Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 Hearing dates: On the papers Decision date: 07 September 2015 Before: Gleeson JA; Tobias AJA Decision: (1) The applicant's amended notice of motion filed 18 May 2015 be dismissed. (2) Applicant to pay the respondent's costs of the motion. Catchwords: COSTS – indemnity costs – at first instance – Calderbank offers – whether genuine – reasonableness of rejection – first Calderbank offer open for 2 days – second Calderbank offer inclusive of costs – offer of compromise – compliance with UCPR – whether covering letter inconsistent with UCPR – appeal costs – whether offers at first instance may be relied on in relation to indemnity costs on appeal COSTS – interest on costs – whether interest to be awarded on costs as paid by successful appellant – appellant succeeded on single issue of causation of injury – no identification of costs relating to causation issue – appeal costs incurred relatively recently – no order as to interest on costs Legislation Cited: Civil Procedure Act 2005 (NSW) s 101(4) Legal Profession Act 2004 (NSW) s 368(5) Legal Profession Uniform Law Application Act 2014 (NSW) s 70(5) Supreme Court Act 1970 (NSW) s 45AA Uniform Civil Procedure Rules 2005 (NSW) rr 20.26, 42.7, 42.13A, 42.14, 42.15, 42.15A, 51.47, 51.48, 51.49 Cases Cited: Ambulance Service of New South Wales v Worley (No 2) [2006] NSWCA 236; 67 NSWLR 719 AV8 Air Charter Pty Ltd v Sydney Helicopters Pty Ltd (No 2) [2014] NSWCA 238 Barakat v Bazdarova [2012] NSWCA 140 Brymount Pty Ltd v Cummins (No 2) [2005] NSWCA 69 Calderbank v Calderbank [1975] 3 WLR 586; [1976] Fam 93 Cheng v Geussens (No 2) [2014] NSWCA 254 Commissioner of Taxation v Moodie [2014] NSWCA 59; 308 ALR 571 Curtis v Harden Shire Council (No 2) [2015] NSWCA 45 Davis v Swift (No 2) [2015] NSWCA 137 Donnelly v Edelstein (1994) 49 FCR 389 Drummond and Rosen Pty Ltd v Easey (No 2) [2009] NSWCA 331 DSG Holdings Australia Pty Ltd v Helenic Pty Ltd (No 2) [2014] NSWCA 142 Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 Grace v Thomas Street Café Pty Ltd (No 2) [2008] NSWCA 72 Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; 13 VR 435 Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd (No 2) [2013] NSWCA 211; 84 NSWLR 436 Jojeni Investments Pty Ltd v Mosman Municipal Council (No 2) [2015] NSWCA 208 Jones v Bradley (No 2) [2003] NSWCA 258 Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 Leichhardt Municipal Council v Green [2004] NSWCA 341 Macquarie Radio Network Pty Ltd v Arthur Dent (No 2) [2007] NSWCA 339 Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 Old v McInnes and Hodgkinson [2011] NSWCA 410 Perisher Blue Pty Ltd v Nair-Smith [2015] NSWCA 90 Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) [2004] FCA 1437; 212 ALR 281 Porter-Coote v DHSH (Aust) Travel Pty Ltd [2009] NSWSC 1094 Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170 South Eastern Sydney Area Health Service Ltd v King [2006] NSWCA 2 Spedding v Nobles [No 2] [2007] NSWCA 87 The Uniting Church in Australia Property Trust (NSW) v Takacs (No 2) [2008] NSWCA 172 Vale v Eggins (No 2) [2007] NSWCA 12 Whitney v Dream Developments Pty Ltd [2013] NSWCA 188; 84 NSWLR 311 Category: Costs Parties: Perisher Blue Pty Ltd (Applicant) Ghita Nair-Smith (Respondent) Representation: Counsel: J E Sexton SC and R E Montgomery (Applicant) B M Toomey QC and G J Smith (Respondent) Solicitors: HBA Legal (Applicant) Lough & Wells Lawyers (Respondent) File Number(s): 2013/381571 Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Common Law Division Citation: [2013] NSWSC 727 [2013] NSWSC 1463 [2013] NSWSC 1736 Date of Decision: 7 June 2013 4 October 2013 27 November 2013 Before: Beech-Jones J File Number(s): 2006/294818 [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 Court delivered judgment in this matter on 9 April 2015: Perisher Blue Pty Ltd v Nair-Smith [2015] NSWCA 90 (the principal reasons). 2. The appeal by Perisher Blue Pty Ltd (Perisher) against the primary judge's order that it pay $1,368,700 to Dr Nair-Smith was allowed. The Court did not disturb the primary judge's costs orders dealing with specific matters (orders 2, 3, 4 and 5) but ordered that otherwise the plaintiff (Dr Nair-Smith) pay Perisher's costs of the proceedings on the ordinary basis. With respect to the appeal, the Court ordered Dr Nair-Smith to pay one half of Perisher's costs of the appeal. 3. On 23 April 2015 Perisher filed a notice of motion seeking variations to the costs orders made on 9 April 2015. An amended notice of motion was filed, by consent, on 18 May 2015. The issues raised by Perisher's application are whether: 1. Perisher's costs of the trial should be assessed on an indemnity basis from either 16 October 2006 or 13 July 2012. With respect to the earlier date, Perisher relies upon a Calderbank offer. With respect to the latter date, Perisher relies upon both an offer of compromise purporting to be under the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), and a further Calderbank offer; 2. the costs of the appeal (awarded in favour of Perisher as to 50%) be assessed on an indemnity basis based on the same offers; and 3. Dr Nair-Smith should pay interest on the recoverable amounts expended by Perisher on legal costs and disbursements, both at first instance and on appeal, from the date of such expenditure. 1. The Court has now received written submissions together with supporting affidavits and the parties have agreed that the matter be dealt with by the Court on the papers. Although there was no objection to any part of the affidavits filed by the parties' respective solicitors, some of that evidence was in the form of submissions and is to be treated as such. 2. Perisher did not make any written submissions in support of paragraph 1(b) of the amended notice of motion. This sought indemnity costs in respect of the obtaining of certain reports from Mr Needham, an expert, called in Perisher's case. Accordingly this relief may be put aside. 3. Since the hearing of the appeal, Barrett JA has retired from the Court. The parties have consented to the amended notice of motion being dealt with by the remaining members of the Court pursuant to s 45AA(1) of the Supreme Court Act 1970 (NSW). Chronology 1. An understanding of the background to the current application is assisted by a brief chronology of the main events giving rise to the application. Date Description 18 July 2003 Dr Nair-Smith suffers skiing accident at Perisher Blue Resort. 17 July 2006 Dr Nair-Smith files statement of claim in the District Court. 26 September 2006 Pre-trial conference. Directions given for Perisher to request particulars by 11 October 2006; Dr Nair-Smith to answer particulars and to serve medical reports by 8 November 2006; Perisher to serve medical reports by 13 November 2006 and expert reports by 13 December 2006; and the proceedings were fixed for a status conference on 28 February 2007. 16 October 2006 Calderbank-styled offer from Perisher's solicitors to Dr Nair-Smith's solicitors. 6 February 2009 Toner DCJ vacates the hearing fixed to commence on 2 February 2009 for 6 days with costs reserved. 16 July 2010 Hall J orders that the proceedings be transferred out of the District Court and into the Supreme Court. 13 July 2012 Purported offer of compromise and covering letter from Perisher's solicitors to Dr Nair-Smith's solicitors. Calderbank-styled offer from the Perisher's solicitors to Dr Nair-Smith's solicitors. 27 August 2012 Hearing commences before Beech-Jones J. 27 November 2013 Beech-Jones J orders judgment for Dr Nair-Smith in the sum of $1,368,700: Nair-Smith v Perisher Blue Pty Ltd (No 3) [2013] NSWSC 1736. 9 April 2015 Court of Appeal sets aside the judgment at trial and orders a verdict for Perisher against Dr Nair-Smith with costs. Costs at first instance 1. Perisher's application for a special costs order at first instance relies upon three offers of settlement: 1. a Calderbank-styled offer dated 16 October 2006; 2. an offer of compromise purportedly made under the UCPR dated 13 July 2012; and 3. a Calderbank-styled offer dated 13 July 2012. (1) Calderbank offer dated 16 October 2006 1. The terms of this offer by Perisher was to settle the proceedings with a verdict for Perisher and no order as to costs. The letter of offer expressly referred to Calderbank v Calderbank [1975] 3 WLR 586; [1976] Fam 93. The offer was open for acceptance until 5.00pm on 18 October 2006, that is, for two days. The letter did not address Perisher's defence nor sought to explain why the offer was reasonable. The letter advised that Perisher's costs were, at that stage, approximately $7,000 and that the author anticipated that Perisher would incur further costs up to and including the 2-3 day hearing in the order of $35,000 to $40,000. 2. The letter was forwarded to the solicitors for Dr Nair-Smith via the document exchange service. Mr Wells, Dr Nair-Smith's solicitor, deposed that he could not have received the letter before 17 October 2006. He said that, in the ordinary course, mail is opened in his office at approximately 9.00am each day, and he estimated that, at most, he had 32 hours in which to obtain instructions and respond. He stated that he was not able to obtain instructions from Dr Nair-Smith during that time. 3. At the time this offer was made, the proceedings had been on foot for just under three months, having been commenced on 17 July 2006, and while particulars of injury had been provided, it does not seem that any particulars of damage had been provided at that time. No hearing date had been set and the matter was next listed for a status conference before the District Court on 28 February 2007. Submissions 1. Dr Nair-Smith contended that the offer was not open for a reasonable period of time; nor did it involve a genuine compromise on the part of Perisher. Accordingly, it was said that it was not unreasonable for Dr Nair-Smith not to accept it. 2. Perisher sought to justify the very short time permitted for acceptance of the offer by pointing to a timetable for interlocutory steps that had been ordered on 26 September 2006. This required Perisher to obtain medical assessments and serve medical reports by 13 November 2006 and engage a liability expert and serve the expert's report by 13 December 2006. Consideration 1. There is no presumption that an offeree who does not accept an informal offer and does not obtain a judgment more favourable than the offer, will necessarily pay indemnity costs from the date of the offer: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19] (Santow JA, Stein AJA agreeing); Jones v Bradley (No 2) [2003] NSWCA 258 at [6]-[9]; Ambulance Service of New South Wales v Worley (No 2) [2006] NSWCA 236; 67 NSWLR 719 at [18] and Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 (Miwa) at [8]. 2. The parties' submissions addressed two questions, namely, whether – (a) there was a genuine offer of compromise; and (b) it was unreasonable for Dr Nair-Smith not to accept it. It is convenient first to address the second question. Unreasonable refusal 1. It has been said an assessment of the reasonableness of a party's conduct in not accepting an offer must be made on a summary basis: Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 (Elite v Salmon) at [148] (Basten JA). The factors relevant to the question whether a rejection of an offer is unreasonable include whether the offeree had an adequate opportunity to enable it to consider and deal with the offer: Elite v Salmon at [99] (McColl JA) citing Donnelly v Edelstein (1994) 49 FCR 389 at 396. 2. In the present case, the time allowed for acceptance of the offer was unreasonable in all the circumstances. As a practical matter the time allowed was only a little over one day. It was not reasonable to expect Dr Nair-Smith to respond within the very short time permitted, there being no imminent hearing: Elite v Salmon at [117] (McColl JA) and [149] (Basten JA). Further, as the offer was made at an early stage of the proceedings and before the expert evidence had been filed and served, a longer time period would have been required for Dr Nair-Smith to assess the strength or otherwise of her case: see Brymount Pty Ltd v Cummins (No 2) [2005] NSWCA 69 at [29]; Elite v Salmon at [146]-[147] (Basten JA). 3. In addition, Perisher has not demonstrated that Dr Nair-Smith had adequate information to enable her to consider the offer at the time it was made. Not only had Perisher not served its expert evidence, no attempt was made in its solicitor's letter to explain why Perisher's "walk away" offer was reasonable having regard to the strengths and weaknesses of each party's case: see, for example, Vale v Eggins (No 2) [2007] NSWCA 12 at [22] (Beazley JA as her Honour then was; McColl JA agreeing). 4. Accordingly, it was not unreasonable for Dr Nair-Smith not to accept the offer, and no costs consequences should flow from that non-acceptance. 5. If it were necessary to decide, we would conclude that Perisher's offer to forego $7000 in costs did not represent any genuine attempt at compromise. The offer was an invitation to surrender, rather than any form of commercial compromise. 6. Although Dr Nair-Smith's damages claim had not been quantified at the time of the offer, Perisher should be taken to have anticipated a claim for a substantial sum taking into account the nature of Dr Nair-Smith's injuries as particularised and the likely effect on her earning capacity as a medical practitioner. Her case against Perisher on the issue of liability could not be said to be untenable. Nor could it be said that it was not reasonably arguable. The primary judge found in her favour and it was obvious that if she succeeded on liability that damages would be substantial as proved to be the case. The waiver of a modest amount of costs incurred by Perisher, in the circumstances of an arguable case, was not a substantial offer. Nor in the circumstances did the offer represent a genuine attempt to reach a negotiated settlement rather than merely to trigger a costs sanction: Leichhardt Municipal Council v Green at [39] (Santow JA); The Uniting Church in Australia Property Trust (NSW) v Takacs (No 2) [2008] NSWCA 172 (Takacs) at [14] (Hodgson JA). (2) Offer of compromise dated 13 July 2012 1. The issue raised by the offer dated 13 July 2012 is whether it failed to comply with the relevant rule at the time which mandated that an offer of compromise had to be "exclusive of costs": Old v McInnes and Hodgkinson [2011] NSWCA 410; Whitney v Dream Developments Pty Ltd [2013] NSWCA 188; 84 NSWLR 311 (Whitney). 2. The offer of compromise was in the following terms: The defendant offers to compromise the plaintiff's action in the following manner: 1. Verdict and judgment for the plaintiff in the sum of $150,000.00; 2. This offer shall be open until 5pm on 10 August 2012; and 3. This offer is made in accordance with rules 20.26 and 42.13A of the Uniform Civil Procedure Rules. 1. The letter from Perisher's solicitors, accompanying the offer of compromise, relevantly stated as follows: Insofar as acceptance of the offer by the plaintiff carries certain attend [sic] cost outcomes under the UCPR, we make the following observations: i) Any assessment of costs payable to the plaintiff following the event of settlement will necessarily be subject to existing costs orders in the proceedings; ii) Assessment of costs payable to the plaintiff will relevantly involve concurrent assessment of prior costs orders, adverse to the plaintiff, made in favour of the defendant; and iii) All "reserved" costs orders which presently remain at large and in particular, costs incurred and otherwise thrown away on the vacated hearing in February 2009, will require determination in any event. This will no doubt require the matter to be re-listed before the Court for argument. The enclosed Offer of Compromise is served on the above basis and does not otherwise convey an offer to settle the proceedings. [Emphasis added.] 1. The reference in the letter from Perisher's solicitors to "reserved" costs orders was a reference to the costs of various directions hearings and notices of motions which had been reserved in the District Court, as well as the costs of the vacation of the hearing fixed to commence in the District Court on 2 February 2009 which were reserved on 6 February 2009. 2. At the time the offer of compromise was made, UCPR r 20.26, which was contained in Division 4 of Pt 20, relevantly provided: (2) An offer must be exclusive of costs, except where it states that it is a verdict for the defendant and that the parties are to bear their own costs. … (12) A notice of offer that purports to exclude, modify or restrict the operation of rule 42.14 or 42.15 is of no effect for the purposes of this Division. 1. In considering this rule it is also necessary to have regard to rr 42.13A, 42.15 and 42.15A. At the relevant times these rules provided: 42.13A Where offer accepted (1) This rule applies if the offer concerned: (a) is made by the plaintiff and accepted by the defendant, or (b) is made by the defendant and accepted by the plaintiff. (2) The plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim, assessed on the ordinary basis up to the time when the offer was made, unless: (a) the offer states that it is a verdict for the defendant and the parties are to bear their own costs, or (b) the court orders otherwise. …. 