New South Wales Supreme Court CITATION : Karen Da Pos v Mayne Group Limited [2004] NSWSC 1255 HEARING DATE(S) : 03/12/04 JUDGMENT DATE : 21 December 2004 JUDGMENT OF : Buddin J DECISION : The defendant is to pay the plaintiff's costs to be agreed or assessed on a party/party basis up to and including 10 November 2003. Thereafter the defendant is to pay the plaintiff's costs to be agreed or assessed on an indemnity basis. CATCHWORDS : Costs - application for indemnity costs - validity of offer of compromise LEGISLATION CITED : Compensation to Relatives Act Supreme Court Act 1970 Associated Confectionery (Aust) Ltd v Mineral and Chemical Traders Pty Ltd (1991) 25 NSWLR 349 Hillier v Sheather (1995) 36 NSWLR 414 Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 CASES CITED : Manly Council v Byrne & Anor (No2) [2004] NSWCA 227 Marsland v Andjelic (No 2) (1993) 32 NSWLR 649 McLean v Commonwealth of Australia (NSWSC unreported, 22 August 1996) Morgan v Johnson (1998) 44 NSWLR 578 PARTIES : Karen Da Pos (Plaintiff) Mayne Group Limited (Defendant) FILE NUMBER(S) : SC 20244/01 COUNSEL : P Semmler QC/H Silvester (Plaintiff) P Greenwood SC/E Kennedy (Defendant) SOLICITORS : Harrison Dobson and Cottrill Ebsworth & Ebsworth IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION BUDDIN J TUESDAY 21 DECEMBER 2004 20244/01 – KAREN DA POS v MAYNE GROUP LIMITED JUDGMENT 1 HIS HONOUR: The plaintiff brought an action for damages under the Compensation to Relatives Act on behalf of herself and her two children arising out of the death of her husband. 2 The matter was heard before a jury which earlier this year returned a verdict for the plaintiff in the sum of $691,221. After the parties agreed upon the question of interest, I entered judgment in favour of the plaintiff in the sum of $741,221. 3 An offer of compromise dated 10 November 2003 was made to the defendant by the plaintiff. The offer was in the following terms: The Plaintiff offers to compromise all causes of the action upon which the plaintiff claims on the following terms: 1 To accept from the defendants payment of the sum of $700,000. 2 The defendants are to pay the plaintiff's costs as agreed or assessed. This offer is made in accordance with Part 22, Division 1 of the Supreme Court Rules (NSW) and is made without prejudice save as to the issues of costs and interest. This offer may only be accepted before the expiration of twenty eight (28) days after the offer is made. 4 The offer was not accepted. In those circumstances the plaintiff seeks an order for indemnity costs and in doing so relies upon Part 52A rule 22(4) of the Supreme Court Rules which provides that: (4) 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 no less favourable to the plaintiff than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall, subject to rule 33, be entitled to an order 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. Rule 33 has no present relevance. 5 The defendant opposes the making of the order. When the matter was called on for hearing, Mr Greenwood SC, who appeared on behalf of the defendant indicated that there was only one issue that, at this stage at least, required resolution. That issue he identified as being the validity of the offer of compromise. The determination of that issue, he said, turned upon the construction of the offer of compromise itself. The matter has thus proceeded solely upon that basis. 6 The plaintiff's entitlement to make a further application for such an order, should that preliminary or threshold issue be determined against her, was however expressly preserved. Indeed Mr Semmler QC, who appeared for the plaintiff, indicated that he wished to rely upon various affidavits which had been prepared in order to demonstrate that the conduct of the defendant was such as to enliven the discretion which exists pursuant to s 76 of the Supreme Court Act 1970 to make an order of that kind. Mr Greenwood indicated that if that material was to be relied upon for that purpose, then he would seek time within which to put on evidence in response. It was against that background that the debate upon the preliminary issue proceeded. 7 It is common ground that the correct approach to be followed was set out by the Court of Appeal in Manly Council v Byrne & Anor (No2) [2004] NSWCA 227 where Campbell J, with whom Beazley JA and Pearlman AJA agreed said: Part 52A rule 22(4) operates by a two stage process. The first stage involves enquiring whether the offer which has been made is an "offer of compromise" at all, within the meaning of the Rules. This depends in part on whether it satisfies the formal requirements laid down by Part 22 rule 1A(2). It also depends in part on whether the offer which is then made is one which can truly be called a "compromise". If it is decided that the offer which is made is an "offer of compromise" within the meaning of the Rules, then Part 52A rule 22(4) operates to establish a "default" position, that, if the plaintiff obtains a judgment no less favourable than that which the plaintiff had offered to accept, then indemnity costs would follow. It is here that the second stage of the process arises, in that the court can "otherwise order". The court will "otherwise order" when it is persuaded that is appropriate, in the interests of justice, that the "default" position ought not apply. (at para 10) 8 So far as the second stage of the process is concerned, it is common ground that, although a discretion is conferred upon the Court, the plaintiff has a prima facie entitlement to an order and the onus is upon the defendant to persuade this Court that there is no basis for making the order. See generally Marsland v Andjelic (No 2) (1993) 32 NSWLR 649; Hillier v Sheather (1995) 36 NSWLR 414 and Morgan v Johnson (1998) 44 NSWLR 578. 9 The sole basis upon which the defendant opposes the order is the first stage of the process identified in Manly Council. It accepts that in the ordinary course of events that the offer, according to its terms, would be construed to mean that the defendant was to pay the sum of money nominated which would be inclusive of interest and that it was also to pay the plaintiff's costs. However the defendant contends that there is an ambiguity on the face of the document. It is submitted that there is a tension between the terms of the offer itself and the words which appear later on in the document, namely that the offer is made "without prejudice save as to the issue of costs and interest". Those words imply, so the argument runs, that the plaintiff "is in some way reserving her rights as to costs and interest". The defendant sought to highlight the perceived problem by contending that "if the offer had been accepted, it would seem that the plaintiff was reserving rights to make [an] additional claim for interest and costs". The defendant ultimately submitted that, as the offer is ambiguous, it is incapable of acceptance and accordingly, is not a valid offer. This was said to assume some significance in the present case as it was the interest component that took the quantum of the judgment beyond the sum nominated in the offer. 10 The defendant also relies upon the provisions of Part 22, rule 1(b), which is in the following terms: if an offer of compromise made under this Division contains a term which purports to negative or limit the operation of Part 52A rule 22(1), that offer shall be of no effect for any purpose under this Division or Part 52A rule 22. Part 52 rule 22(2) is in substantially similar terms 11 It was contended that the offer contained "a term which purports to limit the operation of the offer of compromise". However, the rule refers to a term "which purports to negative or limit the operation of Part 52A rule 22(1)". In the absence of a term which has that particular effect being identified, this argument cannot succeed. 12 As to the more general argument, the plaintiff submitted that the expression "without prejudice save as to the issue of costs and interest" was in no way intended to qualify the terms of the offer itself. If that had been its purpose, then one would have expected that it would have been done so expressly. On the contrary, its purpose, so it was submitted, was solely to regulate the circumstances in which the document containing the offer could be used in evidence. The preservation of the right to tender the document in support of a particular application could not therefore, it is submitted, affect the validity of the offer. 13 The plaintiff went on to submit that in any event the statement that the offer is made "without prejudice" merely confirms what is provided for by Part 22 rule 6. That being so, the plaintiff recognises that the inclusion of the additional words was probably strictly unnecessary. Nonetheless it is submitted that that can have no impact upon the validity of the offer itself, which was expressed in clear and unambiguous terms. 14 There is one further matter that warrants consideration. Mr Greenwood conceded that the offer of compromise drew no response from the defendant within the relevant period. It can be said that at least at that time, the defendant apparently saw no reason to seek to have clarified or resolved what is now asserted to be an ambiguity in the terms of the offer. 15 Part 22 of the Rules, which is concerned with offers of compromise, is designed to facilitate the early compromise of proceedings. Moreover, as Mason P observed in Morgan v Johnson (supra) the aim of the rule pursuant to which the present application is brought "is to oblige the offeree to give serious thought to the risk involved in non-acceptance…the prima facie consequence of non-acceptance [being] that the rule will be enforced against the non-acceptance party" (at 581). 16 In Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 the Court of Appeal emphasised the professional obligations which are imposed upon legal representatives to advise parties about the application of the Rules. The Court said that: [t]he rule does no more than to oblige litigants, and those advising them, to consider realistically, upon the best information available to them, the prospects of success and the likely outcome of the litigation…[the rule] has added a new duty to the functions of legal practitioners advising litigants. It is a duty which is both protective of the interests of litigants and of the public in the prompt and economical disposal of litigation. It is the duty of courts, allowing for exceptions in particular cases, to give effect to the purpose of the rule (at 725-6). 17 The lack of any response on the part of the defendant is not easy to reconcile with the principles enunciated in the authorities to which reference has just been made. 18 Counsel were unable to locate any decisions which bore directly upon the issue at hand. I was however referred to the decision in McLean v Commonwealth of Australia (NSWSC unreported, 22 August 1996) in which Sperling J held that an offer of compromise that was expressed in terms of a specified sum plus costs was a valid offer. His Honour however contrasted that situation with the case of Associated Confectionery (Aust) Ltd v Mineral and Chemical Traders Pty Ltd (1991) 25 NSWLR 349 in which an offer expressed to be "inclusive of costs" was held to be incapable of being given effect to under the Rules. 19 In all those circumstances, I am of the view that the plaintiff's offer was a valid one and that I should make the orders sought. Orders 20 (a) The defendant is to pay the plaintiff's costs to be agreed or assessed on a party/party basis up to and including 10 November 2003. (b) Thereafter the defendant is to pay the plaintiff's costs to be agreed or assessed on an indemnity basis. ********** Last Modified: 12/21/2004 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.