Supreme Court New South Wales Medium Neutral Citation: Chen v Caldieraro (No 2) [2013] NSWSC 5 Hearing dates: On written submissions Decision date: 17 January 2013 Before: Price J Decision: 1. The plaintiff is to pay the first and second defendant's costs on the ordinary basis as agreed or assessed. 2. There be no order as to costs on the second defendant's cross-claim. Catchwords: Procedure - costs - offer of compromise - application for indemnity costs - whether rejection of offer unreasonable Legislation Cited: Motor Accident's Compensation Act 1999 Uniform Civil Procedure Rules 2005 r 20.26, r 42.1, r 42.2, r 42.15A Cases Cited: Calderbank v Calderbank [1975] 3 All ER 333 Leichhardt Municipal Council v Green [2004] NSWCA 341 Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120; (2006) 67 NSWLR 706 Category: Procedural and other rulings Parties: Xiao Chun Chen (plaintiff) Matteo Caldieraro (1st defendant) The Nominal Defendant (2nd defendant) Representation: Counsel: Mr D Baran (Plaintiff) Mr J Guihot (1st defendant) Mr K Rewell SC + Mr B Kelleher (2nd defendant) Solicitors: Margiotta Solicitors (plaintiff) Coastal Law & Conveyancing Pty Ltd (1st defendant) TL Lawyers, Solicitors (2nd defendant) File Number(s): 2010/155869 Judgment 1Judgment in these proceedings was delivered on 22 November 2012 and the following orders were made: (1) Verdict and judgment for the first defendant (Matteo Caldieraro) and second defendant (Nominal Defendant) as against the plaintiff. (2) The cross-claim of the Nominal Defendant against the cross-defendant Matteo Caldieraro is dismissed. 2Pursuant to directions made by the court, written submissions as to costs have been received from the parties, who are content to rely on their submissions without oral argument. 3The first defendant asks that: "a. The plaintiff pay his costs of and incidental to the defence of the plaintiff's claim on an ordinary basis. b. The second defendant pay his costs of and incidental to the defence of the second defendant's cross-claim on an ordinary basis." 4The plaintiff does not oppose the order that the first defendant seeks against him, but the second defendant submits that there should be no order for costs made in respect of the cross-claim. The second defendant asks that the following orders be made against the plaintiff: (i) the plaintiff pay the second defendant's costs on the ordinary basis up to and including 24 September 2012 and, from 25 September 2012, on an indemnity basis pursuant to UCPR r 42.15(2)(b)(i); (ii) in the alternative, the plaintiff pay the second defendant's costs on the ordinary basis up to 24 September 2012, and thereafter, order, in the exercise of its discretion, that the plaintiff pay the second defendant's costs on an indemnity basis pursuant to the principles enunciated in Calderbank v Calderbank [1975] 3 All ER 333. 5The plaintiff contends that he should pay the second defendant's costs on the ordinary basis as agreed or assessed and no other order should be made. 6The application by the second defendant for indemnity costs is founded upon offers made in letters dated 24 September 2012 from its solicitors to the solicitors for the plaintiff. The first letter enclosed an Offer of Compromise that was stated to have been made in accordance with the Uniform Civil Procedure Rules 2005 (UCPR), r 20.26. The offer proposed that the plaintiff's claim be compromised for a verdict and judgment being entered in favour of the second defendant, with each party paying their own costs. The second letter contained an offer of settlement on the basis of a verdict for the second defendant and that each party would pay their own costs. This offer was expressly made pursuant to Calderbank v Calderbank. 7The second defendant submitted that, at the time the Offer of Compromise and Calderbank offer, it had filed a defence and served all of its expert medical and liability evidence. The second defendant stated that the plaintiff had been served with evidentiary statements from the first defendant and, as such, the plaintiff was fully aware of the case he was required to meet. It was argued that the offer of compromise, which complied with UCPR r 20.26, contained a real element of compromise in that the second defendant was prepared to forgo the costs order it would be entitled to pursuant to UCPR r 42.15 and a judgment was obtained that was less favourable to the plaintiff than the offer. The second defendant contended that the Calderbank offer was exclusive of costs and clear in its terms and it was unreasonable for the plaintiff to reject this offer as the facts underlying the issue of "road" had been made clear in the second defendant's defence, the exchanged surveyor's report and the first defendant's evidentiary statement. 