CALDERBANK OFFERS & OFFERS OF COMPROMISE DECISION LIKELY TO AFFECT FUTURE LITIGATION IN ACT

Legal Directions

Cooper v Singh [2017] ACTCA 21

Introduction

In a recent decision, the ACT Court of Appeal has considered the distinction, in practical terms, between Calderbank offers and offers of compromise made under
Part 2.10 of the Court Procedures Rules 2006 (ACT) (the Rules).

Background

On 25 March 2013, Ms Annetta Singh’s motor vehicle was hit from behind by a vehicle being driven by Ms Michelle Cooper. Ms Singh commenced proceedings against Ms Cooper and her CTP insurer, NRMA Insurance, in the Supreme Court of the ACT.

The parties exchanged settlement offers. Ms Singh made a Calderbank offer of $650,000 plus costs. NRMA countered with a Calderbank offer of $540,000 plus costs. The defendants’ offer was not accepted and the matter proceeded to hearing.

On 21 August 2015, Mossop AsJ (as his Honour then was) gave judgment in favour of Ms Singh in the sum of $311,603 plus costs agreed or assessed. An appeal by Ms Singh against the assessment of damages was dismissed.

Given the terms of the judgment and the settlement offers made, NRMA sought a special costs order requiring Ms Singh to pay the defendants costs’ on an indemnity basis from 27 March 2015 (the day after the expiry of the defendants’ Calderbank offer).

Decision at first instance

Ms Singh’s conduct in rejecting the defendants’ offer was deemed unreasonable. The main issue was the consequences, if any, that would flow from this.

The existence of a regime for offers of compromise under the Rules was said to be significant, in that it reflected a considered policy that distinguished the circumstances of personal injury matters from other cases that came before the courts. In particular, Rule 1011 was noted to provide that if a defendant makes an offer in a personal injury matter which a plaintiff does not accept, and judgment for the plaintiff is no more favourable than the offer:

  • The plaintiff is entitled to party and party costs up to the day the offer was made; and
  • The plaintiff is not required to pay the defendant’s costs after the day the offer was made.

But for the introduction of the Rules-based offers of compromise and the specific provisions in those Rules relating to personal injury matters, Mossop AsJ stated that he would have made an order requiring the plaintiff to pay the defendants’ costs on a party and party basis from the date of the expiry of their offer.

However, given the impact of the Rules-based offers, his Honour found that it was desirable to give weight to the desirability of there being some consistency in approach between costs orders made as a result of offers of compromise and costs orders made as a result of Calderbank offers. His Honour considered that, while it was appropriate to improve the defendants’ costs position because of the making of the offer, he did not consider it appropriate to make the order sought by the defendants.

As a result, an order was made requiring NRMA to pay Ms Singh’s costs of the proceedings up to and including 26 March 2015. There was no order in relation to costs incurred after that date.

Appeal

The defendants raised two issues:

  1. Whether His Honour made an error in principle by approaching the matter on the basis of a need for consistency between the Calderbank offer and an offer of compromise under the Rules; and
  2. Whether his Honour erred in the exercise of his discretion, in failing to accept that Ms Singh’s unreasonable rejection of the offer operated to compel the application of the terms of the Calderbank offer.

 

The defendants submitted that once Ms Singh’s conduct in rejecting the Calderbank offer was deemed unreasonable, the terms of the Calderbank offer should have been enforced.

The Court of Appeal did not accept this submission. It referred to settled principle from cases such as Quirk v Bawden (1992) 111 FLR 115, that a finding of unreasonable conduct did not automatically dictate the exercise of the discretion as to costs. Rather, it was in the nature of the discretion that a number of relevant factors needed to be taken into account.

The Court noted that his Honour’s reasoning included as a factor in the matters to be taken into account in the exercise of the discretion, the existence of the Rules. Importantly, the Court found that his Honour did not say that the Rules had achieved any ascendency. Indeed, it was said to remain open, in appropriate cases, for a court to make a costs order which would be substantially different from the kind of order that would be made if an offer of compromise under the Rules had been made, as opposed to a Calderbank offer. As a result, the first issue raised by the defendants did not succeed.

On the second issue, the Court found that as the defendants could not identify any specific deficiency in the exercise of the discretion, the decision at first instance should stand.

Conclusion

As a consequence of the Court of Appeal decision. it is appropriate for lawyers acting for a defendant (at least in the ACT) to consider expressing a settlement offer to a plaintiff as a Calderbank offer in the first instance, followed by an offer of compromise under the Rules as an alternative. By that method, the defendant achieves the protection of the offer of compromise under the Rules and preserves the potential for an order that the plaintiff pay the defendant’s costs from the date of expiry of the Calderbank offer, which will be more favourable to the defendant than the operation of Rule 1011.

Authored by John Solomon, Managing Partner – Canberra, Phillip Thomas, Associate, Canberra


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