Court of Appeal
Supreme Court
New South Wales

Medium Neutral Citation:

Vieira v O'Shea (No 2) [2012] NSWCA 121

Hearing dates:

On the papers

Decision date:

04 May 2012

Before:

Basten JA at 1;
Meagher JA at 1;
Handley AJA at 1

Decision:

(1) Revoke orders (4) and (5) made on 5 March 2012 relating to the costs of the trial and the appeal.

(2) Set aside the order made in the District Court on 4 May 2011 as to the costs of the trial as between the plaintiff and the first defendant.

(3) Order that the first defendant pay the plaintiff's costs of the plaintiff's claim against the first defendant in the District Court, assessed on the ordinary basis.

(4) Order that the first respondent pay the appellant's costs of the appeal, to be assessed on the ordinary basis up to and including 7 June 2011 and thereafter on an indemnity basis.

(5) There be no order as to the costs of this motion.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:

COSTS - exceptions to the general rule that costs follow the event - offer of compromise - compliance with Uniform Civil Procedure Rules 2005 (NSW) - plaintiff's offer required the defendant to pay plaintiff's costs - whether offer was exclusive of costs - purpose of requiring offers under the Rules to be exclusive of costs - Uniform Civil Procedure Rules 2005 (NSW), r 20.26

COSTS - Calderbank offer made to several defendants jointly - defendants in different interests - whether unreasonable for one defendant to fail to accept offer

COSTS - appeal costs - exceptions to the general rule that costs follow the event - offer of compromise - whether appellant bettered his offer in respect of appeal - whether evidence as to the costs or likely costs of the trial required - level of uncertainty necessary to give rise to non-compliance with the UCPR

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 42.13A, 42.14, 51.47, 51.48; Pt 20, Div 4; Pt 42, Div 3

Cases Cited:

Commonwealth of Australia v Gretton [2008] NSWCA 117
Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141
Grbavac v Hart [1997] 1 VR 154
Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; 13 VR 435
Jones v Bradley (No 2) [2003] NSWCA 258
Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344
Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368
SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323

Category:

Procedural and other rulings

Parties:

Humberto Vieira - Appellant
John O'Shea - First Respondent and Cross-Appellant
Shooting Star Films Pty Ltd - Second Respondent
Treve Williams - First Cross-Respondent
Gregory Victor Nash - Second Cross-Respondent
Leanna Mary Godber - Third Cross-Respondent
Jonathan Mark Lumsden - Fourth Cross-Respondent
James Richard Whitfield - Fifth Cross-Respondent

Representation:

Counsel:

D F Jackson QC/A Paterson - Appellant
J Clarke/J Emmett - First Respondent
Submitting appearance - Second Respondent
D Short - Cross-Respondents
Solicitors:

DLA Phillips Fox - Appellant
Esplin Solicitors - First Respondent and Cross-Appellant
Holman Webb - Second Respondent
Meridian Lawyers - First to Fifth Cross-Respondents

File Number(s):

2010/423230

Decision under appeal

Jurisdiction:

9101

Date of Decision:

2010-12-08 00:00:00

Before:

Rolfe DCJ

File Number(s):

DC 2008/1513

Judgment

1THE COURT: On 5 March 2012, the Court allowed the appeal in these proceedings and gave judgment for the appellant in an amount of $255,248 plus interest. Consistently with that outcome, it ordered that the first respondent pay the appellant's costs of the trial in respect of the claim against the first respondent (order 4) and the appellant's costs in this Court (order 5).

Orders sought to be varied

2The appellant seeks a variation of the orders made on 5 March 2012, by notice of motion filed on 19 March 2012. In respect of the costs of the trial, the appellant seeks payment of his costs (as plaintiff) from the first respondent (first defendant) to be assessed on the ordinary basis up until the date of expiration of the first offer, or such other time as the Court determines, and thereafter on an indemnity basis. He also seeks payment of costs in this Court on an indemnity basis, including the costs of this motion.

3Offers of compromise were made in the course of the proceedings below and during the pendency of the appeal. The offers were drafted as engaging the operation of the Uniform Civil Procedure Rules 2005 (NSW) ("the UCPR"), r 20.26 and hence the costs consequences provided in Part 42. There was a dispute as to whether the offers complied with r 20.26; to the extent they did not comply they were sought to be relied on as Calderbank offers, with similar consequences as to costs. The first respondent accepted the availability of that course. None of the offers was accepted and the first respondent contended that his failure to accept the offers was reasonable in the circumstances.

Costs of trial

4The first offer made by the plaintiff was dated 6 July 2009. It was made more than a year after the proceedings had been commenced, more than three weeks after the plaintiff had filed his third amended statement of claim joining the third to seventh defendants (being partners in the Randwick Equine Centre) and after the additional defendants had filed a defence. The first respondent filed his defence to the third amended statement of claim on the day of the offer. The offer was also made seven months after the first respondent had made his own offer of settlement, on 12 December 2008.

