District Court New South Wales Medium Neutral Citation: Gard v Allianz Australia Insurance Limited [2019] NSWDC 310 Hearing dates: Determined on the papers. Date of orders: 28 June 2019 Decision date: 28 June 2019 Jurisdiction: Civil Before: Weber SC DCJ Decision: 1. The defendant's notice of motion filed on 13 June 2019 be dismissed. 2. The plaintiff pay the defendant's costs of the proceedings, other than the defendant's costs of the motion filed on 13 June 2019. 3. The defendant pay the plaintiff's costs of the motion filed on 13 June 2019. Catchwords: COSTS – Party/Party – Exceptions to general rule that costs follow the event – Motion by defendant for costs on indemnity basis - Offers of compromise/ Calderbank offers – rule 42.15A of the UCPR - where defendant served "walk away" offers on plaintiff –where defendant's offers contained no real compromise - where plaintiff's claim was not frivolous or vexatious – where it was not unreasonable for plaintiff to reject offer – defendant's motion dismissed – costs on the ordinary basis to follow the event Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Botany Bay Council v Latham (No 2) [2013] NSWCA 450 Calderbank v Calderbank [1975] 3 All ER 333 Fairall v Hobbs (No 2) [2017] NSWCA 133 Hancock v Arnold (No 2) [2009] NSWCA 19 Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 Leichhardt Municipal Council v Green [2004] NSWCA 341 Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 New South Wales Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100 Oshlack v Richmond River Council (1998) 193 CLR 72 Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 Taheri v Vitek (No 2) [2014] NSWCA 344 The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120 Category: Costs Parties: Michael Gard (Plaintiff) Allianz Australia Insurance Limited (Defendant) Representation: Counsel: Mr P Blacket SC; Mr J Wilson (Plaintiff) Mr K Rewell SC (Defendant) Solicitors: Stacks Law Firm (Plaintiff) McInnes Wilson Lawyers (Defendant) File Number(s): 2017/00294709-001 Publication restriction: None Judgment Introduction 1. On 7 June 2019, I delivered reasons for the decision in this matter, in which I ordered that Verdict and Judgment be entered for the defendant in the proceedings. 2. I also indicated that I proposed to make an order that the plaintiff pay the defendant's costs on the ordinary basis. I was asked not to do so, so as to allow the defendant to be heard on the question of costs. I made orders for a timetable for the provision of evidence and submissions, and the parties agreed that following the provision of such material, I was to deal with the costs application on the papers. 3. Subsequently, the defendant filed a notice of motion in which it sought the following orders: 1. The plaintiff to pay the defendant's costs of the proceedings on an indemnity basis. 2. In the alternative to (1), the plaintiff pay the defendant's costs on an indemnity basis from 9 March 2018. 3. Any such further or other order as the Court deems fit. 1. The evidence discloses that on 1 July 2016, Allianz made an offer to the plaintiff on the following terms: 1. Verdict for the defendant 2. Each party bear their own costs. 1. The offer was made pursuant to the principles in Calderbank v Calderbank [1975] 3 All ER 333. The offer was open for acceptance until 4pm on 5 August 2016, and the letter relevantly concluded that if the offer was not accepted, "this letter will be tendered and relied upon with respect to costs". 2. On 9 March 2018, the defendant served on the plaintiff an offer of compromise pursuant to rule 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), which offer was open for acceptance for 28 days from the date on which it was made. The terms of the offer were again: 1. Judgment for the defendant. 2. No order as to costs. 1. The defendant submitted that from 20 April 2016, when it served upon the plaintiff a version of the police statement from the driver of the vehicle insured by the defendant, the plaintiff was aware that the position of the driver of the vehicle was that the plaintiff rode his bicycle into the rear of the vehicle, and as a consequence there was no negligence on the part of the defendant. 2. The defendant points out that the defendant's version was at odds with the plaintiff's version, which was based merely on his impression that the vehicle reversed into his path. It was argued that, in the circumstances, the offer was a genuine compromise and it was unreasonable for the plaintiff not to accept it. Indeed, the defendant went so far as to suggest that the plaintiff was delinquent in not accepting the offer (Oshlack v Richmond River Council (1998) 193 CLR 72, at [44]). 3. The alternative costs position of the defendant was that the plaintiff should pay the defendant's costs on an indemnity basis from 9 March 2018, being the date of the offer of compromise under the UCPR. 4. In respect of the offer dated 9 March 2018, rule 42.15A(2)(b) of the UCPR provides that in circumstances such as the present, 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 from the day following the day on which the offer was made, "unless the court orders otherwise". 