Kriketos v Eisman [2007] NSWSC 620

New South Wales Supreme Court

CITATION : Kriketos v Eisman [2007] NSWSC 620

HEARING DATE(S) : 23 & 24 April 2007

JUDGMENT DATE : 31 May 2007

JURISDICTION : Equity

JUDGMENT OF : Hamilton J

DECISION : That the plaintiff must pay the defendants' costs on the indemnity basis from the date of the defendants' offer of compromise.

CATCHWORDS : PROCEDURE [103] – Supreme Court procedure – Procedure under Rules of court – Offer of compromise – Refusal – Entitlement to costs on indemnity basis.

LEGISLATION CITED : Uniform Civil Procedure Rules 2005 Part 42 Div 3 rr 42.13A, 42.14, 42.15 & 42.15A

CASES CITED : In re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622 Kriketos v Eisman [2007] NSWSC 496

Bill Kriketos (P) PARTIES : Marc Richard Eisman (D1) Stephen Morgan Matthews (D2) Gold's Gym Pty Limited (D3)

FILE NUMBER(S) : SC 4968/05

COUNSEL : C Roth, Solicitor (P) S Carmichael, Solicitor (Ds)

SOLICITORS : Charles G Roth & Co Mavrakis & Associates

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

HAMILTON J

WEDNESDAY, 31 MAY 2007

4968/05 BILL KRIKETOS v MARC RICHARD EISMAN & ORS JUDGMENT – On Costs 1 HIS HONOUR: This is an application by the defendants for an order that as from 22 October 2005 the plaintiff pay the defendants' costs on the indemnity basis. The plaintiff opposes this application, though he concedes that he must pay the defendants' costs of the proceedings on the ordinary basis. On the application for indemnity costs the defendants rely only on an offer of compromise under Division 3 of Part 42 of the Uniform Civil Procedure Rules 2005 (the UCPR). 2 Division 3 of Part 42 of the UCPR, as it originally came into force on 15 August 2005, has proved unsatisfactory and has already been amended on no less than three occasions. These were by the insertion of r 42.13A effective 11 November 2005; by the substitution of a different subr (2) of that rule as of 10 March 2006; and by the insertion of r 42.15A effective 8 December 2006. The offer of compromise the subject of decision in this judgment was made on 21 October 2005, before the insertion of r 42.13A, but expired 28 days later, about eight days after the insertion of that rule. 3 The original substance of r 42.13A did not differ in a material fashion from its present substance, in that the then subr (2) provided that, if the offer were made by the defendant and accepted by the plaintiff, unless the court ordered otherwise, the plaintiff was entitled to an order against the defendant for the plaintiff's costs in respect of the claim on the ordinary basis up to the time when the offer was made. 4 The offer which was made by the defendants on 21 October 2005 was for the recording of a "verdict for the defendants" without reference to costs. The words "verdict for the defendants" are not very apposite to an equity suit of the type of these proceedings, but, as this terminology has customarily been used in offers of compromise, their use is not surprising. It is not submitted that the use of those words takes the case outside the relevant rules, and I do not think that such a submission would in any event be sound. What happened in this case was that the proceedings were dismissed and that was the result in proceedings of this type equivalent to a verdict for the defendants. 5 Nor are the proceedings taken outside the relevant provisions of the rules by the fact that there was no monetary claim. I do not decide, as it is not necessary for me to decide, whether or not the rules apply in cases where there is no monetary claim at all. In this case, the plaintiff did make a claim for damages or, alternatively, equitable compensation. Although these claims remained at large and unquantified, they were monetary claims which were defeated by the result of the proceedings and would have been defeated by the acceptance of the offer which was made. 6 There was a perception, and possibly an actuality, of lacunae in Division 3 in the absence of rr 42.13A and 42.15A. It has been submitted that both have relevance to this matter as it falls to be decided. The first is r 42.13A, where the consequence as to costs of the acceptance of an offer (as opposed to the non acceptance of the offer dealt with in rr 42.14 and 42.15) was the situation which prevailed. That rule, when enacted, provided a prima facie regime whereby the plaintiff should have its costs up to the acceptance of the offer, even if the offer involved the defeat of the plaintiff's claim as at that time and from then onwards. 7 Had the plaintiff had, under the rules, the benefit of that prima facie entitlement, then it could be said that the offer in fact made did contain an element of compromise, because it was likely that the rule would give the plaintiff its costs up to the time of that offer, rather than the plaintiff being obliged to pay the whole of the defendants' costs, which is - and is acknowledged by the plaintiff to be - the necessary consequence, at least on the ordinary basis, of the total failure of the plaintiff's claim which resulted from my substantive decision in this matter: Kriketos v Eisman [2007] NSWSC 496. 8 However, it is my view that r 42.13A did not apply to the offer in the present case. True it is that everyone is agreed that the offer was made before the rule became effective. On the other hand, true it is that the rule came into effect some eight days before the offer expired and while it was still open for acceptance. In general terms, a rule of this nature, being procedural, has effect immediately in relation to subsisting proceedings. The contrary was not argued before me. 9 However, the relevant words of the rule were, at the time, that the rule applied if the offer concerned was made by the defendant and accepted by the plaintiff. It seems to me that the proper interpretation of this rule as to its application is that it applies to offers that were made by the defendant when the rule subsisted and accepted by the plaintiff when the rule subsisted. The rule did not exist when the offer was made, and in my view r 42.13A in its original form did not apply to it. 10 That being so, the only rules as to prima facie entitlements to costs applying to this offer were rr 42.14 and 42.15, both of which operated only when the offer was not accepted. In those circumstances, in my view the regime which applied was that there was no prima facie entitlement to costs upon an order being made in terms of the offer, and either party could apply to the court for an order for costs. 11 If such an application were made by either party, it would fall to be determined by the court on its merits. However, the principle which would be central to the court's determination of it is the principle as to costs in settled or abandoned proceedings set out by McHugh J, sitting as a single justice of the High Court, in In re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622. 12 His Honour at 624 drew attention to the fact that the court will not conduct a trial of a hypothetical action between the parties in order to determine the costs. He drew attention to certain exceptions to the general principle, which do not appear to me to apply in the present case. At 624 - 625 his Honour stated the relevant principles as follows: "In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action Australian Securities Commission v Aust-Home Investments Ltd supra. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd [1971] QWN 13, the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent Council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans.