able to dispose of the dispute between them by compromise. It is only in the last resort that a dispute should proceed to trial and to determination. That is for any number of reasons. It is in the interests of the community that scarce resources, such as the court, should not be over-taxed. It is in the interests of the community and of the parties themselves that they should not engage in the rancour which a dispute in court necessarily entails. It is in the interests of the parties themselves to save themselves the expenditure of time and energy necessarily entailed in participation in contested court proceedings.

To treat the rules governing offers of compromise in an overly technical fashion is to undermine these enduring values. Further, it is to risk subverting the statutory mandate to give effect to the overriding purpose of the Civil Procedure Act and the rules of court, which is ‘to facilitate the just, quick and cheap resolution of the real issues in the proceedings’: s 56(1) and (2). These principles provide the framework for a purposive construction of the rules.”

33. In my opinion, applying that approach here, to construe Toll’s UCPR r 20.26 offer the way WFM proposes would be to apply an overly technical approach to the construction of the offer and UCPR r 20.26. Reading the offer as a whole, it attempted to resolve WFM’s claim against Toll and Toll’s cross-claim, which was of a much more modest sum, against WFM. To suggest it was not capable of acceptance because of use of the conjunctive “and” would be to restrict the effect of the offer and the statutory mandate to facilitate just, quick, and cheap resolution of proceedings.

34. In any event, there is no evidence of WFM having attempted to reject one part of the offer and accept the other part, in effect, to resolve one claim and keep the other in dispute for the upcoming trial.

35. In the alternative, Toll points to the letter covering its UCPR r 20.26 offer which stated that the offer was also made in accordance with Calderbank principles. WFM’s denial of Toll’s award for indemnity costs is that the 6 May 2022 offer, similarly to the 5 June 2020 Calderbank offer, did not indicate that indemnity costs would be sought by Toll in consequence of non-acceptance. A Calderbank offer can be made alongside a formal UCPR 20.26 offer of compromise. That is not contested.

36. My opinion, as discussed above at [11(6)] in these reasons, is that in the context of modern litigation, a letter conveying an offer headed “without prejudice, save as to costs”, would cause lawyers to expect an application for indemnity costs to be made where they reject the offer, and they are unsuccessful. The covering letter of the 6 May 2022 UCPR r 20.26 offer did state the alternative reliance on Calderbank principles.

37. In any event, UCPR r 42.15A(2)(a) provides for the offeror defendant’s entitlement to costs assessed on the ordinary basis up to the day following the offer. That is, 7 May 2022. And pursuant to UCPR r 42.15A(2)(b)(i), provides for the offeror defendant’s entitlement to costs assessed on an indemnity basis from the day following the offer.

38. WFM’s third basis of opposition argued that Toll’s UCPR r 20.26 offer was not open for a reasonable period. WFM relied on UCPR r 20.26(5)(b). Mr J Young of Counsel for WFM withdrew its written submission based on UCPR r 20.26(4). UCPR r 20.26(5)(b) applies to provide that Toll’s offer had to be left open to such date as was reasonable in the circumstances. On the date of the offer, 6 May 2022, the matter was listed for hearing within two months, being fixed to commence on 23 May 2022.

39. WFM’s argument that the period for acceptance was too short, given pre-trial exigencies and preparation demands, does not identify a circumstance making it unreasonable. To the contrary, WFM ought to have been readily advised and well-prepared to assess the offer at that time. Toll cites some of the many authorities that support the reasonableness of a 7 calendar day, 5 working day acceptance period. Toll also points to the fact that WFM could have applied for an extension of the time, but did not do so.

40. In my opinion, on the basis of the 6 May 2022, UCPR r 20.26 formal offer, Toll is entitled to costs assessed on the ordinary basis, from the commencement of proceedings up to 7 May 2022, and thereafter to costs assessed on an indemnity basis.

CONCLUSIONS

41. Firstly, on the basis of its 5 June 2022 offer, Toll is entitled to costs of the proceedings assessed on an indemnity basis; secondly, on the basis of its 6 May 2022 offer, Toll is entitled to costs assessed on an ordinary basis up to 7 May 2022, and thereafter costs assessed on an indemnity basis; and, if I were wrong in these conclusions, then I have concluded that Toll would be entitled to costs thrown away on the vacation of the hearing listed to commence 23 May 2022 on an indemnity basis.

ORDERS

42. I make the following orders:

1. Vacate all prior costs orders.

2. The Plaintiff/Cross Defendant/Respondent (Western Freight Management Pty Ltd) to pay the Defendant/Cross Claimant/Applicant’s (Toll Transport Pty Ltd) costs of the proceedings on an indemnity basis save as for provided in Order 3 below.

3. The Plaintiff/Cross Defendant/Respondent (Western Freight Management Pty Ltd) to pay Defendant/Cross Claimant/Applicant’s (Toll Transport Pty Ltd) costs of the Notice of Motion filed 8 June 2023, including the costs of 13 December 2023, on the ordinary basis.

*Note: Orders as amended on 13 December 2023 pursuant to UCPR r 36.17.

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Decision last updated: 19 December 2023