Abdi v Abdi

Plaintiff's submissions in relation to costs

1. The plaintiff submits that the usual order for costs (in this case, that Nazih pay the plaintiff's costs on the ordinary basis, as either agreed or assessed) should be modified and that orders should be made as follows: 1. Order that the second defendant [Nazih] pay the plaintiff's costs of the proceedings on the ordinary basis up to and including 24 September 2020; and 2. Order that the second defendant pay the plaintiff's costs, calculated on the indemnity basis, as and from the 25 September 2020.
2. The basis on which that special costs order is sought is the making by the plaintiff (and rejection by Nazih) of an offer sent in a letter dated 24 September 2020 which was expressed to be "[w]ithout prejudice save as to costs" and was addressed to the solicitors for each of the defendants (Nazih and Mahmoud). The letter expressly drew attention to the principles outlined in Calderbank v Calderbank (1975) 3 All ER 333 and foreshadowed that an application for indemnity costs would be made in the event (which has occurred) that the defendants did not achieve a result equivalent to or greater than the offer.
3. The 24 September 2020 Calderbank letter, which was sent six days after an unsuccessful mediation on 18 September 2020, contained a without prejudice offer by the plaintiff to settle the proceeding on the following basis: 1. From the net proceeds of sale of the property at 17 Webb Street, Croydon NSW ("Croydon property"): (a) One third (1/3) shall be paid to the First Defendant, Mahmoud Abdi as he directs; (b) One third (1/3) shall be paid into an account in the name of the Plaintiff, Hanife Abdi; and (c) Of the remaining one third (1/3): (i) One half (1/2) of the one third (1/3) (being one sixth (1/6) of the net proceeds of sale) shall be paid at the direction of the First Defendant (Mahmoud Abdi); (i) One half (1/2) of the one third (1/3) (being one sixth (1/6) of the net proceeds of sale) shall be paid into the account established in accordance with paragraph 1(b) above. 2. Each party shall be liable for their own costs.
4. The plaintiff says that the letter sought to promote a resolution of the proceeding on terms which, had they been accepted, would have placed Nazih in a better position than he ultimately achieved in the litigation (which is clearly the case as he would not then have been exposed to the adverse costs order that has now been made). In the circumstances of the present case, it is submitted that the rejection of the plaintiff's written offer was unreasonable and should, accordingly, sound in an order for indemnity costs.
5. It is accepted by the plaintiff that, to be effective, an offer of compromise (whether under the Uniform Civil Procedure Rules (UCPR) or pursuant to the Calderbank principles) must contain some element of genuine compromise (reference being made to Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) (2006) 67 NSWLR 706; [2006] NSWCA 120 at [8] per Basten JA; Ryde City Council v Tourtouras (No 2) [2007] NSWCA 262 at [4] per the Court). However, the plaintiff notes that a "walk away" offer may in some circumstances constitute a genuine offer of compromise (reference being made to Leichhardt Municipal Council v Green [2004] NSWCA 341 (Leichhardt Municipal Council) at [36]-[37] per Santow JA; DSHE Holdings (Receivers & Managers appointed)(in liq) v Nicholas Abboud (No 4); National Australia Bank Ltd v Nicholas Abboud (No 5) [2022] NSWSC 91 at [47] per Ball J).
6. The plaintiff points out that, in the present case, the Calderbank offer outlined a settlement based upon each party bearing its own costs of the litigation (rather than a situation where the plaintiff would be compensated for some part of the plaintiff's costs thrown away). It is submitted that this represented a genuine offer of compromise. Moreover, the plaintiff emphasises that the plaintiff's offer was not made early in the proceeding (when, arguably, it could be said the defendants were unaware of the case they had to meet); rather, the offer was made after the pleadings had closed; and after the conclusion of the court-ordered private mediation held on 18 September 2020. It is submitted that Nazih was thus in a position to assess the strengths and weaknesses of the case against him and should have accepted the offer (having regard to what the ordinary rule as to costs in the UCPR would otherwise provide in the event of the plaintiff succeeding).
7. The plaintiff submits that the time afforded to Nazih to accept the offer (21 days) in all the circumstances (and especially after the issues canvassed at mediation were fresh in the minds of the parties), gave Nazih a reasonable opportunity to consider the proposed compromise.

