District Court New South Wales Medium Neutral Citation: Ellis v Amari Metals Australia Pty Ltd t/as Atlas Steels Pty Ltd (No 2) [2020] NSWDC 699 Hearing dates: On the papers Plaintiff's Submissions – 2 October 2020 Defendant's Submissions – 15 October 2020 Plaintiff's Submissions in Reply – 19 October 2020 Decision date: 16 November 2020 Jurisdiction: Civil Before: Hatzistergos DCJ Decision: The orders of the Court are as follows: (1) The Defendant is to pay the Plaintiff's costs on an ordinary basis up to and including 28 May 2020; (2) Thereafter, the Defendant is to pay the Plaintiff's costs on an indemnity basis. Catchwords: COSTS – Plaintiff successful at hearing – Offer of Compromise by the Plaintiff – Offer open for 7 days prior to the commencement of hearing – Offer less than that obtained in judgment – Whether offer open for a reasonable time in the circumstances – Defendant did not request for an extension of time to consider the offer – Whether court should otherwise exercise discretion as to costs – Where the main contention at hearing was primary liability and contributory negligence Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), rules 20.26, 42.14, 42.15 Cases Cited: County Securities Pty Limited v Challenger Group Holdings Pty Limited (No 2) [2008] NSWCA 273 Gray v Hobson (No 2) [2018] NSWCA 131 Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No. 2) [2008] NSWCA 85 Leda v Weerden [2006] NSWSC 220 Texts Cited: Taylor, Peter (eds), Ritchie's Uniform Civil Procedure New South Wales, LexisNexis Butterworths, Australia, 2006 Category: Costs Parties: Mark Ellis (Plaintiff) Amari Metals Australia Ltd trading as Atlas Steels Pty Ltd (Defendant) Representation: Counsel: Mr D Campbell SC with Mr J Ryan (Plaintiff) Mr A Combe (Defendant) Solicitors: Coutts Solicitors & Conveyancers (Plaintiff) Hicksons Lawyers (Defendant) File Number(s): 2019/140688 Publication restriction: Nil Judgment 1. Following a hearing extending four days, the primary judgment [1] was delivered on 31 August 2020 in favour of the Plaintiff in an amount to be calculated. The entering of final orders was deferred to enable parties to confer, check calculations and advise of any outstanding figures with a view to presenting proposed consent orders that accord with the reasons for judgment and any agreement as to costs within 14 days. 2. Agreed consent orders were entered on 14 September 2020, with judgment for the Plaintiff in the sum of $2,661,532.05, with the Defendant to have a credit of $636,504.07 in respect of workers compensation payments. This produced a net amount of $2,025,027.98. In light of the inability to reach an agreement as to costs by the parties, orders were made by consent in Chambers on 21 September 2020 as follows:- 1. The Plaintiff to serve on the Defendant and lodge on my Associate submissions as to costs by 2 October 2020. 2. The Defendant to serve on the Plaintiff and lodge on my Associate submissions as to costs by 15 October 2020. 3. The Plaintiff to provide any submissions in reply by 22 October 2020. Submissions 1. Accompanying the Plaintiff's submissions was an offer of compromise pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR) 20.26, served with a covering letter forwarded by email dated 28 May 2020 offering to compromise the proceedings on the following basis:- 1. Judgment for the Plaintiff in the sum of $1,600,000 clear of workers compensation payback payment plus costs and disbursements as agreed or assessed. 2. The offer being open for acceptance until 4pm Wednesday 4 June 2020. 1. The Defendant did not dispute that the offer of compromise had been served by way of email, received at 12.54pm on 28 May 2020. [2] 2. The Plaintiff contended that the substance of the Plaintiff's claim was contained in the Statement of Particulars filed with the Statement of Claim on 6 May 2019. The Amended Statement of Particulars was filed on 14 May 2020, which set out the claim for future treatment and replacement of prostheses in some detail. It acknowledged that a Second Amended Statement of Particulars was filed on the first day of the hearing which corrected an arithmetic error in the calculations for the costs of prosthetic replacements. 3. The Plaintiff submitted that at no stage during the currency of the Plaintiff's offer of compromise did the Defendant suggest that it had either insufficient particulars to enable it to assess the quantum of damages or that the Plaintiff's offer was not open for long enough for the Defendant to give it proper consideration. 