5. The defendant concedes, however, that the rule does not require any form of exceptional circumstances to be made out to justify departure from the usual rule. Rather, it submitted that the discretion was one which had to be exercised having regard to all the circumstances of the case (Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368). 6. The plaintiff submitted that the Court, in its discretion, ought depart from the prima facie position outlined above, and "order otherwise" for two reasons: 1. the defendant's offer failed to include the necessary element of compromise: Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368); and 2. the defendant's "walk away" offer can only successfully trigger an entitlement to indemnity costs if the plaintiff's claim approached "something of the character of being frivolous or vexatious": Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [31], cited and followed in Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [51]. 1. Whilst there is no exhaustive list of circumstances which the Court can consider in relation to exercising its discretion to displace the presumption for ordering indemnity costs and "order otherwise", three broad categories of relevant considerations have been established: Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [48] per McColl JA – Gleeson JA and Sackville AJA agreeing – citing New South Wales Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100, at 102. Those categories are: 1. the offer did not involve any compromise; 2. the rejection was not unreasonable; or 3. the period for acceptance was unreasonable. 1. In Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8], the Court approached the issue by reference to two questions, namely: 1. whether there was a genuine offer of compromise; and 2. whether it was unreasonable for the offeree not to accept such offer. 1. I consider that it is fair to say that the authorities have demonstrated that the Court is slow to make an indemnity costs order in respect of "walk away" offers. It is not enough to show that the offer of compromise was genuine, in order for a "walk away" offer to trigger a successful award of indemnity costs under rule 42.15A of the UCPR. 2. An order for indemnity costs in respect to a "walk away" offer would require the plaintiff's claim to "approach something of the character of being frivolous or vexatious": Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [31], cited and followed in Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [51]. 3. In my view, the defendant's offer contained no real compromise at all. It was, in reality, an offer requiring capitulation by the plaintiff, without any element of compromise (Leichhardt Municipal Council v Green [2004] NSWCA 341 at [39]; Botany Bay Council v Latham (No 2) [2013] NSWCA 450 at [12]; Taheri v Vitek (No 2) [2014] NSWCA 344). 4. While each matter will fall to be determined on its facts, to decide otherwise, in my view, would be contrary to many decisions of the NSW Court of Appeal. For example, in Fairall v Hobbs (No 2) [2017] NSWCA 133, it was stated: [25] An offer of compromise by its nature must contain an element of compromise: Robb Evans & Associates v European Bank Ltd (No. 2) [2009] NSWCA 170; Mega-top Cargo Pty Ltd v Moneytech Services Pty Ltd [2016] NSWCA 3. This offer was in effect an offer to capitulate. The offer did not contain the necessary element of compromise. An award of indemnity costs is not justified. 1. In The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120; 67 NSWLR 706, the Court stated: [8] It is well established that an offer which does not involve a real and genuine element of compromise, will not be taken into account in relation to costs, either under the general law principles established by Calderbank v Calderbank, or under rules of Court .... 1. The plaintiff also submitted that it was not unreasonable to reject the offer at the time when it was made, as the plaintiff at that stage had no basis to know what the driver's version of events would be until the driver was in the witness box. He also points to the fact that at the time of the offer, no lay or expert evidence had been served, and that certain photographic evidence, which became important in the outcome of the proceedings, was only produced in the few weeks prior to the trial; and in respect to one important photograph, at the time that the driver was giving evidence in the witness box. 2. I consider there to be merit in these submissions. However, to my mind, the overriding consideration which militates against the proposition that the plaintiff should pay the defendant's costs at any stage on an indemnity basis, is the fact that the offer of compromise, being as it was, a "walk away" offer, offered insufficient compromise. As such, it was not unreasonable in all the circumstances for the plaintiff to reject it. 3. These considerations apply equally within the context of an offer under the UCPR, and a Calderbank offer. 4. In the circumstances, therefore, the defendant's motion should be dismissed. 5. The Court makes the following orders: 1. The defendant's notice of motion filed on 13 June 2019 be dismissed. 2. The plaintiff pay the defendant's costs of the proceedings, other than the defendant's costs of the motion filed on 13 June 2019. 3. The defendant pay the plaintiff's costs of the motion filed on 13 June 2019. ********** 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: 09 July 2019