Cinema Center Services Pty Limited v Eastaway Air Conditioning Pty Limited [2000] ACTSC 17 (15 February 2000)

Last Updated: 29 February 2000

Cinema Center Services Pty Limited v Eastaway Air Conditioning Pty Limited

[2000] ACTSC 17 (15 February 2000)

CATCHWORDS

COSTS - indemnity costs - early offer by plaintiff made at a time when plaintiff had not served expert reports or given full discovery - defendant's failure to accept offer not unreasonable - plaintiff made lower offer when case part-heard - defendant did not respond to offer - plaintiff recovered more than offered on previous two occasions - defendant liable for indemnity costs incurred by plaintiff following reasonable time to consider later offer.

Quirk v Bawden [1992] ACTSC 118; (1992) 111 FLR 115

No. SC 379 of 1995

Judge: Miles CJ

Supreme Court of the ACT

Date: 15 February 2000

IN THE SUPREME COURT OF THE )

) No. SC 379 of 1995

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: CINEMA CENTER SERVICES PTY

LIMITED

Plaintiff

AND: EASTAWAY AIR CONDITIONING

PTY LIMITED

Defendant

ORDER

Judge: Miles CJ

Date: 15 February 2000

Place: Canberra

THE COURT ORDERS THAT:

1. The defendant pay four-fifths of the plaintiff's costs incurred to 16 March 1999 (including costs reserved on 12 November 1998) to be assessed or taxed on a party-and-party basis and to pay the whole of the plaintiff's costs incurred on and after that date to be assessed or taxed on an indemnity basis.

1. Application is made on behalf of the plaintiff for an order that the defendant pay costs on an indemnity basis. The amount of the judgment recovered, including interest on the damages awarded, was $285,859.26.

2. On 21 August 1998 the solicitor for the plaintiff wrote to the solicitor for the defendant in the following terms:

"We confirm that we have been instructed that the plaintiff is prepared to settle this action on the following terms:

a) Judgment for the plaintiff for $280,000

b) Defendant to pay the plaintiff's costs

c) Usual order as to interest

This offer will remain open for a period of 28 days from today. If it is not accepted, and the plaintiff is ultimately awarded damages of $280,000 or more, we give notice that an order will be sought that the defendant pay the plaintiff's costs from the date of this letter on an indemnity basis.

Please let us know whether or not the defendant accepts the offer."

3. The defendant's solicitors did not reply directly to the letter of 21 August 1998. There were, however, further dealings between the solicitors as well as directions hearings and that letter and its contents could not have been overlooked.

4. The hearing was originally fixed to commence on 24 August 1998. That date was vacated by consent and a new date, 23 November 1998, fixed by the Master on 31 July 1998, when various other consent orders for particulars and discovery were made, including an order that the defendant request particulars of damages by 4 August, that the plaintiff furnish those particulars by 10 August 1998 and that there be an exchange of experts' reports by 21 September 1998. It appears that the latter was not complied with, at least not by the plaintiff, and in hindsight the order may have been inappropriate. Obviously an exchange cannot take place without the participation of both parties. The report of Mr McComb, for the defendant, dated 25 July 1998 may or may not have been served within time, but the report of Mr Rusden, for the plaintiff, of 24 September 1998 was not served until 2 October 1998. The defendant later applied, successfully, on 12 November 1998 for an extension of time to 19 November 1998 in which to respond to the report of Mr McLean, also for the plaintiff, dated 1 October 1998, and was also given an extension to the same date to serve an updated report of Mr McComb.

5. I note also that according to the affidavit of Mr Grant Carolan, solicitor for the defendant, sworn 23 November 1998, that as at 8 September 1998 discovery had not yet been completed and that he had been informed by Mr Harper, solicitor for the plaintiff, that Dr Killen's instructions were that relevant documents would fill two wool bales. Such instructions could not assist in clarifying the real issues.

6. The hearing eventually commenced on 23 November 1998. The taking of evidence on liability concluded on 22 December 1998. The hearing resumed on 16 March 1999 for the continuation of evidence on damages and concluded on 19 March 1999. The case was then adjourned for the reception of written submissions, the last of which was received on 3 September 1999.

