IN THE SUPREME COURT OF VICTORIA	Not Restricted	
AT MELBOURNE
COMMON LAW DIVISION
PERSONAL INJURIES LIST
 S CI 2017 00515

LINA DI FALCO	Plaintiff	
		
v		
		
EMIRATES	Defendant	

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JUDGE:	FORBES J	
WHERE HELD:	Melbourne	
DATES OF HEARING:	11-14 June, 16 July 2019	
DATE OF JUDGMENT:	15 October 2019	
CASE MAY BE CITED AS:	Di Falco v Emirates (Ruling No 3 – Costs ruling)	
MEDIUM NEUTRAL CITATION:	[2019] VSC 732	

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COSTS – Offer of compromise – Calderbank letter – Whether to order special costs order on indemnity basis – Whether rejection of offer of compromise and Calderbank offer by plaintiff was ‘unreasonable’ – plaintiff’s rejection of offer not unreasonable, Supreme Court (General Civil Procedure) Rules 2015, O 63, r 26.08(4).

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APPEARANCES:
	Counsel	Solicitors	
For the Plaintiff	No appearance	Arnold Thomas & Becker	
			
For the Defendant	No appearance	Clyde & Co	

HER HONOUR:
1	On 15 October 2019 when I published reasons dismissing the claim made by the plaintiff for damages pursuant to s 9 Civil Aviation (Carriers’ Liability) Act 1959 (Cth), the parties sought time to make submissions on the appropriate costs orders. I have received submissions from the defendant dated 17 October 2019 as to the costs orders that it seeks and on 29 October 2019 the plaintiff notified the Court that she did not intend to provide submissions.   
2	The Court has power to award costs in the exercise of a general discretion pursuant to Order 63 of the Supreme Court (General Civil Procedure) Rules 2015 (the ‘Rules’).  The defendant submits that I should order that the plaintiff pay its costs consistent with the practice that the successful litigant ought recover its costs.  The purpose of such an order in favour of a successful party is to compensate it for the expense incurred in conducting the litigation, not to penalise an unsuccessful litigant.  No reason has been advanced why this usual practice of costs following the event should be departed from in this case. 
3	The further issue for consideration is whether or not I should make a special costs order for payment of costs calculated on an indemnity basis because of an Offer of Compromise under r 26.08 of the Rules and a Calderbank letter.  Both of which were dated 6 March 2019 and served by the defendant. 
4	The two offers were in identical terms.  Each invited the plaintiff to withdraw her claim on the basis that each party bear their own legal costs.  The Calderbank letter set out argument as to why the defendant believed that the plaintiff would not establish that an accident had occurred within the meaning of Article 17 of the Montreal Convention 1999.  It asserted that the plaintiff’s claim was bound to fail. 
5	The consequences of rejection of the offers are different.  However, as explained below, both raise considerations as to whether or not the plaintiff’s rejection of the offer was ‘unreasonable’.
6	Order 26 of the Rules provides for parties to make offers of compromise.  Rule 26.08 governs the costs consequences that flow from such offers.  Those costs consequences vary depending on whether the offer is one relied on by a plaintiff or defendant and whether the outcome is more or less favourable than the offer of compromise that was made.  In each circumstance rule 26.08 provides for an entitlement to costs on a particular basis, ‘unless the Court otherwise orders.’  The rule therefore provides a presumption in favour of indemnity costs for a plaintiff from the date of an offer of compromise rejected by a defendant.  Where a defendant relies on an offer of compromise and a plaintiff wins but achieves a lesser outcome, then costs are still awarded on a standard basis but the plaintiff pays the defendant’s costs from the date of the offer that was rejected. In each case the presumption as to entitlement can be displaced in the discretion of the Court.  
7	In circumstances, as here, where the plaintiff has not succeeded the applicable rule is 26.08(4) which provides: 
Where an offer of compromise is made by a defendant and the plaintiff unreasonably fails to accept the offer and the claim to which the offer relates is dismissed or judgment on the claim is entered in favour of the defendant, then unless the court otherwise orders – 
(a)	the defendant shall be entitled to an order against the plaintiff for the defendant’s costs in respect of the claim until 11.00am on the second business day after the offer was made, taxed on the ordinarily applicable basis; and
(b) 	the defendant shall be entitled to an order against the plaintiff in respect of the defendant’s costs after the time referred to in paragraph (a) taxed on an indemnity basis.
Unlike the other situations set out in r 26.08, where a plaintiff loses, the costs consequences of a defendant’s offer of compromise are qualified by the failure to accept the offer being ‘unreasonable’.  In considering whether the failure to accept was ‘unreasonable’ factors relevant to assessing reasonableness in relation to Calderbank offers are applicable to an offer of compromise.
8	The general principles applicable where a party rejects a Calderbank offer, enlivening the issue of whether or not to order indemnity costs are set out in Hazeldene Chicken Farms Pty Ltd v Victorian Workcover Authority (No 2).  First, unlike offers of compromise under the rules, Calderbank offers carry no presumption that rejection leads to a special costs order.  Rather, the rejection of a Calderbank offer is a matter to which the Court has regard in determining whether it is appropriate to depart from the ordinary rules as to costs. 
9	Consideration of the appropriate costs order weighs a number of considerations:  the policy considerations of private and public costs savings by encouragement of early and realistic assessments of claims, the greater indemnification of plaintiffs put to additional expense by a defendant’s refusal of a reasonable offer made and the equally important but competing consideration that potential litigants not be discouraged from bringing their disputes before the court.
10	The test of unreasonable rejection is directed at accommodating these various considerations.  As the Court said: 
Of course deciding whether conduct is “reasonable” or “unreasonable” will always involve matters of judgment and impression. These are questions about which different judges might properly arrive at different conclusions. 
…a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters: 
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.  
