Hobson v Northern Sydney Local Health District

1. [1]

   HIS HONOUR: Following publication of my judgment in the principal proceedings (Hobson v Northern Sydney Local Health District [2017] NSWSC 589) Mr Hobson sought an order for the payment of his costs on an indemnity basis. Several grounds were initially advanced in support of the claim. However, by the time oral argument had concluded, Mr Hobson’s position had contracted to reliance upon an offer of compromise dated 2 November 2016, served on all defendants shortly before the hearing commenced. It was in the following relevant terms:

2. [2]

   The letter that accompanied the Offer of Compromise included the following paragraph:

3. [3]

   Mr Hobson submitted that he was entitled to a special order for costs having regard to the fact that his offer was not accepted and that he obtained judgment on his claim that was no less favourable than the terms of his offer. In such circumstances Mr Hobson contended that he was entitled to indemnity costs unless the Court otherwise ordered. Mr Hobson contended that the Court would not order otherwise.

4. [4]

   The second and fourth defendants opposed the making of an indemnity costs order against them. That opposition distilled to the following propositions.

5. [5]

   First, the defendants submitted that the offer did not comply with the rules. UCPR 20.26(1) provides, among other things, for the making of an offer by notice in writing by “any party…to any other party.” The defendants contended that the offer offended this rule inasmuch as it was made to all defendants collectively rather than to each defendant individually. The defendants submitted that the offer as it was framed was incapable of acceptance except with the concurrence of all four defendants.

6. [6]

   Secondly, and in a related sense, the defendants submitted that it would be unfair to expose them to the potential of an indemnity costs order in circumstances where they had been given no real opportunity to accept the offer. In other words, even assuming the offer were valid in form, its acceptance, in practical terms, required the agreement of all defendants, which no single defendant might be expected to have achieved in the time allowed for acceptance of the offer, even on the assumption that it could have been achieved at all.

7. [7]

   Thirdly, and also in a related sense, the defendants contended that the offer could not be characterised as genuine. They submitted that Mr Hobson must have known that they would not have been able to accept, or to organise all of the defendants to accept, the offer in the time allowed by the offer. The defendants submitted that Mr Hobson could without difficulty have formulated separate offers directed to each defendant in a way that would have obviated the difficulty which the defendants say they have identified. They go further and submit that the awkward form of the offer must necessarily have resulted from a deliberate forensic decision taken by Mr Hobson at the time. Indeed, the defendants went as far as to characterise Mr Hobson’s offer as “mischievous”, having regard to the then existing different and competing interests and resources of the several defendants, which by implication meant that the offer was never capable of acceptance either in the time provided or at all.

Consideration

1. [8]

   I agree that the form of Mr Hobson’s offer of compromise was invalid. Despite the defendants’ submissions indicating or suggesting otherwise, there is direct authority in support of the proposition for which they contend. In Vieira v O'Shea (No 2) [2012] NSWCA 121, the Court of Appeal said the following:

2. [9]

   In the present case, there was no common interest among all of the defendants or between any two of them beyond successfully defending Mr Hobson’s claim. Two of the defendants were released from the proceedings during the hearing, although on different terms. None of the defendants was ever able to bind the others in a settlement. There were no cross-claims filed by any defendant against any other defendant. There is no evidence to suggest, and Mr Hobson in any event did not submit, that any single defendant was able to bind the other defendants with respect to considering or accepting the offer of compromise or in any way at all. It follows in my view, in accordance with authority, that it was not unreasonable for the second and fourth defendants not to accept the offer.

3. [10]

   There may be other reasons for this conclusion. The litigation was not without some complexity. The significant and competing expert opinions on the question of the defendants’ respective liabilities all bear witness to this fact. The offer of compromise was also served only five days before the commencement of the trial and at a time when the parties’ respective legal advisers might have been expected to be in the final stages of preparation for the case. The two defendants who were ultimately released from the proceedings were still parties at that stage. The offer was in terms open for acceptance by no later than the morning of the first day of the hearing, even though the letter accompanying the offer indicated that if more time were required, the solicitor for Mr Hobson would “seek instructions”.

4. [11]

   I consider that this is a case in which it was not unreasonable for the second and fourth defendants not to accept Mr Hobson’s offer of compromise. It follows that Mr Hobson’s application for indemnity costs should be rejected.