Supreme Court New South Wales

• Medium Neutral Citation: The Owners Corporation Strata Plan 70579 v Midwest Constructions Pty Ltd & Ors [2012] NSWSC 644
• Hearing dates: 7 May, 11 May 2012
• Decision date: 13 June 2012
• Jurisdiction: Equity Division
• Before: Sackar J

Decision

See paragraph 111

• Catchwords: Offer of compromise, unreasonableness, multiple tortfeasors, settlement of one tortfeasor, indemnity costs, costs, pre-judgment interest, calderbank offer
• Legislation Cited: Home Building Act 1989 (NSW); Uniform Civil Procedure Rules 2005 (NSW); Civil Liability Act 2002 (NSW); Law Reform (Miscellaneous Provisions) Act 1946 (NSW)
• Cases Cited: A v N [2012] NSWSC 549; Baxter v Obacelo Pty Ltd (2001) 205 CLR 635; Bennett v Jones [1977] 2 NSWLR 355; CSR Ltd v D'arcy [1999] NSWCA 216; Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145; Haines v Bendall (1991) 172 CLR 60; HSD Co Pty Ltd v Masu Financial Management Pty Ltd (2008) NSWSC 1279; Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85; Old v McInnes [2011] NSWCA 410; Ruby v Marsh (1975) 132 CLR 642; Screenco Pty Ltd v RL Dew Pty Ltd [2003] NSWCA 319; Tang Man Sit (Deceased) v Capacious Investments Ltd [1996] AC 514; Townsend v Stone Toms & Partners [1984] 27 BLR 26 [CA]; Vieira v O'Shea (No 2) [2012] NSWCA 121
• Category: Principal judgment
• Parties: The Owners - Strata Plan No 70579 - plaintiff; Midwest Constructions Pty Limited - first defendant; Zolsan Pty Limited - second defendant; J & R & J Investments Pty Ltd - third defendant
• Representation: Counsel: J Young - plaintiff; J Johnson - first to third defendants; Solicitors: Grace lawyers - plaintiff; Colin Biggers Paisley - first to third defendants
• File Number(s): 2009/55032

Judgment

The Proceedings

1 The plaintiff as proprietor of registered strata plan No 70579 (being the strata plan and land and the residential unit block built upon that land at 1 - 3 Funda Place, Brookvale) commenced proceedings in this Court in April 2009 by way of summons and list statement in which it alleged numerous building defects had occurred during construction.

2 The first defendant was a builder who built the residential unit block and did associated demolition works and improvements on the land.

3 The second and third defendants were the developers of the land and it was asserted that they were responsible for the works undertaken by the first defendant.

4 The fourth defendant was a person who certified the work including the demolition and associated works performed by the first defendant.

5 It was asserted in the proceedings that the works were performed by the first defendant for and on behalf of the second and third defendants as developers of the land and that the land was residential building works for the purposes of the Home Building Act 1989 (NSW) (the Act).

6 The plaintiff as the immediate successor in title to the second and third defendants was, it asserted, entitled to the benefit of statutory warranties arising under the Act. Allegations were made about defects and omissions in the works carried out by the first defendant and/or a delay and failure to complete the work or rectify the work with due diligence and within a reasonable time.

7 The claim against the second and third defendants was said to be in the alternative and again it was said that they had breached statutory warranties arising by reason of section 18C of the Act.

8 The claim against the fourth defendant was on the basis of a duty of care owed to avoid economic loss arising from the breach of his obligations to properly certify the works. The fourth defendant brought proceedings for contribution against the other defendants.

9 In the original pleading an amount of $952,898 inclusive of GST but not of the cost of rectification of fire safety deficiencies in the building was claimed.

The Progress of the Matter

10 On 11 December 2009 the Court ordered the plaintiff, inter alia, to file and serve a Scott Schedule.

11 The plaintiff filed the Scott Schedule on 9 April 2010 detailing 473 items claimed by the plaintiff (including defect rectification costs, overhead and profits, builders margin contingency fees, GST etc).

12 Certain lay evidence was prepared and served by the plaintiff.

13 In due course, the parties exchanged various versions of the Scott Schedule.

14 On 27 May 2010 the plaintiff served quantum evidence from a Mr John Roberts in relation to its claim quantifying the claim in the sum of $1.632,839 million.

15 On 2 July 2010 the Court referred the whole of the matter to Ms Janet Grey as Referee for enquiry and report.

16 On 12 August the defendants served certain evidence and responded to the Scott Schedule.

17 On 30 August RMB Lawyers who acted for the fourth defendant wrote to the plaintiffs' solicitors requesting clarification of the plaintiffs claim. In that letter the fourth defendants solicitors indicated that their client was uninsured and requested greater precision as to what was being claimed against that defendant.

18 By letter dated 9 September the plaintiffs solicitors informed the fourth defendants solicitors that the claim was based principally upon items 441 - 473 of the Scott Schedule, but to lesser extent items 319 - 440.

19 On 15 September the solicitors for the fourth defendant indicated that now clarity had been provided they would soon respond to the plaintiff's claim.

20 On 21 October the solicitor for the first to third defendants sent a letter requesting the quantum of the plaintiff's legal costs to that date.

21 On 22 October the plaintiff's solicitors responded by indicating that give or take $20,000 the approximate figure was $338,985.55 inclusive of GST.

22 On 27 October it became apparent to the other defendants that the plaintiff had made an offer to the fourth defendant. However, the solicitors for the fourth defendant regarded the plaintiffs offer at that point as unrealistic as the fourth defendant was uninsured.

23 On 3 November the solicitors for the first to third defendants made an offer of settlement to the plaintiff of $410,000 together with costs of $300,000 (inclusive of disbursements and GST). The offer also involved the proceedings being discontinued against those defendants with mutual releases. The offer was said to be open until the close of business on the first day of the hearing on 9 November. It was proposed if the offer was accepted a deed was to be executed. It was further said the offer was to be treated as a Calderbank offer.

24 However on 8 November the solicitors for the first to third defendants served a notice of Offer of Compromise on the solicitors for the plaintiff. The offer was said to be in the sum of $700,000 (inclusive of GST) in "full and final settlement of the proceedings". There was a further offer that the first to third defendants would pay the plaintiffs costs of the proceedings as agreed or assessed. It was also said to be an offer pursuant to Rule 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) UCPR.

25 On the same day the plaintiffs solicitors responded with a counter offer, but also claimed that in the circumstances, the offer by the defendants was unreasonable. In particular the plaintiff asserted that it was not clear until "late last week" and "earlier today" by the service of joint expert reports what concessions the defendants were making and further asserting that some of the items had not been costed by anyone. They sought an explanation as to how the $700,000 had been arrived at. Nonetheless a counter offer was put in the form of a judgment for the plaintiffs in the sum of $1.5 million made up of $1.2 million inclusive of interest and $300,000 for costs.