11	The defendant accepts that it bears the onus of demonstrating the plaintiff’s unreasonableness in relation to the Calderbank offer and the Offer of Compromise. 
12	The offers were made after the conclusion of discovery and interrogatories and after  determination of the preliminary point of application of the ‘significant injury’ provisions of the Wrongs Act 1958 (Vic).  The wording of the offers was clear and there was no issue regarding the time allowed for consideration.  The Calderbank letter foreshadowed that indemnity costs or alternatively solicitor/client costs would be applied for.  The crucial issues for consideration are the prospects of success on what was known at March 2019 and the extent of the compromise offered by the defendant.
13	The defendant’s argument as outlined in its Calderbank letter and in the submissions filed in support of its costs application was that the plaintiff’s claim was ‘bound to fail’ as she could not demonstrate that an ‘accident’ as defined had occurred.  It argued that the claim failed to articulate the cornerstone ‘accident’ as required by the Convention in pleadings until such time as the joint memorandum was filed shortly prior to trial.  
14	The pleaded claim from commencement identified liability under the Carriers’ Act and Montreal Convention.  While it initially pleaded provisions relevant to an incorrectly referenced Montreal Convention, it was abundantly clear that the plaintiff sought to prosecute a convention claim notwithstanding that the pleadings in part suggested action by the airline more akin to a breach of duty of care.  I do not accept the argument that the plaintiff failed to articulate her claim and that this failure demonstrated a fundamental flaw.  
15	First, the defendant was under no misapprehension of how the plaintiff put her case. In its Calderbank letter the defendant referred to the circumstances surrounding the requests for water and stated ‘To the extent that the plaintiff suggests that Emirates’ cabin crew members blatantly refused to serve her with water despite her alleged complaints of feeling sick / unwell, Emirates strongly denies her version of events and will put it to proof……’.  At this time Emirates had sworn answers of the plaintiff as to the circumstances of her requests for water.
16	Second, the law clearly provides that in certain circumstances a refusal or an omission by airline staff can amount to an accident as defined.  Whether, in this case as in every case,  there was such an omission or refusal that met this test was a question of fact.  Assessing the prospects of success as at March 2019, the plaintiff had available to her the sworn answers to interrogatories of the defendant.  Those answers were affirmed on 6 November 2017 by a customer affairs officer who was not ultimately a witness at trial.  He deposed that standard operating procedure was for cabin crew to fulfil all passenger requests for water whether during full meal service or ‘WeCare’ cycles or otherwise and that the practice was to provide water and/or refreshments to passengers on demand and/or direct passengers to galley areas or water fountains.  If at trial the evidence was that passengers were always provided with water on demand as deposed to in the interrogatories, then the plaintiff’s case was at least arguable.  
17	The evidence at trial was more qualified, and perhaps more realistic, than the sworn interrogatories. It allowed that competing priorities of staff meant that not all requests were met on demand and that requests would on occasion be deferred.  Emirates led evidence at variance from that provided in its answers, that passengers were only directed to drinking fountains or galley areas if they made a specific request to get water for themselves but not generally directed as a matter of standard practice. 
18	In those circumstances, assessing whether or not the plaintiff could establish an accident while still difficult, in light of the Emirates sworn evidence to that point, was at least arguable.  
19	The question of reasonableness is not limited by the fact that ultimately the plaintiff did not establish liability. If so being wrong in judgment about one aspect of the case would almost always be seen to equate to an unreasonable rejection with hindsight.  Consideration of any offer must be holistic. It must reasonably consider prospects of success that encompass both liability and causation as well as the potential quantum of the claim.  This case was contested not just on the question of whether the plaintiff could establish ‘an accident’ had occurred.  Emirates also disputed that dehydration was a cause of the fall and injury and contested quantum.  The plaintiff satisfied me that dehydration was a cause of her fall and injury.  The quantum of pain and suffering damages suggested by Emirates as appropriate should the plaintiff establish a liability was in the sum of $100,000 to $150,000.  The plaintiff suggested a figure of $300,000. On any view, the injury and the potential for an award of damages was significant.  Weighing the potential of a claim is part of the assessment of the extent of the compromise.  
20	It is relevant, given the parties views about the potential quantum of the claim, that the defendant made no offer of damages.  It was, in my view, properly characterized as an ‘invitation to capitulate’, made with the escalation of costs emphasized and the foreshadowing of an indemnity costs application. It is rather a re-statement of the outcome that it contends the Court should arrive at made for the purpose of seeking a cost advantage.  I have regard for the purpose of special costs orders; being to encourage the timely and realistic assessment of claims and the risks associated with litigating them, and being particularly mindful of the comments of Redlich J that special costs orders not discourage litigants from bringing disputes to the courts.  I am not satisfied that the plaintiff’s rejection of the offer to withdraw her claim in consideration of being relieved of the potential burden of paying the defendant’s legal costs was unreasonable.  
21	Therefore, the Calderbank offer in my view does not warrant a special costs order in favour of the defendant.  In relation to the Offer of Compromise, the defendant having failed to establish that the failure to accept the offer was unreasonable, r 26.08(4) has no application. 
22	In accordance with these reasons I will order that the plaintiff pay the defendant’s costs, including reserved costs, on a standard basis to be assessed in default of agreement.  I will otherwise order the proceeding be dismissed.