Offers Relating to Cost Orders Opposed by the Plaintiff

Lonergan v Trustees of the Sisters of Saint Joseph & Anor (Costs Ruling) [2021] VSC 717 (1 November 2021)

The parties are in dispute in relation to cost orders.   The plaintiff seeks an order that the defendants pay his costs of the proceeding on a standard basis.  The defendants, on the other hand, rely on the Calderbank and Hazeldene offer seeking that the defendants pay the plaintiff’s costs on a standard basis to 2 August 2021; and the plaintiff pay the defendants’ costs on an indemnity basis from 3 August 2021.  The Court relied upon the proximity of the time the offers were made with the trial in determining whether or not the plaintiff's refusal of the offers was unreasonable in the circumstances. 

Facts:

In relation to a judgment delivered by the Court on 7 October 2021, the parties agree the plaintiff should have judgment against the defendants for $714,350.  The plaintiff seeks an order that the defendants pay his costs of the proceeding on a standard basis.  The defendants rely on two offers to settle the proceeding made in accordance with the principles in Calderbank v Calderbank (‘Calderbank’) and Hazeldene’s Chicken Farm v VWA (No 2) (‘Hazeldene’s’), and seek orders that the defendants pay the plaintiff’s costs on a standard basis to 2 August 2021; and the plaintiff pay the defendants’ costs on an indemnity basis from 3 August 2021.

On Friday 30 July 2021, a judicial mediation of the proceeding took place.  The first Calderbank offer was served later that afternoon, and was open for acceptance until 4pm on Monday 2 August.  The amount offered was $950,000 plus costs.  On 9 August 2021, the trial commenced with the matters in issue including whether the defendants were directly and vicariously liable for the acts of the abuse perpetrated by Coffey, the nature and frequency of the abuse, and the assessment of damages. 

The second Calderbank offer was served at about 10am on the morning of 12 August, and was open for acceptance until 4pm that day.  The amount offered was $1,100,000.  Both offers provided that if the Plaintiff accepts the Offer, the Defendants will require him to sign a Deed of Release, including a solicitor’s certificate.  If the Offer is not accepted before its expiry, and should the matter proceed to judgment and the Plaintiff obtains a result no more favourable than the terms of the Offer, then the Defendants will produce the letter to the Court on the question of costs and seek a special costs order.

On Monday 17 August, after the plaintiff’s case had effectively completed save for tendering documents, the defendants admitted negligence which was a cause of the abuse of the plaintiff and his injuries.

Issues:

I. Whether or not the defendants are entitled to costs on an indemnity basis.

II. Whether or not the refusal of the offers was unreasonable in the circumstances.

Applicable law:

Supreme Court Act 1986 (Vic) s 24 - provides that the power to award costs, and to determine by whom and to what extent they are to be paid, is in the discretion of the court.

Calderbank v Calderbank (‘Calderbank’) [1976] Fam 93 (‘Calderbank’) - provided for principles such as: (i) That it is in the interests of the administration of justice that litigation should be compromised as soon as possible and so save both private and public costs;

(ii) To indemnify an offeror whose offer is later found to have been reasonable against the costs thereafter incurred. This is considered reasonable because from the time of rejection of the offer the real cause of the litigation is the offeree’s rejection of the offer;

(iii) To this end, a party in receipt of an offer of compromise should have some incentive to consider the offer seriously. That incentive is the prospect of a special order as to costs;

(iv) It is nevertheless important not to discourage potential litigants from bringing their disputes to the Court

Hazeldene’s Chicken Farm v VWA (2005) 13 VR 435 (‘Hazeldene’s’) - where the Court of Appeal stated that matters relevant to that issue would ordinarily include:

(a) the stage of the proceeding at which the offer was received;

(b) the time allowed to the offeree to consider the offer;

(c) the extent of the compromise offered;

(d) the offeree’s prospects of success, assessed as at the date of the offer;

(e) the clarity with which the terms of the offer were expressed;

(f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.

Mischel v Mischel Holdings Pty Ltd (in liq) (No 2) [2012] VSC 421 [33]–[34] - where the period for which the offer was open was reasonable in the circumstances, and the offer was expressed in clear terms, foreshadowing an order for costs in the terms sought.

Grech v Deak-Fabrikant (No 4) [2016] VSC 35 [10] - provided that the Calderbank offer was so far in excess of the judgment sum that an order for indemnity costs from the date of the expiry of the offer is warranted.

Gill v Gill (No 2) [2014] VSC 612 (‘Gill’) [14]  - held that an order for indemnity costs from the date of the expiry of the offer would give effect to relevant policy objectives.

ACCC v Harris Scarfe Australia Pty Ltd (No 2) [2009] FCA 433 [10] - provided that vindication as to the occurrence of the childhood sexual abuse and the defendants’ liability for it were proper aims for the plaintiff to pursue.

MacLean v Rottnest Island Authority [2001] WASCA 323 [36] - held that when the offers were made the plaintiff had a number of important matters on his mind, the court should not encourage use of Calderbank offers in those circumstances.

Analysis:

The defendants submitted that at the time the Calderbank offer was made, notwithstanding its proximity to trial and the period for which it was open, the plaintiff ought to have been fully aware of the strengths and weaknesses of his case and should have been able to assess the probable and possible outcomes and respond without delay. 

On the other hand, the plaintiff submitted that the Calderbank offers were made at a time when the defendants maintained their denial of liability, and had not admitted the particulars of abuse alleged by the plaintiff.

Vindication as to the occurrence of the childhood sexual abuse and the defendants’ liability for it were proper aims for the plaintiff to pursue.   Each offer required the plaintiff to sign a ‘deed of release’, the terms of which were not specified, leaving significant doubt as to what was proposed.  

The plaintiff’s counsel submitted that the first offer was open for 7.5 business hours, and the second for 6 business hours.  When the first offer was open, the plaintiff was at his home in Ouyen, and his legal advisers were in Melbourne, reducing the plaintiff’s opportunity to sit with his lawyers and talk through the offer.  The second offer was only open for a number of hours during one sitting day.  The plaintiff was at the time suffering from serious psychological ill health which made engagement with the litigation very difficult for him.

The deed required by the defendants was not attached to either offer, or otherwise provided to the plaintiff.  The terms of the deed were not set out in either offer.  Any deed of release required by the defendants should have been provided with the offer to ensure there was no uncertainty as to the terms on which it was made.

Conclusion:

The Court concluded that it was not unreasonable for the plaintiff to fail to accept the offers.  Judgment will be entered for the plaintiff against the defendants in the sum agreed.  The defendants are ordered to pay the plaintiff’s costs of the proceeding, including any reserve costs, on a standard basis.