Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Curtis v Harden Shire Council (No 2) [2015] NSWCA 45 Hearing dates: On the papers Decision date: 16 March 2015 Before: Bathurst CJ; Beazley P; Basten JA Decision: (1)Amend order 4 made by the Court in the appeal proceedings so as to delete therefrom the words "and of the appeal". (2)Order that the respondent pay the appellant's costs of the appeal assessed on the ordinary basis up to 24 September 2013 and on and from that date on an indemnity basis. (3)Otherwise dismiss the notice of motion with no order as to costs. Catchwords: COSTS – indemnity costs – effects of offers of compromise – whether offer including "costs as agreed or assessed" complies with UCPR, r 20.26 – whether offer of compromise was genuine – whether refusal of offer was reasonable – whether order other than as provided for by UCPR, r 42.14 should be made COSTS – indemnity costs – whether offer that is not compliant with UCPR, r 20.26 can have effect as Calderbank offer – where party making non-compliant offer seeks exercise of discretion to order indemnity costs pursuant to Civil Procedure Act 2005, s 98 and UCPR, r 42.2 Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56, 98 Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 42.2, 42.14 Cases Cited: Calderbank v Calderbank [1975] 3 All ER 333; 3 WLR 586 Curtis v Harden Shire Council [2014] NSWCA 314 Old v McInnes and Hodgkinson [2011] NSWCA 410 Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194 Whitney v Dream Developments Pty Ltd [2013] NSWCA 188 Category: Costs Parties: CA 2012/241825 John Curtis (Appellant) Harden Shire Council (Respondent) CA 2012/241832 John Curtis on behalf of himself and Jasmine Paterson, Jacob Paterson, Angus Curtis and Emily Curtis (Appellant) Harden Shire Council (Respondent) Representation: Counsel: H M Marshall SC / R Taylor (Appellants) R Sheldon SC (Respondent) Solicitors: McCabe Partners Lawyers (Appellant) Mills Oakley (Respondent) File Number(s): 2012/241825; 2012/241832 Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Common Law Citation: [2012] NSWSC 757 Date of Decision: 9 July 2012 Before: Fullerton J File Number(s): 2007/293512; 2007/293513 [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.] Judgment 1. THE COURT: The appellant brought two proceedings against the respondent. In proceedings SC 2010/331018 the appellant claimed damages for nervous shock arising from the death of his partner, Debbie Anne Paterson, in a single vehicle accident which occurred whilst she was driving her vehicle on a portion of Kingsvale Road, Kingsvale, upon which the respondent was carrying out road works. In proceedings SC 2010/331029 the appellant brought proceedings on his own behalf and on behalf of Ms Paterson's children under the Compensation to Relatives Act 1897 (NSW). 2. It appears that the matters proceeded before the trial judge on the question of liability only, although there does not appear to be an order for the determination of liability as a separate question. The evidence on liability was common to both proceedings. The trial judge entered a verdict for the respondent in each matter. On 10 September 2014, this Court allowed appeals by the appellant from her Honour's order in each matter: CA 2012/241825 and 2012/241832 respectively. The Court ordered that the matter be remitted for the determination of damages only. The Court also ordered that the respondent pay the appellant's costs at first instance and on appeal: Curtis v Harden Shire Council [2014] NSWCA 314. 3. On 13 February 2015, the High Court refused special leave to appeal from this Court's decision. 4. By notice of motion filed on 22 September 2014 in CA 2012/241825, the appellant sought the following orders: 1. That the costs order made on 10 September 2014 be set aside, and in lieu thereof: 2. That the respondent pay the appellant's costs on an indemnity basis from the date of the offer of compromise and on an ordinary basis prior thereto in respect of the Supreme Court Proceedings SC 2010/331018; 3. That the respondent pay the appellant's costs on an indemnity basis from the date of the offer of compromise and on an ordinary basis prior thereto in respect of the Court of Appeal Proceedings CA 2012/241825; 4. That the respondent pay the appellant's cost of and incidental to the notice of motion. 1. The appellant filed an identical notice of motion in appeal proceedings CA 2012/241832. Costs at first instance 1. The appellant made an offer of compromise in each of the proceedings at first instance on 22 August 2011 in the following terms: "Verdict for the Plaintiff, with damages to be assessed but reduced by 10% plus costs as agreed or assessed." 1. Each offer was open for 28 days and stated that it was made in accordance with the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 20.26. The offers were accompanied by a letter indicating only that the offers were enclosed by way of service. 2. The appellant acknowledges that the offers of compromise made in the Supreme Court proceedings did not comply with UCPR, r 20.26(2): see Whitney v Dream Developments Pty Ltd [2013] NSWCA 188. Although he made no other offer to settle the proceedings, including by way of a Calderbank offer: Calderbank v Calderbank [1975] 3 All ER 333; 3 WLR 586 he seeks favourable exercise of the Court's discretion under the Civil Procedure Act 2005 (NSW), s 98 to order indemnity costs from the date of the non-compliant rules offer. 3. The discretion conferred on a court by s 98 in the making of costs order is subject, relevantly, to the rules of court. Pursuant to UCPR, r 42.2 "[u]nless the court orders otherwise … costs payable … under an order of the court or these rules are to be assessed on the ordinary basis". The appellant contends that the Court should, in the exercise its discretion, make an order other than that costs be assessed on the ordinary basis. He submitted that he had attempted to compromise the proceedings by making an offer in each proceeding, which although non-compliant with the rules, nonetheless offered a genuine compromise of the proceedings which recognised the risks and vagaries of litigation. He pointed out that if accepted, the offers would have achieved the overriding purpose of the Civil Procedure Act, s 56. 