5The plaintiff's claim was for an amount of $258,710, together with the on-going costs of keeping and maintaining the horse and damages for the loss of opportunity to race him. The offer sought to compromise the whole action for $215,600, with the defendants to pay his costs.

6The notice was in the form of a formal offer. Sub-rule 20.26(4) requires that such an offer may only be made by a plaintiff when the defendant has been given particulars of the plaintiff's claim and such documents as are available to the plaintiff and as are necessary to enable the defendant to consider the offer fully. Particulars had been provided approximately a year earlier, the plaintiff's primary evidence had been served on 3 April 2009 and final production of documents occurred on 22 May 2009. Accordingly, sub-rule (4) was satisfied.

7In written submissions in support of the motion, the appellant conceded that the offer did not comply with the UCPR because it was not "exclusive of costs". It is true that the offer was not stated to be exclusive of costs: the statement as to costs could have been understood as indicating that the offer was indeed not inclusive of costs, but was otherwise otiose as the same costs consequences followed from the application of the rules. (Somewhat opportunistically, the solicitors for the first respondent submitted that a later offer of compromise did not comply with the rules because it was not stated to be exclusive of costs and therefore should be presumed to be inclusive.) The UCPR are to be construed by reference to their apparent purpose. A mere reference to costs in an offer otherwise compliant with Part 20, Div 4 will not take the offer outside the rules unless the reference operates inconsistently with the relevant costs rule: Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141, (Giles JA, Handley AJA, Whealy J) at [26]-[29]. The offer, if accepted, entitled the offeror to his costs: the offer did not seek to vary the effect of UCPR r 42.13A.

8Nevertheless, accepting the concession made by the appellant, and the approach of the first respondent that the offer be treated as a Calderbank offer, it is necessary to consider whether it should have the consequence sought by the appellant, namely that, not having been accepted, indemnity costs should be paid from the end of the offer period.

9The first respondent contended that he could not accept the offer because it proposed payment not only by him but also by the third to seventh defendants. There is some awkwardness in an offer to compromise on the basis that the defendants "together" pay a specified sum to the plaintiff. The third to seventh defendants were not originally sued by the appellant, but were sued by the first respondent on a cross-claim. As a precaution against a finding that they, rather than the first respondent, were the parties responsible they were joined to the statement of claim on 12 June 2009. As the intent of the offer was to settle the whole of the claims against all defendants, the appellant had no obvious interest in which defendant, or how many of the defendants, made the payment.

10The question is whether it was an offer "capable of acceptance" by the first respondent: Grbavac v Hart [1997] VSC 37; [1997] 1 VR 154 at 164. The inquiry as to whether it was unreasonable for the unsuccessful offeree to have rejected a Calderbank offer assumes that the offer was capable of acceptance by the offeree: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37]; Jones v Bradley (No 2) [2003] NSWCA 258 at [8]-[9]; Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; 13 VR 435 at [20]; Commonwealth of Australia v Gretton [2008] NSWCA 117 at [43], [44], [117], [120].

11The offer was sent under a covering letter addressed to the solicitors for the first respondent (as first defendant) and the solicitors for the third to seventh defendants. It was an offer to compromise "this action in whole" on terms that those defendants "together" pay the sum of $215,600 and that those defendants pay the appellant's costs as assessed or agreed. In its terms the offer was made to those defendants jointly to resolve the whole of the proceedings. That offer was not capable of being accepted by the first respondent on behalf of the other defendants in the absence of authority to do so. As between the first and the other defendants, their interests were opposed.

12Without the agreement and acceptance of the other defendants, all that the first respondent could do was to make a counter-offer, which may or may not have addressed the position of the third to seventh defendants. For example, he could have offered to indemnify the appellant for any liability to pay the costs of the third to seventh defendants in the event that he settled with the first respondent and discontinued against them. If the first respondent had paid the sum of $215,600 and the costs as assessed or agreed, his conduct would not have constituted an acceptance of the offer. Nor would it have resolved the "action in whole". There would have remained the question whether the appellant would proceed against the third to seventh defendants and, in the absence of his doing so, a further question as to the basis upon which the proceedings against them would be disposed of, particularly in relation to their costs.

13As the offer was not capable of acceptance by the first respondent alone and as it is not suggested that the first respondent was able to bind the other defendants, it was not unreasonable for the first respondent not to accept the offer.

14The letter of 22 February 2010 was relevantly in the same terms and the same analysis applies. The appellant's application for assessment of his costs of the trial on an indemnity basis is rejected.

15As a technical matter, not raised by the parties, the orders made on 5 March 2012 did not expressly set aside the order of the trial judge as to the costs of the trial as between the appellant and the first respondent. That omission should be corrected and order (4) varied accordingly.

Costs of appeal

16Judgment was delivered in the District Court on 8 December 2010. A notice of appeal was filed in this Court on 4 March 2011. On 21 March 2011 the first respondent filed a cross-appeal. On 2 May 2011 the appellant filed his written submissions on the appeal.

17On 6 June 2011, two days after the appeal was listed for directions, the appellant filed an offer of compromise in an amount of $180,000, the offer being open for acceptance for 28 days. The offer was stated to be made in accordance with UCPR, r 20.26.

18The first respondent disputed that the offer complied with the relevant rule for three reasons. First, it was said that the offer failed to state that it was "exclusive of costs", as it was required to be by UCPR 20.26. However, the rule does not require such a statement, but merely requires that the offer "must be exclusive of costs": r 20.26(2). The evident purpose of that requirement is that the effect of the offer, whether accepted or rejected, will be to engage the relevant costs rule in Pt 42. The offer did not purport to be inclusive of costs and there was no reason to infer that it was, so as to invalidate its operation under r 20.26, with which it purported to comply.

19The purpose of requiring an offer under the UCPR to be exclusive of costs is to allow the rules with respect to costs to operate according to their terms. Thus, where an offer is made by a plaintiff and not accepted by the defendant and the plaintiff obtains a judgment which betters the offer, the plaintiff is entitled to an award of costs assessed on the indemnity basis from the day following the day on which the offer was made, unless the Court otherwise orders: r 42.14. With respect to appeals, the rules merely pick up with appropriate modifications the provisions of Pt 20, Div 4: r 51.47. The costs rules in Pt 42, Div 3, are also subject to modifications: r 51.48.

20Secondly, the submission claimed that the offer "was asking the first respondent to give up the cross-appeal". That was not so: the cross-claim was against the Randwick Equine Centre partners and was defensive. The appellant made no claim on the appeal in respect of their liability. The offer was to compromise the appeal against the first respondent. It was open to the first respondent to protect his position with respect to the cross-appeal, if he were minded to accept the offer.

21A third objection was that the offer did not identify the orders which were to be made if it were accepted. In particular, it did not identify the fate of the costs order in favour of the first respondent in the trial court. In substance, this was a claim that the offer was uncertain.

22It may be accepted that lack of clarity in the terms of the offer is a relevant consideration in determining whether the rejection of a Calderbank offer is unreasonable: Hazeldene's Chicken Farm at [25], referred to by this Court in Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [12]. However, it would require a significant element of uncertainty to render the offer one which did not comply with r 20.26. The appeal being a distinct proceeding, an offer made in respect of the appeal should be understood as seeking to invoke the costs rules as applicable to the appeal. Accordingly, the formal offer of 6 June 2011 to settle the proceedings on condition that the first respondent pay the appellant $180,000 must be understood as a compromise of the appellant's claim for damages and challenge to the costs order made at the trial. There was no evidence that the first respondent understood it any other way.

23In some circumstances, evidence as to the costs or, if not assessed, the likely costs of the trial might need to be provided in order to know whether the appellant has bettered his offer in respect of an appeal. However, in the present case, that evidence is not required. The orders made on the appeal exceeded the offer by a considerable amount, disregarding the costs of the trial, to which he is also now entitled. It follows that, absent some basis upon which the Court should otherwise order, he is entitled to his costs of the appeal on an indemnity basis from 7 June 2011. (Although the notice of motion referred to the whole of the costs of the appeal, no submissions were directed to the period prior to 7 June 2011; absent reliance on an offer made prior to trial, no such justification is possible.)

24There is no reason why the Court should otherwise order. The issues were well understood by the parties, the amount in dispute having been determined by the trial judge, quite properly, despite giving judgment for the first respondent.

25If the offer were not to be treated as a formal offer under the rules, it would be necessary to consider whether the first respondent was unreasonable in failing to accept it as a Calderbank offer. As explained by the Court in Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 (Spigelman CJ, Beazley and McColl JJA) at [42], "[t]he fact that one party has won at first instance does not mean that efforts to compromise should cease". The first respondent and his lawyers no doubt assessed what was at stake and made an informed decision not to accept the fresh offer. The outcome either demonstrated that their assessment was erroneous or at least that they accepted a risk which materialised. There is no reason why the first respondent should not be held to the element of the risk which he accepted in not taking up the offer, namely that, thereafter, he was litigating at risk of an indemnity costs order.

26The appellant should have the costs of the appeal assessed on the ordinary basis up to and including 7 June 2011 and thereafter on an indemnity basis.

27The appellant has been partly successful and partly unsuccessful in relation to his motion. The issues, as to the costs of the trial and the costs of the appeal, were discrete. There should be no order as to the costs of the motion.

Orders

28The Court makes the following orders: