LAWS1014 Lecture Notes - Lecture 5: Formal System, Institute For Operations Research And The Management Sciences, Affidavit
16 May 2018
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Week 5: Trial or No Trial
5.1 Incentives to settle
• Forms of incentives to settle:
1. UCPR offer of compromise procedure which outlines a specific set of instructions that
parties are obligated to follow to make an offer of compromise that is valid under the
UCPR
2. Common law form of incentives to settle! CALDERBANK LETTERS
Calderbank letters relates to an offer of settlement expressed to be ‘without
prejudice save as to costs’
Cost consequences for unreasonably rejecting the offer is in the discretion of the
court, rather than being governed by the UCPR formal system
• Rationale:
Private benefit:
▪ Risk of adverse costs order to rejecting party will make the offeree take the
offer seriously, recognizing the potential consequences of rejecting the offer
▪ Therefore, encourages a reasoned approach to settlement by both plaintiffs and
defendants
Public policy:
▪ Public benefit: Facilitates a timely resolution of disputes (s56 CPA!)
▪ Provide incentives for parties to end their litigation as soon as possible →
timely, does not freeze up court resources
▪ Discourage wasteful and unreasonable litigant behaviour (cost consequences)
5.1.1 Offer of compromise (UCPR)
• Offer rules: UCPR Part 20 r 26
Any party, in notice of writing, can offer to compromise on any claim in the
proceedings (formal notice)
Offer of compromise must state that it is made in accordance with the governing
UCPR rules
Does not need to relate to all claims e.g. if there is both a fraud and negligence claim,
one can still go to trial
More than one offer to the same claim can be made. There is no limit
Offer must specify how long it is to be open:
▪ If offer has been made more than 2 months before the matter is set for trial:
open for max. 28 days
▪ If offer has been made 2 months or less before the matter is set for trial: open
for reasonable amount of time
▪ Offer cannot be withdrawn during period it is open
Not an admission of liability and cannot be used against the party in court
Must be exclusive of costs but may propose cost arrangements
Sufficient documentation (what kind of documentation?) must be supplied to offeree
so they can consider offer completely. The offeree can give notice within 14 days that
the offer cannot be fully considered
Risk of costs order on party that rejects a genuine, reasonable and fair offer
Must be a genuine offer of compromise (see Leach v The Nominal Defendant
below)
• Acceptance rules:
Acceptance by serving a written notice of acceptance
Contents of offer must be forthcoming within 28 days of acceptance of the offer
(unless offer states otherwise). If not, accepting party can withdraw acceptance by
again serving a written notice
find more resources at oneclass.com
find more resources at oneclass.com
• General cost proposals in offers of compromise, offers and costs:
If good offer rejected and if defendant should have accepted the offer, the defendant
may have to pay entire cost of plaintiff (indemnity, rather than ordinary basis)
If offer is accepted and no provisions about costs made, costs will follow the event,
assessed on an ordinary basis
If the offer is rejected and upon disposition of the claim, the rejecting party is no
better off than they would have been had they accepted the offer, costs are partially
determined on an ordinary basis and partly on an indemnity basis. The party
benefiting from such costs order depends on the disposition of the claim (the result)
(SEE BELOW!)
Offer may propose certain cost arrangements:
a) If offer is for judgement in faour of defendant: offer may propose that
defendant will pay a specified amount of the plaintiff’s costs
b) Offer can propose that costs assessed or agreed as of time of making of the
offer will be paid by the offeror
• Cost apportionment when offer rejected and matter gone to trial
SITUATION A: Judgement ‘No less favourable to plaintiff’ (UCPR r 42.14)
Offer: PLAINTIFF offers $500,000 to settle
Result: REJECTED BY DEFENDANT
Result at trial: PLAINTIFF WINS. Receives judgment greater than $500,000. This is
a ‘judgement no less favourable to the plaintiff’ because it is more favourable than
the offer to settle of $500,000. They receive more.
How costs are apportioned:
1. From date of commencement of proceedings: PLAINTIFF’S COSTS assessed on
ORDINARY BASIS
2. From date of offer to date of judgement: PLAINTIFF’S COSTS assessed on
INDEMNITY BASIS
Reasoning for this cost apportionment:
▪ Since defendant has to pay more than $500,000, they should have accepted
the offer to settle, since he would have only had to pay $500,000.
▪ Because they rejected a good offer, they get ‘punished’ from the date of the
offer, since costs are assessed on an indemnity basis
▪ The reason why plaintiff’s costs are assessed on an indemnity basis from the
date of the offer, is so that defendant’s cannot use the opportunity to make a
late rejection of the offer, to bear less costs
Other implications (RELATED TO s57 – JUST, QUICK and CHEAP)
▪ Defendant cannot ‘play the system’ as said above → NO INJUSTICE, LESS
DELAY
▪ Plaintiff would also want to make offer ASAP to take advantage of potential
indemnity costs if the defendant wrongly rejects the offer → QUICK
SETTLEMENT
SITUATION B: Judgement ‘no more favourable to plaintiff’ (UCPR r 42.15)
Offer: DEFENDANT offers $500,000 to settle
Result: REJECTED BY PLAINTIFF
Result at trial: PLAINTIFF WINS. Receives judgement less than $500,000. This is a
‘judgement no more favourable to the plaintiff’ because it is less favourable than if
they accepted the offer of $500,000. They receive less
How costs are apportioned:
1. From date of commencement of proceedings: PLAINTIFF’S COSTS assed on
ORDINARY BASIS
2. From date of offer to date of judgement: DEFENDANT’S COSTS assessed on
INDEMNITY BASIS
find more resources at oneclass.com
find more resources at oneclass.com
Reasoning for this cost apportionment:
▪ Since defendant had to pay less than $500,000, and plaintiff received less, the
plaintiff should have accepted this offer.
▪ Default rule is that costs follows the event, so loser pays (defendant pays
plaintiff’s costs assessed on ordinary basis)
▪ But plaintiff still has to pay for ‘punishment’ of rejecting a good offer, of the
costs assessed on indemnity basis
Note: costs could be breakeven
SITUATION C: Judgement for defendant (UCPR 42.15A)
Offer: DEFENDANT offers $500,000 to settle
Result: REJECTED BY PLAINTIFF
Result at trial: DEFENDANT WINS, judgement for defendant; claim is dismissed!
How costs are apportioned:
1. From date of commencement of proceedings: DEFENDANT’S COSTS assessed
on ORDINARY BASIS
2. From date of offer until date of judgement: DEFENDANT’S COSTS assessed on
INDEMNITY BASIS
Reasoning:
▪ Plaintiff could have accepted the offer to have $500,000. Instead they lost
and got nothing, and also would be subject to a large costs order
• ‘Walk-away’ offers, must be genuine offer of compromise: Leach v The Nominal Defendant
Facts: Respondent (defendant) argued that it had been subject to unnecessary costs
due to the appellant’s (plaintiff’s) refusal to accept a letter of compromise. Defendant
argued they were entitled to an order for payment of its costs on an indemnity basis
from the date of the offer (UCPR r 42.15A).
Held: It was a ‘walk-away’ offer, which offeror expresses willingness to settle on the
grounds that each party pay their own costs. Court found no element of genuine
compromise, it only related to costs. It offered the appellant nothing by way of
damages for his injuries. It didn’t serve the public policy of encouraging settlement.
Application to vary costs ofer as dismissed
• S98CPA: Discretion as to ordering indemnity costs: Hart Security Australia Pty Ltd v
Boucousis
Facts: Defendant had offered to settle, plaintiff rejected. Defendant arguing for
plaintiffs to pay indemnity costs.
Issue: When indemnity costs are triggered by UCPR rr 42.14-42.15A by the rejection
of a good offer, does the court always have to order them?
NO, because under s98 of the CPA, the court always has an unfettered discretion. The
foundation for discretion under the UCPR comes from s98.
Court can ‘order otherwise’
But must look at how big the compromise in terms of monetary value
Conflicting decisions by the court – one judge says not much of a compromise, so no
costs assessed on indemnity basis, and other judge says it was a substantial
compromise and plaintiff was in a position to properly assess it against the prospects
of success, so costs should be assessed on indemnity basis
5.1.2 Calderbank letters (common law derived)
• Rules offers versus Calderbank offers:
Advantage of rules offer: If a successful offer is made under the rules, the
consequences are virtually automatic:
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
5. 1 incentives to settle: forms of incentives to settle, ucpr offer of compromise procedure which outlines a specific set of instructions that parties are obligated to follow to make an offer of compromise that is valid under the. Ucpr: common law form of incentives to settle! Calderbank letters relates to an offer of settlement expressed to be without prejudice save as to costs". Cost consequences for unreasonably rejecting the offer is in the discretion of the court, rather than being governed by the ucpr formal system: rationale: 5. 1. 1 offer of compromise (ucpr: offer rules: ucpr part 20 r 26. Any party, in notice of writing, can offer to compromise on any claim in the proceedings (formal notice) Offer of compromise must state that it is made in accordance with the governing. Does not need to relate to all claims e. g. if there is both a fraud and negligence claim, one can still go to trial.
