Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Taheri v Vitek (No 2) [2014] NSWCA 344 Hearing dates: On the papers Decision date: 03 October 2014 Before: Bathurst CJ; Emmett JA; Leeming JA Decision: In each appeal: 1. Vary order 1 made on 1 July 2014 to order that the appellant pay the respondents' costs of the proceedings on an ordinary basis until 1 May 2014, and on an indemnity basis thereafter. 2. Order that the appellant pay the respondents' costs of the notice of motion filed 9 July 2014. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: COSTS - offer of compromise - "walk-away" offer - substantial compromise in foregoing costs - special costs order made Legislation Cited: Uniform Civil Procedure Rules (Amendment No 59) 2013 Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 36.16, 42.15, 51.47 Cases Cited: Botany Bay City Council v Latham (No 2) [2013] NSWCA 450 Calderbank v Calderbank [1975] 3 All ER 333 Kable v New South Wales (No 2) [2012] NSWCA 361 Category: Costs Parties: Veeda Taheri (Appellant) Peter Vitek (1st Respondent) Shoshana Vitek (2nd Respondent) Representation: Counsel: B Walker SC / M Sneddon (Appellant) D Pritchard SC / B Zipser (Respondents) Solicitors: McLaughlin & Riordan (Appellant) Farrar Lawyers (Respondents) File Number(s): 2013/364156; 2013/200165 Decision under appeal Citation: [2013] NSWSC 589; [2013] NSWSC 1764 Before: Bergin CJ in Eq; Rein J File Number(s): 2010/328982; 2005/258339 Judgment 1THE COURT: On 1 July 2014, the Court dismissed these appeals: Taheri v Vitek [2014] NSWCA 209. The successful respondents, by notices of motion filed 9 July 2014, sought a variation of the costs order in each appeal, reflecting offers of compromise made by them which were not accepted by the appellant. 2The notices of motion are supported by affidavits sworn by the respondents' solicitor on 17 July and 18 August 2014. The Court has the benefit of written submissions filed 31 July and 7 August 2014. 3A threshold question of power arises in light of r 36.16(3A) and (3C) of the Uniform Civil Procedure Rules 2005 (NSW). The respondents' notices of motion were filed within the 14 days specified by the rules, but contained an obvious error, which was corrected by amended notices of motion filed outside that period. Paragraph 1 of each notice of motion, as originally filed, sought: "An order pursuant to Part 36 Rule 16 of the Uniform Civil Procedure Rules 2005 (NSW) vacating order 2 made on 1 July 2014." 4However, order 1 made in each of the appeals decided on 1 July 2014 was "Appeals dismissed, with costs". Order 2 related to a notice of motion to amend the grounds of appeal, which was not pressed at the hearing of the appeal. 5Paragraph 1 of the amended notice of motion sought: "An order pursuant to Part 36 Rule 16 of the Uniform Civil Procedure Rules 2005 (NSW) vacating orders 1 and 2 made on 1 July 2014 insofar as they relate to costs." 6At all times since the filing of the original notices of motion, the substance of the respondents' application has been plain. Paragraphs 2 - 5 of the original and amended notices of motion specify the time periods in respect of which the respondents seek orders for costs in their favour on an ordinary basis, and then on an indemnity basis, depending upon the success of the various offers of compromise they have served. 7The limitation upon power to vary final orders reflected in r 36.16 is an important aspect of finality: see Kable v New South Wales (No 2) [2012] NSWCA 361 at [2]. Nevertheless, it has no application here, where the Court's jurisdiction to vary the order has been formally invoked within time and where, as here, the orders sought are plain on the face of the original notices of motion. 8The substance of the application is that the respondents made three "walk-away" offers of compromise, on 17 July 2013, 10 December 2013 and 2 May 2014. The first and second were made shortly after the first and second appeals were commenced (they were commenced on 1 July and 3 December 2013). Each offer was that the appeal (or the appeals) be dismissed, with each party paying their own costs. In that form, the offers complied with the rules relating to offers of compromise in UCPR Pt 20, r 20.26, as made applicable to appeals by Pt 51, r 51.47. All offers were made after the change to the rules effected by the Uniform Civil Procedure Rules (Amendment No 59) 2013, but, in any event, it has long been open for a defendant (or respondent to appeal) to engage the rules by an offer that there be a verdict in its favour with no order as to costs. 9However, as the appellant's submissions point out, the offers made on 17 July and 10 December 2013 in large measure invited capitulation by the appellants in each appeal. There is no evidence before the Court as to the costs incurred by the respondents at those times (some three weeks after the commencement of the first appeal, and seven days after the commencement of the second appeal). It would be expected that virtually no costs would have been incurred by those times. 10In our view, it would not be appropriate for the non-acceptance of either of those offers to lead to the consequences for which Pt 42, r 42.15 provides. The only measure of compromise involved on the part of the respondents was not to seek their costs which could not, by that stage, have been significant: cf Botany Bay City Council v Latham (No 2) [2013] NSWCA 450 at [12] (Adamson J, Ward and Leeming JJA agreeing). If that were not so, then the rule could be engaged by a defendant (or a respondent to an appeal) early in the litigation making a "walk-away" offer of compromise; that would not serve the public policy of encouraging settlement. 11For the same reasons, if the correspondence of 17 July and 10 December 2013 be treated in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333, the same result obtains. 12The position is different in relation to the final offer of compromise, which was served under cover of a letter dated 2 May 2014. By then, there had been an exchange of written submissions on each appeal. The offer of compromise was that in each appeal there be "judgment in favour of the respondents" with no order as to costs. Those offers were open for acceptance for 14 days, until 16 May 2014. Moreover, the letter stated that the respondents' costs on a solicitor/client basis in both appeals, excluding fees of senior counsel, were approximately $120,000. The letter said "accordingly, the compromise proposed in the offer of compromise is very generous". 13It is not possible, on the materials available to this Court, to determine whether the costs recoverable on assessment incurred by the respondents are $120,000 or anything approaching that amount (which seems extraordinarily high). However, by that time, the respondents had undoubtedly incurred substantial costs and the appellant was well aware of the nature of the submissions the respondents would be making on the appeals. It was correct to say that this final offer of compromise involved a significant element of compromise, and it was unreasonable for the appellant not to accept it. 14Accordingly, the respondents are entitled to have their costs on an indemnity basis, in each appeal, from 2 May 2014 onwards. 15The respondents also sought an order that the appellant pay the costs of their motion on an indemnity basis. In light of their failure in relation to the first and second offers of compromise, no such order is appropriate. They should, however, have their costs of the motion on an ordinary basis. 16Accordingly, in each appeal, the following orders should be made: 1. Vary order 1 made on 1 July 2014 to order that the appellant pay the respondents' costs of the proceedings on an ordinary basis until 1 May 2014, and on an indemnity basis thereafter. 2. Order that the appellant pay the respondents' costs of the notice of motion filed 9 July 2014. ********** 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: 03 October 2014