42.15 Where offer not accepted and judgment as or less favourable to plaintiff (1) This rule applies if the offer concerned is made by the defendant, but not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim concerned as favourable to the plaintiff, or less favourable to the plaintiff, than the terms of the offer. (2) Unless the court orders otherwise: (a) the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made. … 42.15A Where offer not accepted and judgment as or more favourable to the defendant (1) This rule applies if the offer concerned is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim concerned as favourable to the defendant, or more favourable to the defendant, than the terms of the offer. (2) Unless the court orders otherwise: (a) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made. 1. In relation to rr 42.14, 42.15 and 42.15A, the onus lies on the party seeking to displace the presumptive rule: Curtis v Harden Shire Council (No 2) [2015] NSWCA 45 at [27] (rr 42.14, 42.15) ; Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [45] (r 42.15A). The same view should be taken in relation to the question of onus in r 42.13A. 2. It is also necessary to refer to the costs rules with respect to reserved costs. At the relevant time, r 42.7 provided: (1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including: (a) costs that are reserved, and (b) costs in respect of any such application or step in respect of which no order as to costs is made, are to be paid and otherwise dealt with in the same way as the general costs of the proceedings. (2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings. 1. In Whitney, Bathurst CJ observed (at [24]) that the use of a phrase "exclusive of costs" in r 20.26(2), suggests that what is intended is that a compliant offer will not deal with costs at all. The Chief Justice noted (at [25]) that an offer providing for payment of costs removes the residual discretion of the Court to make a contrary order, relevantly in that case under r 42.13A. Such an offer was inconsistent with the scheme for making offers of compromise laid down by the rules in force at the relevant time. The Chief Justice concluded that an offer containing a term that the offeree pay the costs of the offeror takes away that right which was part of the scheme of the rules at the time. 2. Barrett JA explained the operation of the rules in force at that time in Whitney at [52] as follows: The requirement in r 20.26 that an offer be 'exclusive of costs' dictates that essential characteristic. In providing that an offer must be 'exclusive of costs', r 20.26 requires that the offer not attempt to deal with the matter of costs at all (that is, it must say nothing about the matter) and, in that way, leave the Division 3 rules to operate untrammelled by any apparent contractual qualification, supplement or contradiction. 1. One further matter should be mentioned at this point. There is a conflict in decisions in this Court to the approach to be taken when exercising the discretion to make an "otherwise" order under Division 3 of Pt 42 UCPR. In outline the differing approaches are whether it is necessary to show "exceptional circumstances" for making an "otherwise" order, or whether the discretion is to be exercised having regard to all the circumstances of the case. 2. The former approach finds support in Porter-Coote v DHSH (Aust) Travel Pty Ltd [2009] NSWSC 1094 at [5] (Gzell J), specifically dealing with r 42.13A. Gzell J applied by analogy, the approach to an "order otherwise" under r 42.14 in Macquarie Radio Network Pty Ltd v Arthur Dent (No 2) [2007] NSWCA 339, where Beazley JA (as her Honour then was) at [15] held that the Court would only deviate from the general rule provided for in r 42.14 and make a different order if the Court found exceptional circumstances for doing so. See also South Eastern Sydney Area Health Service Ltd v King [2006] NSWCA 2 at [83] (Hunt AJA; Mason P and McColl JA agreeing). 3. The latter approach is reflected in Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 (Regency Media) at [15], where this Court (Spigelman CJ, Beazley and McColl JJA), said in relation to rr 42.14, 42.15 and 42.15A, each of which was expressed to be "unless the court orders otherwise" (emphasis added): The relevant provisions of these rules do not specify that exceptional circumstances or the avoidance of substantial injustice must be established before the court will make a different order to the prima facie order for which the rules provide and, in our opinion, the rule should not be so construed. Rather, the discretion is one that has to be exercised having regard to all the circumstances of the case. 1. In Barakat v Bazdarova [2012] NSWCA 140 at [42]-[50], Tobias AJA (Bathurst CJ and Whealy JA agreeing) reviewed the authorities in the context of an "order otherwise" for the purposes of r 42.14(2), but found it unnecessary to determine which line of authority to follow. McColl JA referred to the conflict in decisions in this Court in Commissioner of Taxation v Moodie [2014] NSWCA 59; 308 ALR 571 McColl JA at [64]. In Jojeni Investments Pty Ltd v Mosman Municipal Council (No 2) [2015] NSWCA 208 at [18], the issue was noted but did not need to be resolved. 2. It may be observed that, in practice, the difference in view may be more a matter of semantics, particularly if the reference to "exceptional circumstances" is understood as explaining the operation of the relevant rule rather than impermissibly attempting to place a fetter on the exercise of the Court's discretion: see the observations of McColl JA (Gleeson JA and Sackville AJA agreeing) in Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) at [46]-[47], where reference is made to the view of Hely J in relation to the like power to "order otherwise" in O 23, r 11(4) of the Federal Court Rules 1979 (Cth) (as then in force). 3. Hely J considered that the use of language such as "compelling and exceptional circumstances" with respect to the discretion to make an "otherwise" order, merely "convey[s] that the prima facie position should only be departed from for proper reasons which, in general, only arise in an exceptional case": Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) [2004] FCA 1437; 212 ALR 281 at [17]. 4. As will appear below, it is unnecessary here to determine which line of authority to follow here. Submissions 1. Dr Nair-Smith submits that Perisher's offer of compromise did not comply with r 20.26(2) as in force at the time the offer was made, because when read together with the accompanying covering letter, the offer impermissibly made reference to costs. It was emphasised that the covering letter specifically stated that the offer was only made with the qualifications referred to in the letter. It was said that it was implicit in the covering letter that Perisher was offering to pay Dr Nair-Smith's costs, other than the adverse and reserved costs orders. 2. Perisher did not dispute that the offer of compromise should be read together with the covering letter. It submitted that the "observations" in the covering letter did not qualify the offer of compromise, but rather clarified that the offer was exclusive of costs in accordance with r 20.26(2). 3. Perisher did not seek to rely upon the offer of compromise as a Calderbank offer, should it be found to be a non-complying offer in accordance with the rules operative at the time. Consideration 1. The question is whether any of the "observations" in the covering letter operate inconsistently with the cost consequences specified in the UCPR at the time for the acceptance of an offer of compromise. 2. As to observations (i) and (ii), we do not consider that they made the offer of compromise a non-complying offer. As to observation (i), the point of distinction between the present case and Whitney, is that in Whitney the costs were required to be paid by the offeree, which was inconsistent with the court's residual discretion to order "otherwise", whereas in the present case the observation merely recognised the operation of the presumptive rule that if the offer was accepted the offeror would pay the offeree's costs as provided in r 42.13A. As to observation (ii), the mere reference to the assessment of costs payable under the existing costs orders in Perisher's favour did not mean that Perisher's offer dealt with costs contrary to r 20.26(2). Perisher was only drawing attention to its intention to require those prior costs orders to be assessed concurrently with the costs which would be payable to Dr Nair-Smith by operation of the presumptive rule should she accept the offer of compromise. 3. The position however is different with respect to observation (iii) (set out at [24] above). 4. The qualification expressed in that observation made clear that the offer of compromise was served subject to the inclusion of the words "all reserved costs … will require determination in any event". Contrary to Perisher's submissions, this requirement did more than merely reserve Perisher's right to apply for an "otherwise" order under r 42.13A(2)(b). 5. If the offer had been accepted by Dr Nair-Smith, the relevant presumptive rule was that Perisher must pay her costs as plaintiff, up to the date of the offer: r 42.13A(2). Those costs would have included all reserved costs, since the combined effect of rr 42.13A and 42.7 is that reserved costs are to be paid in the same way as the general costs of the proceedings, unless the court orders otherwise under r 42.13A. If the offer had been accepted, Perisher would have the onus to displace the presumptive rule. The offer by Perisher sought to vary r 42.13A by requiring the "reserved costs" to be determined "in any event", rather than Perisher having to displace the presumptive rule in respect of paying Dr Nair-Smith's costs of the proceedings generally including the reserved costs. The observation in question was thus inconsistent with the presumptive rule by failing to acknowledge that fact. 6. Even if exceptional circumstances are not required to displace the presumptive rule in r 42.13A, by attempting to impose the third requirement, Perisher was seeking to avoid the burden of establishing that having regard to all the circumstances an "otherwise" order should be made under r 42.13A(2)(b) by requiring Dr Nair-Smith to agree that the reserved costs would be determined "in any event"; in other words, that they were at large, which was not the case. 7. Accordingly, in our view, the 13 July 2012 offer did not comply with the rules. (3) Calderbank offer dated 13 July 2012 1. By a letter dated 13 July 2012, Perisher offered to settle the proceedings on the following bases: 1. verdict and judgment for the plaintiff in the sum of $150,000; 2. the defendant to pay the plaintiff's costs in the sum of $150,000; 3. the defendant agrees to waive all costs orders previously made in its favour against the plaintiff in the course of these proceedings. The defendant estimates the quantum of these costs orders to be in excess of $120,000; and 4. the defendant agrees to waive any entitlement to and will bring no Application for costs incurred or otherwise thrown away in connection with the vacated hearing in February 2009. The defendant estimates the value of costs incurred or otherwise thrown away in consequence of the vacated hearing at more than $100,000, inclusive of disbursements. 1. The offer was expressed to be open for acceptance by Dr Nair-Smith for a period of 14 days and to expire at the close of business on Friday 27 July 2012. At the time of the offer, the matter was listed for trial commencing on 27 August 2012. The letter was expressed to be made pursuant to the principles of Calderbank v Calderbank. 2. The letter addressed, briefly, Perisher's defence and stated that Dr Nair-Smith was at risk on the question of Perisher's breach of duty. The letter asserted that the overwhelming weight of expert evidence, as confirmed in the draft joint experts' report on liability, was either that Perisher's conduct was both reasonable and in accordance with accepted industry standards, both in Australia and internationally, or that the mechanism of injury described by Dr Nair-Smith could not have occurred as alleged. 3. The letter also asserted that Perisher had reasonable prospects of success on the Civil Liability Act 2002 (NSW) and its contractual defences, and even if Dr Nair-Smith succeeded on liability, that she was likely to be found contributory negligent to a significant degree. This was because loading upon the chair was said to be an exercise in the performance of which ultimately Dr Nair-Smith was mostly responsible. Reference was also made to the divergent evidence on quantum. 4. Mr Wells, the solicitor for Dr Nair-Smith, deposed that at the time of the offer Dr Nair-Smith had incurred costs and disbursements in excess of $750,000. Mr Wells also disputed the estimates given in the offer of the value of Perisher's offer to waive costs orders in its favour, said to be in excess of $120,000, and the value of reserved costs of the February 2009 hearing which had been vacated, said to be more than $100,000 including disbursements. Submissions 1. Perisher contended the estimated commercial value of the offer was $520,000 to the benefit of Dr Nair-Smith. Perisher arrived at this figure by adding together the amount offered, being the judgment sum of $150,000 plus $150,000 in costs, together with the estimated value of the existing costs orders in Perisher's favour ($120,000) and the reserved costs in connection with the vacated hearing in February 2009 ($100,000), both of which Perisher offered to forego. Perisher emphasised that the amount offered was a substantially better result than that ultimately achieved by Dr Nair-Smith following the judgment of this Court. 2. Dr Nair-Smith contended that Perisher's offer did not contain a true element of compromise and that it was not unreasonable for her not to accept that offer. She pointed to her costs at the time of the offer being in excess of $750,000. These costs were greater than both the total amount offered of $300,000 and the estimated value of costs which Perisher was prepared to forego, being an additional $220,000. Consideration Genuine offer of compromise 1. As Basten JA explained in Miwa (at [9]), to characterise an offer by reference to epithets such as "real" or "genuine" adds little to the requirement of compromise, and may imply (wrongly) that the appropriate inquiry is as to the subjective intentions of the offeror. Likewise in the present case, the reference by Dr Nair-Smith to epithets such as "true" adds little to the requirement of compromise. 2. Compromise involves a party giving something away: Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 at 368; Miwa at [9]. Here, at the time the offer was made, it may be inferred that Dr Nair-Smith's damages claim would have been in the order of $1 million. This inference is open from Dr Nair-Smith's schedule of damages of $1,030,790.90 served in August 2012, shortly after the offer was made (Black 691-693). The offer by Perisher involved paying an amount of $300,000 to Dr Nair-Smith and waiving Perisher's entitlement under costs orders in its favour, and its potential entitlements under the reserved costs orders, including that relating to the vacated hearing on 2 February 2009. 3. It is unnecessary to resolve the conflict between the parties solicitors' estimates of the value of the existing costs orders and the reserved costs. This is because the offer is to be assessed objectively by reference to the information available to the parties at the time of the offer, not by later re-estimation: Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170 at [17]. 4. In our view, the offer by Perisher involved the requirement of compromise. The offer involved payment of a substantial sum totalling $300,000 and Perisher waiving the value of the existing costs orders in its favour and the potential value of the reserved costs. When taken together, the offer involved Perisher giving up a substantial amount. Unreasonable refusal 1. Considerations relevant to the determination of an unreasonable refusal are identified in Miwa (at [12]), based on Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; 13 VR 435 at [25], and include: (a) the stage of the proceeding at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree's prospects of success, assessed as at the date of the offer; (e) the clarity with which the terms of the offer were expressed; (f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it. 1. It has been said that it is not necessary that an offer set out with specificity the bases upon which it is said that the offeree should accept the compromise proffered: Miwa at [13]. The relevance of such material will depend upon the extent to which the issues had already been canvassed by way of pre-trial exchange of witness statements and experts' reports, and whether there were circumstances with which the offeror might reasonably expect the offeree not to be conversant. 2. Dr Nair-Smith emphasised that the offer made no mention of her injuries not being causally connected to any breach of duty by Perisher, being the matter on which she ultimately failed in this Court. So much may be accepted, although as Perisher points out, the offer did advert to the expert evidence relevant to the question of Perisher's breach of duty. The offer also drew attention to Perisher's case that "the mechanism of injury described by the plaintiff could not have occurred as alleged". We do not consider that Dr Nair-Smith can point to any informational deficiency as justifying her refusal of the offer as being reasonable. 3. The offer relied on was made approximately six weeks before the trial. It may be inferred from the reference in the letter to the large number of lay and expert witnesses expected to be called at the hearing, that both parties by that stage were fully conversant with the merits and weaknesses of their positions. Although there was a major factual issue in dispute concerning how the accident occurred, the period of 14 days for consideration of the offer was not, in the circumstances, unreasonable. The offer foreshadowed an application for indemnity costs in the event of Dr Nair-Smith rejecting it. 4. The terms of the offer were clear and, insofar as the offer included Perisher foregoing existing costs orders and the reserved costs, it contained sufficient information in the form of an assessment by Perisher's solicitor of a value of the costs offered to be foregone. In a related context of offers inclusive of costs, Basten JA observed in Elite v Salmon at [143]: If a party in receipt of an offer wishes to know how far the sum offered will go in meeting its costs up to that time, all it has to do is ask its lawyers. In an age where lawyers are required to provide advance estimates of their fees and in circumstances where commercial services are billed on a monthly basis, it is unrealistic to suggest that the recipient of an inclusive offer will be confused or otherwise unable to assess the financial risk of proceeding with litigation. In any event, the offeree is likely to be liable for legal fees exceeding the costs recoverable from the other party. Most litigants, in considering offers, will want to know from their own lawyers, how much they will receive in the hand. Of course, if the offer is not left open for a reasonable time, that might itself make non-acceptance a reasonable course. However, an offeree which is genuinely seeking to assess its position, might be advised to seek more time, if it thinks that is reasonably required. 1. Of course, regard may also be had to the offeree's own cost position as at the date the offer inclusive of costs was received. 2. In all the circumstances, we are not persuaded that Dr Nair-Smith's failure to accept the offer was unreasonable. First, given Dr Nair-Smith's own costs at the time were in the order of $750,000, the offer involved capitulation by Dr Nair-Smith in relation to her claim which may be taken to be in the order of at least $1 million. Even if those costs were discounted by the estimated $220,000 referable to the estimated value of the costs orders in favour of Perisher and the reserved costs, the net position was that Dr Nair-Smith's costs were $530,000 compared to the asserted commercial value of the offer on its face of $520,000. Taking into account the net costs position, the offer, in effect, paid no regard to the substantial damages claim. 3. Secondly, Dr Nair-Smith's ultimate failure in this Court did not demonstrate that her prospects of success, viewed objectively at the date of the offer, were other than reasonable. As already indicated, her case was far from hopeless. The primary judge found in her favour. Dr Nair-Smith only failed in this Court on the issue of whether there was a sufficient causal connection between Perisher's breach of duty and her injury suffered. Moreover, Perisher's letter acknowledged the possibility that it might be found liable to Dr Nair-Smith, when it referred to its assessment of the likely reduction in any damages due to her contributory negligence. 4. In our view, the order for payment of Perisher's costs below (on the ordinary basis) should stand. Costs in this Court 1. No offer of compromise was made in this Court by Perisher pursuant to rr 51.47 and 51.48 of the UCPR. Nonetheless, Perisher pointed to r 51.49 which permits this Court to have regard to any offer of compromise made in the Court below. 2. It has been said that r 51.49 operates to inform the discretion which must be exercised pursuant to r 51.48, insofar as it picks up and applies in this Court Division 3 of Pt 42 of the UCPR: Regency Media at [38]. This might be thought to limit r 51.49 to offers of compromise under the rules. However, authority suggests that the operation of r 51.49 is not so limited. In Davis v Swift (No 2) [2015] NSWCA 137, Meagher JA (Leeming JA and Adamson J agreeing) said at [25]: It may be accepted, as UCPR r 51.49 confirms, that the existence of a pre-trial offer can be taken into account in the exercise of the discretion under s 98 of the CPA to award costs in an appeal. See Grace v Thomas Street Café Pty Ltd (No 2) [2008] NSWCA 72 at [33]; Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [39]. However, as was observed in Bathurst Regional Council as Trustee for the Bathurst City Council Crown Reserves Reserve Trusts v Thompson (No 2) [2012] NSWCA 420 at [16], "the usual position is that the appeal costs should primarily be determined by the issues in and the outcome of the appeal proceedings themselves". 1. This view of r 51.49 accords with the approach taken in earlier authorities: Cheng v Geussens (No 2) [2014] NSWCA 254 at [29] (Ward JA; Basten and Barrett JJA agreeing); AV8 Air Charter Pty Ltd v Sydney Helicopters Pty Ltd (No 2) [2014] NSWCA 238 at [26] (Hoeben JA; Barrett and Ward JJA agreeing). 2. Generally, if a pre-trial offer is not renewed (either in the same or different terms) prior to the appeal, the Court will not make a special costs order in respect of the appeal: Grace v Thomas Street Café Pty Ltd (No 2) [2008] NSWCA 72 at [33]. 3. In this case no further offer was made following the decision at first instance. For the reasons already given, no reliance can be placed by Perisher on either the earlier Calderbank offer dated 16 October 2006, or the purported offer of compromise dated 13 July 2012. The focus must be on the Calderbank offer of 13 July 2012. 4. In Miwa at [22], Basten JA gave three reasons why an informal offer made prior to the judgment under appeal, and reasonably rejected by the successful party at first instance, might not be successfully relied upon by the offeror in respect of the cost of its successful appeal to obtain indemnity costs: First, where the offer has expired and not been renewed, the offeree is entitled to say that its success at trial would be a significant event, rendering reasonable the hypothetical rejection of a renewed offer. Secondly, the failure of the offeror to renew the offer prevents that possibility being tested. Thirdly, the offer in the court below to settle "the proceedings" may reasonably be treated as referring to the proceedings then on foot, and not to the possibility of an appeal. 1. The reasoning in Miwa is applicable to Perisher's Calderbank offer of 13 July 2012. First, the parties on appeal are in a different position from that which they were in prior to or at the trial. Dr Nair-Smith was successful at first instance. It was reasonable for her to support the reasoning of the primary judge: Takacs at [16]; Regency Media at [42]. 2. Secondly, Perisher did not renew the offer. 3. Thirdly, the offer at first instance was to settle "the plaintiff's action", being a reference to the first instance proceedings then on foot. The offer is not to be regarded as an offer to settle the subsequent appeal filed by Perisher. 4. Fourthly, Perisher relied upon 41 grounds of appeal (which this Court grouped into 10 issues), but only succeeded on the issue of causation. It has not been shown that it was unreasonable for Dr Nair-Smith to defend the appeal having obtained judgment in her favour at first instance. 5. In our view, it is not appropriate to vary the costs order of 9 April 2015. Interest on costs paid 1. The award of interest on costs is discretionary: Civil Procedure Act 2005 (NSW), s 101(4). No issue was raised in written submissions as to the principles to be applied. It is sufficient to note that the payment of interest is intended to be compensatory, on the basis that the person entitled to costs has been wrongly required to spend money on litigation to enforce established rights: Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) at [44] (Basten JA; Campbell JA agreeing). 2. Perisher's solicitor deposed that Perisher had paid its legal costs to defend the matter as and when regularly billed during the course of litigation from July 2006 onwards. No complaint was made by Dr Nair-Smith concerning the generality of this evidence. Nor was any issue raised by Dr Nair-Smith as to whether a special order for interest on costs can and should be made in the absence of evidence of the amounts paid and the dates of payment of legal costs: Drummond and Rosen Pty Ltd v Easey (No 2) [2009] NSWCA 331 at [3] per Macfarlan JA (Tobias JA agreeing); contra Handley AJA at [49]. Submissions 1. Perisher contended that the amount and duration of the costs burden upon it had been exacerbated by Dr Nair-Smith's contumelious disregard for the rules and orders of the court at first instance. This was a reference to delays in the proceedings at first instance both in the District Court and in the Supreme Court following the transfer of the proceedings to the Supreme Court on 16 July 2010. Dr Nair-Smith did not really contest that she had been responsible for much of the delay at first instance. 2. Dr Nair-Smith resisted the order for interest on the basis that a large part of Perisher's costs were incurred in relation to matters on which it was wholly unsuccessful. It was emphasised that Perisher ultimately succeeded only in relation to causation. It was argued that the costs associated with that issue would be minimal. Consideration 1. It may be accepted that the dilatory conduct of Dr Nair-Smith in the proceedings at first instance contributed to the protracted nature of the proceedings: Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd (No 2) [2013] NSWCA 211; 84 NSWLR 436 at [38] per Meagher, Barrett and Ward JJA. However, we consider that the countervailing factor relied upon by Dr Nair-Smith has significant force. Much of the money Perisher spent on the litigation related to issues on which it lost. Perisher made no attempt to identify the costs which were incurred at first instance, or on appeal, directed solely to the causation issue, nor when those costs were incurred. 2. Further and contrary to Perisher's submissions, the costs order on appeal does not relate solely to its success on the issue of causation. The order that Dr Nair-Smith pay one-half of Perisher's costs of the appeal reflects the success achieved by Perisher on the single (but decisive) issue of causation and the success achieved by Dr Nair-Smith on all other grounds of appeal: see [241] of the principal reasons. In all the circumstances, we do not consider that this is an appropriate case to award interest on costs as paid. 3. There is an additional reason for declining to make such an order with respect to the costs paid in respect of this appeal. The evidence did not establish that Perisher has been out-of-pocket in respect of any significant amount of costs for any lengthy period prior to the hearing of the appeal: see DSG Holdings Australia Pty Ltd v Helenic Pty Ltd (No 2) [2014] NSWCA 142 at [6]. 4. Perisher filed a notice of intention to appeal on 19 December 2013. Its second amended notice of appeal was filed on 8 February 2014. Perisher's written submissions were prepared on 23 May 2014. The appeal was heard over three days commencing on 16 September 2014. Perisher's costs of the appeal must necessarily have been incurred relatively recently. Perisher has the benefit of the costs order made on 9 April 2015. Once those costs have been assessed and the Registrar enters judgment in accordance with the certificate of the costs assessor as filed, interest will run on any unpaid costs: UCPR r 36.10(1); Legal Profession Act 2004 (NSW), s 368(5); see now Legal Profession Uniform Law Application Act 2014 (NSW), s 70(5); Spedding v Nobles [No 2] [2007] NSWCA 87 at [15]. Conclusion 1. Perisher has not made out a case for a special costs order either at first instance, or on appeal, nor for an award of interest on costs as paid. There is no reason why costs of the motion should not follow the event. 2. Accordingly, the orders of the Court are: (1) The applicant's amended notice of motion filed 18 May 2015 be dismissed. (2) Applicant to pay the respondent's costs of the motion. ********** Amendments 07 September 2015 - Para 48: Changed from "12 June 2013" to "13 July 2012 10 September 2015 - Paras 20, 43, 48, 59, 62, 66, 68, 79, 84, 85: grammatical errors corrected. 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 September 2015