AMWAY OF AUSTRALIA PTY LTD v VERNALL (No 2) SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MEAGHER, BEAZLEY and STEIN JJA 13 February 1998 [1998] NSWCA 15 Costs — indemnity costs — offer of compromise — certainty — Calderbank offer — discretion Meagher JA I agree with Stein JA Beazley JA I agree with Stein JA Stein JA On 18 December 1997 the appeal by Amway was dismissed. Following a request by the respondent (Vernall) for indemnity costs, the parties delivered written submissions on the issue. The respondent submits that it is entitled to indemnity costs on the basis of offers of compromise made on her behalf to the appellant after the judgment was given in the trial. PtS2A 122(4) provides as follows: Where an offer is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim to which the offer relates that is no less favourable to the plaintiff that the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall, subject to R33, be entitled to an order that against the defendant for the plaintiff's costs in respect of the claim from the day on which the offer was made, assessed on an indemnity basis in addition to his costs incurred before and on that day, assessed on a party and party basis. Following the jury verdict the trial judge gave judgment in favour of the plaintiff for $534, 034.91 on 25 May 1995, from which the defendant lodged an appeal to this court. On 8 April 1997, the respondent made an offer of compromise open for 28 days, proposing that judgment be entered for a sum of $20,000 less than the judgment sum, but not dealing with the question of interest on the verdict. The appellant did not respond to the offer. In respect of the offer of compromise, the appellant submits that it was not a valid offer because it did not resolve the issue of interest. Accordingly, it was void for uncertainty. Reliance was placed on Whitehouse Properties v Bond Brewing (NSW) (1992) 28 NSWLR 17 which applied general contract law principles to an offer of compromise. In that case, the offer was not void for uncertainty because it specified that an act was to be performed within a 'a reasonable time'. However, in the instant case, since the offer did not include any mention of, nor mechanism for determining, what the respondent intended with respect to interest on the judgment, I do not consider that the appellant should be penalised for failing to respond to the purported offer by paying indemnity costs from its receipt. On 18 September 1997 the respondent's solicitors sent to the appellant a so-called 'Calderbank letter', containing an offer noted as being 'Without Prejudice Save as to Costs'. The terms of the offer were that the judgment be varied by substituting for the sum of $534, 034.91 the sum of $514, 034.91, a reduction of $20,000, and with respect to interest: 2 UNREPORTED JUDGMENTS 'That the Appellant in these proceedings pay interest on the said sum of $514, 034.91 from 25 May 1995 at the rates prescribed pursuant to the Supreme Court Act 1970.' In the alternative the respondent submits that it is entitled to indemnity costs from 19 September 1997, when its Calderbank offer would have been received. In respect of the Calderbank letter, the appellant submits that the offer it contained was for a sum of only 3.75% less than the verdict, should be taken into account in the exercise of the court's discretion to grant indemnity costs. On behalf of the appellant Mr Shore submits that the principal issue was liability and no argument was put on damages. The appellant points to the case of Maitland Hospital v Fisher No 2 (1992) 27 NSWLR 721 at 725 where the court said that: The decision to award or withhold indemnity costs where a Plaintiff's settlement offer has been made but not accepted, involves a discretion to be exercise by reference to all of the circumstances of the case, not be applying a fixed mathematical formula. In the Maitland Hospital case, the court awarded indemnity costs although there was a difference of only 2.5% between the judgment of the court and the compromise offer. In this appeal, I am not persuaded that any circumstances exist discretion by withholding indemnity costs. Although it is correct that the principal issue on appeal was one of liability, it must be noted that damages were put in issue in the notice of appeal and at the hearing. At page 7 in my reasons for judgment I dealt with the attack on damages noting that appellant did not place great stress on the ground. Nonetheless, it was part of the appeal, argued by the appellant and needed to be dealt with by the court. I would order that the appellant pay the respondent's costs incurred after 19 September 1997 on an indemnity basis, and on a party-party basis up to and including 19 September 1997. 1. Order that the appellant pay the respondent's costs incurred after 19 September 1997 on an indemnity basis. 2. Order that the appellant pay the respondent's costs up to and including 19 September 1997 on a party-party basis. Counsel for the appellant: H G Shore Solicitor for the appellant: William K.Chambers Councel for the respondent: J D Hislop QC and P Doherty Solicitor for the respondent: Somerville & Co