26 There is some background to these comments about the assertion of unreasonableness, as follows:

(a) On 30 August the Court had ordered inter alia, that the first to third defendants serve their quantum evidence on or before 20 September 2011;

(b) The first to third defendants served unsworn quantum evidence on 29 September which was sworn on 30 September;

(c) On 12 October at a further conference the Referee directed that the first to third defendants provide to the plaintiff and the Referee the quantum calculations of Mr Michael Waddell (their expert);

(d) On 28 October 2010 the first to third defendants had not served any quantum calculations as directed by the referee. On that day the solicitor for the plaintiff complained about the lack of quantum calculations. That said expert conclaves took place on that day. The plaintiffs solicitor advised that the "Calderbank letter" was deficient and in any event as the parties experts were involved in conclaves there was insufficient time to respond;

(e) The quantum calculations of Mr Waddell were finally supplied on 5 November (a Friday).

27 On 9 November the first to third defendants solicitors wrote to the plaintiffs solicitors noting the plaintiffs solicitors assertion that the offer of 8 November could not be considered was nonsense, given the fact a counter offer was put. The defendants solicitors, in response to a request, asserted that it was irrelevant as to how the $700,000 had been arrived at. The letter went on to point out a number of weaknesses in the plaintiffs case and calculations. The offer of $700,000 was not accepted.

28 Further, early on 9 November the first to third defendants made an Offer of Compromise purporting to be pursuant to rule 20.26 of the UCPR in the amount of $800,000. It was on the basis that the proceedings be dismissed and was said to be only open until 12pm on 10 November 2010. That offer was not accepted.

29 The matter was meant to commence before the Referee on 9 November on all issues, but due in part to the lateness of Mr Waddell's calculations it proceeded largely on the issue of liability.

30 The Offer of Compromise of 9 November was not physically seen by the solicitor with conduct of the matter for the plaintiff until later in the day (around 5pm). Indeed she did not hear about it until mid morning on 9 November.

31 By 9 November 2010 the plaintiff had settled its claim against the fourth defendant for an amount of $100,000 plus costs, as agreed or assessed. A consequence of the settlement was the dismissal of the fourth defendant's cross claims against the other defendants.

32 On 27 November 2010 Ms Grey provided an interim report to the Court on liability. She found for the plaintiff on liability in a number of respects and in particular found the defendants in breach of the statutory warranties. She also decided that a number of the plaintiff's claims failed. On 23 March 2011 the Referee provided a final report quantifying the loss at $753,029.37.

33 The interim and final reports were the subject of an adoption hearing before Einstein J on 11 May 2011 and his Honour delivered a reserved judgment on 13 May 2011. I should observe the defendants sought adoption of the report as handed down by the Referee whereas the plaintiff sought a qualified adoption.

34 During the course of the proceedings before Einstein J an issue arose as to whether or not the Referee had adequately, or at all, dealt with what was described as the superintendents fee issue. The plaintiff had filed an affidavit of Mr John Roberts dated 26 May 2010 before the Referee which had dealt with the requirement of a superintendents fee. The defendants had it seems not filed any evidence dealing with the issue. Mr Roberts had been called before the Referee but was not cross examined about his evidence in relation to the superintendents fee. It was submitted by the plaintiff that the Referee had failed to make any findings about the fee and a question then arose as to whether the Court should determine the issue for itself or remit the matter to the Referee.

35 On 17 May the Court made orders in accordance with short minutes of order and pursuant to paragraphs 2 and 3 thereof that the claim for the superintendents fee should be remitted to the Referee for consideration, and for a further reference hearing and that the Referee convene a conference with the parties to deal with submissions and further evidence (if any) on that issue. The plaintiff was ordered to pay the costs of this issue before the Referee (including the costs of the Referee and associated costs). The plaintiff was also ordered to pay the defendants costs of the motions before the Court of 11 May.

36 The Referee prepared a supplementary report dealing with the superintendents fee issue on 14 November 2011 which report was adopted by the Court on 25 November 2011.

37 By way of adoption of the interim final and supplementary reports the Court has accepted the recommendations of Ms Grey that the plaintiff be awarded, in relation to its original and further claims $753,029.37 for losses arising from breaches of statutory warranties on the part of the defendants. A further amount of $48,300 referable to the claim for the superintendents fee was awarded by the Referee. This led to a total amount which has been awarded by the Referee in the sum of $801,329.37.

What is to be Determined

38 The parties agree that the matters for determination are the amount in respect of which judgment should be entered in favour of the plaintiff against the first to third defendants and what costs orders should be made. The defendants submit that they were entitled to an award of indemnity costs in accordance with the UCPR because the Offer of Compromise was not accepted and a less favourable outcome relevantly was achieved by the plaintiff. In addition there is also a debate about what if any interest should be awarded. The defendant submits no interest at all should be awarded, in the alternative a reduced amount to that claimed.

The Order for Judgment

Two Tranches?

39 The plaintiffs invite the Court to enter judgment in the sum of $801,329.37. The defendants however submit that judgment should be entered in "two tranches". By that the defendant apparently means judgment should be entered for the plaintiffs claim and as they put it "the plaintiffs further claim" (i.e. the superintendent's fee).

40 In my opinion the plaintiffs correctly point out that no judicial basis has been given nor any authorities cited to support such a submission. I regard that approach as inappropriate.

41 In my own mind it simply does not make sense to describe claims in the way the defendants seek to articulate them, nor does it lead logically or sensibly to two judgments. The superintendents fee was an amount referable to the costs of an employee of the rectifying builder effectively to supervise the builder's employees work and any contractors work.

42 Further there would be tasks involved in engaging the builder administering the contract and co-ordinating access as required. Mr Roberts gave evidence about these issues. The main contest before the Referee was the actual quantum to be ascribed to the various activities to be undertaken by the superintendent.

43 It is true that one could describe such a claim as a "further claim", but it is simply part of the overall claim, albeit one component part of various heads of damage which were sought by the plaintiff as a result of the breaches of statutory warranties on the part of the various defendants.

44 I do not believe that whatever the notion may mean, judgment should be entered in "two tranches".

The Settlement With the Fourth Defendant

45 The defendants submit that judgment should only be entered in any event in the sum of $701,329.37 by reason of the amount obtained of $100,000 by way of the settlement with the fourth defendant.

46 No judgment was entered against the fourth defendant. The amount of $100,000 plus costs was accepted by the plaintiffs in full and final settlement of any claim it might have had against the fourth defendant and proceedings were thereby dismissed against him.

47 The defendants contend that the claim made by the plaintiff was an apportionable claim pursuant to the provisions of s 34 of the Civil Liability Act 2002 (NSW) (CLA) and all the defendants were therefore concurrent wrongdoers pursuant to the provisions of s 34(2) CLA.

48 The defendants further submit that the acceptance by the plaintiff of the settlement offer of $100,000 plus costs from the fourth defendant is a recognition by the plaintiff of the apportionable value of the claim pursuant to s 35 of the CLA.

49 I should observe that the Court made orders in accordance with short minutes of order on 17 December 2010 in which by consent, proceedings against the fourth defendant were dismissed. In addition proceedings against the first, second, third, fourth and fifth cross defendants were also dismissed with no order as to costs and the fourth defendant was ordered to pay the plaintiff's costs as agreed or assessed on a party to party basis.

50 The above orders were necessitated by reason of the settlement between the plaintiff and the fourth defendant which in turn resolved the cross summons which had been brought by the fourth defendant against the other defendants. However the other defendants never brought proceedings by way of a cross summons against the fourth defendant nor did they plead any apportionable claim by way of defence. Such a defence must be specifically pleaded: HSD Co Pty Ltd v Masu Financial Management Pty Ltd (2008) NSWSC 1279 at [18].

51 As the apportionable claim was never the subject of any pleading it is unsurprising that there was no reference by the Referee or the Court to any such claim or to any issue in relation to the defendants as concurrent wrongdoers. More to the point there has never been any finding of liability against the fourth defendant.

52 The terms of settlement with the fourth were on a "without admission of liability" basis.

53 Nonetheless and in any event the defendants submit that the $100,000 settlement should be taken into account otherwise it would amount effectively to a double recovery. They submit that even if the apportionment legislation is not applicable the plaintiff cannot recover more than the total of two amounts awarded by the Referee less the $100,000 already received. The defendants rely in this regard on the decision of the High Court in Baxter v Obacelo Pty Limited (2001) 205 CLR 635.

54 I should observe that the case against the fourth defendant was one in negligence. It was asserted that the fourth defendant owed a duty of care to the plaintiff to take reasonable care to avoid the damage of economic loss arising from the failure to properly certify the building. I should also note from the pleading that there is a clear overlap between the heads of damage claimed against the first to third defendants on the one hand, and the fourth defendant on the other. A good example is Schedule B which identifies losses said to be incurred as a result of defective and incomplete rectification works.

55 The case of Baxter was a proceeding by former clients against its former solicitors alleging negligence and breach of contract in respect of a property transaction in which it was alleged the solicitors had acted. The former clients had mistakenly sued the defendants as partners in the solicitors practice. In fact the practice was conducted by a Mr Whitehead, and Mr Baxter was merely an employed solicitor who performed the professional work in question. The initial claim was for damages in excess of $430,000. The former clients entered into negotiations with Mr Whitehead and as a result settled the claim against him and executed a deed of release. The deed provided that the terms of settlement would be filed, that the clients would release Mr Whitehead from all claims upon the payment of $250,000 inclusive of costs and that the statement of claim would be amended to provide for the continuation of the action against Mr Baxter. The settlement involved the entry of judgment against Mr Whitehead. The question for the High Court was whether it was open to the former clients to continue their proceedings against the employed solicitor. The Court concluded that s 5(1)(b) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) did not preclude the former clients from continuing their case against the employed solicitor as the deed of release and the terms of settlement together with their conduct indicated that they did not accept the amount from Mr Whitehead in full satisfaction of the loss or damage they had incurred and hence were not precluded from continuing the action.

56 The former clients accepted that when it came to the assessment of damages for which Baxter was liable the trial judge was bound to give credit for the amount already received by them from Mr Whitehead.

57 Gleeson CJ and Callinan J accepted that credit should indeed be given for the amount received in a settlement against Whitehead in the context of assessing what damages may flow from the negligence of Baxter. Their Honours noted their approval as stated by Lord Nicholls of Birkenhead in Tang Man Sit v Capacious Investments Ltd (1996) AC 514 at 522, in which his Lordship considered the question of an action against one or more persons and expressed the view that a plaintiff could not recover in the aggregate from one or more defendants an amount in excess of his loss. His Lordship went on to express the view that part satisfaction of a judgment against one person does not operate as a bar to the plaintiff thereafter from bringing an action against another who is also liable, but it does operate to reduce the amount recoverable in the second action. See Baxter at [37], [38], [39] and [48].

58 Gummow and Hayne JJ approached the matter in a similar way to Gleeson CJ and Callinan J. See Baxter at [64].

59 In CSR Ltd v D'arcy [1999] NSWCA 216 the Court of Appeal (Mason P, Beazley JA and Brownie AJA), quoted with apparent approval the Victorian Court of Appeal's acceptance of a statement of Oliver LJ in the English Court of Appeal in Townsend v Stone Tom & Partners (1984) 27 BLR 26, where His Lordship had said:

...where a plaintiff with concurrent claims against two persons has actually recovered all or part of his loss from another, that recovery goes in diminution of the damages which will be awarded against the defendant.

60 Here there is no reason why such a principle or the notion should not have equal application. There is no doubt that the settlement with the fourth defendant was clearly not intended to satisfy anything other than the liability of that defendant. The position in relation to the other defendants was quite explicitly kept open. However that is really not to the point.

61 The Referee in awarding the damages was clearly intending to refer to all causes of action. That is, she awarded damages suffered by the plaintiff by whatever cause. It is clear that whilst the case against each defendant had some differences there was a significant overlap in the damages that were claimed by the plaintiff. As was made clear by the High Court, such a principle would not be affected by whether the claim was against joint tortfeasors or several concurrent tortfeasors.

62 It is clear in my view from the above that here it would be unconscientious and contrary to principle for the plaintiff not to be obliged to give credit for the $100,000 when the Court is assessing the quantum of any judgment to be entered in its favour. Here the Referee has quantified those losses and her report as to quantum has been adopted. That said, in the circumstances the Court is here presented with, it is important that the judgment be entered so as to reflect the amount already received from the fourth defendant. The dictates of justice require nothing less.

63 Consistent with principle in my view judgment should be entered in the sum of $701,329.37.

The Question of Costs

64 Ward J has recently restated some general principles as follows in A v N (2012) NSWSC 549 at [11] to [13] as follows:

[11] The Court's power to award costs pursuant to s 98(1) of the Civil Procedure Act 2005 (NSW) is, subject to the rules of court and to statute, discretionary. The discretion is a very wide one (Oshlack v Richmond River Council [1998] HCA 11; (1998) 198 CLR 72; (1998) 152 ALR 83; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 322). It must be exercised judicially (having regard to its statutory context, established principle and the circumstances of the relevant case). The overriding statutory context in which this discretion falls to be exercised is that for which provision is made in s 56 of the Civil Procedure Act, namely, the just, quick and cheap resolution of the real issues of dispute.

[12] Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) provides that, subject to Part 42, if the court makes any order as to costs, it is to order that costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. The general rule is thus that a successful party will be the recipient of an order for costs in its favour (those costs to be on the ordinary or party/party basis). This requires a determination to be made as to what is the relevant "event" for the purposes of the order to be made in accordance with the general rule (a task that may be difficult where there are multiple events - Owners Strata Plan No 64970 v Austruc Constructions Ltd (No 5) [2010] NSWSC 586 per Bergin CJ in Eq). Where there is a mixed outcome in proceedings, an apportionment of costs between issues may be made (Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20) and, if so, may be made on a broad brush basis (Fexuto; Golding v Vella (No 2) [2001] NSWSC 731). It has, however, been recognised that it is only in exceptional circumstances that this should occur (Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 28 ALR 201; (1979) 42 FLR 213; (1979) ATPR 40-141; Stena Rederi Aktiblag v Austal Ships Sales Pty Ltd [2007] FCA 1141 at [12]).

[13] Costs orders are compensatory in nature, to reflect the vindication of the successful claim or defence thereof, not punitive (Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534; (1990) 97 ALR 45; Ohn v Walton (1995) 36 NSWLR 77). Save where there is a special costs order by reference to the procedure provided for under the Rules or in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333; 3 WLR 587, it has been said that a court should depart from the general rule and award indemnity costs only where the conduct of the party against whom the order is sought is "plainly unreasonable" (Sydney City Council v Geftlick [2006] NSWCA 280; Dunstan v Rickwood (No 2) [2007] NSWCA 266). In Leichhardt Municipal Council v Green [2004] NSWCA 341 Santow JA (at [57] said that indemnity costs orders should be reserved for the most unreasonable actions by unsuccessful plaintiffs.

65 As Hodgson JA noted in Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145:

15. It was submitted for Mr Griffith that a successful party may be deprived of costs, and ordered to pay the other party's cost, in respect of an issue lost by the successful party, where that issue was clearly dominant or severable: Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [64], Waters v P C Henderson (Australia) Pty Ltd [1994] NSWCA, 338.

16. I accept that a successful party may be deprived of costs and ordered to pay the other party's costs in those circumstances. I adhere to what I said on this question (Beazley and McColl JJA agreeing) in Turkmani v Visvalingam (No 2) [2009] NSWCA 279 at [9]-[13]:

[9]The applicable principles were stated as follows in the joint judgment of Beazley, Tobias and McColl JJA in James v Surf Road Nominees (No 2) [2005] NSWCA 296 at [31]-[33]:

[31]Costs orders in the Supreme Court are governed by the provisions of s 76 of the Supreme Court Act 1997 and the Supreme Court Rules. Section 76 provides, relevantly that subject to the Act and the Rules, costs shall be in the discretion of the Court: s 76(1)(A). Part 52A r 11 acts as a limited proscription of the Court's discretion conferred by s 76. Part 52A r 11 provides that, subject to Pt 52A, the Court shall order that costs follow the event "except where it appears to the Court that some other order should be made as to the whole or any part of the costs".

[32]The effect of Pt 52A r 11 is that an unsuccessful party may be ordered to pay the entirety of the costs of the successful party, even though the successful party did not succeed on all issues. However, as is specified by the rule itself, the Court is entitled to make a different order. That may occur where there are multiple issues involved. This was the subject of comment in Waters v P C Henderson (Aust) Pty Ltd (unreported CA(NSW) Kirby P, Mahoney and Priestley JJA, 6 July 1994) where Mahoney JA said:

Where the proceedings involve multiple issues the application of the rule that costs follow the event may involve hardship where a party succeeds on some issues and yet fails on others. Particularly is this so where, for example, a defendant succeeds on issues that occupied the bulk of the time taken by the proceedings. Nevertheless, unless a particular issue or group of issues is clearly dominant or separable, it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed.

[33]Similarly, Toohey J made the following observations in Hughes v Western Australian Cricket Association (1986) ATPR 40-748:

1.Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order.

2.Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed.

3.A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the party's costs of them. In this sense, "issue" does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law. (references omitted)

[10]Those paragraphs were quoted with approval in Roads and Traffic Authority v McGregor (No 2) [2005] NSWCA 453 at [17]: and there are similar statements of principle in Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [63]-[65] and Rockdale City Council v Micro Developments Pty Ltd [2008] NSWCA 128 at [115].

[11]In the present case, in my opinion, the issues of liability and apportionment for contributory negligence were not clearly severable: all the arguments relied on by the appellant with a view to negativing liability had, to a greater or lesser extent, some bearing on the Court's overall assessment of the respective degrees of fault of the appellant and the deceased.

[12]The principles stated in the cases have an alternative basis for departure from the usual order as to costs, namely where the successful party fails on a "clearly dominant issue". That seems to suggest that if an issue can be identified that was clearly dominant, on which the successful party failed, the usual order may be departed from even though that issue was not clearly severable. Here, the respondents argued to the effect that the issue of liability was clearly dominant.

[13]The question of whether a departure from the ordinary rule might be justified on this basis should, in my opinion, be approached having regard to the idea of fairness underlying the making of costs orders, which I expressed as follows in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121]:

[121]In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: cf Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Departures from the general rule that costs follow the event are broadly based on a similar approach.

17. Other cases in which similar principles have been expressed include Elite Protective Personnel Pty Limited v Salmon (No 2) [2007] NSWCA 373, and Bostik Australia Pty Limited v Liddiard (No 2) [2009] NSWCA 304.

18. It is clear that this approach is not limited to cases where it was unreasonable for the successful party to raise the issue on which it failed: Rosniak v GIO (1997) 41 NSWLR 608 at 615D. However, the principles only identify cases in which it may be appropriate to depart from the usual result as to costs, not cases in which the court must do so: James at [34]-[36].

19. Further, in my opinion, the underlying principles concerning costs identified in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121] and Ohn v Walton (1995) 36 NSWLR 77 at 79 (referred to in Turkmani at [13]) suggest that the application of these principles may not be exactly the same for successful defendants as for successful plaintiffs. In the former case, the defendant has been caused to incur costs in defending a claim which the decision in the case has wholly rejected, and has thus determined should not have brought about the incurring of any costs at all. In those circumstances, it may be considered appropriate that the defendant have costs associated with reasonable defences, even if they ultimately proved to be unsuccessful and severable. In the latter case, the plaintiff has chosen to bring the whole proceedings and thereby to incur costs and cause costs to be incurred which otherwise would not have been incurred; and in those circumstances, it may be seen more readily as appropriate that the plaintiff be liable for the costs of unsuccessful severable claims or issues, even if it was reasonable to include those claims or issues.

