New South Wales Supreme Court CITATION : Rae v Beddison Corporation Pty Ltd (No 2) [2009] NSWSC 178 HEARING DATE(S) : 2, 3 and 4 February 2009 JUDGMENT DATE : 20 March 2009 JUDGMENT OF : Harrison J DECISION : 1. Judgment for the plaintiff for $235,206.97 together with interest on the sum of $158,878.85 from 17 February 2009. 2. Order the defendant to pay the plaintiff's costs. CATCHWORDS : COSTS – application for costs order – defendant's contention that proceedings commenced in wrong jurisdiction – whether costs in Supreme Court are more substantial than equivalent costs in District Court - COSTS – indemnity costs – offer of compromise – whether circumstances when offer made different to circumstances prevailing at hearing – circumstances different – indemnity costs refused Civil Procedure Act 2005 LEGISLATION CITED : Legal Profession Act 2004 Uniform Civil Procedure Rules 2005 CATEGORY : Consequential orders Ainger v Coffs Harbour City Council (No 2) [2007] NSWCA 212 Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 Mid-City Skin Cancer & Laser Centre v Zahedi-Anarak [2006] NSWSC 1149 CASES CITED : Motor Trade Finances Prestige Leasing Pty Ltd v Elderslie Finance Corporation Ltd [2006] NSWSC 1446 Rolls Royce Industrial Power (Pacific) Ltd (formerly John Thompson (Australia) Pty Ltd) v James Hardie & Coy Pty Ltd [2001] NSWCA 461; (2001) 53 NSWLR 626 TCN Channel Nine Pty Ltd v Anning [2002] NSWCA 82; (2002) 54 NSWLR 333 Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353 PARTIES : Wendy Florence Rae (Plaintiff) Beddison Corporation Pty Ltd (Defendant) FILE NUMBER(S) : SC 15074 of 2007 COUNSEL : F P Carnovale (Plaintiff) M J Slattery QC with D R Meltz (Defendant) SOLICITORS : Brown Wright Stein Lawyers (Plaintiff) Gadens Lawyers (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION HARRISON J 20 March 2009 15074 of 2007 Wendy Florence Rae v Beddison Corporation Pty Ltd (No 2) JUDGMENT 1 HIS HONOUR: On 10 February 2009 I delivered judgment in the principal proceedings: see [2009] NSWSC 27. The question of costs excited some attention for reasons that will become apparent. Written submissions on this issue were provided to me in due course. This judgment deals with that issue in the light of those submissions. 2 The parties are agreed that, having regard to my decision, there should be judgment for the plaintiff for the sum of $235,206.97. That sum represents what the parties have assessed to be the amount claimed as determined by me calculated together with interest up to 16 February 2009. The plaintiff also claims interest on $158,878.85 at the rate of ten per cent per annum from 17 February 2009 until judgment. This is explained below. The defendant's contentions 3 The defendant's principal submission was that the proceedings should have been commenced in the District Court of New South Wales and that the decision to commence the proceedings in this Court will have increased costs. 4 The present proceedings were commenced on 5 October 2007 by statement of claim served on the defendant on 19 October 2007. The claim as pleaded was for $758,000 plus interest. Prior to this, on 1 February 2007, the plaintiff had served a statutory demand on the defendant for the amount of $758,000, which was varied by the Federal Court of Australia on 24 September 2007 to $599,121.15. The Federal Court fixed the time for payment of that varied amount as 15 October 2007. That amount was paid in full on 10 October 2007 (although not received by the plaintiff until the following day). These proceedings were therefore commenced ten days before the Federal Court-ordered time for the payment had expired and five days before payment was effected. 5 The defendant contends that the plaintiff commenced proceedings in this Court claiming $758,000 when she knew, or presumably ought to have known, that the amount in issue would be limited to the sum of $158,878.85 "as the second instalment had by then been paid". This is not strictly accurate. However, the defendant submits, in effect, that there had been no indication from it that the sum ordered on 24 September 2007 by the Federal Court to be paid by 15 October 2007 would not be paid. Accordingly, the proceedings should have been commenced in the District Court. No special or other relief beyond recovery of a debt was in issue. The defendant submitted that it was an abuse of process to have filed proceedings in this Court before the time fell due to pay the second instalment or to maintain the proceedings for the full amount in this Court once payment of the ordered amount had been made. 6 The contention that costs recoverable by legal practitioners for work performed in proceedings in this Court should be higher than costs incurred for comparable work in the District Court requires some examination. 7 Previously Part 52A r33(1A)(2)(f)(ii) of the Supreme Court Rules was to the effect that in relation to a money claim there would be no award of costs if the plaintiff did not achieve $225,000 unless there was a specific reason why the matter should have been brought in the Supreme Court. If the award was between $225,000 and $450,000 then a plaintiff's entitlement was only half costs. The defendant submitted that "[w]hile the exact terms of the previous rule [do] not find expression in the present rules, the ideas behind it persist as sound rules of policy in the exercise of the relevant discretion". The defendant referred to the following cases. 8 In Motor Trade Finances Prestige Leasing Pty Ltd v Elderslie Finance Corporation Ltd [2006] NSWSC 1446, White J considered the previous rules in the following terms: "[6] Prior to the passing of the Civil Procedure Act 2005 (NSW) and the introduction of the Uniform Civil Procedure Rules 2005 (NSW), the Supreme Court Rules 1970 (NSW) provided that, in respect of proceedings commenced after 1 October 1997, the plaintiff was entitled to recover only half its costs if it obtained a sum of more than $225,000, but less than $450,000 (Pt 52A r 33(4)(f)). This rule was an application of the principle that there should be a proportionality between costs recovered and damages awarded. It also reflected the policy that claims for comparatively small amounts should not be brought in the Supreme Court. Under Pt 52 r 33 (5) of the Supreme Court Rules , the plaintiff could recover a higher amount of costs if it appeared to the Court that the plaintiff had sufficient reason for commencing or continuing proceedings in the Supreme Court. That rule did not survive the introduction of the Civil Procedure Act and the Uniform Civil Procedure Rules. [7] Section 98 of the Civil Procedure Act confers a wide discretion on the Court in relation to orders for costs. Subsection 98(1) provides that costs are in the discretion of the court which has full power to determine by whom, to whom and to what extent costs are to be paid. [8] Subsection 98(4) provides that the Court may make an order to the effect that the party to whom costs are to be paid is to be entitled to, inter alia, a specified proportion of the assessed costs. [9] Pursuant to r 42.1 of the Uniform Civil Procedure Rules the Court, if it makes an order as to costs, is to order that costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. [10] These discretionary powers entitle the Court to moderate the costs which a successful party is otherwise entitled to receive to reflect, amongst other things, its degree of success on particular issues, the quantum of damages awarded, their proportion to the length of hearing and the likely costs incurred by the parties, and the conduct of the successful party in the proceedings." 9 In that case the plaintiff had sued for $8M and recovered only $20,000 approximately. There were other reasons why it was appropriate to commence the proceedings in this Court. His Honour awarded the successful plaintiff only three quarters of its costs. He identified the central question as whether the plaintiff had sufficient reason to commence proceedings in the Supreme Court to justify a recovery of costs. The defendant submitted that the plaintiff had not demonstrated that there was sufficient reason in the present case. 10 In Mid-City Skin Cancer & Laser Centre v Zahedi-Anarak [2006] NSWSC 1149 Campbell J said: "[49] In an action for breach of contract, if a plaintiff establishes liability, and obtains an order for payment of nominal damages, that plaintiff is usually not to be regarded as the successful party in the action: Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874; Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394; Oshlack v Richmond River Council (1998) 193 CLR 72 at [98] per McHugh J; Ng v Chong [2005] NSWSC 385. [50] Stephenson LJ in Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394 at 401 explains that costs should be awarded against a plaintiff who has obtained an order for nominal damages because the award of nominal damages: ' … was not the event at which the plaintiffs were aiming. They were aiming at £82,500, and the mere fact that they ultimately got something -- token or nominal damages -- does not enable me to regard them as remaining successful plaintiffs.' [51] As Spender, Nicholson and Finn JJ said in Nexus Minerals NL v Brutus Constructions Pty Ltd & Kozyrski (Full Federal Court, 10 September 1997, unreported) at 12: 'An award of nominal damages ought not today be regarded as a "peg on which to hang costs": cf Beaumont v Greathead (1846) 2 CB 494 at 499; see McGregor on Damages , para404-para405, Sweet & Maxwell, London, (1988, 15th Ed); see also Burrows, Remedies for Tort and Breach of Contract , 269-270, Butterworths, London (2nd ed 1994).' [52] As with all questions of costs, the ultimate decision must be made by reference to the facts of the individual case. One circumstance that Hamilton J in Ng v Chong [2005] NSWSC 385 at [8] regarded as possibly justifying an award of costs in favour of someone who recovered nominal damages was when " some other right is vindicated by the judgment, eg, the establishment of a legal right irrespective of whether any substantial remedy is obtained." However no such question arises in the present case." 11 The defendant submitted that the plaintiff had failed to demonstrate that there was anything special about this case that would promote the Supreme Court over the District Court as the appropriate jurisdiction. It contended that there was "nothing special about the issues or the quantum of this case that indicates that the Supreme Court is the proper jurisdiction to determine it". Citing Mid-City Skin Cancer & Laser Centre (supra) as authority, the defendant argued that there should be no award of costs to the plaintiff. The plaintiff's response 12 When the plaintiff commenced her proceedings on 5 October 2007 she was still owed $758,000 absent any adjustment to that sum in accordance with the terms of the agreement. That amount exceeded the jurisdictional limit of the District Court. 13 The plaintiff recognised for the purposes of the present argument that the defendant's submissions amount in effect to a submission that she should have waited until after 15 October 2007 to see if the defendant complied with the order of the Federal Court to pay the sum of $599,121.15 by that date and then to have sued for the balance of $158,878.85 if it did. The plaintiff submitted that there were two reasons why that contention should be rejected. First, the defendant claimed in the Federal Court proceedings that it was solvent and secondly the defendant had declined to pay even the undisputed amount of $599,121.15 unless the plaintiff gave up any claim for the balance. 14 It is unnecessary to deal with first of these reasons. With respect to the second reason, it is to be observed that Mr Beddison gave the following evidence before me: "Q. And you say in paragraph 3 that Miss Rae served a statutory demand on your company on 1 March 2007 claiming $758,000 plus interest you say; yes? A. Yes. Q. You say the Federal Court ordered that a lesser amount be paid by 15 October 07, do you notice that? A. Yes. Q. Now you had calculated as far back as February 07, might even have been January 07, that the amount that you owed her was $599,121.15, hadn't you? A. From memory, I think that's right, that's correct. ***** Q. And you argued through your lawyers in the Federal Court that at the time the demand was served, the debt wasn't due because the charge hadn't been lifted by then, do you recall that? A. I wasn't in court. I don't recall what my lawyers-- Q. In any event, you know the charge was lifted in March 07, wasn't it? A. I am not sure precisely but I - I know it was lifted some time. Q. It was lifted very, very shortly after you raised the complaint, wasn't it? A. I don't know. I don't recall. Q. If you accept that it was lifted in March 07, you had no reason from that time on to decline to pay Miss Rae at least $599,000, had you? A. Yes, I had reason not to. Q. What reason? A. She wouldn't agree on the figure. Q. Well, can I just put it another way. You would only pay her 599 odd thousand dollars being your calculation if she agreed not to claim the balance, right? A. Correct. Q. So although you had worked out that you owed her a minimum of that amount, you weren't prepared to pay her what you said you owed her unless she agreed not to claim any more, correct? A. She rang me early in January-- Q. Can you tell me whether that is correct? SLATTERY: With respect, it is a question that does invite an explanation and the witness is giving it. HIS HONOUR: It may do but it is susceptible to a yes or no answer before the explanation arrives, isn't it? SLATTERY: If your Honour pleases. HIS HONOUR Q. Do you understand the question? A. Yes, I do, your Honour, yes. The answer is yes. Q. It is being put to you you were not prepared to pay the $599,000 without some arrangement being made about the claimed balance? A. Correct." 15 The plaintiff submitted, having regard to that evidence and the attitude evinced by the defendant, that it clearly had not paid even the undisputed amount because the plaintiff would not accept it as her sole entitlement. Such an attitude by the defendant was commercially and legally indefensible. It was not, therefore, open to the defendant to contend that the plaintiff should have known that the defendant would pay the undisputed amount before 15 October 2007. Consideration 16 The present debate about the relationship between the costs incurred by the parties and the choice of jurisdiction for the litigation of the present proceedings appears to me to have been predicated upon an assumption that is not, or may not be, completely accurate. That assumption is that the costs of litigating in this Court are higher than litigating the same dispute in the District Court. That assumption may in part have been generated by evidence given by Ms Bradonjic, the solicitor for the defendant, in an affidavit sworn by her, that she, or her firm, would use solicitors and barristers with more experience, and by implication at greater expense, when matters are litigated in the Supreme Court as opposed to a lower court. She was cross-examined about this opinion: "Q. So the size of the dispute was $160,000 and are you saying because it was in the Supreme Court, you took charge of it yourself, did it yourself, whereas if it had been in a lower court, the District Court, you would have given it to a first year solicitor, is that what you are saying? A. I don't allocate the work but the supervising partner who would have allocated the work allocated the work to me because it was a Supreme Court matter, yes. Q. And you say in paragraph 14 that the work required on a matter such as this to meet the standards and directions of the Supreme Court is greater than the other courts, lower courts; do you see that reference? A. Yes. Q. Do you practise in the courts of New South Wales? A. No. Q. So you have no way of knowing whether the District Court of New South Wales has a practice of requiring written submissions and affidavits and similar case management requirements as the Supreme Court? A. I have a general idea of what that Court requires because it is the same as the County Court of Victoria. Q. And that is what you base your understanding on, is it? A. Yes. " 17 The arguments proffered by the parties are in reality directed to the question of the rates at which costs should be assessed rather than at the question of whether or not the plaintiff as a successful party should be entitled to any costs at all. The plaintiff succeeded and, subject to what appears below, would in accordance with the ordinary rule be entitled to an order for costs in her favour. This would be so whether or not the proceedings were commenced in this Court or elsewhere. I do not agree with the defendant's submission that commencement of proceedings in this Court, even accepting that the amount in dispute should have been recognised by the plaintiff to be less than $160,000, thereby and without more disqualifies her from recovering costs from an unsuccessful defendant in the ordinary course of events. There is a distinction to be drawn between an order specifying the proportion of the total costs that a party may, or ought to, be entitled to on the one hand, and the calculation or quantification of the amount of those costs or of that proportion when assessed on the other hand. Nothing in the cases upon which the defendant relies suggests otherwise. 18 For example, s 98 of the Civil Procedure Act 2005 is in part as follows: "(1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings. (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount." 19 The section is based upon the assumption that costs will be assessed. Only s 98(4)(c) operates instead of the assessment process. Neither party suggested that I should specify a gross sum for costs pursuant to that subsection. 20 Moreover, the assessment process makes it clear that the rates at which costs are to be awarded are subject to an overriding principle of reasonableness. For example, ss 363 and 364 of the Legal Profession Act 2004 deal with the criteria applicable to an assessment of costs and the principles to be applied in an assessment of costs ordered to be paid by a court as follows: "363(1) In conducting an assessment of legal costs, the costs assessor must consider: (a) whether or not it was reasonable to carry out the work to which the legal costs relate, and (b) whether or not the work was carried out in a reasonable manner, and (c) the fairness and reasonableness of the amount of legal costs in relation to the work, except to the extent that section 361 or 362 applies to any disputed costs. (2) In considering what is a fair and reasonable amount of legal costs, the costs assessor may have regard to any or all of the following matters: (a) whether the law practice and any Australian legal practitioner or Australian-registered foreign lawyer acting on its behalf complied with any relevant legislation or legal profession rules, (b) any disclosures made by the law practice under Division 3 (Costs disclosure), (c) any relevant advertisement as to: (i) the law practice's costs, or (ii) the skills of the law practice or of any Australian legal practitioner or Australian-registered foreign lawyer acting on its behalf, (e) the skill, labour and responsibility displayed on the part of the Australian legal practitioner or Australian-registered foreign lawyer responsible for the matter, (f) the retainer and whether the work done was within the scope of the retainer, (g) the complexity, novelty or difficulty of the matter, (h) the quality of the work done, (i) the place where, and circumstances in which, the legal services were provided, (j) the time within which the work was required to be done, (k) any other relevant matter." ***** "364(1) In conducting an assessment of legal costs payable as a result of an order made by a court or tribunal, the costs assessor must consider: (a) whether or not it was reasonable to carry out the work to which the costs relate, and (b) whether or not the work was carried out in a reasonable manner, and (c) what is a fair and reasonable amount of costs for the work concerned. (2) In considering what is a fair and reasonable amount of legal costs, a costs assessor may have regard to any or all of the following matters: (a) the skill, labour and responsibility displayed on the part of the Australian legal practitioner or Australian-registered foreign lawyer responsible for the matter, (b) the complexity, novelty or difficulty of the matter, (c) the quality of the work done and whether the level of expertise was appropriate to the nature of the work done, (d) the place where and circumstances in which the legal services were provided, (e) the time within which the work was required to be done, (f) the outcome of the matter. (3) An assessment must be made in accordance with the operation of the rules of the relevant court or tribunal that made the order for costs and any relevant regulations. (4) If a court or a tribunal has ordered that costs are to be assessed on an indemnity basis, the costs assessor must assess the costs on that basis, having regard to any relevant rules of the court or tribunal and relevant regulations." 21 These principles apply uniformly without any distinction or differences based upon the particular court or tribunal concerned. 22 Section 366 also provides that Division 11 of the Act "does not limit any power of a court or a tribunal to determine in any particular case the amount of costs payable or that the amount of the costs is to be determined on an indemnity basis". 23 Sections 56 and 60 of the Civil Procedure Act 2005 are important as well: "56(1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. (3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court. (4) A solicitor or barrister must not, by his or her conduct, cause his or her client to be put in breach of the duty identified in subsection (3). (5) The court may take into account any failure to comply with subsection (3) or (4) in exercising a discretion with respect to costs. " ***** "60 In any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute." 24 The notion of proportionality was discussed and emphasised by the Chief Justice in TCN Channel Nine Pty Ltd v Anning [2002] NSWCA 82; (2002) 54 NSWLR 333 at [175] in the following terms: "[175] The maintenance of public confidence in the administration of justice requires this Court to be concerned that the legal costs of conducting litigation bear at least a rational, and preferably a proportionate, relationship to the value of what is in dispute. This consideration strongly suggests that this Court should undertake the re-assessment of damages." 25 In my principal judgment at par [46] I observed "that the amount in issue in these proceedings is on any view disproportionate to the costs that have undoubtedly been incurred by both parties in the prosecution of their respective positions in this litigation". That was not intended to be a comment upon the propriety or otherwise of the plaintiff's decision to commence or to continue proceedings in this Court for the recovery of a sum that was within the jurisdiction of the District Court. It was, and was intended only to be, a reference to the fact that the costs of litigation in any forum have become notoriously high and that the smaller the sum in question the greater is the disproportion between those costs and the amount in issue. As the plaintiff correctly submits, that disproportion should not weigh against her in the present case in a determination of the question of whether or not she should be entitled to the usual costs order. That would only be so if her choice of jurisdiction had had the effect of increasing costs over those that would have been incurred in the District Court. 26 Because the assessment of the costs in these proceedings is subject to the discretion of a costs assessor applying the principles of s 364 to which I have referred, the choice of jurisdiction does not in my opinion have, and ought not to have, any effect upon the rates at which costs will be assessed. The conduct of the litigation in this Court would not, and should not, be discernibly different in procedural or substantive terms from the conduct of the same litigation in a lower court. There should therefore be no corresponding difference between the cost of conducting the same litigation in this Court or elsewhere that would not be recognised by a costs assessor and accommodated by her or him in the cost assessment process. I give no weight to the evidence of Ms Bradonjic if it was intended to suggest otherwise. 27 Senior counsel and senior solicitors regularly appear and instruct in the District Court and junior barristers and junior solicitors regularly do the same in this Court. The choice of the level of seniority of solicitors and barristers, and by implication the choice of how much to spend on a case, is a function of a number of considerations including the amount involved in the dispute and the relative importance in monetary terms of the outcome to the parties. For the same reasons the cost of litigation is in no real sense a function of, or directly related to, the jurisdiction in which the litigation is conducted. The only exception to that proposition would be if there were differences in the rate of fees levied by this Court and the District Court for filing documents and the like, or if there were fees that were payable in this Court that were not payable in cognate circumstances in the District Court. However, these differences, if any, would always have been apparent to the parties. The significance of the differences falls away having regard to the failure of the defendant to apply for a transfer of the proceedings to the District Court pursuant to s 146 of the Civil Procedure Act 2005. This is considered below. 28 Experienced legal practitioners conducted the case at hand before me in an efficient way. Only the real issues in dispute were dealt with even if agreement about the boundaries may not in all cases have emerged until the hearing had commenced. However, I observed no aspect of the conduct of the hearing before me that would in my experience not have been replicated before any judge of the District Court. It was at all times equally open to both parties had they been so minded to apply to this Court for the transfer of the proceedings to the District Court pursuant to s 146 of the Civil Procedure Act 2005. Neither party did so. If the considerations that generated the defendant's submissions on the issue of the relationship between the costs of the proceedings and the choice of jurisdiction were always as significant as the defendant's submissions would suggest, then it is surprising that it never made such an application. 29 The plaintiff was successful in recovering the whole sum of $158,878.85. I am unable to accept that the defendant did not know or understand from no later than the middle of October 2007, when it paid the undisputed amount to the plaintiff, that the real dispute was about the sum of $158,878.85, subject only to the possibility of adjustment in accordance with the terms of the agreement. There was however a suggestion in the evidence of Ms Bradonjic that she did not understand this. That evidence was as follows: "Q. All right. When your client was served with these proceedings and when you became aware of them, at that point the dispute was about the sum of about $158,000, wasn't it? A. No. Q. Well, you are aware, aren't you, that your client paid the sum of about $599,000 on about 10 or 11 October? A. Yes, I was aware of that but the claim was for 758,000. Q. Yes, but if he had paid 599,000 before he was served with it, then from that time on the claim could only be 158,000, couldn't it? A. You are asking me what the claim was in the statement of claim. It was 758,000. Q. No, I am talking about what the claim was that was going to be the subject of the dispute in this Court when your client was served with the proceedings? A. I am not entirely sure what you are asking me. HIS HONOUR Q. What he is asking you is if 750 were claimed and 600 were paid, the claim would have become one for 150 on that analysis, wouldn't it? A. Yes. Q. And that would have been clear to you as the solicitor in charge, or would it not? A. It wasn't clear exactly what the claim was because they were still claiming the 758. So it wasn't quite clear to me because the statement of claim wasn't very detailed as to what the claim was exactly. Q. But were you involved in the proceedings in the Federal Court at all? A. Not at the outset. I was later on. Q. And you did you become aware that an order was made for the payment of the 599 odd thousand dollars by a certain date? A. Yes. Q. And you became aware that it was in fact paid? A. Yes. CARNOVALE Q. Don't you recall that the statement of claim pleaded that the defendant hasn't paid to the plaintiff the purchase price deferred amount of $758,000 by 19 January 2007 or at all? A. I would have to have a look at the statement of claim again to refresh my memory. HIS HONOUR Q. Just out of interest, was the 599 odd thousand dollars paid through the offices of Gadens? A. Yes, it was. Q. So there would be correspondence on your file dealing with the payment of that claim? A. Yes, there is. It is attached to the affidavit. CARNOVALE Q. If you look at paragraphs 14, 15 and 16 of the pleading, what I have just said to you is correct, isn't it? A. Would you repeat the question, please? Q. Well, that the pleading pleads that the purchase price deferred amount was $758,000 and the defendant hasn't paid the plaintiff that amount or any part of it by the due date of 19 January 07, or at all, do you see that? A. Yes. Q. It then pleads that the defendant is indebted to the plaintiff for that sum? A. Yes." 30 I confess to having some little difficulty with Ms Bradonjic's evidence that "it wasn't quite clear to [her] because the statement of claim wasn't very detailed as to what the claim was exactly". In the circumstances that prevailed at that time, having regard to all that had occurred involving the parties in the Federal Court and in this Court in 2007, during which time the defendant was represented and presumably advised by its current solicitors, there can be little if any doubt that a reasonably competent and informed legal practitioner acting for the defendant should have understood what was the actual amount claimed in these proceedings once the statement of claim had been read. Moreover, the issues in these proceedings thereafter were unambiguously limited to the plaintiff's entitlement to that sum in the light of the defendant's claim to reduce it by reference only to the adjustment formula for which the agreement provided. 31 Pursuant to r 42.1 of the Uniform Civil Procedure Rules 2005, if the court makes any order as to costs, it is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. Unless the court orders otherwise or the rules otherwise provide, costs payable to a person under an order of the court or the rules are to be assessed on the ordinary basis: see r 42.1. I do not consider that the defendant's submission that the plaintiff is entitled to no costs can be construed as an application pursuant to r 42.4 that I make an order about maximum costs payable by it to the plaintiff. 32 I consider that the defendant should pay the plaintiff's costs of the proceedings. It does not appear to me that some other order should be made as to the whole or any part of the costs. Indemnity costs 33 The plaintiff sought costs on an indemnity basis. Rule 42.14 provides as follows: "42.14(1) This rule applies if the offer concerned is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim concerned 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." 34 The plaintiff made an offer of compromise contained in her solicitor's letter to the defendant's solicitor on 7 December 2007. It was in the following relevant terms: "We act for the Plaintiff in the above proceedings. The Plaintiff makes the following offer of compromise to the Defendant in accordance with Division 4 of Part 2 of the Uniform Civil Procedure Rules 2005 (NSW) (the "Rules"). The Plaintiff offers to accept the sum of $195,000.00 in full settlement of the Plaintiff's claims (other than costs) in the above Proceedings. This offer is open for acceptance until 5 00 pm on 14 January 2008 at which time the offer will terminate." 35 The defendant contended that the offer of compromise was invalid and ineffective for three reasons. First, because the offer did not state that the amount that the plaintiff would accept in full settlement was in addition to the sum of $599,121.15 that the plaintiff had already received. The defendant relied in this respect upon rule 20.26(3)(b) which is as follows: "(3) A notice of offer: (a) must bear a statement to the effect that the offer is made in accordance with these rules, and (b) if the offeror has made or been ordered to make an interim payment to the offeree, must state whether or not the offer is in addition to the payment so made or ordered." 36 It will be apparent that the offeror in the present case is the plaintiff. This rule has no application to the facts of the present case. 37 Secondly, the defendant argued that the offer was invalid because it contained no genuine compromise. This was because the amount outstanding and payable by the defendant after 15 October 2007 was $158,875.85 whereas the amount that the plaintiff offered to accept was $195,000. The defendant characterised that offer as "a demand for payment of the entire amount" and not as a genuine offer of compromise. 38 In order to determine this question it is necessary to look at the reasonableness of the offer. There must have been a genuine compromise offered: see Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375. As there was a demand for what the defendant described as the full amount, an indemnity costs order would only be made in exceptional circumstances that were not extant in this case: Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353. 39 The defendant's submission appears to rest entirely upon the proposition that interest should be excluded in determining the maximum amount of the plaintiff's claim at the date of the offer. No authority is cited for that proposition. That is not surprising. In this case interest was expressly claimed in the statement of claim and would have formed part of any amount recoverable by the plaintiff if she succeeded. The offer indicated that the plaintiff was prepared to accept less than the full amount that she sued for including interest. Rule 42.16 provides that for the purpose of determining the consequences as to costs in rule 42.14, the period for which the Court is to disregard interest is the period after the date of the offer and not before. The plaintiff was entitled to a maximum amount of $216,228.56 inclusive of interest as at the date of the offer. In the plaintiff's submission the sum of $195,000 represented a genuine compromise in those circumstances. I would have accepted this submission as entitling the plaintiff to an order for indemnity costs if it were not for the defendant's final point. 40 The defendant argued thirdly that the circumstances prevailing when the offer of compromise was made were relevant to whether indemnity costs should be ordered and that indemnity costs should not be awarded in this case because the plaintiff succeeded on a claim that was in certain respects different to the claim as it was formulated when the offer was made. In particular, of the four general matters in dispute, the plaintiff failed on the issue of recruitment costs and either failed on or withdrew her arguments advanced before the trial on the issue of bonuses. The first matter is not relevant because the prospect of loss on some issues and success on others are the very matters that should generate attention to any offer that is made. Conversely, the defendant succeeded in answering all that was propounded before trial on bonuses. The basis upon which the plaintiff succeeded was a new point advanced in final submissions: see par [40] of the principal decision. The abandonment of those arguments did not occur until well into the hearing and after the plaintiff had issued numerous subpoenas and required discovery on that issue. It was also well after the defendant's failure to accept the plaintiff's offer and in circumstances where it had prepared its defence, and incurred costs, on a different basis. 41 In Rolls Royce Industrial Power (Pacific) Ltd (formerly John Thompson (Australia) Pty Ltd) v James Hardie & Coy Pty Ltd [2001] NSWCA 461; (2001) 53 NSWLR 626, Stein JA said this at pars [95] – [98]: "[95] I can see no error in his Honour's decision on the failure of the Calderbank offer. The cross-claim by James Hardie was late and was not a circumstance at the time of the offer of 4 June 1999. Surely what must be relevant is the circumstances which exist at the time the offer is made? The cross-claim produced a change of circumstance which, if in existence as at 4 June 1999, would have been likely to have produced a different complexion to the litigation so far as Rolls Royce was concerned. [96] There is English authority which supports this – Gaskins v British Aluminium Co Ltd [1976] 1 QB 524 and Preotta v Times Newspaper Ltd [1991] 4 All ER 46. A similar stance was adopted by Mahoney AP in Fowdh v Fowdh (Unreported, NSWCA, 4 November 1993) cited by Curtis J. [97] Mahoney A-P noted that after expiry of the offer and the