Solicitors:
John Stomo (Plaintiff)
File Number(s): 2018/305373
[2]
Judgment
HIS HONOUR: By amended summons filed in December 2019, the plaintiff sought orders to reduce damages awarded against him by the NSW Civil and Administrative Tribunal (NCAT), both at first instance and through an Appeal Panel. The application for judicial review was a difficult one in which to suceed, at least on a preliminary view of the Court on reading the papers.
There was a change in solicitor on or about 6 December 2018, representing the plaintiff, and, when the proceedings were before the Court for hearing, on 22 February 2019, the legal representative of the plaintiff sought leave to withdraw the application for judicial review. The application for leave to withdraw was not opposed and leave was granted. The only outstanding issue was the question of costs.
The issue of costs has been dealt with on the papers, including an affidavit filed for the plaintiff, of Natasha Joukahdar, sworn 27 February, 2019. The effect of the affidavit is that a letter, purportedly containing a Calderbank offer was sent to the plaintiff on 1 February 2019, remaining open until 8 February 2019.
The defendants rely upon the Calderbank letter to seek their primary remedy which is the payment by the plaintiff of the defendants' costs on an indemnity basis on and from 8 February 2019. Otherwise, the cost would be on the ordinary basis.
The plaintiff does not oppose costs on an ordinary basis, but does oppose the costs on an indemnity basis.
The letter, dated 1 February 2019, from the solicitors then acting for the defendants to the plaintiff, personally, on the basis that the solicitor for the plaintiff had indicated, on at least two occasions, that he no longer acted for the plaintiff, was an offer that expressly sought to rely upon the principles in Calderbank v Calderbank (1975) 3 All ER 833 as explained in Messiter v Hutchinson (1987) 10 NSWLR 525. It also warned that failure to accept the offer would, in circumstances where the defendants achieved an outcome materially better than the terms of the offer, result in the defendants seeking costs on an indemnity basis.
The offer was in or to the following effect:
1. The plaintiff withdraw the Supreme Court proceedings within five business days of the written acceptance of the offer;
2. Each party bear his or her own costs of the Supreme Court appeal.
The offer was not accepted, during the time that it was open and the proceedings were withdrawn, as earlier stated, at the hearing on 22 February 2019 (approximately one year later).
[3]
The substantive proceedings
As earlier stated, the substantive proceedings sought judicial review of a single judgment and/or an Appeal Panel decision of NCAT, or more correctly seeking leave to appeal. The grounds of appeal involved an assertion that there was no evidence to support one at least of the Appeal Panel's findings; that it took into account irrelevant considerations and other such grounds (appeal grounds 1 to 6).
There were five further grounds of appeal that were to the effect of: that identification of the wrong issue or asking the wrong question; the reversal of the onus of proof; the wrong question being asked in relation to another issue of fact; a lack of evidence in relation to the question of whether further works were ameliorative of the damages payable; procedural fairness; and the failure to consider a fourth ground of appeal relating to an expert report.
It is unnecessary and quite inappropriate for the Court to discuss, at length, the merits or otherwise of the grounds of appeal. However, as earlier stated, given the factual nature of the decision on damages, which was the major aspect of the appeal, and the terms of the reasons for each decision the application for leave to appeal and/or judicial review had difficulties.
Nevertheless, the nature of the appeal and the timing of its withdrawal occasioned significant costs associated with the substantive appeal. Written submissions had been filed in relation to the appeal and the matter was listed for, and from the defendant's perspective ready for, hearing.
[4]
Principles on costs and Calderbank offer
The starting point for any analysis of the issues of costs must be s 98 of the Civil Procedure Act 2005 (NSW) which grants to courts to which the Act applies the discretion to award costs and the full power to determine by whom and to whom, to what extent costs are to be paid. Further, by the provisions of s 98(1)(c) of the Act, the Court may award costs either on an ordinary basis or an indemnity basis. The foregoing provision does not restrict the discretion of the Court, otherwise available, to award costs on a different basis completely.
With the exception of superior courts of record with general jurisdiction, the awarding of costs is a statutory entitlement. The source of the discretion is, for present purposes, irrelevant. The discretion to award costs must be exercised judicially and costs are not a punishment but part of the process by which the successful party is compensated for the successful enforcement or defence of that party's legal rights and entitlements: Oshlack v Richmond River Council (1998) 193 CLR 22; [1998] HCA 11; Ohn v Walton (1995) 36 NSWLR 77.
As indicated earlier, the usual order is that the unsuccessful party pays the cost incurred by the successful party on "the ordinary basis". This question, of course, is governed by the operation of the Uniform Civil Procedure Rules 2005 (UCPR), and in particular Part 42. The UCPR sets out a prescribed method for making an Offer of Compromise under the rules. In this case, the defendants did not seek to make an Offer of Compromise as prescribed by the Rules, but, instead, sought to utilise the principles as to costs associated with the judgment in Calderbank, supra.
There are two fundamental issues, in the Court exercising jurisdiction, in relation to a Calderbank letter. First, the offer must be shown to have been a genuine offer of compromise: Leichardt Municipal Council v Green [2004] NSWCA 341 at [21]-[24], [36]; Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 at [4]-[5], Bartlett v Coomber (No 2) [2008] NSWCA 282.
Secondly, it must be demonstrated, by the applicant for indemnity costs relying upon the Calderbank principles, that the rejection of the offer by the other party was "unreasonable": Ofria v Cameron (No 2) [2008] NSWCA 242 at [20]; County Securities Pty Limited v Challenger Group Holdings Pty Limited (No 2) [2008] NSWCA 273 at [31]-[33].
The principles have been set out, as has the underlying purpose for the principles in Calderbank offers, by the defendants in their written submissions, to which principles the plaintiff has agreed. Ultimately, in a matter such as this, the fundamental issue is whether the offer of compromise is genuine.
This was an offer to "walk away" from the proceedings and the question always arises whether such an offer is a genuine attempt to reach a negotiated settlement or is being used as a trigger to invoke cost sanctions, should the offer be rejected and the outcome be one that is equal to or better than the proposal: Leichardt Municipal Council v Green, supra, at [39].
It is for the Court to evaluate whether the offer, in this instance, is a genuine offer or one put forward merely to invoke a cost sanction, should the defendants have been successful. The evaluation of that question is not done with the benefit of hindsight but, rather, at the time that the offer was made. Further, as suggested, extra-curially, in a paper by the then President of the Court of Appeal, Justice Beazley, the time during which the offer is left open may point to whether the offer is a genuine one.
[5]
Consideration
The evaluation of whether this is a genuine offer of compromise must take into account the circumstances in which the offer was made. This was an appeal to the Supreme Court from NCAT. NCAT had determined, both at first instance and on appeal, the merits of the proceedings and had, itself, awarded indemnity costs for reasons which are irrelevant to the current issue. Further, as already noted, there were significant difficulties with successfully challenging the decisions of NCAT, in circumstances where they were largely decisions of fact (albeit challenged on the basis of alleged principles of law).
Further again, at the time that the offer was made, it was made directly to the plaintiff and not to his legal representatives (as, it seems, at the time he had none). That also was a factor to be borne in mind in evaluating whether the offer was a genuine one. In the absence of legal representation, it would have been difficult for the plaintiff to assess properly the nature and effect of the offer and the merits of his application for leave to appeal and/or judicial review. The letter containing the Calderbank offer is, as earlier stated, dated 1 February 2019 and was made at a time when the defendants were made aware that there was no legal representation presently advising the plaintiff and only 2 to 3 weeks before the hearing.
Nevertheless, the plaintiff did relatively urgently require legal representation and could have engaged his replacement solicitors at a point in time that allowed him to receive advice as to the merits of his application and the full circumstances and consequences of the offer. Ultimately, I do not consider that the absence of legal representation at the point where the Calderbank offer was made is decisive of the issue.
At the time that the offer was made, when the plaintiff had filed and served six volumes of material (albeit much of it irrelevant) and should, at a point in time three weeks (two weeks if one takes the end of the period during which the offer was open) before the hearing, be in a position to assess the merits of the appeal and that which was to occur at the hearing.
The fundamental question is whether the "walk away" offer was an offer of compromise, genuinely made. Did it involve a compromise? It certainly seeks for the plaintiff to withdraw the proceedings and walk away from the appeal. Of itself, that does not require a determination that the offer was one of total capitulation or not one that genuinely proposed a compromise.
Given the nature of the appeal proceedings and the internal appeal that had been already determined in NCAT, it seems, particularly because the difficulties with the appeal were identified, albeit globally, in the letter of 1 February 2019, that the offer was a genuine compromise that was sought to be effected and would have saved the plaintiff some significant costs (even on a party-party basis).
In all the circumstances, it seems appropriate compensation to the defendants is to award indemnity costs based upon the Calderbank offer of 1 February 2019. Certainly such a course implements the purpose of encouraging the promotion of the settlement of disputes.
More importantly, it represented a proposal by the defendants in the proceedings that they would forego costs orders to which they would otherwise be entitled, which, of itself, may be significant in the proceedings. This was done in the context of a total vindication by NCAT of the defendants' rights in the applications before it and immediately prior to the time when written submissions would have been required.
The Court makes the following order:
1. The plaintiff shall pay the defendants' costs of the proceedings on an ordinary basis, as agreed or assessed, up to and including 8 February 2019;
2. The plaintiff shall pay the defendants' costs of the proceedings on an indemnity basis, as agreed or assessed, on and from 9 February 2019.
[6]
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Decision last updated: 03 January 2020