Nazih's submissions as to costs

1. Nazih argues that the costs of the proceeding should be paid on the ordinary basis (as proposed in the principal judgment at [196]).
2. Nazih says that he was not the cause of the litigation; and that there was no evidence to suggest that he (Nazih) was "complicit in the decision to record him on the title to the property".
3. It is submitted that the outcome of the litigation imposes a significant burden on Nazih in circumstances where he made financial contributions to his parents which on any view contributed to their ability to purchase the subject property. Moreover, it is said that Nazih is now left with no interest in the proceeds of sale of the property in circumstances where he assumed personal liability under a mortgage executed by him and made contributions to the repayment of the mortgage debt.
4. Nazih says that at the time of service of the Calderbank offer the plaintiff had not filed evidence (that not being done until November 2020) and that all that was available to him was the pleading (although I would interpose to note that Nazih would have been appraised at that stage of the plaintiff's position insofar as it had been outlined at the mediation). Further, Nazih points out that the offer did not identify the quantum of costs incurred up to the date of the offer and that there was no accompanying document identifying the costs incurred by the plaintiff at the date of the offer or any prediction or statement of likely future costs. Thus, it is said that Nazih did not know at the time of the offer the quantum of the plaintiff's costs (and he says that he still does not know the quantum of costs in dispute). It is thus said that the offer was not couched in terms which permitted Nazih to make an informed decision as to whether or not to accept the offer.
5. Nazih says that the factual issues in dispute were complex due to the existence of cultural and language factors; and that the circumstances and nature of the litigation were not so clear cut as at the time of the offer to render it unreasonable for him to reject it. It is said that "[a]fter all, he was but one defendant and he could not be expected to appreciate the difference between a resulting and a constructive trust".
6. Insofar as the plaintiff's submissions on costs allude to the issues canvassed at the mediation, Nazih's position (without Nazih wishing to breach the confidentiality of the mediation) is that the strengths and weaknesses of the case as against him were not fully canvassed at the mediation (and, in any event, he notes again that the plaintiff's evidence was not provided until a further period of two months had passed).
7. It is submitted that, on balance, it was reasonable in all the circumstances for Nazih to reject the offer of compromise.

Determination

1. It is well-recognised that there is a broad discretion as to costs (see s 98 of the Civil Procedure Act 2005 (NSW); Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (Oshlack)) but that it must be exercised judicially (see Oshlack at [22] per Gaudron and Gummow JJ) and having regard to the overriding statutory purpose mandated by s 56 of the Civil Procedure Act. The usual order is that costs follow the event (see r 42.1 of the UCPR); unless the Court considers that some other order ought to be made (see Commonwealth of Australia v Gretton [2008] NSWCA 117 (Commonwealth v Gretton) at [38] per Beazley JA, as Her Excellency then was (with whom Mason P agreed)).
2. The purpose of costs awards is primarily compensatory not punitive (see Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [37] per Gleeson JA, with whom Meagher and Barrett JJA concurred, his Honour there citing Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 542 per Mason CJ; and see also Ohn v Walton (1995) 36 NSWLR 77). The discretion to be exercised in a manner which is primarily directed to the position of the successful party.
3. However, it is also well known that there are circumstances in which special costs orders are warranted. Leaving aside cases of relevant delinquency (see Fountain Selected Meats (Sales) Pty Ltd v Universal Produce Merchants Pty Ltd (1988) 81 ALR 397; [1988] FCA 364; Dunstan v Rickwood (No 2) [2007] NSWCA 266 at [44] per McColl JA), special costs orders are commonly sought where the offer of compromise procedure under the UCPR is validly invoked or where the Calderbank principles are applicable. The public policy underlying the making of special costs orders in such circumstances is the interest in encouraging settlement of litigation and discouraging wasteful and unreasonable behaviour of litigants (see Leichardt Municipal Council; Maitland v Fisher (No 2) (1992) 27 NSWLR 721 at 724 per the Court).
4. In the present case, as noted above, the special costs order that is sought by the plaintiff is put forward by reference to the non-acceptance by Nazih of a without prejudice settlement offer that expressly invoked the Calderbank principles.
