Costs Orders and UCPR 42.34 - The importance of making a realistic assessment of quantum
In late December 2015, the plaintiff was awarded Judgment in her favour in the Supreme Court of NSW in the amount of $21,757. On 2 March 2016, Justice Harrison handed down his decision on the issue of costs.
The plaintiff submitted that in accordance with the general rule that costs follow the event, there should be an order for costs in her favour. The defendant opposed such an order and submitted that any cost order made should take into consideration the following submissions:
- The plaintiff was not entitled to any order for costs because the amount of damages was less than $500,000 and that she was unable to demonstrate that the “commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted” (Rule 42.34 of the Uniform Civil Procedure Rules);
- That the defendant was entitled to indemnity costs by reason of the plaintiff’s rejection of the defendant’s Offer of Compromise in the amount of $100,000 plus costs; and
- The defendant should be granted an order for costs in relation those costs incurred responding to the plaintiff’s claim for lost income which was abandoned on the second day of the Hearing.
The Court observed that any decision in relation to this Rule must be made in retrospect and it was therefore important to ensure that hindsight did not influence the decision. Ultimately, the Court held that the plaintiff was not entitled to her costs having regard to the application of this Rule. The case was not particularly complex and even if there may have been some doubt about the validity of the amount claimed at the outset, continuation of the proceedings in the Supreme Court could not be warranted following correspondence between the parties in October 2014 regarding the quantum of the claim.
Offer of Compromise
The plaintiff sought to argue that the Offer of Compromise was invalid. The Offer of Compromise was made on the basis that a Consent Judgment/Order be executed, without any admission of liability, and would have included a note that the terms of the agreement not be disclosed. The plaintiff argued inter alia that the non-disclosure clause contravened Rule 36.1A(2) of the UCPR and that the Judgment proposed did not determine all the issues in the proceedings as the non-admission of liability left that issue unresolved. Harrison J agreed with the defendant and held that ‘the non-admission and non-disclosure terms were no more than notations’ that ‘did not require the Court to make orders that it was neither empowered nor permitted to make’ and that there was no merit to the plaintiff’s argument that the offer did not determine all the issues in the proceedings.
The plaintiff also contended that in the event the Offer of Compromise was found to be valid, the order she obtained was more favourable than the defendant’s offer. The plaintiff submitted that the proceedings were an attempt at vindication and that successful efforts to establish liability against the defendant could not be assessed in dollar terms. An offer to settle the proceedings with an express non-admission of liability was therefore less than a full vindication of her decision to sue. The Court did not agree with this argument and ordered that the defendant was entitled to indemnity costs.
Loss of income claim
The defendant also made a claim for costs thrown away by the plaintiff abandoning her claim for lost income on the second day of hearing. This claim was also successful.
The initial Judgment in favour of the plaintiff will, when the cost orders are taken into consideration, result in the plaintiff owing the defendant a significant debt. This case shows that there can be very serious implications for plaintiffs who do not make a realistic assessment of quantum. It also demonstrates the value of a well weighted and well worded Offer of Compromise.
Kylie Agland, Partner
Stacey King, Solicitor