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[2024] ZANCHC 54
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D.C.A obo N.M and Another v Member of the Executive Council for the Department of Health, Northern Cape Province (2250/2016) [2024] ZANCHC 54; 2025 (1) SA 410 (NCK) (31 May 2024)
FLYNOTES:
COSTS – Calderbank offer –
Secret
offer by plaintiff
–
Reconsideration of costs –
Defendant rejected first offer – Unequivocally accepted last
offer that resulted in
consent order – Acceptance of offer
encompassing claim and costs terminates all pre-existing
entitlements – Effectively
concludes litigation –
Impermissible for plaintiff to now invoke a Calderbank offer to
seek special costs order after
grant of consent order inclusive of
costs – Application dismissed.
SAFLII
Note:
Certain
personal/private details of parties or witnesses have been
redacted from this document in compliance with the law
and
SAFLII
Policy
IN
THE HIGH COURT OF SOUTH AFRICA, NORTHERN CAPE DIVISION, KIMBERLEY
Reportable
Case
No: 2250/2016
In
the matter between:
D[...] C[...] A[...]
OBO
NM
FIRST PLAINTIFF
S[...]
J[...]
SECOND PLAINTIFF
and
MEMBER OF THE EXECUTIVE
COUNCIL
FOR THE DEPARTMENT OF
HEALTH,
NORTHERN CAPE
PROVINCE
DEFENDANT
Neutral citation:
DC A[...] and Another v Member of the Executive Council for
the Department of Health: Northern Cape Province
(Case no.
2250/2016) (31 May 2024)
Heard:
30 January
2024
Delivered:
31 May
2024
Judgment
Phatshoane
DJP
Introduction
[1]
The plaintiff, Ms D[...] C[...] A[...], is before this Court with an
application for the
reconsideration of two costs orders that I made
on 15 March 2023 and 11 August 2023. Essentially, she seeks relief
pursuant to
a secret offer to settle that she made on 25 January
2023, that the party and party costs as contained in the consent
order of
15 March 2023 be up to and include 25 January 2023 and that
an award of costs on an attorney and client scale be made with effect
from 26 January 2023 onwards. This form of relief is not provided for
in the Uniform Rules of this Court. However, it was contended
for
plaintiff that based on her right of access to justice, the relief
sought is akin to that available to a defendant who has
made a secret
offer to settle as provided for in rule 34 of the Uniform Rules of
this Court. The key issue being whether the defendant,
the Member of
the Executive Council (MEC) for Health, Northern Cape, ought to bear
the actual expenses the plaintiff incurred because
he rejected the
plaintiff’s first secret offer, on the same basis as the
plaintiff would have been held liable to bear the
defendant’s
expenses for not accepting his reasonable offer made in terms of rule
34.
[2]
The plaintiff’s principal argument for the reconsideration of
costs hinges on
the
Calderbank
principle which has its
origin from the longstanding English Court of Appeal decision in
Calderbank
v Calderbank.
[1]
The issue in
Calderbank
was whether a party could
in a ‘without prejudice’ communication in which an offer
of settlement had been made, reserve
that party’s right to
waive the confidential (that is, the ‘without prejudice’)
nature of the offer in order
to rely upon it for the purposes of
making an application for indemnity costs. Cairns LJ held that that
was permissible.
[3]
Originally the
Calderbank
offer
was thought to find application only in matrimonial matters where no
payment into court procedure was available. The position
changed
following the English Court of Appeal decision in
Cutts
v Head.
[2]
There, Oliver LJ emphasised the following passage
in
Computer
Machinery Co. Ltd. v. Drescher
[1983]
1 W.L.R. 1379
by Sir Robert Megarry V.C:
"In
my view, the principle in question is one of perfectly general
application which is in no way confined to matrimonial cases.
Whether
an offer is made 'without prejudice' or 'without prejudice save as to
costs,' the courts ought to enforce the terms on
which the offer is
made so as to encourage compromises and shorten litigation. The
latter form of offer has the added advantage
of preventing the offer
from being inadmissible on costs, thereby assisting the court towards
justice in making the order as to
costs…”
And at 610, Oliver LJ
said:
“
I
think that it must now be taken to be established that the Calderbank
formula suggested by Cairns L.J. is not restricted to matrimonial
proceedings but is available in all cases where what is in issue is
something more than a simple money claim in respect of which
a
payment into court would be the appropriate way of proceeding
.
. .
”
The practice of making
offers of compromise on
Calderbank
terms has since been
widely accepted beyond England. For example, Hong Kong, Singapore,
New Zealand, Ireland, Canada, and Australia,
all recognise the
Calderbank
offers. Such offers are
also firmly entrenched in international arbitration practice.
[3]
[4]
The principle in
Calderbank
was
res
nova
in
our law until fairly recently when few South African decisions
acknowledged the plaintiff’s common law right to make a
secret
offer “without prejudice save as to costs” to a defendant
and to later, after judgment, avail itself of costs
not recoverable
in the ordinary course against such a defendant, should the Court
have made an award in excess of that tendered.
[4]
In
AD
& Another v MEC for Health and Social Development, Western
Cape
[5]
(the
AD
matter)
Rogers J considered two discrete questions namely (i) whether a
Calderbank
letter
is admissible at all in relation to costs; and (ii) if so, what
effect the letter has on the court's discretion as to costs.
The
court held, on good authority, that in order to be admissible such an
offer must explicitly state that it is made without prejudice
'except
in relation to costs' (or words to similar effect). If the words
'without prejudice' are expressly qualified by the phrase
'except in
relation to costs', there were no reasons of policy to treat the
communication as inadmissible for purposes of
determining a just
and equitable costs order.
[5]
Rogers J further held that the public policy of encouraging
settlements would be better
served if litigants appreciated the risk
of adverse costs orders if they disregarded reasonable offers of
settlement. He then concluded
that in principle
Calderbank
offers
were admissible in relation to costs and could be disclosed to the
court for that purpose after judgment has been given.
As to the
effect of a
Calderbank
offer on costs, Rogers J said:
“
(T)he
Commonwealth cases emphasise that a plaintiff who has made such an
offer is not entitled to attorney/client costs merely because
he made
a secret offer which was less than what the court awarded. The court
must consider whether the defendant behaved unreasonably,
and
thus put the plaintiff to unnecessary expense, by not accepting the
offer or making a reasonable counter-offer. Factors mentioned
in the
Commonwealth cases are whether the defendant has engaged reasonably
in attempting to settle; whether the plaintiff was offering
a fair
discount based on a realistic assessment of the case rather than
holding out for the best conceivable outcome; whether
the plaintiff
allowed the defendant a reasonable time to consider the offer; the
extent of the difference between the amount of
the offer and the
amount of the award; and the nature of the proceedings and resources
of the litigants.”
[6]
The plaintiff’s secret offer to settle has its genesis in the
common law and,
in my view, consideration of such offers ought to be
infused in the Court’s power to regulate its own process. I
could find
no reason why a plaintiff, who makes an offer without
prejudice except in respect of costs, ought not to be afforded the
same rights,
flowing from a
Calderbank
offer and the benefit
of law, as afforded to a defendant in terms of rule 34, which would
place such a plaintiff in the same position
which a defendant
occupies in the context of an offer made to avoid litigation and in
certain cases, the significant expense thereof.
The public policy and
public interest consideration which form the basis for penalising a
plaintiff with costs, for not accepting
a defendant’s
reasonable offer, must logically find application where a defendant
fails to accept a plaintiff’s reasonable
offer to settle.
Background
[7]
The plaintiff made a secret offer to settle to the defendant on 25
January 2023, some
13 court days before the trial (the first secret
offer). The offer sets out the following notices:
“
TAKE NOTICE
FURTHER THAT the defendant is invited to make any reasonable
counteroffer or to engage in negotiation with the plaintiff
on any
reasonable alternative basis of settlement or to request an extension
of the
spatium
deliberandi
insofar as he may reasonably require such extension. . .”
And
“
TAKE NOTICE
FURTHER THAT the plaintiff shall disclose this offer to the court at
the appropriate time if indicated, after judgment
for purposes of
consideration or reconsideration of any costs order made or to be
made, regardless whether the ultimate award exceeds
this offer or
not.
TAKE NOTICE FURTHER THAT
the plaintiff shall seek an appropriate costs order against the
defendant, including (but not limited
to) costs on an
attorney and client and own client basis or an attorney and client
basis or on any other basis which will
ensure recovery of so much of
the otherwise irrecoverable costs but for this offer as the court may
deem meet, should it appear
that the offer should have been accepted
or that the defendant should have engaged the plaintiff on reasonable
alternative settlement
negotiations but did not do so.”
[8]
The Full Court of the Supreme Court of Western Australia cautioned of
offers made shortly before
the trial in
Maclean
v Rottnest Island Authority
[6]
in these terms:
“
[T]he Court should
not encourage the use of a Calderbank letter delivered shortly before
trial when the other party might reasonably
be expected to have their
minds on a number of matters. The use of a Calderbank letter is an
aid to the administration of justice
and should be encouraged. Its
use as an indiscriminately wielded tactical weapon should be
discouraged.”
Whether
a
Calderbank
offer served late in the
proceedings will give rise to indemnity costs will depend heavily on
the surrounding circumstances.
[7]
[9]
In the first secret offer the plaintiff extended an invitation to the
defendant to resolve the
question of quantum by conceding an amount
of R18 950 000 of her proven or agreed damages suffered in her
representative capacity
and on behalf of NM, the minor child, flowing
from the hypoxic-ischaemic brain injury suffered by NM at birth plus
interest on
the capital sum and party and party costs.
[10]
The first secret offer was open to acceptance until 10h00 on 08
February 2023 unless the plaintiff extended
it at the defendant’s
request. The defendant did not accept the offer. Instead, on 07
February 2023, he made a counter-offer
in terms of rule 34(1) and (5)
for an amount of R17 464 123.20 and further called upon the plaintiff
to make a counter-offer if
his offer was unacceptable. One of the
caveats to the defendant’s counter-offer was that the offer
stood to be disclosed
to the court, after judgment, for
purposes of reconsideration of any costs order made.
[11] On
the eve of the trial, 12 February 2023, the plaintiff made its second
‘without prejudice’
secret counter-offer of R22 million.
On the same date the defendant responded to the plaintiff’s
second secret offer with
a further counter-offer for an amount of R18
932 651.03. The plaintiff rejected the offer as being substantially
less than a reasonable
amount.
[12]
The trial was set down to commence on 13 February 2023 for a period
of two weeks until 24 February
2023 and for a further week from 13
March to 17 March 2023. This notwithstanding, the parties resolved
certain parts of the plaintiff’s
claim at the commencement of
the trial and other parts on 15 February 2023. The trial was
postponed to 13 March 2023.
[13]
In the interim, the plaintiff brought an application for the payment
of R9 574 902 pending the
finalisation of the trial, which concerned
those heads of damages and numerous items in respect of future
medical expenses which
had been settled between the parties. The
latter application was set down for hearing when the trial resumed on
13 March 2023.
However, it was not entertained as envisaged but was
withdrawn because the parties engaged in further settlement
negotiations which
resulted in the full and final settlement
agreement concluded on 14 March 2023 to the effect that the defendant
would pay the plaintiff’s
claim for damages in the amount of
R20 million in certain agreed instalment. On 15 March 2023 the
settlement agreement which contained
an order as to costs on party
and party scale was made an order of this Court including costs of
various experts and those for
the employment of two counsel.
[14]
The issue of interest payable on the capital amount was postponed for
argument to 09 May 2023.
Following argument, in a
well-considered judgment, I ordered the defendant on 11 August 2023
to pay mora interest at the rate of
10.75% per annum on the capital
sum of R20 million calculated from 15 March 2023, the date of the
consent order, to the date of
final payment. The defendant was
further ordered to pay the plaintiff’s costs of adjudication of
the aspect of interest on
party and party scale which costs included
costs consequent upon the employment of two counsel.
The plaintiff’s
argument
[15]
It was argued for the plaintiff that she and NM are entitled to be
indemnified against irrecoverable
costs to the fullest extent
possible which can only be achieved if the Court was to order the
defendant to bear attorney and client
costs from the date of the
first secret offer, 25 January 2023. It was contended that the
indemnifying costs (attorney and client
costs) she seeks were not
punitive costs in the ordinary sense based on some objectionable
conduct on the part of the defendant,
albeit are often associated
with some form of punishment or disapproval by the court. The
association is unintended and incorrect.
[16]
Insofar as there may have been some objectionable conduct on the part
of the defendant in the
present case, it was argued, this would be no
more than just a factor for the court to consider in the exercise of
its discretion.
Even if the defendant had acted in an exemplary or
commendable manner but with an unreasonable assessment of the risk
the indemnity
costs would have to be awarded to the plaintiff. It was
argued that exceptional circumstances ought not to be extant for such
costs
to follow as would be the case if traditional punitive costs
were awarded.
[17]
It was further argued for the plaintiff that the assessment of her
claim, on her version, indicated
that NM’s damages were
probably in excess of the settled figure of R20 million. Any
irrecoverable costs, so it was argued,
were likely to significantly
erode the award that NM would receive. It was further argued that the
plaintiff’s first secret
offer was a substantial discount which
the defendant ought to have accepted to obviate the adjudication of
the residual question
on irrecoverable costs.
[18]
It was further contended that the defendant acted with impunity and
elected to oppose the main
action for an extended period. When its
tactics did not bear fruit, it settled in the face of the inevitable
adversity of paying
a larger award. The defendant ought not to be
allowed, so it was argued, to enjoy the benefit of escaping the
probable irrecoverable
costs. It was argued that the minor child was
prepared to sacrifice a significant portion of ‘his award’
to escape
the dire effects of irrecoverable costs without the
advantage of the defendant’s deep pockets. The defendant’s
conduct,
it was argued, caused the plaintiff to incur significant
expense in enforcing NM’s rights to a valid, fair and
justifiable
claim. In addition, so it was argued, the defendant has
not conducted himself with the utmost probity; that his conduct of
the
litigation was vexatious and therefore there appeared to be no
reason why the plaintiff and NM should bear their irrecoverable
costs.
The defendant’s
argument
[19]
The defendant raised no less than five points
in limine
in
answer to the application for reconsideration of costs but pressed
ahead with only three. These points
in limine
are interwoven
with the merits of the application and in fact the defendant largely
referred to his points
in limine
in response to almost all of
the averments as set out in the plaintiff’s founding
affidavit. The first attack against
the application is that the
first secret offer contained an invitation to the defendant to make a
counter-proposal or engage in
negotiations with the plaintiff or to
request an extension of the
spatium deliberandi
as the
defendant may reasonably require. The offer would expire on 08
February 2023 and thereafter it would not be open for acceptance
save
with the plaintiff’s written consent.
[20]
The defendant contends that insofar as he made a counter-proposal,
which the plaintiff rejected,
this resulted in the expiry of the
plaintiff’s first secret offer because its acceptance period
had never been extended.
Consequently, so it was contended, the
plaintiff cannot rely on her first secret offer for purposes of the
reconsideration application.
The plaintiff’s second secret
offer of R22 million, it was argued for the defendant, superseded the
first secret offer. The
second secret offer exceeded the final
settlement figure of R20 million thus it was inconsistent with the
Calderbank
principles. The plaintiff’s conduct, in
bringing the present application, it was argued, amounted to an abuse
of court process.
[21]
The defendant’s second point
in
limine
pivots
on the
res
judicata
legal
doctrine. It was argued that the Court did not deliver judgment or
make an award after consideration of the evidence. The
consent order
issued was premised on the agreement which settled the capital sum
and costs thus the matter was
res
judicata
which
left no room for reconsideration of costs. It was argued with
reference to the decisions in
Eke
v Parsons
[8]
and
Gollach & Gomperts (1967) (Pty) (Ltd) v Universal Mills &
Produce Co (Pty) Ltd & Others
[9]
that the consent order
brought finality to the
lis
between the parties. The
settlement agreement, it was argued, eliminated the underlying
dispute. Where, as here, a settlement agreement
was made an order of
the Court the parties were bound thereby. It was impermissible for a
party to litigate on issues that were
finalised because that would
never bring finality in the litigation, so ran the argument.
[22]
The defendant’s third point
in limine
is to the effect
that the Court is
functus officio
apropos any aspect of the
interest judgment handed down on 11 August 2023. The plaintiff had
argued for costs on a punitive scale
during the hearing on interest
which the Court refused to grant. It was contended that she ought to
have availed herself of an
appeal against the costs in the ordinary
scale as awarded in the interest judgment if she was aggrieved
thereby. She acquiesced
in the judgment. Consequently, no factual or
legal basis existed for the plaintiff to seek reconsideration of
those costs. In any
event, it was argued, the question of costs on
the interest judgment was also
res judicata
and I had no
authority to amend my final order.
[23]
On the merits the defendant contended that the plaintiff had not
shown that he displayed vexatious
or mala fide conduct which would
warrant costs on an attorney and client scale. It was further argued
that the defendant made numerous
attempts to settle various heads of
damages with the plaintiff and thus he ought not be punished for his
efforts. On 14 February
2023, seven days after the defendant made his
first counter-offer, in response to the plaintiff’s second
secret offer, the
defendant made a further offer of R18 932 651.03,
just about R17 000 less than the plaintiff’s initial first
offer of R18 950
000. This counter-offer, it was argued, the
plaintiff had been unwilling to consider. Instead, it was argued, the
plaintiff had
then shifted the goalposts and demanded R22 million on
the basis of what she regarded as comprehensively detailed and
motivated
information.
The discussion
[24]
Central to the defendant’s preliminary attack to the
application is that it traversed issues
which were
res judicata
.
It is trite that the Court has the common law jurisdiction to
reconsider costs on the basis of facts which a party was prohibited
from presenting which are brought to its attention after judgment. On
reconsideration of the costs the court will exercise its
discretion
anew with the advantage of the knowledge of the secret offer and
award such costs it deems appropriate.
[25]
It should first be considered whether the plaintiff’s first
secret offer is admissible
in relation to the reconsideration of
costs. If it is, then it ought to be determined whether the defendant
acted reasonably by
rejecting the plaintiff’s first secret
offer or by not making reasonable counter-offers or reasonably
engaging in early attempts
to settle the dispute and thus ought to be
mulcted in “indemnity costs” or irrecoverable costs
(attorney and client
costs) being the actual expenses incurred in the
litigation as opposed to what a party can tax and recover on a party
and party
basis.
[26]
The admissibility of the first secret offer poses no difficulties
because, in my view, the offer
complies with the requirements
articulated in the
AD
matter.
[10]
For instance, it was expressly made without prejudice save as to
costs. It makes plain that the plaintiff would disclose the offer
to
the court after judgment for purposes of reconsideration of costs and
that the plaintiff would seek an appropriate costs order
against the
defendant, including (but not limited to) costs on an attorney
and client so as to recover so much of her irrecoverable
costs. The
defendant’s counter-offers were also subject to similar
caveats. On a reading of the offers and counter-offers
made by both
parties it is clear that they both intended to devolve the risk of
substantial costs of litigation upon each other
if either of them
elected not to accept what was ‘reasonably’ offered.
[27]
On the view I take of this matter, it is not necessary to discuss at
any great length whether
the second secret offer superseded the first
and the legal effect of such a proposition. The answer to the
question whether the
second secret offer rendered nugatory the first
must surely be in the negative. This is so because the second secret
offer leaves
no room for any suggestion that it consigned to the past
the first secret offer because to it
had been
inserted
the following text: “without derogating in any
way from any right which the first plaintiff has or may have in terms
of her
initial common law secret offer, and with full retention of
such right(s).” The words employed admits of only one
construction
-
the defendant was unequivocally put on notice of the plaintiff’s
intention to press ahead with the application for reconsideration
of
costs based on the first secret offer. Otherwise put, this was an
indication
that, if a settlement offer is unreasonably
refused, then the defendant would be at risk of a subsequent
application for a costs
order on an attorney and client scale based
on the primary secret offer.
[28]
A much more controversial aspect of the present case, which in truth,
as I see it, is the nub
of this case, is the last agreement concluded
between the parties on 14 March 2023, which led to the consent order
of 15 March
2023. The question is what weight should the Court attach
to this. The settlement of R20 million was dealt with in terms of
three
agreements. The first was concluded on 13 February 2023 for R5
100 971. The second on 15 February 2023 for R957 902 which included
the R5 100 971 and the balance on 15 March 2023 which brought the
total claim to R20 million as set out in the consent order.
[29]
The consent order which incorporates the agreement between the
parties specifically decrees that
the plaintiff is entitled to costs
on party and party scale. In
Eke
v Parsons
[11]
it was observed:
“
[31] The effect of
a settlement order is to change the status of the rights and
obligations between the parties. Save for litigation
that may be
consequent upon the nature of the particular order, the order brings
finality to the
lis
between
the parties; the
lis
becomes
res
judicata
(literally,
‘a matter judged’). It changes the terms of a settlement
agreement to an enforceable court order. The type
of enforcement may
be execution or contempt proceedings. Or it may take any other form
permitted by the nature of the order.
That
form may possibly be some litigation the nature of which will be one
step removed from seeking committal for contempt; an example
being
a
mandamus
.”
And Ad para 36:
“
[36] In sum, what
all this means is that even with the possibility of an additional
approach to court, settlements of this nature
do comport with the
efficient use of judicial resources. First, the original underlying
dispute is settled and becomes
res
judicata
.
Second, what litigation there may be after the settlement order will
relate to non-compliance with this order, and not the original
underlying dispute. Third, matters that culminate in litigation that
precedes enforcement are fewer than those that don’t.”
[30]
It is axiomatic that consent orders are products of discussions
between the parties and are not
conceived through a judgment of the
court following consideration of the evidence. The plaintiff argued
that in the context of
this case it was irrelevant that the consent
order followed as it did and not after an independent assessment of
all the evidence
at the end of a trial which ran its full course. The
consent order, so it was argued, did not finally resolve the question
of reconsideration
of costs. The defendant’s stance, on
the obverse of the coin, is that the litigation ended when he finally
agreed to
offer, in full and final settlement of the claim, the
amount of R20 million plus costs in the ordinary cause.
[31]
It is highly contentious whether the plaintiff’s attorneys,
during the final stages of
negotiation, on 14 March 2023, expressed
the view that the plaintiff would persist with her intended
application to seek a reconsideration
of the costs on the basis of
the first secret offer to settle.
It
is trite that an applicant who seeks final relief in motion
proceedings must, where there is a dispute of fact, accept his or
her
opponent’s version unless those allegations are, in the opinion
of the court, not such as to raise a real, genuine or
bona
fide dispute of fact or are so far-fetched or
clearly untenable that the court is justified
in rejecting them
merely on the papers.
[12]
[32]
The plaintiff’s attorney, the deponent to the founding
affidavit, avers that during the
settlement discussions of 14 March
2023 he conveyed to the defendant’s attorney that the plaintiff
would abandon its contemplated
application for reconsideration of the
costs if the defendant was prepared to pay an amount of R21 million.
He stated that the
defendant declined to accept the proposal which
meant that this application would follow. The defendant’s
divergent position
is that there would have been no settlement
reached on 14 March 2023 had the parties agreed that the plaintiff
would still pursue
the reconsideration of costs. The
defendant’s deponent stated that such proposition would have
defeated the purpose
of the settlement of the dispute. In any event,
he intimated, there would have been no reason why the parties would
not have disclosed
the disagreement on costs to the Court as they did
on the question of interest payable on the capital when the consent
order was
issued. In his view, the plaintiff is precluded from
revisiting a settled issue.
[33]
On
the approach I wish to adopt, it is not necessary to determine
whether the dispute is genuine or bona fide. What lies at the
heart
of the application is whether the plaintiff is entitled to invoke
reconsideration of the costs where her claim was settled
by agreement
which included an order of costs. Counsel for the plaintiff referred
me to no less than nine foreign case-law.
Findlay
v Railway Executive
[1950]
2 All ER 969
(CA);
Calderbank v Calderbank
[1975]
3 All ER 333
(CA);
Cutts
v Head
[1983] EWCA Civ 8
;
[1984]
1 All ER 597
(CA);
Singapore
case of
SBS
Transit
Ltd
(formerly known as Singapore Bus Services
Limited
)
v
Koh Swee Ann
[2004]
3 SLR(R) 365;
[2004] SGCA 26
; the Canadian case of
Mosher
v Reimer
2004
ABQB 496
; Supreme Court of Victoria case in
Hazeldene's
Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2)
[2005] VSCA 298
;
13 VR
435
; the Supreme Court of Western Australia in
Mount
Lawley Pty Ltd v Western Australian Planning Commission
[2006] WASC 82
;
and
Atton
v National Mutual Life Association
of
Australasia
(No
2)
[
2007
]
NSWSC
348.
[34]
The above foreign case-law discusses the
Calderbank
principles in the context
of disputes which had been fully adjudicated and judgment given. They
do not directly bear on the question
of reconsideration of the costs
where the claim was settled by agreement which included an order of
costs.
In
Edwards
Madigan Torillo Briggs Pty Ltd v Stack
[2003]
NSWCA 302
(
EMTB
)
the New South Wales Court of Appeal was confronted with a situation
where, following four or five days of the hearing, there had
been
some settlement agreement with a number of defendants. One of the
defendants,
EMTB,
whilst
prepared to have judgment in its favour contended for costs against
the plaintiff on an indemnity basis or alternatively
on party and
party basis. The decision of the trial judge in refusing indemnity
costs in that case was upheld on appeal because
the
Calderbank
offers
had been made at an early stage of a complex litigation and so the
plaintiff had not been afforded a fair opportunity to
consider them.
In addition, the Court reasoned that the 14 days
spatium
deliberandi
provided
for in the offers was much less than that specified in the rules and
therefore unreasonable.
I
have here to do with a wholly different case.
EMTB
was
not concerned, as here, with a case where costs formed part of the
settlement agreement.
[35]
Counsel
for the plaintiff’s submission that the principles which have
been developed concerning rule 34, stretching over many
decades,
serve a useful purpose in reconsidering costs applications, where a
plaintiff’s
Calderbank
offer comes under
scrutiny, is manifestly good. In the context of rule 34 it has
authoritatively been said that w
here
the plaintiff accepts an offer that includes a tender of costs up to
the date when the offer was made, the court has no discretion
to
award the plaintiff further costs incurred after that date.
[13]
In
Erasmus
v Santam Insurance Ltd and Another
[14]
Flemming DJP said:
“
If
an offer is made in settlement of both the claim and costs,
acceptance brings an end to all pre-existing entitlements. The
litigation itself is at an end.”
And at 896D he said:
“
A
third consideration is that settlement has a core of contractual
offer and acceptance. Procedural rules are not the place to qualify
the operation of contractual principles.”
At 898D-E he went on:
“
The
present defendant, in tendering costs to the date of the tender, did
not offer costs incurred at a later date. Nor on any special
basis
such as attorney and client costs, costs of two counsel, or any other
addition to liability for costs which, in the absence
of a
special addition, does not attach to an order for payment of
'costs' or an offer to pay 'costs'.”
[36] In
my view, litigants must be afforded the opportunity to negotiate in
good faith and encouraged to settle
their disputes whenever it is
possible. To ripen into a contract, it is necessary that the offer be
accepted by the offeree.
[15]
There can be no question here that the defendant unequivocally
accepted the last offer that resulted in the consent order. The
principles
adverted to in
Erasmus
v Santam Insurance
(supra),
whilst not directly addressing the Calderbank offer,
apply
equally to the present matter -
acceptance
of an offer encompassing both the claim and costs terminates all
pre-existing entitlements and effectively concludes
the litigation
.
To
my mind, it is impermissible for the plaintiff to now invoke a
Calderbank
offer to seek a special
costs order after the grant of a consent order inclusive of costs.
[37]
Even if I am wrong in concluding as I did, there is another reason
why the application should fail.
In
exercising its discretion on reconsideration of costs a court must
have regard to all relevant considerations which should be
determined
on a casuistic basis.
The
Victorian Court of Appeal in
Hazeldene’s
Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2)
[16]
held that i
t
is neither possible nor desirable to give an exhaustive list of the
relevant circumstances. A court considering a submission
that
the rejection of a Calderbank offer was unreasonable should
ordinarily have regard at least to the following factors –
(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.
[38]
In
Hazeldene’s
(supra)
the VSCA approved what Redlich J said
in
Aljade and MKIC v OCBC
[17]
that
it was not necessary to establish misconduct by the offeree before
the rejection of the offer could be viewed as unreasonable.
The lack
of merit in the manner a party has conducted its case is not a
prerequisite for costs on attorney and client basis to
issue.
It
bears mentioning that t
he
parties critiqued each other’s conduct of the litigation and
some serious aspersions were cast. No worthwhile purpose will
be
served to have regard to the details. It suffices that criticism
levelled were unhelpful to either of the parties’ case.
[39]
As observed by Rogers J i
n
the
AD
matter,
the
commonwealth cases emphasise that a plaintiff who has made such an
offer is not entitled to attorney/client costs merely because
he made
a secret offer which was less than what the court awarded. The court
must consider whether the defendant behaved unreasonably,
and
thus put the plaintiff to unnecessary expense, by not accepting the
offer or making a reasonable counter-offer.
[18]
[40]
To recap, the trial commenced on 13 February 2023 on the question of
quantum because liability
had already been conceded almost five years
prior to the trial. It is common cause that the parties had appointed
various experts.
In particular, the plaintiff engaged no less than 15
experts in various fields and several items had been placed in
dispute. The
claim involved an estimation of what was mostly future
damages. As I see it, due to the intricate nature of the
dispute numerous
offers and counter-offers were inevitable. In fact,
both parties afforded each other the opportunity to make such
counter-offers.
It counts against the plaintiff that the defendant
had in response to the plaintiff’s second secret tender,
offered her R18
932 651.03, sufficiently close to her first secret
offer of R18 950 000. This was rebuffed as the plaintiff had then
offered an
amount of R22 000 000.
[41]
It is a favourable consideration that the trial itself did not run to
its completion in light
of negotiations that went about behind the
scene which resulted in the settlement. Insofar as genuine attempts,
aimed at amicably
resolving the dispute, had been ongoing for quite
some time characterised by various offers and counter-offers, it is
difficult
to discern that one of the parties should be mulcted in
irrecoverable costs. I say this fully appreciative of the hardship
that
may well befall the plaintiff and NM having to bear their own
irrecoverable expenses. However, the plaintiff did not discharge the
onus that rested on her of showing that the rejection of her first
Calderbank
offer was
unreasonable.
[19]
[42]
It can hardly be argued, in my view, that the defendant had failed to
engage or did not respond
constructively to the plaintiff’s
proposals or moved at a glacial pace that is to be frowned upon.
Indeed, the situation
may have been different had the defendant been
rigid and employing dilatory tactics. I am unpersuaded that the
defendant had throughout
the negotiation phase displayed unreasonable
conduct in its independent estimate of the value of the case or
assessment of the
risk as to costs should the litigation ensue to
finality. In the end, the back and forth negotiations yielded
positive results
and stymied what could have been a protracted and
arduous trial. On the aforegoing exposition, the application for
reconsideration
of costs must fail.
[43]
I had been urged to make an attorney and client costs order in the
interest judgment that was
adjudicated separately following the
consent order based on the plaintiff’s first secret offer. The
argument on reconsideration
of costs in respect of the interest
judgment attracts a similar reasoning as in the main application for
reconsideration. It follows
that the argument on costs, in respect of
the interest judgment, must also falter.
[44] On
the question of costs of the reconsideration application, the
defendant urged that they be on a punitive
scale against the
plaintiff because the application constituted an abuse of the court
process. In my view, the plaintiff had an
arguable case and was at
pains to vindicate NM’s right to what she believed to have been
the just and equitable outcome of
the case on costs. To this end, I
am not swayed that her conduct is deserving of censure. Costs shall
follow the result on the
ordinary basis. An order is therefore made.
Order:
1.
The
application for reconsideration of costs is dismissed with costs on
party and party scale.
PHATSHOANE DJP
Appearances:
For
the first plaintiff
Adv
WP De Waal SC (with Adv CH Botha)
Instructed by:
Elliot Maris
Attorneys, Kimberley.
For the first
defendant:
Adv RT Williams SC
(with Adv S Mahomed)
Instructed
by:
Robert Charles
Attorneys & Conveyancers, Kimberley.
[1]
[1975] 3 All ER 333 (CA).
[2]
[1983] EWCA Civ 8
;
[1984] 1 All ER 597
(CA) at 608–609.
[3]
See Article by Benjamin Kasep- (Barrister-at-Law), ‘
Calderbank
Offers’
;
Available at
<https://13wentworth.com.au/wp-content/uploads/2019/01/calderbankoffers.pdf>
and the authorities cited
therein.
[4]
See for example:
AD
& Another v MEC for Health and Social Development, Western Cape
2017
(5) SA 134
(WCC);
Van Reenen v Lewis and
Another
[2019]
JOL 44811
(FB); and
RNT
obo DORM and Another v Amanfo and Another
(2011/1359)
[2024]
ZANWHC 91
(27 March 2024).
[5]
Ibid
paras 42-43 and 60.
[6]
[2001] WASCA 323
para 36.
[7]
Benjamin
Kasep- ‘
Calderbank
Offers’
,
above n 3.
[8]
2016 (3) SA 37
(CC) para 31.
[9]
1978 (1) SA 914 (A).
[10]
AD &
Another v MEC for Health and Social Development, Western Cape,
Above
n 4
.
[11]
2016 (3) SA 37 (CC.
[12]
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984
(3) SA 623
(A)
at
634E – 635C; see also
Wightman
t/a JW Construction v Headfour (Pty) Ltd and Another
[2008] ZASCA 6
;
2008
(3) SA 371
(SCA) at Para 12.
[13]
See Cilliers, Loots and Nel ‘
Herbstein
& Van Winsen-The Civil Practice of the High Courts of South
Africa’
,
5 ed (Juta & Co Ltd, Cape Town 2009). Vol 1 at 627 (
and
the authorities cited therein
).
[14]
1992 (1) SA 893
(W)
at
895H-896.
[15]
Bloom
v The American Swiss Watch Company
1915
AD 100
at 102.
[16]
[2005] VSCA 298; 13 VR 435.
[17]
[2004]
VSC 351.
[18]
AD &
Another v MEC for Health and Social Development, Western Cape,
Above
n 4 at para 61.
[19]
The applicant for indemnity costs bears the onus of showing the
rejection of a
Calderbank
offer was unreasonable.
–
see
Benjamin Kasep-
(Barrister-at-Law), ‘
Calderbank
Offers’
,
above n 3, at p.25E (and authorities cited therein) -
MGICA
(1992) Pty Ltd v Kenny & Good Pty Ltd (
1996)
70 FCR 236
, 240;
Spa
v Downer EDI Rail Pty Ltd
[2007]
NSWSC 1292
, [8] .