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[2018] NSWSC 605

Beech v Squire (No 2)

Application for indemnity costs dismissed

Catchwords

COSTS — Party/Party — Exceptions to general rule that costs follow the event — Offers of compromise/Calderbank offers — Offer of compromise contained no element of compromise — No issue of principle — UCPR Pt 20 r 20.26, Pt 42 r 42.15A

Cases cited

  • Beech v Squire[2018] NSWSC 594
  • Calderbank v Calderbank [1975] 3 All ER 333
  • Leach v Nominal (QBE Insurance (Australia) Ltd) (No 2) (2014) NSWCA 391

Legislation cited

  • Uniform Civil Procedure Rules 2005 (NSW)

Judgment

Summary

  1. [1]

    On 4 May 2018 I delivered the principal judgment in these proceedings: Beech v Squire [2018] NSWSC 594 (the “Principal Judgment”). These reasons should be read in conjunction with the Principal Judgment and defined terms in that judgment have the same meaning in these reasons.

  2. [2]

    At the conclusion of the Principal Judgment, I indicated that the Summons would be dismissed and that I would hear the parties as to costs. With the exception of one matter, each of the orders to give effect to the Principal Judgment was either a matter of agreement or non-opposition. The one exception was Corinne’s application for an order that some of her costs be paid on the indemnity basis as a result of an offer of compromise.

  3. [3]

    The Court rejects Corinne’s application because the offer of compromise upon which her application was based, being for the plaintiffs to agree to their claim being dismissed and to paying Corinne’s costs on the ordinary basis, did not contain an element of compromise so as to warrant an indemnity costs order being made.

The facts

  1. [4]

    On 9 September 2016 the proceedings were stood over by the Family Provision List Judge, Hallen J, to 14 October 2016. I infer from the Court’s file that it was expected that a hearing date would be allocated on that next occasion.

  2. [5]

    Under cover of a letter from Corinne’s solicitors dated 5 October 2016, Corrine made an offer of compromise dated 4 October 2016 (the “Offer”) in accordance with Part 20 of the Uniform Civil Procedure Rules 2005 (NSW) (the “UCPR”).

  3. [6]

    The relevant terms the Offer were:

  4. [7]

    It will be apparent that the Offer invited total capitulation by each of the plaintiffs.

  5. [8]

    Mr P R Glissan of Counsel, who appeared for Corinne, submitted that the Offer had been made in expectation of the hearing of the proceedings. I accept that to be so, because when the matter was next before Hallen J on 14 October 2016, his Honour fixed the proceedings for hearing on 16 November 2016.

  6. [9]

    The Offer was expressed to be open for acceptance until 5.00pm on 11 November 2016.

  7. [10]

    In the events which happened, on 14 November 2016 Hallen J vacated the hearing listed for 16 November 2016.

  8. [11]

    The plaintiffs did not accept the Offer.

  9. [12]

    In the Principal Judgment I determined that each of the plaintiffs failed, so that their summons should be dismissed.

The parties’ submissions

  1. [13]

    Mr Glissan submitted:

    1. (1)

      The Offer satisfied the formal requirements under UCPR Part 20 r 20.26. In particular, it did not offend r 20.26(2)(c) which requires that an offer “must not include an amount for costs and must not be expressed to be inclusive of costs”. Nor did not it make an offer in relation to costs of the kind contemplated by r 20.26(3) which provides:

    2. (2)

      Corinne had obtained an order or judgment on the claim no less favourable to her than the terms of the Offer, because the summons would be dismissed and she would now be entitled to her costs for the entirety of the proceedings. That result engaged UCPR Part 42 r 42.15A, which provides:

    3. (3)

      It followed that Corinne was now “entitled” to orders of the kind referred to in r 42.15A(2), including that her costs of the proceedings on and from 6 October 2016 should be paid on the indemnity basis.

    4. (4)

      The plaintiffs had comprehensively failed, including with findings being made that there had been inadequate disclosure of her financial circumstances by Claire. Had the plaintiffs accepted the Offer, then all of the costs of the proceedings from that date would have been avoided.

    5. (5)

      In response to my question, Mr Glissan confirmed that if, for whatever reason, the Court came to the conclusion that the Offer was not an offer of compromise for the purposes of r 42.15A, he did not rely on the Offer as an offer made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333.

  2. [14]

    Mr A G Martin of Counsel, who appeared for the plaintiffs, submitted:

    1. (1)

      The Offer was not an offer of compromise for the purposes of r 20.26 because it did not contain any element of compromise, but was an invitation to his clients to capitulate.