4. The Plaintiff submitted that the Defendant at trial mounted a sustained attack on the Plaintiff's case on primary liability and also ran a strong case in support of its argument in respect of contributory negligence. That case was described as wholly unsuccessful. So far as the outcome was concerned, the Plaintiff contended that the Plaintiff and his wife's evidence on damages were largely unchallenged, although it accepted that a number of the Defendant's arguments on damages were accepted, particularly on the question of future economic loss and in relation to the claim for the waterproof/recreational prosthesis. [3] Notwithstanding this, it submitted that the Defendant's case was squarely focused on the questions of primary liability and contributory negligence. In the circumstances, the Plaintiff seeks an order pursuant to UCPR 42.14 that the Defendant pay its costs on an ordinary basis up to 28 May 2020 and pay on an indemnity basis the Plaintiff's costs from 29 May 2020. 5. The Defendant argued that the Plaintiff's offer was only open for 7 days. It drew attention to UCPR 20.26(5) which required that the closure date for the acceptance of an offer compromise be no later than 28 days from the date the offer is made where the offer is made two months or more before the date for commencement of trial, or alternatively, "in any other case – is to be such date as is reasonable in the circumstances". 6. It pointed out that the parties participated in mediation on 21 May 2020 when the matter failed to settle. Thereafter the matter was scheduled for hearing in the list commencing 9 June 2020 and that liability and contributory negligence were both in issue. The nature of the Plaintiff's claim for damages was then amended at hearing by the provision of a Second Amended Statement of Particulars and the Plaintiff maintained a claim for substantial economic loss was challenged on the basis that it was unsustainable. 7. The Defendant submitted that the offer did not comply with UCPR 20.26(5) in that it did not provide the Defendant a reasonable amount of time to consider the offer. Reliance in this respect was placed on the decision in Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No. 2). [4] It was submitted that Basten JA noted that a party seeking indemnity costs has the obligation to demonstrate that the offer of compromise provided the other party sufficient and reasonable time to consider the offer in accordance with UCPR 20.26. In particular, reference was made to Basten JA's comments at [23], where he stated:- …To do that it must demonstrate that its offer was left open for a period which was reasonable in all the circumstances. Because the present case is truly borderline, it should be concluded that Kooee has failed to establish that its offer was left open for a reasonable time… 1. Accordingly, the Defendant submitted that the Plaintiff is not entitled to indemnity costs on and from 4 June 2020. 2. The Defendant further drew attention to UCPR 42.14(2), which it submitted retains discretion for the Court not to order costs on an indemnity basis by the words "Unless the court orders otherwise." In these circumstances, it submitted that as the time for compliance with the offer of compromise was not reasonable in a case where there were live issues of liability and contributory negligence, the discretion should be exercised not to order indemnity costs as sought. The Defendant requested that the Court make an order that the Defendant pay the Plaintiff's costs on an ordinary basis for the proceedings. In the alternative, it submitted that if an award of indemnity costs was made that costs should be awarded on and from 5 June 2020, being the date of the expiration of the offer. 3. In submissions in reply, the Plaintiff contended that the offer it made was open for a period of 7 days such that it would lapse on 4 June 2020, namely after the commencement of the substantive hearing before the court on 3 June 2020 and only after a prior mediation as well. The matter was in fact, however, set down for hearing in the list in the sittings commencing 9 June 2020. 4. The Plaintiff submitted that the decision of Kooee was distinguishable, as the offer of compromise in that case was served on the day prior to the commencement of the hearing and was left open for acceptance for a period of 22 hours. It was in these factual circumstances, Basten JA held (with whom Giles and Tobias JJA agreed) that the offer was not left open for such time as was reasonable in the circumstances and was therefore not given effect to. It submitted that the present circumstances differ markedly from those in Kooee, which was a commercial dispute of some complexity involving questions of contractual interpretation and set off. In contended that the instant case was a common law action for damages arising from personal injury which the Defendant sought to challenge on the grounds of liability and contributory negligence. In the circumstances, the Defendant had ample time to consider the Plaintiff's offer and elected to allow it to lapse. 5. The Plaintiff further pointed out that the Defendant's argument on economic loss was accepted at trial, and that it was irrelevant to the questions of costs as the economic loss claim was not the subject of amendment, but rather it was framed in the same terms at the time of the Plaintiff's offer of compromise. The Plaintiff cited commentary [5] to support the proposition that the mere fact that a late offer is left open for a few days will not necessarily preclude compliance with the "reasonable time" requirement in UCPR 20.26(5). In support it cited the decision Gzell J in Leda v Weerden [6] where an offer expressed to be open for a period of 4 days was given effect in light of the provisions of 42.15(2)(b)(ii). 6. The Plaintiff contended that the offer of compromise be given effect under UCPR 42.14(2)(b)(i) and that the Defendant should be ordered to pay the Plaintiff's costs on the ordinary basis up to 28 May 2020 and on an indemnity basis from 29 May 2020. Consideration 1. UCPR 20.26 relevantly reads as follows: 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. … (5) The closing date for acceptance of an offer— (a) in the case of an offer made two months or more before the date set down for commencement of the trial—is to be no less than 28 days after the date on which the offer is made, and (b) in any other case—is to be such date as is reasonable in the circumstances. (emphasis added) 1. UCPR 42.14 is in the following terms:- (1) This rule applies if the offer is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim no less favourable to the plaintiff than the terms of the offer. (2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim— (a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and (b) assessed on an indemnity basis— (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made. 1. In Kooee, Basten JA (with whom Giles and Tobias JJA agreed) outlined the relationship between UCPR 42.15(2)(b) and UCPR 20.26 stating at [19]: …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)). [7] 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".) 1. His Honour proceeded to refer to three factors that come into play in determining whether something is "reasonable in the circumstances":- 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. (emphasis added) 1. In Gray v Hobson (No 2), [8] an offer of compromise was served by the Appellant on the Respondent following an unsuccessful mediation on 1 November 2016. It was open until 9.00am on 3 November 2016. The hearing was fixed for a three week hearing, set to commence on 7 November 2016. The Court (comprising of Basten and Macfarlan JJA and Simpson AJA) stated at [7]-[8]:- [7] In the present case it can be inferred that at the time the offer was made the parties had a "clear perception of the strengths and weaknesses of their positions". They had participated in a mediation to resolve the proceedings on 1 November 2016, the day of Dr Gray's offer, and must have been well-advanced in their preparation for the hearing, fixed for three weeks to commence on 7 November 2016. Thus they would have been "armed with sufficient information to make a reasoned judgment of the offer" (Leda v Weerden (No 3) [2006] NSWSC 220 at [10]). Further, and perhaps most importantly, Mr Hobson must be taken to have been in a position to assess his prospects of success in the proceedings as he made his own settlement offer within the period Dr Gray's offer was open. Moreover, it is relevant that during this period, Mr Hobson did not request any extension of the time for acceptance of the offer to enable him to give it further consideration (see Port Kembla Coal Terminal Ltd v Construction, Forestry, Mining and Energy Union (NSW Branch) (No 2) (2014) 88 NSWLR 471; [2014] NSWIC 3 at [38]). [8] In these circumstances, Dr Gray's offer was open for a period that was reasonable in the circumstances. He is therefore entitled to an order that his trial costs incurred after 1 November 2016 be assessed on the indemnity basis. (emphasis added) 1. In County Securities Pty Limited v Challenger Group Holdings Pty Limited (No 2), [9] an offer was sent by the Plaintiff (who were unsuccessful at trial, but successful on appeal) on 12.30pm on 9 February 2007, expressed to be open until 4pm on 13 February 2007. The trial commenced on 20 February 2007. In considering whether the period was sufficient, McColl JA (with Beazley and Spigelman JJA agreeing) found it was, stating at [35]:- The next question is whether Challenger and CHL had an appropriate opportunity to consider and deal with the offer. In my opinion they did. It smacks of naivety to contend that Challenger and CHL were so busy devoting their time to preparation for trial that they could not consider the offer. The period leading up to the trial is precisely when parties are often in the best position to consider an offer. While compromise should be considered from when a party's claim is foreshadowed, clearly the further the process of preparation for trial has advanced, the better will the recipient of an offer be able to assess its prospects of success. Experienced practitioners know that decisions as to whether offers should be accepted are often made in a matter of hours, not days. Further, County had, in my view, clearly explained the basis of its claims on the two earlier occasions to which I have referred. By 9 February 2007 Challenger and CHL had County's affidavit evidence and must have been in a position to evaluate it in light of its own case, an issue to which I will return when considering the reasonableness of the rejection of the offer. In any event, had Challenger and CHL needed more time to consider the offer, they could have asked for it: Elite (at [149]) per Basten JA. Instead they either responded with what could only be described as a disdainful offer of $50,000 inclusive of costs or, if their letter preceded County's, chose to sit on their offer. It can be inferred that they had evaluated what they regarded as County's prospects of success – wrongly as the judgment in this Court makes clear – at the time they sent their 9 February offer. (emphasis added) 1. It follows from the above that the Defendant's submission as to what constitutes a reasonable time in the circumstances by reference to the contents of UCPR 20.26(5)(b) cannot be accepted. 2. The offer of compromise expired on 4 June 2020 in circumstances where the hearing commenced on 22 June 2020. The fact that the matter proceeded to mediation on 21 May 2020 and that it was listed in the sittings commencing 9 June 2020 indicates that the matter was in the advanced stages of preparation. 3. This was a relatively straight forward case. I accept the Plaintiff's submissions that the main issue of contention between the parties was in relation to primary liability and contributory negligence. No request was made by the Defendant for an extension of time to consider the offer. The fact that the Defendant opposed the Plaintiff's claim for economic loss matters little in circumstances where its contentions largely succeeded and nevertheless the Plaintiff obtained an outcome in excess of the amount in the proposed offer. 4. In those circumstances, I am satisfied that the Plaintiff's offer was compliant with UCPR 20.26(5)(b). The Defendant raised no other argument as to the offer being non-compliant with the UCPR. In those circumstances, I see no reason why the presumptive effect of UCPR 42.14 should not apply. 5. Accordingly, I order as follows:- 1. The Defendant is to pay the Plaintiff's costs on an ordinary basis up to and including 28 May 2020; 2. Thereafter the Defendant is to pay the Plaintiff's costs on an indemnity basis. ********** Endnotes 1. Ellis v Amari Metals Australia Pty Ltd t/as Atlas Steels Pty Ltd [2020] NSWDC 627. 2. Defendant's Costs Submissions at [1]. 3. See for example Ellis v Amari Metals Australia Pty Ltd t/as Atlas Steels Pty Ltd [2020] NSWDC 627 at [184] and [218]. 4. [2008] NSWCA 85 (Kooee). 5. Peter Taylor (eds), Ritchie's Uniform Civil Procedure New South Wales, LexisNexis Butterworths, Australia, 2006 at [20.26.40]. 6. [2006] NSWSC 220. 7. This was the predecessor rule to UCPR 20.26(5)(b). 8. [2018] NSWCA 131. 9. [2008] NSWCA 273. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 December 2020