8The plaintiff submitted that there was never a serious issue as to there being an arguable case and that damages were agreed between the parties. The only issue was liability which at all material times was clearly arguable. The plaintiff pointed out that the second defendant had never applied for summary dismissal. The plaintiff contended that the offer of compromise was not a genuine offer, but was a request for a complete capitulation in real terms. Reference was made to the offer being delayed, to the parties having attended mediation without success, and to the second defendant being aware that the plaintiff was entirely impecunious and without any means whatsoever of funding a case. The plaintiff argued that the offer objectively viewed on the material available to the second defendant offered nothing. 9No submission was made by the plaintiff that the offer of compromise did not comply with UCPR, r 20.26 as it clearly does. 10The general rules are that costs follow the event (UCPR, r 42.1) and costs payable under an order of the court are to be assessed on the ordinary basis (UCPR, r 42.2). Where an offer of compromise is made by a defendant in accordance with UCPR r 20.26, but is not accepted by the plaintiff there is a presumptive entitlement to indemnity costs, as from the beginning of the day following the day on which the offer was made, if a judgment obtained by the defendant was more favourable to the defendant than the terms of the offer (UCPR, r 42.15A). The court may order otherwise, but the burden of persuading the court lays upon the plaintiff who did not accept the offer of compromise. 11The offer of compromise must be real and genuine: The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120; (2006) 67 NSWLR 706 per Basten JA at [8]; Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 per Basten JA at [9]. 12The question that arises is whether the offer by the second defendant for judgment to be entered in its favour with each party to pay their own costs constitutes a real and genuine compromise. No legal principle exists that mandates that a 'walk-away' offer cannot be regarded as a genuine offer of compromise (Leichhardt Municipal Council v Green [2004] NSWCA 341 per Santow JA at [36]). Each case depends upon its own circumstances. 13The offer was made approximately 5 weeks prior to the commencement of the hearing. The second defendant was entitled to be confident of the strength of its case both on the question of liability and whether the accident occurred "on a road" within the statutory meaning in the Motor Accident's Compensation Act 1999. The second defendant had undoubtedly incurred significant costs by the time that the offer was made. I am not persuaded that its offer to the plaintiff to walk away from the litigation without penalty as to costs was not a genuine compromise, but was a request for a complete capitulation. A true demand to capitulate would have required the plaintiff to pay the second defendant's costs. 14I do not think that the plaintiff's argument that he was indebted to his lawyers for costs and disbursements incurred, impacts upon the genuineness of the second defendant's offer. The second defendant was prepared to forgo the costs that it had incurred in order to bring the case to an end. 15I find that the offer of compromise was real and genuine. Nevertheless, the court retains a discretion as to the award of indemnity costs. The plaintiff must show that his rejection of the offer was not "unreasonable" in all the circumstances of the case as the persuasive burden rests upon him. The plaintiff submitted that it was not unreasonable for him to reject the offer, given that the matter was prepared for trial, he was impecunious and indebted to his lawyers. 16The plaintiff was in a difficult position. He had suffered severe spinal injuries in the accident. His admission into the Lifetime Care and Support Scheme was subject to the court's decision as to whether his accident had occurred on a public road. Although the second defendant's confidence in its case was justified, the plaintiff's claim cannot be described as hopeless. In all the circumstances, his rejection of the offer was not unreasonable. I do not propose to order indemnity costs. 17As to the cross-claim, I agree with the second defendant's contention that its cross-claim did not raise additional issues to those raised in the statement of claim. The reality is that the second defendant provided the first defendant with considerable assistance in resisting the plaintiff's claim. The plaintiff's lack of success rendered the cross-claim nugatory and it was formally dismissed. I do not propose to make a costs order in favour of the first defendant on the cross-claim. Orders 18Accordingly, I make the following orders: 1. The plaintiff is to pay the first and second defendant's costs on the ordinary basis as agreed or assessed. 2. There be no order as to costs on the second defendant's cross-claim. ********** 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: 25 February 2013