    2. (2)

      Furthermore, the Offer was not an offer for the purposes of r 20.26 because r 20.26(3) represented the totality of what kind of offer could be made in relation to costs. While the Offer did not include an amount for costs, nor did it make an offer in accordance with the possibilities identified in r 20.26(3).

    3. (3)

      Even if the Offer complied with the rules so as to give rise to an entitlement of the kind referred to in r 42.15A(2), then the Court should order otherwise under that rule because the Offer did not contain an element of compromise.

The law

  1. [15]

    As to the relevant legal principles, I respectfully adopt what was said by McColl JA (with whom Gleeson JJA and Sackville AJA agreed) in Leach v Nominal (QBE Insurance (Australia) Ltd) (No 2) (2014) NSWCA 391 (“Leach”) (emphases added):

Resolution

  1. [16]

    I accept Mr Martin’s submission that the Offer does not contain sufficient (or any) element of compromise. It invites capitulation. As McColl JA observed in Leach, there may be some cases where, for example, even a walk away offer may contain the requisite element of compromise. The Offer is even less favourable than a walk way offer, because it postulates that the plaintiffs should pay Corinne’s costs. Nevertheless, there may be cases (for example, a case which at the time of the making of the offer should have been recognised as utterly hopeless) where even an offer of complete capitulation may be sufficiently a compromise to engage the operation of the rules in relation to offers of compromise. This is not such a case.

  2. [17]

    As is noted in paragraph [42] of Leach, the offer must be considered at the time it was made and not with the benefit of hindsight. I reject Mr Glissan’s submission recorded in paragraph [13(4)] above because it relied on hindsight. While the Court has ultimately found against the plaintiffs, their respective claims could not, at the date the Offer was made, have been described as frivolous, vexatious or hopeless. An offer of even a relatively small payment in satisfaction of the plaintiffs’ claims would have demonstrated a sufficient element of compromise. An invitation to capitulation does not.

  3. [18]

    The conclusions I have just expressed may be given juridical significance in two ways. First, it could be said that an offer of compromise which does not contain the requisite element of compromise is not, on the proper construction r 20.26, an offer falling within that rule. That is because it is not “an offer…to compromise” within the meaning of r 20.26(1) that “In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings…on specified terms”. On that analysis, no entitlement under r 42.15A would even have arisen. This is how I understood Mr Martin to be putting his first submission (see paragraph [14(1)] above) and I accept it as correct.

  4. [19]

    Alternatively, if I am wrong in that conclusion and r 20.26 is to be construed as being concerned only with the form of the offer (i.e. does the offer in its terms satisfy the requirements of r 20.26?), then the lack of an element of compromise becomes the basis on which the Court should otherwise order pursuant to r 42.15A. This approach engages the principles discussed in Leach, which I proceed to apply.

  5. [20]

    This was not an all or nothing case. Because it invited complete capitulation, the Offer was less favourable to the plaintiffs than even a walk away offer which might engage the indemnity costs provisions if the proceedings were frivolous or vexatious. The plaintiffs’ claims were not frivolous, vexatious or hopeless, notwithstanding that they were ultimately unsuccessful. In those circumstances, I am satisfied that the Offer did not serve the public policy of encouraging settlement because it did not contain any element of compromise. Based on that conclusion, and assuming that the Offer was an offer under r 20.26, the Court would “order otherwise” to confine Corinne, as the successful defendant, to her costs being paid on the ordinary basis. Accordingly, in the alternative, Mr Martin’s submission recorded in paragraph [14(3)] above succeeds.

  6. [21]

    On either analysis, Corinne’s application for indemnity costs must be dismissed.

  7. [22]

    Finally, I should record that because either analysis gives the same result, it is not necessary for me to consider Mr Martin’s submission in paragraph [14(2)] above and I respectfully refrain from doing so.

Conclusion

  1. [23]

    The Court’s orders are:

    1. (1)

      Summons dismissed.

    2. (2)

      The defendant is entitled to an indemnity out of the estate for her costs of the proceedings on the indemnity basis.

    3. (3)

      The defendant’s application for indemnity costs on and from 6 October 2016 is dismissed.

    4. (4)

      The plaintiffs are to pay the defendant’s costs of the proceedings on the ordinary basis.

    5. (5)

      Direct that the exhibits be returned to the parties to be held by them in accordance with paragraph 28 of Supreme Court Practice Note SC Gen 18.

Unofficial copy. Source: NSW Caselaw. Refer to the official version for authoritative text.