Supreme Court New South Wales Medium Neutral Citation: Edwards v Merlaust Pty Ltd (Costs) [2024] NSWSC 25 Hearing dates: On the papers Date of orders: 02 February 2024 Decision date: 02 February 2024 Jurisdiction: Common Law Before: Schmidt AJ Decision: Mr and Mrs Edwards bear Merlaust's costs, as agreed or assessed. Catchwords: COSTS – indemnity costs – offers of compromise – where a Calderbank offer is made – where offer is made pre-trial – where offer is only made for a very limited period – where offer is not renewed before appeal – where offer requires the parties to enter a non-disparagement deed – where offer is the only basis relied on for a departure from the usual costs order Legislation Cited: Civil Procedure Act 2005 (NSW), s 98 Supreme Court Rules 1970 (NSW), Pt 52A, r 11 (repealed) Uniform Civil Procedure Rules 2005 (NSW), r 20.26 Cases Cited: Amaca Pty Ltd v Novek (2009) 9 DDCR 199; [2009] NSWCA 50 Brymount Pty Ltd (t/a Watson Toyota) v Cummins [2005] NSWCA 69 Edwards v Merlaust Pty Ltd [2023] NSWSC 1477 Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 Monie v Commonwealth (No 2) [2008] NSWCA 15 South Sydney Council v Morris (No 3) [2001] NSWCA 200 Category: Costs Parties: Andrew Edwards (First Plaintiff) Maureen Edwards (Second Plaintiff) Merlaust Pty Ltd (Defendant) Representation: Counsel: M V Sahade (Plaintiffs) Q Rares (Defendant) Solicitors: Oliveri Lawyers (Plaintiffs) Martin Street Lawyers (Defendant) File Number(s): 2023/237890 Publication restriction: Nil JUDGMENT 1. I gave judgment in this matter, an appeal from the Local Court, in December 2023: Edwards v Merlaust Pty Ltd [2023] NSWSC 1477. Merlaust now seeks an indemnity costs order, relying on its 26 August 2022 offer of compromise made prior to the Local Court hearing, which Mr and Mrs Edwards did not accept. 2. It made no separate offer in relation to the costs of the appeal. The parties' cases 1. Merlaust relied on Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 at 409-410, where it was observed that, because an offer is made in respect of a claim and not a trial, the consequences of an offer are not exhausted at the conclusion of the trial and, therefore, may have relevance on an appeal. 2. Under the Uniform Civil Procedure Rules 2005 (NSW) ('UCPR'), the usual costs order is that costs follow the event. In this case, that is an order that Mr and Mrs Edwards bear Merlaust's costs, as agreed or assessed. There is no issue about the Court's power to make some other order, in the exercise of its costs' discretion: Civil Procedure Act 2005 (NSW), s 98. 3. The offer was said to be an offer of compromise for $62,000, made in accordance with UCPR r 20.26 and open for only 10 days, on the basis that the parties agree to enter a deed in respect of mutual releases and each bear their own costs. 4. In the Local Court, the 26 August costs offer was successfully relied on. Mr and Mrs Edwards were ordered to pay Merlaust $83,655.55 on the ordinary basis up to the date of the offer and indemnity costs thereafter. This was unchallenged on appeal. 5. In these proceedings, Mr and Mrs Edwards disputed Merlaust's reliance on Ettingshausen at 404-410 as permitting such an indemnity order to be made. They accepted that the offer did amount to a Calderbank offer, as had been concluded in the Local Court, it not having been made in accordance with the requirements of the UCPR. 6. This rested on the requirement of the UCPR that, amongst others, the offer had to include the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment: UCPR r 20.26(2)(ii). 7. It followed from this, they contended, however, that the result of the decision in Ettingshausen did not apply to Merlaust's offer. 8. To support this, Mr and Mrs Edwards relied on Brymount Pty Ltd (t/a Watson Toyota) v Cummins [2005] NSWCA 69; Amaca Pty Ltd v Novek (2009) 9 DDCR 199; [2009] NSWCA 50 at [107]-[108]; and Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344. They submitted that the principle that an offer made before an original trial can be relied on as the basis of an indemnity costs order in appeal proceedings did not apply to Calderbank offers. 9. I have concluded that their case must be accepted. The Rules and the authorities 1. In Brymount, Beazley JA, as her Honour then was, noted that, in Ettingshausen, the pre-trial offer had been made under the then Supreme Court Rules 1970 (NSW). Calderbank offers stand outside the scope of compromise offers made pursuant to such Rules, but they do fall within the ambit of a court's general discretion with respect to costs, dealt with in Pt 52A r 11 of those Rules: at [22]-[25]. 2. It was found to be relevant to the exercise of the costs discretion that no further offers had been made after the pretrial Calderbank offer and that the compromise offers substantially pre-dated the proceedings in the Court of Appeal, by two and a half years in one case, and two years in the other: at [28]. This, coupled with the substantial judgment the respondent received in the District Court, led to the view that the appellants should have advanced subsequent offers in the period between the trial and appeal, if they wished to secure their claim for indemnity costs in respect of the appeal: at [29]. 3. Further, if the offers had been made under the Rules, pretrial, they would have ceased to be operative in appellate proceedings, "save insofar as the offers would have been relevant to this Court's discretion as to costs under Pt 52A r 11 (See South Sydney Council v Morris (No 3) [2001] NSWCA 200 at [10]). A party who makes a Calderbank offer ought be in no better position than a party who made an initial offer of compromise in accordance with the District Court Rules": at [30]. 4. In Amaca, a pretrial Calderbank offer was also the only offer made, and the only reason pointed to in support of a discretionary departure from the usual costs order. In light of the Court having repeatedly stressed the great importance of whether a fresh offer of settlement is made in respect of the appeal proceedings, an indemnity costs order was refused: at [108]. 5. In Miwa, consideration was given to the lack of reference to any case where an informal offer, made prior to the judgment under appeal and reasonably rejected by the successful party in the trial court, had been successfully relied on in the appeal, with the result that an indemnity costs order was made: at [22]. 6. It was also observed at [22] that where the offer had expired and not been renewed before the appeal, the offeree is entitled to say that its success at trial would be a significant event, rendering reasonable the hypothetical rejection of a renewed offer. Further, the failure to renew the offer prevented that possibility being tested. Additionally, the offer in the court below to settle "the proceedings" may reasonably be treated as referring to the proceedings then on foot, and not to the possibility of an appeal. 7. The terms of the offer are also relevant: at [23]. Pre-trial offers open for a limited time rarely carry significant weight: Monie v Commonwealth (No 2) [2008] NSWCA 15 at [4] and Amaca at [107]-[108]. This is because futile costs applications should not be encouraged. The indemnity costs order must be refused 1. Given what was decided in the cases Mr and Mrs Edwards relied on, I am satisfied that what was decided in Ettingshausen cannot be applied in this case. 2. While the applicable principles are relevant to the exercise of the Court's costs discretion on this appeal, I am satisfied that it cannot justly be concluded that a basis for the indemnity costs order sought has been established. 3. That is because Merlaust did not take the available step of renewing its offer before the appeal; the pretrial offer was only available for a very limited period of 10 days; it required the parties to enter a non-disparagement deed; and that despite this, on appeal that offer was the only basis relied on for a departure from the usual costs order. 4. In the result, I have been persuaded that the discretion to make an indemnity costs offer may not be exercised. The result may have been otherwise, if a further offer had been made in similar terms, but it was not. 5. In all the circumstances, I am satisfied that the indemnity costs order sought must be refused and the usual order must be made. Orders 1. For these reasons I order that Mr and Mrs Edwards bear Merlaust's costs, as agreed or assessed. ********** Amendments 02 February 2024 - Decision in coversheet and order in paragraph 24 amended to include both plaintiffs. 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