District Court New South Wales Medium Neutral Citation: Chen v State of New South Wales (Costs) [2012] NSWDC 187 Hearing dates: On the papers Decision date: 10 October 2012 Jurisdiction: Civil Before: Judge Peter Johnstone Decision: Defendant's application for indemnity costs dismissed with costs Catchwords: COSTS - indemnity costs - where offers of compromise not accepted by plaintiffs and judgment more favourable to defendant - whether period left open for acceptance of offers was reasonable Legislation Cited: Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005 (UCPR) Cases Cited: Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 Morgan v Johnson (1998) NSWLR 578 Pittorino v Yates [2009] NSWCA 87 Category: Costs Parties: Irene Rui Chen (1st Plaintiff) Gong Xiang Xuan (2nd Plaintiff) State of New South Wales (Defendant) Representation: Mr C Evatt with Ms L Evans (Plaintiffs) Mr M Spartalis (Defendant) Friend & Co Lawyers (Plaintiffs) Makinson & d'Apice Lawyers (Defendant) File Number(s): 2011/54439 Publication restriction: None REASONS FOR Judgment 1The defendant has applied for an award of indemnity costs against each plaintiff from the day following offers of compromise made by it to the plaintiffs but not accepted by them, where the judgment was more favourable to defendant than the offers. 2The plaintiffs in these proceedings are Ms Irene Chen and her mother, Ms Gong Xuan. They brought these proceedings alleging wrongful arrest, false imprisonment, assault and malicious prosecution by two police officers. The defendant opposed the plaintiffs' claims for damages. 3The dispute proceeded to trial on 16, 17, 18, 19, 20, 23, 24, 26, and 27 April 2012. Written submissions were subsequently provided and judgment was reserved on 18 June 2012. A written judgment was delivered on 17 August 2012. The Court directed the entry of judgment in favour of the defendant against each plaintiff. The plaintiffs were ordered to pay the defendant's costs on the ordinary basis, but leave was given for an application to be made for a differential order for costs. 4The defendant applied for a differential order on the basis that offers of compromise were served in which the defendant offered to compromise the proceedings. The defendant offered to compromise the first plaintiff's claim by making a payment of $50,000, exclusive of costs. The defendant offered to compromise the second plaintiff's claim by making a payment of $30,000, exclusive of costs. 5The judgment obtained by the defendant was clearly more favourable to defendant than the offers. In the ordinary course, unless the Court were to order otherwise, the defendant would be entitled to an orders for costs against the plaintiffs to be assessed on an ordinary basis up until the day the day the offer was made, and on an indemnity basis from the beginning of the following day: UCPR r 42.15A(2)(b)(i). 6The plaintiffs do not ask the Court to otherwise order. What they submit is that UCPR r 42.15A(2)(b)(i) has no operation, because the offers of compromise were not left open for acceptance for such time as was reasonable in the circumstances as required by UCPR r 20.26(7)(b). That rule provides: "(7) The following provisions apply if an offer is limited as to the time it is open for acceptance: (a) the closing date for acceptance of the offer must not be less than 28 days after the date on which the offer is made, in the case of an offer made 2 months or more before the date set down for commencement of the trial, (b) the offer must be left open for such time as is reasonable in the circumstances, in the case of an offer made less than 2 months before the date set down for commencement of the trial." The relevant facts 7The trial was fixed to commence on 16 April 2012. 8On 29 March 2012 an informal settlement conference was held between the parties, but the dispute was not resolved. 9The defendant made the offers of compromise the next day, 30 March 2012. The offers were expressed to be open for acceptance until 3.30pm on Friday 13 April 2012. 10Thus, the offers were made less than 2 months before the date set down for commencement of the trial, and, the period for acceptance was some 15 days. 11Those 15 days included the Easter holiday period of Friday 6 April to Monday 11 April 2012. 12On the morning of the date of expiry of the offers, at 11.09 am, the plaintiffs' solicitor sent an email to the defendant's solicitor asking for the period of acceptance to be extended from 3.30pm to 5.00pm, a period of 1½ hours: "We note your offers of compromise in this matter. We seek an extension of time for acceptance to 5pm today. Please advise your instructions by return." 13Later that day, at 1.52pm, the defendant's solicitor sent an email to the plaintiffs' solicitor refusing the request: "I'm instructed that the offer will not be extended." 14The offers were not accepted before 3.30pm and they expired. 15The background to the request for the extension was not communicated by the plaintiff's solicitor. Although that background is possibly not, therefore, strictly relevant, it is in my view illustrative, for reasons to which I will come. According to the plaintiff's solicitor, his evidence on the point being uncontested, the plaintiffs wanted to consult their barrister, Mr Clive Evatt, about the offers. Mr Evatt was absent from chambers from 4 April to 11 April 2012, which period included the Easter break, then he was busy in court until Friday 13 April 2012, such that a conference with him could not be arranged until 4.00pm that day. The extension of time of 1½ hours was sought to enable the plaintiffs to consult with Mr Evatt. The solicitor asserts: "Had the extra time of 1½ hours been granted, Mr Evatt may have been able to persuade the plaintiffs to accept the offer." 16The plaintiffs were, therefore, unable to consult with Mr Evatt before expiry of the offers. Discussion and findings 17Having regard to the imminence of the hearing date, in my view, to leave the offers open for a period of 15 days was reasonable in the circumstances. What was unreasonable was the failure to extend the period by 1½ hours. In my view, the defendant's failure to do so rendered the period for acceptance unreasonable, such that it did not comply with UCPR r 20.26(7)(b). 18The defendant's written submissions cite the passage in Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 at [15] - [24] where Basten JA referred to three factors as relevant to the consideration of what is a reasonable time for leaving open an offer of compromise. Those factors were: first, the extent to which the parties may reasonably be expected to have a clear perception as to the strengths and weaknesses of their positions, so that the reasonableness of a particular offer might be speedily assessed. Second, the stage that the proceedings have reached and because at trial costs accrue daily, even on an hourly basis, there is a heightened incentive to respond within the time permitted. And, thirdly, counterbalancing the first factor, the distraction from preparing or running a trial caused by the need to address the terms of an offer, provide advice and obtain instructions. 19As against that, in Pittorino v Yates [2009] NSWCA 87, Tobias JA said that an offeree should not be placed under undue and unfair pressure, and should have the opportunity to make an informed and reasoned judgment whether or not to accept the offer. 20It would have been more prudent for the plaintiffs' solicitor to have informed the defendant's solicitor of the reason for the requested extension. But neither did the defendant's solicitor enquire why the extension was required. 21It must have been abundantly clear to the defendant, having regard to the brevity of the extension requested, that the request was not frivolous, and that the offers of compromise were being treated seriously. The fact that it was the Friday preceding the Monday when the trial was due to commence was a further indicator that there was some clear purpose to the request. 22In Morgan v Johnson (1998) NSWLR 578 at 581 - 582 Mason P articulated the rationale for the rules relating to costs in respect of offers of compromise, including this: "The purpose...is to encourage the proper compromise of litigation, in the private interests of individual litigants and the public interest of the prompt and economical disposal of litigation... The idea...is to encourage settlement or compromise of proceedings, and more specifically, to encourage litigants to give serious consideration to the settlement of proceedings..." 23Section 56 of the Civil Procedure Act 2005 mandates the overriding purpose of the Act and the UCPR: to facilitate the just, quick and cheap resolution of issues in dispute. There are obligations placed on parties and their lawyers by s 56(3) and s 56(4) to assist the Court to further that overriding purpose. The Court may take into account any failure to comply with those obligations in exercising a discretion as to costs. In my view, the refusal to agree to the extension of time requested in this case amounted to such a failure. 24It is true that the plaintiffs did not make any subsequent offer, or counter-offer after the period for acceptance expired. That, however, is using hindsight to excuse the professional discourtesy that occurred here. Solicitors must strive to maintain their own high standards of behaviour, and cannot point to the actions of others to justify lowering their own adherence to the appropriate standards of professional behaviour. 25For all these reasons the defendant's application for indemnity costs based on its offers of compromise fails. Disposition 26The defendant's application for indemnity costs based on its offers of compromise is, therefore, dismissed. 27The costs of the defendant's application should be dealt with separately and discretely from the costs in the substantive proceedings, and should follow the event, in accordance with UCPR r 42.1. 28I therefore order the defendant to pay the plaintiffs' costs of its application for indemnity costs. The plaintiffs, however, are not entitled to receive separate payment for those costs, and may only recover their entitlement by way of set-off against the defendant's entitlement to costs in respect of the substantive proceedings. 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. Decision last updated: 10 October 2012