7. On 8 March 1999, when the evidence on liability was concluded but the evidence on damages remained to be completed, the solicitors for the plaintiff wrote to the defendant a further letter as follows:

"In an endeavour to avoid the additional costs which will be incurred when the hearing of this action resumes next week, we have been instructed to put a further settlement proposal.

We are instructed to consent to a judgment in the plaintiff's favour in the sum of $220,000 plus costs.

You will recall that we previously put an offer by Calderbank letter of $280,000 plus costs. In the event that judgment is entered in the plaintiff's favour for that amount or more, we still intend to rely on that earlier letter.

Should the plaintiff recover an award of damages of $220,000 or more, but less than $280,000, we give you notice that we propose to seek an order that the judgment carry costs on a party-and-party basis to the date of this letter, and indemnity costs thereafter.

The offer will remain open until 5 pm on Friday next, 12 March."

8. Again there was no reply and the hearing resumed and was completed as already outlined.

9. In my decision published on 17 December 1999, I stated that, since the case had taken much longer than I thought it should have taken, especially because of the excessively technical nature of the case presented on behalf of the plaintiff, both with regard to liability and to damages, I was of the tentative view that the defendant should pay four-fifths of the plaintiff's costs to be taxed on a party-and-party basis.

10. Mr Harper, for the plaintiff, submitted that, in view of the defendant's failure to accept the plaintiff's offers of compromise contained in the letters already set out, costs should be awarded on an indemnity basis in respect of work done and disbursements incurred from a reasonable time after 21 August 1998, or alternatively after 8 March 1999.

11. Where costs would otherwise be awarded against a losing party on the usual party-and-party basis, the rejection by the losing party of a reasonable offer of compromise on the part of the victorious party, which, if accepted, would have reduced significantly the costs of litigation, may result in the victorious party obtaining a more favourable order for costs, even on an indemnity basis.

12. The plaintiff's offers at both stages were, on the face of it, reasonable, since the plaintiff eventually recovered more than was offered on either occasion. By the same token, however, it could not be said that the defendant's failure to accept the earlier offer of $280,000 with costs when made on 21 August 1998 was unreasonable. The experts' reports to be presented on behalf of the plaintiff remained to be served, and when they were served they left the defendant with very little time in which to respond. Particulars of the plaintiff's claim for damages were not supplied until 10 August 1998. In my view, the defendant and its legal advisers were not in a position to make a reasonably informed decision as to the reasonableness or otherwise of the plaintiff's first offer at the time it was made on 21 August 1998. I do not think that the defendant should be penalised by a special order as to costs incurred at that stage. However, the second offer was a generous one on the part of the plaintiff and made at a stage when the relative strengths and weaknesses of the case for the parties were or should have been known to them. There is no positive explanation put forward on behalf of the defendant which explains its failure to accept that offer. In fact there is no evidence of any consideration given or advice taken on the offer, or indeed whether it was considered at all. When one party has made a reasonable offer of compromise, and the other party fails to respond to it (or puts a wholly unrealistic counter offer, which is not the case here) the party showing a willingness to compromise is in a strong position to seek an enhanced order for costs in the event of receiving judgment more favourable than the offer made: see Quirk v Bawden [1992] ACTSC 118; (1992) 111 FLR 115. The plaintiff placed itself in that position by making the offer of 8 March 1999.

13. After considering all the circumstances in the light of the submissions made, I am of the view that the appropriate order is that the defendant pay four-fifths of the plaintiff's costs incurred to 16 March 1999 (including costs reserved on 12 November 1998) to be assessed or taxed on a party-and-party basis and to pay the whole of the plaintiff's costs incurred on and after that date to be assessed or taxed on an indemnity basis.

14. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, the Chief Justice.

Associate:

Date: 15 February 2000

Counsel for the plaintiff: Mr D C D Harper

Solicitor for the plaintiff: Abbott Tout Harper & Blain

Counsel for the defendant: Mr G Carolan

Solicitor for the defendant: Corrs Chambers Westgarth

Date of hearing: 22 December 1999

Date of judgment: 15 February 2000