New South Wales Supreme Court CITATION : Portelli v Tabriska Pty Ltd (No 2) [2008] NSWSC 94 HEARING DATE(S) : On written submissions JUDGMENT DATE : 19 February 2008 JURISDICTION : Common Law Division JUDGMENT OF : Hislop J DECISION : (1) The application by the first and second defendants for indemnity costs is refused with costs. (2) The application by the fifth defendant for indemnity costs is refused with costs. CATCHWORDS : COSTS - Calderbank letter - rejection of offer not unreasonable. LEGISLATION CITED : Uniform Civil Procedure Rules MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FCR 236 SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 Jones v Bradley (No 2) [2003] NSWCA 258 CASES CITED : Gretton v Commonwealth of Australia [2007] NSWSC 149 Spedding v Noble [2007] NSWCA 29 Wagstaff v Haslem [2007] NSWCA 28 Collingwood Hotel Pty Ltd v O'Reilly [2007] NSWCA 155 Roads and Traffic Authority of NSW v Dederer [2007] HCA 42; (2007) 81 ALJR 1773 Clinton Joseph Portelli (Plaintiff) Tabriska Pty Ltd (First Defendant) PARTIES : Gustav Herstik (Second Defendant) Troy Terrence Gibson (Third Defendant) Daniel David Stephens (Fourth Defendant) Gorton John Lee t/as Elite One National Security Service (Fifth Defendant) FILE NUMBER(S) : SC 20672/01 Stacks/Goudkamp Solicitors (Plaintiff) SOLICITORS : Henry Davis York (First, Second Defendants) Curwoods Lawyers (Fifth Defenant) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION HISLOP J Tuesday 19 February 2008 20672/01 CLINTON JOSEPH PORTELLI v TABRISKA PTY LIMITED & ORS (No. 2) JUDGMENT Background 1 The plaintiff was injured in a street fight following an earlier altercation with some of his assailants at a nearby hotel. He unsuccessfully sought to recover damages for his injuries from the owner and occupier of the hotel (first defendant), the licensee of the hotel (second defendant), and the supplier of security services to the hotel (fifth defendant). He was ordered to pay the costs of those defendants. 2 The first and second defendants sought an order for indemnity costs against the plaintiff from 9 March 2004 or, in the alternative, from 26 July 2006. They relied upon Calderbank offers made in letters dated 9 March 2004 and 26 July 2006 respectively. 3 The Calderbank letter dated 9 March 2004 relevantly stated: "The alleged assault did not take place on the premises of the said hotel. The assault committed by the third and fourth defendants was not reasonably foreseeable and therefore was not reasonably preventable by our clients. Our clients engaged qualified security personnel who acted appropriately. We consider that the court will find that our clients were not negligent and that verdicts will be entered in favour of our clients against the plaintiff. For commercial reasons only, we are instructed that the first and second defendants will agree to accept a verdict in its and his favour against the plaintiff on the basis that the first and second defendants pay and bear its and his own costs of the proceedings to date. This offer is made in accordance with the principle in Calderbank v Calderbank (1976). The offer is stated to be open for 28 days from the date of this letter." 4 The letter dated 26 July 2006 reiterated that the solicitors for the first and second defendants considered their clients would not be held liable in negligence for the injuries suffered by the plaintiff. It made an offer which was open for 28 days from the date of the letter that the first and second defendants were prepared to accept a verdict in their favour with each party to pay their own costs in full and final settlement of the plaintiff's claim against them. 5 The offers of the first and second defendants were not accepted by the plaintiff. 6 The fifth defendant sought an order for indemnity costs against the plaintiff from 14 June 2006. It was asserted that on 13 June 2006 an offer of compromise was served on the plaintiff in accordance with UCPR 20.26. The offer was said to be: "The Fifth Defendant agrees to pay its own costs to date on the basis the Plaintiff consents to judgment in favour of the Fifth Defendant." 7 On the same date a Calderbank offer was served upon the plaintiff by the fifth defendant. The plaintiff did not accept either offer. Principles 8 Rule 42.1 of the Uniform Civil Procedure Rules 2005 ("the Rules") provides: "Subject to this Part, if the court makes any order as to costs, the court 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." 9 Rule 42.2 provides: "Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis." 10 The Court may have regard to a Calderbank letter when deciding questions of costs. It may make an order that a defendant is entitled to indemnity costs where an offer has been made in a Calderbank letter and the judgment obtained by the plaintiff is less favourable to him or her than the terms of the offer. 11 Unlike a notice of offer of compromise under r 20.26 "… the mere making of an offer by a 'Calderbank letter' and its non acceptance followed by a result more favourable to the offeror (less favourable to the offeree) than that represented by the offer will not automatically lead to the making of an order for payment of costs on an indemnity basis." - MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FCR 236 at 239. 12 However, "In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure" - SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37]; Jones v Bradley (No 2) [2003] NSWCA 258. 13 It is for the defendant to persuade the Court that the plaintiff acted unreasonably in rejecting the Calderbank offer - Gretton v Commonwealth of Australia [2007] NSWSC 149 at [16] and that the ordinary rule as to costs should be displaced by an order for costs on an indemnity basis. Discussion 14 The first and second defendants submitted that their offers represented a true and genuine compromise as the first and second defendants had incurred costs in the proceedings as at the time of those letters and that as the verdict and judgment for the first and second defendants is more favourable than the terms of the offer, an indemnity costs order should be made in favour of the first and second defendants. 15 The fifth defendant submitted that an order for indemnity costs should be made by reason of the offer of compromise under UCPR 20.26 or, alternatively, pursuant to the Calderbank letter as the failure to accept the offer was unreasonable. 16 The offers made in the Calderbank letters by the first, second and fifth defendants required the plaintiff to abandon his action. At the time the offers were open for consideration the plaintiff's advisers did not have the benefit of the relevant and significant decisions of the Court of Appeal in Spedding v Noble [2007] NSWCA 29, Wagstaff v Haslem [2007] NSWCA 28 and Collingwood Hotel Pty Ltd v O'Reilly [2007] NSWCA 155 nor the decision of the High Court in Roads and Traffic Authority of NSW v Dederer [2007] HCA 42; (2007) 81 ALJR 1773. The submissions of the first, second and fifth defendants do not, in my opinion, demonstrate that the plaintiff's refusal at that stage to abandon his action was unreasonable and that in all the circumstances a departure from the ordinary rule as to costs was warranted. 17 The plaintiff submitted that the alleged offer of compromise was not in the proper form nor was it in substance an offer of compromise made under and complying with the rules. The material before me does not enable this issue to be determined. As the onus is upon the fifth defendant, I accept the submission of the plaintiff that it should be dealt with on the same discretionary basis as the Calderbank offers and with the same result. Orders 18 The orders of the Court are: 1. The application by the first and second defendants for indemnity costs is refused with costs. 2. The application by the fifth defendant for indemnity costs is refused with costs ********** 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.