Unbettered Calderbank offer gives rise to no presumption of solicitor-client costs

Stipanov v GCFM [2006] VSC 258, in which a professional negligence claim against a solicitor failed on causation, was posted on here. The costs decision, Stipanov v GCFM (No. 2) [2006] VSC 424 has only recently come to my attention. Despite the complete failure of the plaintiff’s claim and an early substantial offer from the defendant which had gone unaccepted, the defendant was awarded costs only on a party and party basis. I think it is a curious decision for two reasons.

First, the Supreme Court interpreted the rules relating to rules of court offers of compromise as not applying to the case where a plaintiff loses altogether as opposed to the case where the plaintiff wins but gets less than what was offered, and reasoned according to the principles applicable to Calderbank offers of compromise. Calderbank offers are those not made under the procedure specifically provided by the rules of court, but made by a letter headed “Without prejudice save as to costs”. (The Court held, in this regard, that there is ‘no rule, predisposition, presumption or guideline to the effect that a failure to obtain a judgment more favourable than a rejected Calderbank offer will, in the absence of persuasion to the contrary, lead to a special costs order.’ That proposition would come as a shock to most solicitors, but it comes from a thorough decision of Justice Redlich in Richfield Investments Pty Ltd v Oversea–Chinese Banking Corporation Ltd [2004] VSC 351.)

Second, despite having canned the reliability of the plaintiff and the honesty of her solicitor husband in the principal judgment, the Court decided that it was not unreasonable for the plaintiff to have rejected a substantial offer made early in the proceedings for the following reason:

’20 There is a particular danger in considering issues of witness credibility through the prism of hindsight. In my earlier reasons for decision, I explained why I could not accept the reliability or accuracy of much of what Ms Stipanov said, and why I formed such an adverse view as to [her husband’s] credibility. But these conclusions were only arrived at after hearing evidence over several weeks. It can be very difficult to predict how a particular witness will perform under the pressures of giving evidence in court, or may be perceived by an unknown judge.’

The witnesses whose performance in court had to be predicted were the very person who had to decide whether to accept the offer — the plaintiff — and her husband. The plaintiff must have known that she had psychological problems which distorted her reality. That is what she said at trial, and there is no suggestion that the realisation that she had such problems suddenly came upon her at trial. Given the centrality of the solicitor husband’s false testimony to her case, the plaintiff presumably knew he was going to give the evidence he did. It is inconceivable that the Court is to be understood to have meant that the plaintiff should not be penalised for not accepting the offer because she could not predict very well at that early stage how her evidence was likely to be received given her distorted sense of reality, or whether her husband’s implausible evidence would be believed. Let’s face it: the husband’s evidence was probably implausible because it was untrue. If it was untrue, presumably the plaintiff knew it to be untrue. But the other explanation tends to suggest that the Court conceived of the plaintiff’s solicitors rather than the plaintiff herself as the persons whose ability to predict the outcome of the trial was relevant. To understand what I am saying, it is necessary to consider the conclusions about the witnesses made by the Court at first instance:

’94 … the relevant events occurred some 8 or so years before the trial. It is not uncommon for witnesses to experience problems recalling the details of conversations and events after such a period of time. However, the problems in respect of Ms Stipanov and her husband went beyond those sorts of problems.

95 I have no doubt that Ms Stipanov found the experience of giving evidence terribly stressful. She complained of problems focussing on what was being asked of her. Her answers were frequently non-responsive and rambling. On other occasions her answers were vague or self-contradictory to such a degree that it was difficult to know just what she was saying had happened. I am not able to say to what extent these difficulties were due to her psychological problems, which are said to include anxiety, poor concentration, sleep problems, agoraphobia and “distortions of reality”. I did not form the impression that Ms Stipanov deliberately lied in court, notwithstanding that what happened in relation to the part-time work request form did not reflect well on her credit[3]. Nevertheless, for the reasons already given, I have serious doubts about the reliability and accuracy of much of her evidence.

96 [Ms Stipanov’s husband] was in a different position. He is a qualified solicitor, although with no professional experience in personal injury litigation. An obviously intelligent man, he displayed no trouble understanding questions asked of him. Faced with difficult questions which presented a problem for his wife’s case, some of his answers were evasive or non-responsive or argumentative. His apparent preparedness to say what would best advance his wife’s case also led him at times into giving evidence which I found simply implausible. His smirking response, when asked about his wife’s dishonesty in respect of the part-time work request form, also did no great favour to his own credit.’

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