time in which to accept it, two things emerged which significantly changed the situation. [98] He said: '… It is one thing for a plaintiff to present her evidence, make an offer of compromise, and to succeed at the trial on that evidence. In such a case, indemnity costs may be warranted. It is another thing for the plaintiff to present a case and make an offer of settlement, and then to succeed at the trial upon a relevantly different case. A plaintiff who has done that may not readily receive indemnity costs. I do not mean by this that minor differences between the case at offer and the case at trial will be of significance or that, if the difference be significant, a discretionary judgment for indemnity costs may not be given. But where the difference between the position at offer and the position at trial be as the Master assessed it to be, a decision to refuse indemnity costs may readily be understood'." 42 That statement was approved in Ainger v Coffs Harbour City Council (No 2) [2007] NSWCA 212 by McColl JA at [30] –[31] as follows: "[30] In determining whether an indemnity costs order should be made, the Court considers the circumstances at the time the offer was made: Rolls Royce Industrial Power (Pacific) Ltd (Formerly John Thompson (Australia) Pty Limited) v James Hardie & Co Pty Ltd (Pacific) Limited [2001] NSWCA 461; (2001) 53 NSWLR 626 (at [95]) per Stein JA (Davies AJA agreeing). Thus, it will be relevant to consider the strengths and weaknesses of each party's case as they may have been apparent to the parties at the time the offer was made: South Eastern Sydney Area Health Service v King [2006] NSWCA 2 (at [90]) (Hunt AJA, Mason P and McColl JA agreeing) [31] The test of whether or not indemnity costs of a trial should be granted does not depend on whether the offeree acted reasonably in not accepting it: Port Stephens Shire Council v Tellamist Pty Ltd (No 2) [2004] NSWCA 415 (at [16]) Giles JA (Santow and Ipp JJA agreeing). However, success on a different case from that being advanced at the time of the offer could be significant: Port Stephens Shire Council v Tellamist Pty Ltd (at [16]) referring to Rolls Royce Industrial Power (Pacific) Ltd v James Hardie ." 43 In my opinion the defendant's submissions on the third point should be accepted. The plaintiff's argument that the calculations to be made ought permissibly include sums arguably referable to interest that a successful plaintiff might expect to recover is undoubtedly correct. In the present case "the plaintiff obtain[ed] an order or judgment on the claim concerned no less favourable to the [her] than the terms of the offer" when viewed simply as a matter of arithmetic. However, the defendant's assessment or calculation of what proportion of the offer might be interest, as an element of the total sum for which the plaintiff indicated she was prepared to settle, has to be, and might reasonably be assumed to have been, made in the context of the issues as they existed at the time when the offer was being considered. In my opinion there are good reasons for the Court to order otherwise in accordance with rule 42.14(2). 44 The circumstances that resulted in the order or judgment upon which the plaintiff relies were not the same circumstances that the defendant was required or able to consider at the point when its decision to accept or to reject the plaintiff's offer was being made. The strengths and weaknesses of the parties' respective positions changed at the trial from what they were in late 2007. To a small, but significant, degree at least the plaintiff succeeded on a case that was not advanced at the time of the offer. However, the difference between the amount of the offer and the maximum amount that the plaintiff appeared to be entitled to at the time was also small. This does not appear to me to be a case where in all of the circumstances it would be appropriate to order that costs payable by the defendant be paid on an indemnity basis. Mediation 45 The defendant made submissions about the fact that there was no mediation in this case even though the defendant expressly asked for it. There is no clear suggestion in these submissions that the failure of the parties to mediate was somehow the fault of the plaintiff even though the plaintiff's own submissions appear to detect a criticism of her about that. There is in any event no evidence to support a contention that the plaintiff unreasonably refused to settle, assuming that such an allegation were made. It is unnecessary further to consider this issue. Conclusion and orders 46 It follows that the defendant should be ordered to pay the plaintiff's costs of the proceedings on an ordinary basis. The parties reached an agreement about the quantum of the plaintiff's entitlement on her claim. The agreed sum was $158,878.85. The sum of $235,206.97 represents that amount together with interest calculated on it up to and including 16 February 2009. The plaintiff also claims interest from 17 February 2009 on the sum of $158,878.85 until judgment. I will therefore direct the parties to bring in short minutes of order to reflect my decision on costs and to incorporate the adjusted final figure with interest added for which sum the plaintiff will be entitled to judgment having regard to the date when final orders are made. ********** 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.