5. It was not suggested by Nazih that the offer in the present case was not a valid Calderbank offer. In Whitney v Dream Developments (2013) 84 NSWLR 311; [2013] NSWCA 188 , the Court of Appeal considered what amounts to the essence of a Calderbank, emphasis being placed on whether the offer (or the circumstances in which it was conveyed) indicated the intention that it was to be relied on as to costs if it were to be rejected or not accepted and a judgment more favourable than the offer be achieved (see Bathurst CJ at [42]; Barrett JA similarly at [57]-[59]), it being crucial (in determining whether the offer took effect as a Calderbank offer) to determine the manifested objective intention of the offeror. In the present case, that intention was clearly manifest in the Calderbank offer made to the defendants.
6. It is also necessary, to enliven the discretion to make special costs orders by reference to the rejection of a Calderbank offer, that the offer in question amounts to a genuine offer of compromise (that was it unreasonable for the party against whom the order is sought not to accept) (see the authorities referred to by the plaintiff above; and see also Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 at [4] per Handley, Basten and Beazley JJA; and Hancock v Arnold (No 2) [2009] NSWCA 19 at [23] per Ipp, McColl and Basten JJA).
7. In the present case, the offer in effect required capitulation by Nazih (and, for that matter, Mahmoud), in the sense that the offer required Nazih to accept the plaintiff's claim (although the plaintiff offered to bear its own costs). An offer that invites no more than a capitulation or surrender on the part of a party may well not be found to involve a genuine element of compromise. I consider this aspect of the present offer below.
8. The making of a valid Calderbank offer that is better than the result ultimately obtained at the conclusion of a contested hearing does not automatically result in an indemnity costs order (see Commonwealth v Gretton at [43]), nor does it raise a prima facie presumption that such an order should be made (see SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 (at [37]) per Giles JA; Jones v Bradley (No 2) [2003] NSWCA 258 (Jones v Bradley) at [7]-[9] per Meagher, Beazley and Santow JJA; South Eastern Sydney Area Health Service v King [2006] NSWCA 2 (South Eastern Sydney Area Health Service) at [90] per Hunt AJA; see also Favotto Family Restaurants Pty Ltd v Chief Commissioner of State Revenue (No 2) [2020] NSWSC 519 (Favotto) at [28]; Chief Commissioner of State Revenue v Platinum Investments Management Ltd (No 2) [2011] NSWCA 197 at [9] per Campbell and Macfarlan JJA and Handley AJA.
9. The party seeking the special costs order bears the onus of demonstrating that the rejection of the offer was "unreasonable" in all the circumstances of the case (see Leichhardt Municipal Council at [19]; Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [26] per Giles, Ipp and Tobias JJA).
10. Whether rejection of a Calderbank offer (or other offer of settlement) was unreasonable is an evaluative judgment to be made by reference to the terms of the offer and all the relevant surrounding circumstances (King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No 2) [2009] NSWCA 204 at [11] per Young JA with whom Campbell and Hodgson JJA agreed). It has been said that a finding of unreasonableness should not be made other than on clear grounds (Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 at [113] per Basten JA with whom Giles JA and Young CJ in Eq agreed).
11. The factors to be taken into regard when considering whether the rejection or non-acceptance of the offer was unreasonable (summarised in Favotto at [20]-[30]) include: the stage of the proceeding at which the offer was received; the time allowed to the offeree to consider the offer; the extent of the compromise offered; the offeree's prospects of success assessed as at the date of the offer; the clarity with which the terms of the offer were expressed; and whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it (see Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 at [25] per Warren CJ, Maxwell P and Harper AJA; Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398 at [8] per Buchanan and Tate JJA and Sifris AJA; Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [12] per Basten JA with whom McColl and Campbell JJA agreed).
12. Factors that have been found to be relevant in determining whether the rejection of a Calderbank offer was not unreasonable, and tending against such finding, have included: all relevant evidence not having been served at the time of the offer (Vale v Eggins (No 2) [2007] NSWCA 12 at [22] per Beazley JA); the full parameters of the dispute remaining uncertain at the time of the offer (Precision Products (NSW) Pty Ltd v Hawkesbury City Council (2008) 74 NSWLR 102; [2008] NSWCA 278 at [192] per Allsop P with whom Beazley and McColl JJA agreed); the offeror's case changing after the making of the offer (South Eastern Sydney Area Health Service at [85] per Hunt AJA); the inclusion of conditions in the offer (Magenta Nominees Pty Ltd v Richard Ellis (WA) Pty Ltd (unreported, FCAFC, Spender, French and Lee JJ, 29 August 1995); and the issues in dispute in the proceedings being complex (MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 at 242D per Lindgren J). (Other than the first, it is difficult to see that any of these factors is here applicable.)
13. Turning to the kinds of considerations referred to above that are relevant in determining whether the rejection of the plaintiff's offer was unreasonable in the present case, I note as follows.
14. The offer was made (as Nazih emphasises) before the evidence was served. However, it was made after a mediation at which one would expect that the respective parties' positions were outlined in sufficient detail to enable the parties to assess to the strengths and weaknesses of the opposing cases (particularly having regard to the ordinary obligation of good faith that parties owe in participation in such a mediation). Insofar as Nazih here says that the summary of strengths and weaknesses were not fully canvassed at the mediation, it is impossible for me to assess this in the absence (for obvious reasons) of evidence as to what transpired at the mediation. Moreover, the central issue in dispute related to the circumstances in which Nazih's name was recorded on the title to the Croydon property (and conversations with family members as to the position in the years that followed as to the interests held in the property). To the extent that Nazih was a party to those conversations and events, he must have known what his evidence would be; and, having regard to the evidence that emerged at the hearing, it seems apparent that he was also aware of the competing position taken by his siblings on the issue of his ownership of the Croydon property. Therefore, the fact that the Calderbank offer was made before the filing of evidence is not necessarily a strong factor pointing against a finding of unreasonableness in the present case.
15. As to the time allowed to consider the offer (21 days) that seems to me to have afforded a sufficient opportunity for Nazih to consider the offer (particularly having regard to the fact that the offer was made after the parties had participated in a mediation).
16. As to whether the offer comprised a genuine element of compromise (and the extent of that compromise), as adverted to above the offer was in essence a "walk away" offer, requiring Nazih to accept the plaintiff's case. Further, while the giving up of a claim for costs by the plaintiff is in my opinion capable of amounting to a genuine compromise, the extent of that compromise is not readily ascertainable in the absence of evidence as to the level of costs that had by then been incurred by the plaintiff. A "walk away" offer may be recognised as involving a significant element of comprise where the costs incurred can be seen as undoubtedly or objectively substantial, for example in light of the volume of affidavit and expert evidence prepared (see Taheri v Vitek (No 2) [2014] NSWCA 344 at [9]-[14] per Bathurst CJ, Emmett and Leeming JJA; Port Kembla Coal Terminal Ltd v Construction Forestry Mining and Energy Union (New South Wales Branch) (No 2) (2014) 88 NSWLR 471; [2014] NSWIC 3 at [43], [49]-[50] per Walton J, President, Staff J and Boland AJ). However, it follows that offers made when a proceeding is at an early stage of preparation are not likely meet this threshold (see, for example, Owners - Strata Plan No 87265 v SAAIB (No 2) [2021] NSWSC 394 at [37]-[39] per Henry J). Given that in the present case the offer was made before the filing of evidence, it may have been reasonable at the time to have concluded that the costs incurred to that point by the plaintiff were not necessarily of a substantial nature. Of course, it must also be noted that it would have been open to Nazih to seek information as to the extent of the costs incurred at that time had he wished to explore acceptance of the offer.
17. As to the prospects of success of the plaintiff's claim assessed at the date of the offer, the difficulty here is that, in essence, the prospects of success depended largely on an assessment of which version of competing accounts of conversations between family members should be accepted, those conversations going back quite some years. The assessment of prospects of such a claim would necessarily be difficult. While there was ultimately an obvious inconsistency in some of the defendants' accounts of the events (such as in relation to whether Nazih was an investment partner of Mahmoud or had an interest that should be compensated in some fashion) and issues arose as to the handwritten addition to the statutory declaration which had been made by Mahmoud, until the evidence was filed (and tested) the extent to which there was cause for doubt as to the prospects of the claim is moot.
18. As to the clarity of the offer, with one qualification that I refer to below, I consider that the offer was expressed with sufficient clarity.
19. Finally, as to the foreshadowed consequences of rejection of the offer in terms of a costs application if the offer was not bettered by the judgment, these were made abundantly clear in the offer.
20. As to the matters raised by Nazih in his submissions, I make the following observations.
21. Nazih maintains that he was not the "cause" of the litigation. I accept that he was certainly not the moving party (he being a defendant to the claim). However, Nazih chose to defend the proceeding and maintained throughout that he had an entitlement to a one-third interest in the Croydon property. Hence, the submission that Nazih was not "complicit" in the decision to put his name on the title is difficult to understand. Nazih's position was that he held his one-third share of the title in his own right beneficially and the evidence put forward by Nazih was that he agreed to have his name recorded on the title (indeed his own evidence was that this was an investment in partnership with Mahmoud and he maintained that he had in fact contributed half the money for the acquisition and would have been entitled to a half interest in the Croydon property). There can be no suggestion that his name was somehow unknowingly recorded on the title.
22. As to the submission that the outcome of the litigation imposes a significant burden on Nazih, or is in some way unfair to him because he made financial contributions to the property, this is not a factor that points to the reasonableness or unreasonableness of rejecting the offer. An unsuccessful party in litigation will not uncommonly be in the position that the result is disadvantageous financially to him or her. There is no evidence of any particular hardship (nor would that in my view be relevant to the reasonableness or unreasonableness of rejection of the offer at the time). Nazih's contribution to mortgage payments (which was for a limited time and seems to have been in the context of contributions to the family expenses while he was living in the Croydon property) was a matter considered in the principal judgment but again I cannot see how it affects the reasonableness or otherwise of rejecting the offer. Moreover, I note that Nazih's contributions seem to have been the basis for Mahmoud's stated desire to leave Nazih an additional amount out of Mahmoud's share of the Croydon property or proceeds of sale (which, if adhered to by Mahmoud, may well in future provide some compensation for Nazih's past expenditure).
23. I have already addressed the submission that there was no evidence filed at the time of the offer; and that the offer did not make clear the extent of the costs that the plaintiff was offering to forego. The inability for me to make any assessment as to what occurred at the mediation means that the submission made by Nazih in relation thereto goes nowhere.
24. As to the submission that the factual issues in dispute were more complex due to the existence of cultural and language factors, the cultural factors did not feature in the issues for determination (the most that might be said is that Nazih appears to have been concerned not to displease Mahmoud out of respect for the latter's position as head of the household) and the language difficulty says nothing about the reasonableness or otherwise of not accepting the offer that was made (there was no suggestion that Nazih or his lawyers had any difficulty in understanding an offer made in English; nor did the language difficulties have any perceivable impact on the conduct of the trial). As to the submission that Nazih could not be expected to know the difference between a resulting and constructive trust, such a submission ignores the fact that Nazih had the benefit of legal advice; and I would have expected his legal advisers to have been capable of explaining to him in simple language the issues confronting him in the litigation.
25. One matter not clearly (but perhaps obliquely) raised by Nazih in submissions is that introduced by the reference by him to the fact that he was but one defendant. This was an offer made to both defendants and it would appear from its terms that it was intended that it could only be accepted by both of the defendants (i.e., not by one alone). Arguably, Nazih could have accepted an offer whereby he agreed to hold his share of the proceeds on trust for Hanife and Mahmoud as tenants in equal shares without Mahmoud's assent to such a course of action. However, the offer contemplated that Mahmoud would give directions as to his share of the proceeds and, more problematic in this context, it was a term of the offer that each party pay its own costs. Therefore, it seems on its face that it was not intended that it would be open to Nazih to accept the offer if Mahmoud did not also accept it (conversely, if acceptance by one but not the other was contemplated, then this suggests that the offer was not expressed with sufficient clarity, hence the qualification I made above). This illustrates the difficulty with the making of offers of compromise to joint defendants (see, for example, as in Bassett v Cameron (No 2) [2021] NSWSC 419, though there I considered that the offers were capable of acceptance by one and not another party).
26. On balance, taking into account the above factors, and in particular that this was a walk away offer in respect of which the extent of the compromise was not known (due to the lack of information as to the quantum of costs being offered to be foregone); and that it was made jointly to two defendants (one of whom - Mahmoud - had adopted an adamant stance in the proceeding, which Nazih may well not reasonably have been able to withstand) and apparently only able to be accepted by both; I have concluded that it was not unreasonable for Nazih to reject the offer at the time it was made. Accordingly, the order made as to costs at the time of publication of the principal judgment will stand and it is not necessary to make any further order as to costs. This will thus now dispose of the proceeding.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 May 2022