4. The appellant contrasted his offers to compromise the proceedings, which the respondent accepted were genuine, with the respondent's conduct. He relied on two principal matters in this regard. First, the respondent did not even acknowledge service of the offers. Secondly, although on 25 May 2011 the respondent had made an offer of compromise in each proceeding on the basis of a verdict for the respondent, with each party to pay his and its own costs, he submitted that that offer was not a reasonable or genuine attempt to achieve a compromise. Rather, according to the appellant, the respondent's offer required his "unconditional surrender". On the appellant's submissions, the respondent's overall conduct indicated that its intention was that it would only settle the proceedings on the basis of a verdict in its favour. The appellant also referred to the respondent's conduct in relying on its offer to obtain an order for indemnity costs from the trial judge. 5. In determining whether to exercise its discretion pursuant to s 98, in circumstances where a party has purported to make a rules-based offer, the court is required to have regard to all the circumstances. 6. In Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194, the last paragraph of an offer, purportedly made under the rules, also stated that it was intended to operate as a Calderbank offer. The issue in that case had been whether the rules applied to probate proceedings. 7. The Court considered that the terms of the offer showed an overriding intention that it was to operate as a Calderbank offer if not effective under the rules. In the course of his judgment, Ipp JA (Mason P and McColl JA agreeing) stated, at [27], that whether an offer was so intended to operate was dependent upon what was revealed by the terms of the offer. His Honour contrasted the position of an offer that only disclosed an attempt to take effect if it complied with the rules and an offer that disclosed an intent to operate regardless of compliance with the rules. 8. In Whitney v Dream Developments, Bathurst CJ, at [43], noted that a party's conduct in seeking to compromise litigation, including the making of open offers, may be relevant to how the Court will exercise its costs discretion. His Honour observed, however, that an offer expressly made pursuant to r 20.26 would not of itself take effect as a Calderbank offer unless there was something in it or in the surrounding circumstances that indicated the offeror intended to rely on the rules offer on the question of costs, regardless whether the offer complied with UCPR, r 20.26. 9. In the present case, there was nothing in the communications between the parties that indicated that the appellant intended that his offers should be treated as offers to settle regardless of whether they complied with the rules. Nor was there anything in the conduct of the respondent that would compel the court to exercise the discretion to make an order other than that costs be assessed on the ordinary basis. In particular, he did not forewarn the respondent that he intended to make an application for indemnity costs other than by way of his purported rules offer. The respondent should not, therefore, be penalised by indemnity costs ordered as a matter of the court's discretion when it was not put on notice of any such an application. 10. That is sufficient to reject the appellant's application that his costs at first instance be paid on an indemnity basis from the time of its offer of compromise. For completeness, however, we should indicate that we also reject the submission that the respondent's offer was not a genuine offer of compromise. The rules specifically permit an offer to be made in the terms contained in the respondent's offer: UCPR, r 20.26(3). The compromise in such an offer is contained in the offer that each party bear its own costs, notwithstanding the entry of a verdict for the defendant. 11. It may be that in a particular case an offer seeking a verdict in return for compromise only as to costs would not be a genuine compromise. For example, a defendant may make an offer shortly after receipt of the statement of claim when only minimal costs have been incurred or where no evidence has been served so as to enable a plaintiff to assess the reasonableness of the offer. 12. However, that is not this case. Here, proceedings were commenced in 2007. The respondent did not make its offer of compromise until 25 May 2011, some four years after the commencement of proceedings. The extent of the work that had been done as at that date was not the subject of evidence or submissions, although in its submissions the respondent identified the lay and expert evidence that remained outstanding as at the date of the appellant's offer. Nonetheless, it can be inferred that the respondent would have incurred not insubstantial costs by the date of its offer. It follows, in our opinion, there was no substance in the appellant's complaint that the respondent's offer was not genuine. The offers in appeal proceedings CA 2012/241825 and 2012/241832 1. On 23 September 2013, the appellant made an offer of compromise pursuant to UCPR, r 20.26 in each of the appeal proceedings. Each offer was in the following terms: "Verdict for the Appellant, with damages to be assessed but reduced by 10%, plus costs as agreed or assessed." 1. The offer was open for acceptance until 5 pm on 24 September 2013. The proceedings in the Court of Appeal were heard on 25 September 2013. The offer was not accepted. 2. In the appeal proceedings, the Court ordered that the matter be remitted for assessment of damages only. The Chief Justice observed that it was not clear whether contributory negligence, which had been pleaded in the defence, remained in issue. There was no reference to contributory negligence in the judgment of the primary judge or the judgment of this Court. Nor was contributory negligence raised by the parties in their submissions. 3. Accordingly, as it is apparent that contributory negligence was not in issue on the appeal, the appellant obtained an order that was no less favourable than the terms of his offer. UCPR, r 42.14 provides in that circumstance, that unless the court otherwise orders, the appellant was entitled to his costs on the ordinary basis until the time from which the costs are to be assessed on an indemnity basis: UCPR, r 42.14(2)(a). In accordance with UCPR, r 42.14(2)(b), the appellant is entitled to his costs assessed on an indemnity basis as from the beginning of the day after the offer, that is, as and from 24 September 2013. 4. The respondent did not dispute that if the offer was rule compliant, UCPR, r 42.14 was engaged. However, he disputed that the offer was rule compliant. UCPR, r 20.26 in its present form commenced on 7 June 2013. The previous rule specified that an offer made pursuant to UCPR, r 20.26 must be exclusive of costs. An offer that included a clause that the offeree pay the offeror's costs as agreed or assessed has been held not to be exclusive of costs: see Old v McInnes and Hodgkinson [2011] NSWCA 410. 5. UCPR, r 20.26(2)(c) in its present form provides: "20.26 Making of offer … (2) An offer under this rule: … (c) must not include an amount for costs and must not be expressed to be inclusive of costs …" 1. The appellant's offers neither contained an amount for costs nor were they expressed to be inclusive of costs. The offers were therefore compliant with UCPR, r 20.26. 2. The respondent accepted that the appellant's offers of compromise in the appeal proceedings were genuine offers of compromise, but contended that it was not unreasonable for it to refuse the offer. Although, given its contention that the offer of compromise did not comply with the rules, the respondent's submissions are directed to whether the Court should exercise its discretion under s 98, it is appropriate to consider its submissions in determining whether the Court should make an order otherwise than as provided for by UCPR, r 42.14. The matters relied upon by the respondent were as follows: 1. The offer was made less than 48 hours before the appeal was listed for hearing; 2. The respondent had the benefit of a first instance decision in its favour; 3. There was no new evidence capable of affecting the assessment of liability; 4. The appellant did not provide the respondent with an assessment of the damages he contended he would receive; 5. The appellant did not provide an estimate of costs incurred by prosecuting the claim up to that date. 1. As to the submission on timing, it should be noted that the rule itself countenances the making of "late" offers: UCPR, r 42.14(2)(b)(ii). This does not mean that the time at which an offer is made cannot be taken into account in determining whether an order different from that specified in r 42.14 should be made. However, when a party resists the operation of UCPR, r 42.14 or UCPR, r 42.15, the onus is on the offeree to demonstrate why the Court should "order otherwise". The respondent did not adduce evidence or otherwise submit that the time allowed for consideration was unreasonable in the circumstances or that it was not reasonably possible for it to give proper consideration to the offer in that period of time. 2. The respondent next submitted that it had the benefit of the first instance decision in its favour and the nature of the appeal proceedings was such that there was no new evidence that was capable of affecting the determination of liability. It is not evident from the respondent's submission why these factors, in this case would cause the Court to order otherwise than under UCPR, r 42.14. The very point of an appeal is to challenge the order or judgment made by the court below. 3. The matter in issue on the appeal was liability. The appeal was by way of rehearing: s 75A. There was no application to adduce further evidence. Accordingly, the Court was required to determine, on the evidence in the court below, whether the respondent negligently caused the harm suffered by the appellant as a result of Ms Paterson's accident. Given that the respondent accepts that the offers proposed a genuine compromise of the proceedings, the mere fact that the first instance decision was in its favour and there was no new evidence is insufficient in this case to persuade the Court to order otherwise that in accordance with UCPR, r 42.14. 4. The failure of the appellant to provide an assessment of damages or a breakdown of costs is also not sufficient to cause the Court to make an order otherwise than that for which UCPR, r 42.14 provides. There is nothing in a rules offer which requires such assessments to be provided. (To identify the amount of such costs would have required care to avoid contravening r 20.26(2)(c).) The respondent's submissions on these matters appear to have been directed to the position had the offer been a Calderbank offer engaging the court's discretion under the Civil Procedure Act, s 98. It is not necessary to consider the relevance of such matters with respect to a Calderbank offer. 5. We therefore see no reason in the circumstances why the appellant should not have the benefit of the rule. 6. Accordingly, the Court makes the following orders in each of CA 2012/241825 and CA 2012/241832: 1. Amend order 4 made by the Court in the appeal proceedings so as to delete therefrom the words "and of the appeal". 2. Order that the respondent pay the appellant's costs of the appeal assessed on the ordinary basis up to 24 September 2013 and on and from that date on an indemnity basis. 3. Otherwise dismiss the notice of motion with no order as to 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. Decision last updated: 16 March 2015