20. Most of the cases in which these principles have been considered are cases where a successful plaintiff (or appellant) has not recovered full costs. Two cases which did concern successful defendants (or respondents) give some support to the distinction I have drawn in the previous paragraph: Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 at [24]-[25], and Sydney Ferries v Morton (No 2) [2010] NSWCA 238 at [18]. However, this distinction is not necessary for my decision in this case.

The Requirements of Rule 20.26

66 The defendants served their offer purporting to be an Offer of Compromise for $800,000 on the morning of 9 November 2010. It was expressed to be in full and final settlement and that the plaintiff's costs would be paid "as agreed or taxed". The offer was said expressly to be made in accordance with Rule 20.26 of the UCPR.

67 UCPR 20.26 is in the following terms:

20.26 Making of Offer

(1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms.

(2) An offer must be exclusive of costs, except where it states that it is a verdict for the defendant and that the parties are to bear their own costs.

(3) A notice of offer:

(a) must bear a statement to the effect that the offer is made in accordance with these rules, and

(b) if the offeror has made or been ordered to make an interim payment to the offeree, must state whether or not the offer is in addition to the payment so made or ordered.

(4) Despite subrule (1), a plaintiff may not make an offer unless the defendant has been given such particulars of the plaintiff's claim, and copies or originals of such documents available to the plaintiff, as are necessary to enable the defendant to fully consider the offer.

(5) If a plaintiff makes an offer, no order may be made in favour of the defendant on the ground that the plaintiff has not supplied particulars or documents, or has not supplied sufficient particulars or documents, unless:

(a) the defendant has informed the plaintiff in writing of that ground within 14 days after receiving the offer, or

(b) the court orders otherwise.

(6) An offer may be expressed to be limited as to the time it is open for acceptance.

(7) The following provisions apply if an offer is limited as to the time it is open for acceptance:

(a) the closing date for acceptance of the offer must not be less than 28 days after the date on which the offer is made, in the case of an offer made 2 months or more before the date set down for commencement of the trial,

(b) the offer must be left open for such time as is reasonable in the circumstances, in the case of an offer made less than 2 months before the date set down for commencement of the trial.

(8) Unless the notice of offer otherwise provides, an offer providing for the payment of money, or the doing of any other act, is taken to provide for the payment of that money, or the doing of that act, within 28 days after acceptance of the offer.

(9) An offer is taken to have been made without prejudice, unless the notice of offer otherwise provides.

(10) A party may make more than one offer in relation to the same claim.

(11) Unless the court orders otherwise, an offer may not be withdrawn during the period of acceptance for the offer.

(12) A notice of offer that purports to exclude, modify or restrict the operation of rule 42.14 or 42.15 is of no effect for the purposes of this Division.

68 Meagher JA (with whom Giles JA agreed) in the Court of Appeal in Old v McInnes [2011] NSWCA 410, said at [105]:

Mr McInnes relies upon the Offers of Compromise as offers in accordance with UCPR 20.26 and alternatively as informal offers relevant to the exercise of the discretion as to costs: see Trustee for the Salvation Army (NSW) Property Trust & Anor v Becker (No. 2) at [7], [27]; Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344 at [7]-[8]. UCPR r 20.6(2) provides:

"(2) An offer must be exclusive of costs, except where it states that it is a verdict for the defendant and that the parties are to bear their own costs."

Neither of the offers made on behalf of Mr McInnes was "exclusive" of costs or within the exception in r 20.6(2). Each provided that Mr McInnes should pay Mr Old's costs "as agreed or assessed". For that reason, neither was an offer in fact "made under rule 20.26" for the purposes of UCPR r 42.13 and accordingly each was of no effect for the purposes of the Offer of Compromise regime under the UCPR: Trustee for the Salvation Army (NSW) Property Trust & Anor v Becker (No. 2) at [22]-[24]; Dean v Stockland Property Management Pty Ltd & Anor (No. 2) [2010] NSWCA 141 at [16]-[29].

69 The offer here of 9 November would in my view fail for the same reason, it being expressed to be the payment of costs "as agreed or assessed".

70 However I have had drawn to my attention a subsequent judgment of the Court of Appeal in Vieira v O'Shea (No. 2) [2012] NSWCA 121, being a joint judgment of Basten, Meagher JA and Handley AJA in which their Honours were considering an offer of costs "as assessed or agreed". Their Honours said at [7]:

In 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 rule. (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) [2001] 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.

71 It has been submitted that the two cases appear to indicate entirely different approaches by the Court of Appeal. I observe that the Court in Vieira did not consider (it seems) its prior decision in Old.

72 The plaintiff submits that the decision in Vieira is irreconcilable with Old. The defendants take the same position. I am of course unable to resolve such conflict, but the view I have come to on the facts as later appears obviates the need for me to attempt to do so.

73 In order to comply with r 20.26 the offer must be left open for such time as is reasonable, in the case of an offer made, less than 2 months before the date set down for the commencement of the trial (r 20.26(7)(b)). Here the relevant offer was made on the morning of 9 November and was said to expire at 12pm on 10 November.

74 The defendants submit that in all the circumstances that was a reasonable time in which the plaintiff could and should have been able to give consideration to the offer. The plaintiff rejects that proposition.

75 In Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No. 2) [2008] NSWCA 85, the Court of Appeal had to consider the nature of reasonableness for the purposes of r. 20.26(7)(b). Giles and Tobias JJA said at [2]:

We agree with his Honour's explanation of why Kooee's first offer of compromise does not avail it. We agree that its second offer of compromise was not left open for such time as was reasonable in the circumstances, and so can not bring entitlement to indemnity costs pursuant to UCPR r 42.15, and with his Honour's balancing of factors relevant thereto; to which we would add that the many observations to the effect that service of an offer of compromise under rules of court obliges the offeree to give serious thought to the risks of the proceedings and their outcome (eg Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724; Hillier v Sheather (1995) 36 NSWLR 44 at 422) mean that the court should not be ungenerous to an offeree in determining whether a time is reasonable. It is not submitted that the second offer of compromise should be given effect as a Calderbank offer, nor could be if it was not left open for a reasonable time. It follows that the costs of the trial and of the appeal should be paid on the ordinary basis, and we agree with Basten JA's reasons for proportionate costs of the trial.

76 Basten JA examined the facts and said at [13] - [21]:

[13]. There is an unresolved tension between the operation of the rule which provides that costs generally follow the event and the rules which provide for the allocation of costs in cases where offers of compromise have been made but not accepted. Although it is true that the general rule is not made subject to any other rule, because it operates at a level of generality it arguably should be understood as subject to more particular rules, in circumstances where they are engaged: see, eg, The Ombudsman v Laughton [2005] NSWCA 339; 64 NSWLR 114 at [19]-[23] (Spigelman CJ). Alternatively, the two provisions can be reconciled by treating the rules with respect to offers of compromise as informing the proper application of the general rule by specifying how "the event" should be identified in the particular circumstances created by an offer made in compliance with the rules.

[14]. It is not in doubt that Kooee, in reducing the judgment against it to an amount of $1.36 million, has bettered its offer by some 13%. That is a significant element of compromise, which is capable of attracting an order for indemnity costs in accordance with UCPR r 42.15, from the first day of the trial: see r 42.15(2)(b)(i). However, there is an issue as to whether, being open for approximately 24 hours, the offer was "left open for such time as [was] reasonable in the circumstances", within the terms of r 20.26(7)(b). If that condition were not satisfied, it would not necessarily be an irrelevant consideration on the question of costs, but it would not be an offer engaging an entitlement to indemnity costs pursuant to r 42.15.

[15]. Viewed in the abstract, an offer which is made less than 23 hours before the commencement of a hearing and requiring acceptance within that period, would not appear to have been left open for a reasonable time. Against that, there are practical considerations which might support a different conclusion. The first is that each of the parties had made prior offers, that of Kooee having been the subject of explanation as to the method of calculation of the component parts. Secondly, less than two weeks earlier Primus had made an assessment of its own position which led it to make an offer to settle for an amount of $2.5 million, an amount $1.25 million above the first Kooee offer. The second offer by Kooee reduced that gap by $300,000. Both the figures and the timing suggest that Primus could have been expected to assess the second offer with reasonable expedition.

[16]. The practical circumstances which must have existed at the time the offer was made may be said to tend in either direction. Thus, it appears to be common ground, as the Court might have assumed, that the legal representatives of Primus were conferring in preparation for the forthcoming trial, throughout the period that the offer was open. While that may have facilitated an immediate consideration of the offer by advisers who were focused on the relevant issues, it may also be said that the provision of an offer the day before trial provided an inconvenient distraction from preparation of the case for hearing.

[17]. In Leda Pty Ltd v Weerden (No. 3) [2006] NSWSC 220, Gzell J considered an offer made exactly one week before a trial, which was left open for four days. Amongst other considerations, his Honour noted that r 42.15(2)(b) envisaged an order for indemnity costs in relation to an offer made "on or after the first day of the trial". In such circumstances, the defendant will be entitled to an order for costs assessed on an indemnity basis "as from 11.00am on the day following the day on which the offer was made".

[18]. The precise interrelationship of the reasonable time provision in r 20.26 and the time from which indemnity costs may be awarded pursuant to rr 42.14, 42.15 and 42.15A appears not to have been explored in the cases. It is arguable that, if the other party is to be at risk of an adverse costs order on an indemnity basis from 11.00am on the following morning, the expectation must be that a period of 24 hours or less may constitute a reasonable time within which to consider and respond to an offer. In a sense, that may be seen as a small concession in respect of offers made during the trial, as an offer made before the first day of the trial will place the other party at risk as to costs from the beginning of the day following the day on which it was made: see, eg, r 42.15(2)(b)(i). Such an offer may be made on the day before the trial or some months before the trial. Yet, at least in the latter case, r 20.26(7)(a) requires that the offer be left open for at least 28 days to comply with the rule.

[19]. The reason for the discrepancy in relation to early offers is unclear. The primary incentive to accept arises from the potential for an adverse costs order on an indemnity basis where the offer is refused and the other party betters its offer. The fact that such costs will run from a specified time after the offer is made may be seen as an additional incentive to accept the offer and also an incentive to give it prompt consideration. The specification of the time from which indemnity costs will run clearly does not purport to determine what is a reasonable time in relation to a pre-trial offer which must be left open for 28 days and therefore should not be seen as identifying the period which is reasonable in relation to an offer made less than two months before the date for commencement of the trial. All that can fairly be inferred from the terms of r 42.15 is that an offer made on or after the first day of the trial may constitute a relevant offer for the purposes of the rule; such an offer must allow a "reasonable" time for acceptance (r 20.26(7)(b)). The time will effectively be cut short if, before its expiration, the Court begins to give its decision: r 20.25. (The reference in r 20.27 to the "period of acceptance" is presumably meant to be a reference to the defined term "period for acceptance".)

[20]. In considering whether the time allowed for acceptance is "reasonable in all the circumstances" once a trial commences, or indeed final preparation commences, three factors come into play. The first is that both parties may reasonably be expected to have a clear perception of the strengths and weaknesses of their positions, so that the reasonableness of a particular offer may be speedily assessed. Secondly, because significant costs will be accruing on a daily, even an hourly basis, there is a heightened incentive to respond within the time permitted. Thirdly, and counterbalancing the first factor, the need to address the terms of an offer, provide advice and obtain instructions will often be a significant distraction from final preparation.

[21]. In relation to the first factor, it should be accepted that by the day before the hearing, in commercial litigation involving experienced counsel and solicitors, the legal representatives would have been able to give the client an immediate assessment of:

(a) the approximate costs incurred to date;

(b) the likely length of the trial;

(c) the approximate amount of costs assessed on an indemnity basis if the matter proceeded to trial, and

(d) the most likely outcome, which may involve a range as to quantum.

It should also be accepted that someone with authority to bind the client would have been available to give instructions based on legal advice as to the preferable response.

Discussion

77 The defendants of course submit here that the offer of $800,000 together with costs would have left the plaintiff in a position where it need not have credited the $100,000 to be received from the fourth defendant, and that the amount of the judgment is clearly not as favourable as the outcome would have been if the 9 November offer was accepted. That must be so.

78 Whether the time frame was reasonable however has to be viewed objectively at the time the offer was made and not retrospectively with the benefit of a less favourable position having been obtained by the plaintiff.

79 The defendants point to other offers previously made. They understandably point to those as requiring the plaintiff, in the context of getting ready for the reference, to be able to assess the position relatively quickly.

80 The plaintiffs say, again understandably, that they were unable properly to consider the earlier offers, and there is some support for that assertion in the correspondence.

81 Distractions and preparation to one side, a party has an obligation (in the clients interest) and as part of the overall statutory obligations to take reasonable steps to resolve litigation (see s 56(3A), CPA). Each case however has to be viewed in context.

82 Hence the offers evolved from $410,000 (plus costs) on 26 October to $700,000 (plus costs) on 8 November, and overnight to $800,000 (plus costs) on 9 November. This was in a context where Mr Waddell had not fully quantified the defendants position on quantum. More importantly the defendants flatly refused to explain the basis of their offer of $700,000. True it is they set out what they regarded as weaknesses in various aspects of the plaintiff's claims in the letter of 9 November. The plaintiff was prepared to make a counter offer and did do so albeit one of a very different order.

83 By this time (8-9 November) the plaintiff with the assistance of its advisers must have formed some views both about liability and quantum on the materials available, but the defendants position had not been fully quantified. They were however being subjected to ever increasing offers (in a relatively short period of time) in what seems to me could be regarded as an air of some anxiety on the part of the defendants especially where those defendants were unable and/or unwilling to provide an explanation for the offer of $700,000. A party in such circumstances would do well to make explicit the basis for its offer (or increase).

84 The condition imposed here (just a little over 24 hours) to respond itself betrays a degree of brinkmanship. In my opinion the plaintiffs were entitled to regard the offers with some scepticism given their frequency and increase, especially because the defendants rejected a request for an explanation.

85 To make a fresh offer on the morning of the hearing against the previous offers was likely to be a distraction and in all of the circumstances in my opinion imposed a real burden upon the plaintiffs and their advisers. In any event the frequency as it were of the offers was also objectively open to the interpretation that there was indeed more money available and it was a case of who blinked first.

86 I consider the time given to the plaintiff was not reasonable in all the circumstances. There was a lot going on and materials were incomplete especially on quantum. Therefore even if the offer otherwise complied with r 20.26 it would not provide a proper foundation for any award of indemnity costs.

The Appropriate Costs Order

87 UCPR 42.1 provides that a Court should order that costs should follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs.

88 This case essentially turned largely on questions of fact and expert opinion on the alleged defects and whether there was a breach of statutory warranties with the need, where relevant, to quantify the loss. The parties' legal advisers along with their clients have a responsibility to the secure resolution of their grievances as expeditiously and cost efficiently as can be achieved. To fight to the bitter end will often come at a price. The question of costs of course is discretionary, but here I do consider the circumstances warrant a departure from the usual order. Although I do not regard the time given to the plaintiff to consider the offer of 9 November was reasonable, it was clear the defendants wanted to settle. It is also clear that the plaintiff was ultimately unsuccessful in relation to a number of its claims. The quantum awarded was substantially less than the amount claimed. The failure to claim the superintendents fee in a timely fashion was costly to the plaintiff and rightly so, not only because it had to bear the costs associated with it but much less was recovered than was claimed.

89 The plaintiff received and obtained a reduced percentage of its total claim (approximately 45-46% of the original claim).

90 The defendants in the written submissions contend in all of the circumstances costs should not follow the event and that costs ought to be awarded to the plaintiff on an ordinary basis up until 12pm on 10 November 2010, and that save for the costs order of 17 May 2011 (the superintendents fee issue) there should be no order as to costs thereafter.

91 On any view the plaintiff has ended up in a position which is less favourable than it would have been had it accepted the offer on 10 November. It is however easy to be wise after the event, and the defendants did contest liability and to some extent were successful in having some claims dismissed on this basis. The plaintiff did however enjoy a not insignificant measure of success and its claim could not be described as fanciful.

92 After 10 November there were no further offers. Following the findings of the Referee on 25 March and on 16 May 2011 the plaintiffs served their own Offer of Compromise. I do not consider this really adds anything given its date in proximity to Einstein J's judgment (13 May 2011).

93 I do not regard the plaintiffs as being entitled to the usual order for costs. To have persisted with the first stage of the hearing on liability in November was reasonable enough. However given the Referee's interim report the plaintiffs in my view should have more realistically addressed the question of quantum prior to contesting it on 8 March 2011. From her report of 27 November 2010 it is plain a number of not insignificant claims were rejected. Whilst Mr Roberts on 2 February 2011 costed the claims at $1,308,686 Mr Sassine on 4 March 2011 costed the claims at $781,510. I do not consider the plaintiff moved promptly enough to realistically address its real strengths and weaknesses on quantum especially after 27 November 2010.

94 In my view the plaintiffs should only get 60% of the costs incurred after 10 November 2010. That is I believe a fair recognition of the fact that although they succeeded to an extent on liability a number of claims were rejected, and yet they persisted with a very large claim which in part may have been influenced by what Mr Roberts thought was reasonable, but which was as it turned out quite unrealistic.

95 Nothing I have said is intended to interfere with the costs orders made by the Court already awarded on the superintendents fee issue.

The Claim for Interest

96 The plaintiff makes a claim for interest and has submitted a schedule of calculations. The defendants submit no interest should be payable, alternatively very much less than the plaintiff claims.

97 Interest before judgment is dealt with by s 100 of the CPA. Section 100 relevantly provides:

(1) In proceedings for the recovery of money (including any debt or damages or the value of any goods), the court may include interest in the amount for which judgment is given, the interest to be calculated at such rate as the court thinks fit:

(a) on the whole or any part of the money, and

(b) for the whole or any part of the period from the time the cause of action arose until the time the judgment takes effect.

(2) In proceedings for the recovery of a debt or damages in which payment of the whole or a part of the debt or damages has been made after the proceedings commenced but before, or without, judgment being given, the court may include interest in the amount for which judgment is given, the interest to be calculated at such rate as the court thinks fit:

(a) on the whole or any part of the money paid, and

(b) for the whole or any part of the period from the time the cause of action arose until the time the money was paid.

(3) This section:

(a) does not authorise the giving of interest on any interest awarded under this section, and

(b) does not authorise the giving of interest on a debt in respect of any period for which interest is payable as of right, whether by virtue of an agreement or otherwise, and

(c) does not authorise the giving of interest in any proceedings for the recovery of money in which the amount claimed is less than such amount as may be prescribed by the uniform rules, and

(d) does not affect the damages recoverable for the dishonour of a bill of exchange.

(4) In any proceedings for damages, the court may not order the payment of interest under this section in respect of the period from when an appropriate settlement sum was offered (or first offered) by the defendant unless the special circumstances of the case warrant the making of such an order.

(5) For the purposes of subsection (4), "appropriate settlement sum" means a sum offered in settlement of proceedings in which the amount for which judgment is given (including interest accrued up to and including the date of the offer) does not exceed the sum offered by more than 10 per cent.

98 The plaintiff submits the interest regime should be read together and consistently with the costs regime in the UCPR. Both, it is submitted, are clearly directed to promoting settlement. It is submitted by the plaintiffs that if the Offer of Compromise is held to be invalid, s 100(5) has no application. The defendants submit that s 100(5) has operation whether the offer was a valid Offer of Compromise or not. It is contended by the defendants that ss (5) is not to be narrowly construed. I consider the defendants submission to be plainly correct. There is no reason given the very general terms of the subsection and the clear policy underlying it (namely to encourage expeditious and cost efficient settlements) to read the subsection down as it were.

99 The defendants submit therefore the plaintiff is not entitled to interest because if one considers the relevant offers of $700,000 or $800,000 made on 8 and 9 November and if judgment is entered for say $701,329.37, that amount will not exceed the offers by more than 10% for the purposes of the subsection. The defendants go on to submit that there are no special circumstances for the purposes of s 100(4).

100 The plaintiff contends that if the Court was of the view that if the offer imposed an unreasonable time or was accompanied by insufficient information then both or either of those factors would constitute special circumstances for the purpose of s 100(4).

101 In addition to the above arguments the defendants contend interest should not in any event be awarded. As I understand first, it is said the amounts awarded by the Referee are in present day figures. The Referee, it is submitted, provided for an allowance of a 5% contingency margin. In addition it said the pursuit of the superintendents fee was ill conceived and that the relevant delays occasioned were of the plaintiffs own making.

102 The defendants also submit that if the Court awards interest it should be calculated on $653,029.37 and then on $701,329.37. The defendants submit the plaintiff has had the benefit of the $100,000 since December 2010 and that this amount should therefore be taken into account.

The Purpose of Awarding Pre Judgment Interest

103 The High Court comprising Mason CJ, Dawson, Toohey and Gaudron JJ in Haines v Bendall (1991) 172 CLR 60 explained the underlying policy behind such an award at 66 - 67 as follows:

An award of interest up to the date of judgment is an award of interest in the nature of damages: Fire and All Risks Insurance Co. Ltd. This statement acknowledges that the award of interest is an integral element in the attainment of the object of damages, namely, to compensate a plaintiff for injury sustained. Hence the award of interest is compensatory in character. While "[i]nterest should not be awarded as compensation for the damage done" (emphasis added) (Jefford v. Gee), the award of interest is nevertheless an essential element in the achievement of true compensation for that damage. In Thompson v. Faraonio, the Privy Council stated that "[t]he reason for awarding interest is to compensate the plaintiff for having been kept out of money which theoretically was due to him at the date of his accident" (emphasis added): see also Batchelor v. Burke, per Gibbs C.J.; M.B.P. (S.A.) Pty. Ltd. v. Gogic; cf. Ruby v. Marsh, per Barwick C.J. The award of interest for the period of delay in payment between the date of accrual of the cause of action and judgment affords the fair legal measure of compensation: Pheeney v. Doolan, per Reynolds J.A. Thus, it is the award of damages and, where appropriate, interest awarded on damages for the period up until the judgment takes effect which allows the plaintiff to be placed in or restored to the situation, as far as money can do, in which he or she would have been but for the defendant's negligence.

Section 94(1) of the Supreme Court Act confers a wide discretion on a court awarding interest. That discretion must, however, be exercised in accordance with legal principle: Cullen v. Trappell, per Gibbs J. That means that the discretion must be exercised in conformity with the general principles governing the award of damages so that an award of interest on damages for personal injury should do no more than assist in the restoration of a plaintiff to the position in which he or she would have been but for the defendant's negligence.

104 There is no doubt that the award of interest involves the Court exercising a discretion to compensate a successful party for the practical loss it has suffered: Screenco Pty Ltd v RL Dew Pty Ltd [2003] NSWCA 319.

105 As a general proposition a successful plaintiff will be entitled to an award of interest: Ruby v Marsh (1975) 132 CLR 642 at 644.

106 If an appropriate settlement offer has been made and rejected by the plaintiff interest can only be awarded for the period after the date of the offer in special circumstances. The 10% buffer in CPA 100(5) is of course an appropriate guide. If there has been delay on the part of the plaintiff interest should not be refused as a punishment for delay: Bennett v Jones [1977] 2 NSWLR 355.

107 In determining what may or may not amount to special circumstances it has been held that this term requires an impressionistic judgment and defies comprehensive definition. In Re: Norman [1886] 16 QBD 673 the Court of Appeal had to consider the term in the context of statutory provisions dealing with the taxation of a solicitors bill of costs. Lopes LJ said at 677:

The statute uses the words " special circumstances." Those are wide, comprehensive, and flexible words, and I think that the legislature intended them to be so, and that no Court can or ought to lay down any exhaustive definition of them. Charges which in one case would be special circumstances, in another would not be such. It is for the discretion of the judge to say what are special circumstances in a particular case. I cannot express my meaning better than by adopting the words of Bowen, L.J. in In re Boycott when he said: "Special circumstances, I think, are those which appear to the judge so special and exceptional as to justify taxation. I think no Court has a right to limit the discretion of another Court, though it may lay down principles which are useful as a guide in the exercise of its own discretion. It seems to me to be the true view of the statute, that there must be special circumstances making the payment differ from an ordinary payment, and that the judge thereupon has a discretion as to whether they are sufficient to authorize taxation." That is entirely in accordance with my view, and expresses what I desire to convey.

108 I consider in all the circumstances the plaintiff should be awarded interest. That is so notwithstanding the ultimate result. I have arrived at this position for a number of reasons which when taken cumulatively amount here in my opinion to special circumstances.

109 The time frame of the offers I have already said in the circumstances have imposed an unreasonable burden on the plaintiffs. Further, although the superintendents fee issue has proven a costly item for the plaintiffs it clearly was not ill conceived, so much as overestimated. In addition where delay has been occasioned I consider it would be inappropriate to visit that upon the plaintiffs. There is some justification for the submission that the unavailability of the Referee and such other delays as have occurred should not prevent the award of interest. I am of the view that not all of the delay in dealing with the matter can be visited upon the plaintiffs. It would be quite unfair to do so. I also reject the defendants argument as to the 5% margin.

110 However I do consider the defendants point is valid when they submit some allowance should be made for the plaintiffs having use of the $100,000 for a time. The plaintiffs as I understand the matter accept that. The calculation of interest should therefore be on $701,329.37. The parties on the last occasion agreed that as at 8 May 2012 that figure would have been $56,558.85. That figure should be revised accordingly.

Conclusion

111 As the time provided for the acceptance of the Offer of Compromise, even assuming it was valid, was unreasonable there should be no order for indemnity costs in favour of the defendants. Up to 12 pm on 10 November the defendants should pay the plaintiffs costs on an ordinary basis as agreed or assessed, thereafter the defendants should pay 60% of the plaintiffs costs on an ordinary basis as agreed or taxed. The Court's order of 17 May 2011 in relation to the further reference should be undisturbed. Notwithstanding the amounts offered, and the amount in respect of which judgment will be entered, the plaintiff is entitled to interest because on the facts of this case there are special circumstances that warrant the award. I would invite the parties to prepare short minutes to otherwise reflect my reasons.

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Decision last updated: 14 June 2012