Simone v Kola (No 3)

In June 2017, I concluded that judgment had to be entered for Mr Simone: Simone v Kola (No 2) [2017] NSWSC 821. The parties have now agreed on the orders to be made to give effect to that judgment, other than as to costs.

Mr Simone seeks an order that the defendants pay his costs of the proceedings below, on the ordinary basis up to and including 23 December 2015, when he made a Calderbank offer and thereafter on an indemnity basis. The defendants contend that there should be no departure from the usual order under the Uniform Civil Procedure Rules 2005 (NSW), that costs as agreed or assessed be ordered in Mr Simone’s favour. There is no issue as to the Court’s power to make the disputed order under s 98 of the Civil Procedure Act 2005 (NSW).

The offer was in the following terms:

The offer was made after the pleadings had all been filed and Mr Simone had filed the evidence on which he relied. There was no response to the offer and no evidence led on this application, as to why it was rejected.

The hearing in the Local Court commenced on 4 February 2016, when the parties relied on agreed facts which departed significantly from the defendants’ pleaded case, as I explained in the earlier judgment.

On the appeal Mr Simone was entirely successful. In the result, there is no question that the defendants would have been better off, if they had accepted Mr Simone’s December 2015 offer.

In issue is whether that offer involved any compromise.

Even an offer of comprise on a “walk away” basis can involve real compromise. As discussed in Fabre v Lui (No 2) [2015] NSWCA 312 at [7], a defendant’s offer to bear its own costs can also constitute a compromise. That will not be so, if no significant costs have been incurred: Curtis v Harden Shire Council (No 2) [2015] NSWCA 45 at [17]. That, however, is not this case.

What must be determined, as at the date of the offer in question, is whether the defendant is offering to forego something of substance: Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [42]. In some cases the only room for compromise is in relation to cost, given what is in issue: Leach at [43]. This is such a case.

Mr Simone relied on McDougall J’s judgment in Rickard Constructions v Rickard Hails Moretti & Ors [2005] NSWSC 481, where his Honour observed at [30] – [32]:

At [38] his Honour observed that determining “whether the offer was genuine, or involved a real element of compromise, requires assessment of the position of the offeror as well as that of the offeree”. At [40] he concluded that in that case, the offer did involve a genuine element of compromise, even though it may have offered no monetary return over and above the costs incurred. Mr Simone contended that this was a similar case.

Neither party led evidence as to the making or rejection of the offer. Mr Simone accepted that what he had offered did not involve a great deal of compromise, but submitted that it was unreasonable for the defendants to have rejected the offer, given his acceptance that he would bear the costs of his cross-claim, in respect of which he had a strong case. That was certainly borne out by the conclusions which I reached on the appeal, which turned in part on concessions which the defendants there made.

The defendants’ case was, nevertheless, that the offer involved no element of compromise, reflecting as it did simply a verdict and judgment in favour of Mr Simone. It was also submitted that in any event, the offer did not reflect the outcome of the appeal. In the result, the exceptional discretion to award indemnity costs should not be exercised in Mr Simone’s favour.

The difficulty with that submission was, of course, that Mr Simone was entirely successful on the appeal, including in relation to the case which he advanced on the cross-claim. The defendants’ submissions also did not address the question of whether it had been unreasonable for them to have rejected the offer. That has to be resolved in light of the circumstances at the time the offer was made.

It is thus necessary to take into account that the offer was made after the defendants had served their evidence and Mr Simone his. The difficulties with their pleaded case must by then have been apparent, given Mr Kola’s departures from the pleaded case. That was reflected in the agreed statement of facts which the parties advanced at the hearing which commenced in June 2016.

At the time the offer was made, there could simply be no question that Mrs Kola was liable to Mr Simone for the assessed costs pursed against her on the cross-claim. The difficulties with the case which the defendants were pursuing, having elected not to call evidence from Mrs Kola and other relevant witnesses to establish their case, must also have been apparent at the time the offer was received.

In the result, it cannot be doubted that Mr Simone’s offer to settle on the basis that he would not pursue his costs of the cross-claim, did involve a real compromise. In those circumstances, that it was unreasonable for the defendants to have rejected that offer, is not open to doubt.

In the result, the orders which Mr Simone sought must be made.

For these reasons I order that: