Casey v Pel-Air Aviation Pty Ltd; Helm v Pel-Air Aviation Pty Ltd (No 3)

1. [1]

   Orders were made in favour of Dr Helm on 12 June 2015 for reasons given that day and in a judgment delivered on 15 May (see Casey v Pel-Air Aviation Pty Ltd; Helm v Pel-Air Aviation Pty Ltd [2015] NSWSC 566 and Casey v Pel-Air Aviation Pty Ltd; Helm v Pel-Air Aviation Pty Ltd (No 2) [2015] NSWSC 734)). Dr Helm sought an order for costs assessed on an ordinary basis up to and including 30 January 2015 and indemnity costs thereafter. Pel-Air’s case was that there should be no departure from the usual order under the Civil Procedure Act 2005 (NSW) and the Uniform Civil Procedure Rules 2005 (NSW), that it should bear Dr Helm’s costs as agreed or assessed.

2. [2]

   There is no question as to the Court’s power to depart from the usual order. Dr Helm’s case was that this discretion would be exercised in his favour, given the offer of compromise he made on 16 December 2014. His solicitor then advised:

3. [3]

   Pel-Air's case was that this offer did not comply with Rule 20.26 which now provides:

4. [4]

   The problem with the offer was submitted by Pel-Air to be that it did not specify the proposed orders for disposal of the proceedings, necessary so that Rule 20.27(3) can be given effect. It provides:

5. [5]

   In the circumstances, it was argued, Dr Helm’s offer was invalid and could not be relied on, even as a Calderbank offer (see Calderbank v Calderbank [1975] 3 WLR 586), as had been concluded in Whitney v Dream Developments Pty Ltd [2013] NSWCA 188; (2013) 84 NSWLR 311. There Bathurst CJ concluded that an offer which had been made on the basis of judgment for the Plaintiff against the First Defendant in a sum specified, with the first defendant to pay the plaintiff’s costs as agreed or assessed, did not comply with Rule 20.26. He observed:

6. [6]

   Dr Helm’s offer was not made inclusive of costs. Whitney was concerned with an earlier form of Rule 20.26 (see Whitney at [22]). Then it relevantly provided:

7. [7]

   The current form of Rule 20.26 does not require an offer of compromise to be “exclusive of costs” as Rule 20.26(2) formerly provided. It now requires that the offer be made on “on specified terms” (Rule 20.26(1)). In the case of an offer as to disposal of the claim, the offer must specify the proposed orders for disposal of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment (Rule 20.26(2)). Rule 20.26(3) expressly contemplates that such an offer may deal with costs.

8. [8]

   Despite the submission advanced for Dr Helm, that the words of the offer made on his behalf, were words “uniformly used in a judgment” and could be used in a judgement disposing of the claim, the proposed orders for disposal of his claim were not specified in the offer made, as the Rule now requires. Accordingly, Rule 20.26 does not apply to the offer.

9. [9]

   Contrary to the case advanced for Pel-Air, however, that does not mean that the offer cannot be relied on to support the costs order which Dr Helm seeks. Barrett JA in Whitney did not consider that an offer which did not comply with Rule 20.26 could not be relied on as a Calderbank offer, as Pel-Air submitted. What his Honour said was:

10. [10]

    In Whitney, the plaintiff had not indicated, either expressly or by implication, that, if the offer did not take effect under the Rules, the right to rely on it on the question of costs was reserved. Barrett JA considered that to be an essential ingredient of a Calderbank offer. Bathurst CJ agreed observing:

11. [11]

    Old v McInnes and Hodgkinson [2011] NSWCA 410 was a case where a failed offer under the Rules was not accepted to have been an offer made on a Calderbank basis. Beazley JA discussed other authorities in which it has been observed that the settlement of matters must be encouraged by the Court, for reasons both of public policy and private interests. That, of course, is consistent with the overriding purpose specified by s 56 of the Act, which the Court is obliged to seek to give effect whenever it exercises any power given to it by the Act or the Rules, namely, the just, quick and cheap resolution of the real issues in the proceedings. As her Honour discussed sensible offers of settlement must be encouraged, consistent with this obligation, as an incentive to bringing litigation to an end, as soon as possible and discourage unreasonable behaviour by litigants, as discussed in Leichhardt Municipal Council v Green [2004] NSWCA 341 at [14]).

12. [12]

    In Old, Beazley JA took the view that “the fact that a failed Rules offer of compromise is not strictly conformable with the usual Calderbank offer, does not preclude the court from considering whether it should exercise its discretion as to costs so as to make some other order than costs follow the event, in accordance with UCPR, r 42.1” (at [34]). Her Honour also concluded “that, in circumstances where the offer of compromise was technically deficient, but nonetheless would have achieved the same result for Mr Old had it been accepted, as would have been achieved under the UCPR, the Court should act pragmatically and justly as between the parties” (at [36]).

13. [13]

    Meagher JA (Giles JA agreeing) reached a different conclusion on the facts, which included that while the offer had been made “without prejudice save as to costs” it made no statement that it was to operate as a Calderbank offer (see at [117] - [118]).

14. [14]

    The circumstances are similar in this case, in that the offer was made without prejudice save as to the costs, but did not expressly indicate that it was also to operate as a Calderbank offer. They, however, are not the only matters relevant to a determination of what lies here in issue, namely, whether justice demands that there should it be a departure from the usual costs order, in all of the circumstances of this case.

15. [15]

    In my view, in this case, given the parties to these proceedings, the nature of Dr Helm’s claim, the time that the offer was made and the limited compass of what was in issue, as discussed in the May judgment, it would be to inject an air of unreality into these proceedings, to conclude that the settlement offer which Dr Helm made in December 2014 was not intended by him or understood by Pel-Air to be proposing a settlement on terms which Dr Helm intended to rely on, if his offer was not accepted and he succeeded in achieving a more favourable outcome.

16. [16]

    The offer did not technically comply with the requirements of the new Rule 20.26, because as it was drafted by Dr Helm’s solicitors, it did not specify the orders which would have to be made to effect the settlement on the terms proposed. It thus does not attract the consequences which rejection of such an offer would result in, under the Rules. The settlement offered was, however, not only clear, it offered a real compromise, accompanied by a reasonable period for acceptance. In its terms the offer was capable of acceptance and admissible under s 131 of the Evidence Act 1995 (NSW), on a costs application.

17. [17]

    It was not submitted by Pel-Air that its rejection of the offer had been reasonable. Its only point was that the offer was technically invalid as an offer under Rule 20.26. That depended on the proper construction of the offer and the new provisions of the Rule, matters about which reasonable minds might differ, but there was no suggestion that this was raised with Dr Helm by Pel-Air, or that the offer was otherwise responded to, as his letter invited.

18. [18]

    Given what was really lying in issue between the parties, when the offer was made, that was hardly a reasonable response, particularly having in mind the obligations imposed on the parties by s 56 of the Act.

19. [19]

    In all of the circumstances rejection of that offer was unreasonable. In the result, justice demands a departure from the usual costs order, on the terms sought by Dr Helm.

Other matters

1. [20]

   Dr Helm also sought orders permitting him to proceed to assess his costs forthwith and to stay enforcement of the costs order, pending determination of Pel-Air’s appeal, conditional on it paying 70% of the costs assessed or agreed.

2. [21]

   Those orders were not opposed, consistently with the stay agreed as to damages, dealt with in the June judgment. Accordingly, I am satisfied that these orders should be made.

Order

1. [22]

   For these reasons, I order that: