Hungry Jack’s Pty Ltd v Fourtounas (No 2)

THE COURT: On 10 December 2020 the Court dismissed an application by Hungry Jack’s Pty Ltd (the applicant) for leave to appeal from a judgment in favour of the respondent, Sylvia Fourtounas, in the District Court. This Court directed that the applicant pay the respondent’s costs of the application for leave to appeal. [1]

Ms Fourtounas has sought to vary the costs order. The application by notice of motion was filed within the time permitted, namely within 14 days from the date of entry of the orders. She seeks the following orders:

On 15 October 2020 the respondent’s solicitors served an offer of compromise which sought that the summons seeking leave to appeal be dismissed with no order as to costs. The offer remained open for a period of 14 days. It was not accepted. Pursuant to the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 42.15A, where the defendant (respondent) makes an offer which is not accepted by the plaintiff (applicant) and the defendant obtains a judgment no less favourable than the terms of the offer, the normal rule is that the defendant will obtain costs to be assessed on the ordinary basis up to and including the day of the offer and, from the first day thereafter, on an indemnity basis. The Court has power, however, to make a different order.

The applicant resists an order for costs payable on an indemnity basis on three grounds.

First, it submitted that the period of the offer (14 days) was not reasonable in the circumstances. It submitted that the offer should have been open for 28 days, being the required time with respect to an offer made more than two months prior to the hearing of the application: UCPR, r 20.26(7). [2] However, on any view this was a straightforward application: 14 days was an ample period within which to require a response. The objection to the period cannot be sustained.

The second objection was that the offer did not involve a “genuine compromise.” The offer was for dismissal of the application with no order as to costs. Such an offer is permissible pursuant to UCPR r 20.26(3)(a). The amount in dispute in the present case was $35,800. The amount of costs incurred by the respondent at the time the offer was made may well have been small, but it would not have been insignificant relative to the amount of the judgment. Further, if the matter went to a hearing, even on a leave application alone, it may be assumed that the respondent would have incurred costs being a substantial proportion of the amount in issue. Accordingly, the offer involved a compromise: the rule requires no more.

Thirdly, the applicant submitted that where a “walk away” offer was made the Court should otherwise order unless the claim had the character of being “frivolous or vexatious”. Reliance was placed upon a statement to that effect in Regency Media Pty Ltd v AAV Australia Pty Ltd. [3] The statement in Regency Media was made in the context of determining what was a “genuine compromise”, and whether to “otherwise order”.

There are three reasons for rejecting that submission. First, with respect to the term “genuine compromise”, care must be taken in the use of the term “genuine” to avoid imposing a constraint on the statutory language which is not present in the rule. It is the objective nature of the offer which is in issue, not the subjective intention of the offeror. In any event, in the present circumstances, a compromise was involved.

Secondly, context is important; the Court in Regency Media stated:

Thirdly, UCPR r 20.26 was varied in 2013 so as to expressly permit the offer of a judgment in favour of the defendant with no order as to costs. Care must be taken in relying on statements made in earlier cases (such as Regency Media) applying a different rule.

The onus lies on the applicant to establish good reason why the Court should make a different order. It sought to do so. The applicant noted that the application was not without merit, the Court having identified error in the way that the trial judge applied s 5H of the Civil Liability Act 2002 (NSW). However, the Court also held that it was “by no means clear that the error has led to a material injustice to the applicant.” [4] The result was that the issues sought to be raised on the appeal were not determined. Apart from the doubt as to whether the applicant would have succeeded on the merits on the appeal, it should be noted that the legal error on the part of a trial judge raised no issue of principle, the correct approach having already been addressed by an earlier judgment of this Court.

In the circumstances, there is no injustice in allowing r 42.15A to operate according to its terms. The Court should not vary that operation. The costs of this motion should form part of the costs of the leave application.

Accordingly, the Court makes the following order: