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Alexander, Phillipa --- "Offers of compromise and counsel's cancellation fees" [2014] PrecedentAULA 66; (2014) 125 Precedent 56

OFFERS OF COMPROMISE AND COUNSEL’S CANCELLATION FEES

By Phillipa Alexander

OFFERS OF COMPROMISE

It might have been expected that the amendments to Uniform Civil Procedure Rule (UCPR) 20.26 (NSW), effective from 7 June 2013, would have ended the argument once and for all in relation to the validity of offers of compromise which include provision for the payment of costs.

UCPR 20.26 was amended as a result of the decision of the NSW Court of Appeal in Old v McInnes and Hodgkinson,^[1] as approved in Whitney v Dream Developments Pty Ltd,^[2] that an offer of compromise which included an offer for costs as agreed or assessed did not constitute an offer 'exclusive of costs' and therefore was not a valid offer under the UCPR.

The amended r20.26 relevantly provides:

‘(2) An offer under this rule:

(c) must not include an amount for costs and must not be expressed to be inclusive of costs, and ...

(3) An offer under this rule may propose:

(b) that the costs as agreed or assessed up to the time the offer was made will be paid by the offeror, or ...’

However, the NSW Supreme Court has recently considered the validity of two offers of compromise made by defendants in Dailhou v Kelly; State of NSW v Kelly (No. 3).^[3]

Mr Dailhou had claimed damages for personal injuries sustained when he fell down a flight of stairs at Kelly's Bookshop. The State of NSW as employer also sought recovery for workers’ compensation payments made to Mr Dailhou. Negligence was not established and judgment was entered for the defendants (Mr Kelly and his company) on both claims.

The defendants sought special orders for costs, based on their offer of compromise made to Mr Dailhou on 29 November 2013, as follows:

‘1. Judgment for the plaintiff against the defendants in the sum of $600,000 plus costs as agreed or assessed.

2. If this offer is accepted, payment in the sum of $600,000 is to be paid within 28 days of the later to occur of the following:

(a) Receipt by the defendants' solicitor of a sealed Consent Judgment;

(b) Receipt by the defendants' solicitor of a Medicare Australia notice of judgment or settlement executed by the plaintiff;

(c) Receipt by the defendants' solicitor of a notice under ss1177, 1179 or 1182 of the Social Security Act 1991; and

(d) Receipt by the defendants' solicitor of an authority to receive made out to the defendants from the plaintiff satisfactory to the defendants' solicitor.

3. This offer is made in accordance with Rule 20.26 of the Uniform Civil Procedure Rules.

4. This offer shall be open for a period of 28 days only.’

The defendants had also made a further offer to Mr Dailhou in July 2014, in the form of a Calderbank offer in the sum of $500,000 clear of workers’ compensation payments plus costs as agreed or assessed, but this offer was not considered by the court.

The plaintiff's counsel argued that as the offer included an offer for costs as agreed or assessed, it did not comply with r20.26, citing Old v McInnes and Hodgkinson.^[4] This argument was rejected by Adamson J who held that the offer complied with the amended r20.26.^[5]

The plaintiff's counsel also argued that the offer was uncertain with respect to whether it was made clear of workers’ compensation payments or whether the plaintiff would be obliged to repay the workers’ compensation payments out of the $600,000. Adamson J held that there was no ambiguity, as s151Z of the Workers Compensation Act 1987 (NSW) necessarily operated to provide that the workers’ compensation payments would be deducted from the $600,000.^[6]

The plaintiff was ordered to pay costs on the ordinary basis up to and including 29 November 2013 and on an indemnity basis from 30 November 2013.

The defendants had also served an offer of compromise on the State of NSW by letter dated 3 September 2013. The offer of compromise provided as follows:

‘The defendants offer to compromise the plaintiff's claim in the following manner:

1. Judgment for the plaintiff against the defendants in the sum of $160,000 in answer to the cause of action on which the plaintiff claims.

2. The defendants to pay the plaintiff's costs and disbursements as agreed or assessed.

3. If this offer is accepted:

(a) Payment in the sum of $160,000 is to be paid within 28 days of the later to occur of the following:

(i) The date of judgment; and

(ii) Receipt of an authority to receive satisfactory to the defendants.

(b) Payment of the plaintiff's costs and disbursements as agreed or assessed is to be paid within 28 days of the following:

(i) The parties reaching agreement upon the plaintiff's costs and disbursements; or

(ii) The filing of a Certificate of Determination.

4. This offer is made in accordance with Rule 20.26 of the Uniform Civil Procedure Rules.

5. The defendants agree that they are jointly liable to the plaintiff for the whole amount of the offers in paragraphs 1 and 2.

6. This offer shall be open for a period of 28 days only.’

The plaintiff's counsel submitted that the offer did not comply with r20.26 because it made payment conditional on the specified matters. Adamson J held that the conditions did not take the offer outside the provisions of r20.26. In particular, Adamson J held the provision that payment would be made within 28 days of the specified circumstances was not inconsistent with r20.26(8), which provides:

‘(8) Unless the notice of offer otherwise provides, an offer providing for the payment of money, or the doing of any other act, is taken to provide for the payment of that money, or the doing of that act, within 28 days after acceptance of the offer.’

The defendants obtained an order against the State of NSW that costs be paid on the ordinary basis up to and including 3 September 2013, and on an indemnity basis from 4 September 2013.

COUNSEL'S CANCELLATION FEES

An application for leave to appeal to the District Court of NSW under s385 of the Legal Profession Act 2004 (NSW) has been refused in Commissioner of Police v Hoffman.^[7] Mr Hoffman, a former police officer, had brought a claim to set aside the decision of the Commissioner of Police that Mr Hoffman's suffering of chronic post-traumatic stress disorder was not as a result of his having been hurt on duty and for the decision to be replaced by a contrary decision of the District Court.

Counsel briefed on behalf of Mr Hoffman was described by Neilson DCJ as 'a very experienced member of the junior Bar, or to use the usual oxymoronic terminology of the law, a “senior junior”.'^[8]

During the course of the proceedings, a costs agreement and disclosure document had been provided by counsel to Mr Hoffman's solicitor, which relevantly provided:

‘All Courts, Commissions and Tribunals:

(a) Hearings, arbitrations, mediations and motions, including not reached and adjournments and matters settled prior to hearing, fee according to the number of days set aside or actual hearing time, whichever is the greater: $3,500 per day.

(b) Mentions, conferences, advices, drafting, other chamber work, views (including travelling time) $400 per hour.

Where matter is adjourned or vacated prior to the hearing dates, fees may be charged in respect of the diarised time allotted, unless a substitute brief on hearing is obtained by the barrister to offset the hearing fees lost in respect of the adjourned or vacated hearing dates.’

The matter was set down for hearing on 23 March 2012. Late on Sunday 11 March 2012, the solicitor for the Commissioner of Police advised Mr Hoffman's solicitor by email that he had instructions to accept liability for 'hurt on duty' and would prepare consent orders accordingly.
Mr Hoffman was then entitled to his costs of the proceedings which included a 'brief on hearing' fee for counsel of $3,500. Objection to the fee was made on behalf of the Commissioner of Police on the basis that the matter had settled 10 days prior to hearing. The fee was allowed by the costs assessor as reasonable. On review by the Commissioner to the review panel, one panel member considered the fee reasonable while the other considered that counsel's hourly rate charges up to 8 March 2012 were likely to have comprised all the work done by the barrister and that an additional fee was not reasonable. In the absence of agreement, the panel was required to affirm the determination of the costs assessor.
The Commissioner of Police sought leave to appeal from the determination of the review panel. While evidence was given that counsel did not obtain other court work for 23 March 2012, Neilson DCJ rejected the contention that counsel did not do any relevant 'work' which entitled him to charge a brief fee and held that counsel 'held himself available at all material times until the matter was settled'.^[9] Neilson DCJ considered that:
'[Counsel] was entitled to charge a fee for a brief on hearing when the matter settled when it did. The only matter which might have disentitled [counsel] to charge that fee would have been other court work which he might have found for 23 March 2012. ... It is not to the point that counsel may have been able to do some chamber work on 23 March 2012. Counsel get used to appearing in court and doing their chamber work before going to court or after leaving court and for many years (as when I was at the Bar) working 18 hours a day, six days a week.’^[10]

Leave to appeal was refused and the Commissioner of Police was ordered to pay the costs of the application.

Phillipa Alexander is a specialist in legal costs with Costs Partners. PHONE: (02) 9006 1033 EMAIL: Phillipa@costspartners.com.au.

^[1] [2011] NSWCA 410 (22 December 2011).

^[2] [2013] NSWCA 188 (25 June 2013).

^[3] [2014] NSWSC 1220 (3 September 2014).

^[4] See note 1 above.

^[5] See note 3 above at 9.

^[6] Ibid at 15.

^[7] [2014] NSWDC 113 (4 June 2014).

^[8] Ibid at 7.

^[9] Ibid at 42.

^[10] Ibid at 45.