Barecall Pty Ltd v Hoban & Ors

CATCHWORDS: COSTS - indemnity costs - offer of compromise - reasonableness of rejection

LEGISLATION CITED: Uniform Civil Procedures Rules 2005, r 20.26 (2)

CASES CITED: Barecall Pty Ltd v Hoban [2010] NSWCA 269

Barecall Pty Limited ACN 060 527 095 (Appellant) David Hoban (First Respondent) PARTIES: Deon Russell Harvey (Second Respondent) Anthony Rossi (Third Respondent) Radoslav Spadina (Fourth Respondent) Jason Lussick (Fifth Respondent)

Mr D E Baran (Appellant) COUNSEL: Mr G Blank (First Respondent) Mr M Evans with Ms C Sclavos (Second, Third & Fifth Respondents)

Schreuder Partners Lawyers (Appellant) Goodman Law (First Respondent) SOLICITORS: Lathams Lawyers (Second & Third Respondents) In Person (Fourth Respondent) Medcalf Grant Lawyers (Fifth Respondent)

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT DATE OF DECISION: 16 October 2009

LOWER COURT MEDIUM NEUTRAL CITATION: Barecall Pty Limited v Hoban [2009] NSWSC 1104

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 2006/257180

ALLSOP P MACFARLAN JA HANDLEY AJA

Friday 12 November 2010 BARECALL PTY LTD v HOBAN & ORS (No 2) Judgment 1 ALLSOP P: On 12 October 2010 the Court made orders dismissing the appeal, subject to dealing with the matter of costs, both below and on appeal: Barecall Pty Ltd v Hoban [2010] NSWCA 269. 2 The parties had not provided the Court with relevant material with which to deal with the arguments of the appellant on the primary judge's costs orders. The primary judge made orders for indemnity costs in favour of the first to third and fifth defendants. Her Honour's reasons of 3 December 2009 set out why she refused to award indemnity costs from the commencement of the proceedings, and why she awarded indemnity costs from 1 November 2007 in relation to the fifth defendant and from February 2008 (on the evidence 8 February) in relation to the first, second and third defendants. (The plaintiff and the fourth defendant reached an accommodation.) Her Honour failed to be precise about the orders in relation to the first, second and third defendants, but it is implicit from her Honour's reasons that her Honour made an order for costs on a party-party basis prior to 8 February 2008 and on an indemnity basis thereafter. 3 The appellant complains about these orders for indemnity costs. The respondents (without any apparent notice of cross-appeal) complain about the failure of the primary judge to award indemnity costs from the commencement of the proceedings. 4 Dealing with the latter matter first (and dispensing with the need for a cross-appeal), her Honour's reasons for refusing to award indemnity costs from the commencement of proceedings on the basis that the case was and should have been understood to be hopeless should not be interfered with. Her Honour dealt with this at [6] and [7], as follows: "[6] Perhaps I should deal first with the suggestion that there should be an order for indemnity costs from the commencement of the proceedings. I think in the circumstances it is not appropriate that I order indemnity costs from the commencement of the proceedings. I am conscious of the fact that the Chan v Cresdon (1989) 168 CLR 242 point in relation to the guarantee of the obligations under the lease is one of which the plaintiff ought to have been aware at the time the proceedings commenced. But there was at least an arguable case based on construction of the lease that the Chan v Cresdon point might not have been successfully raised against the plaintiff. [7] In any event even had that point always been doomed to failure, that still left the claim based on estoppel and a common assumption estoppel, and I am not convinced that it would have been apparent from the outset to the plaintiff that that was a case that was doomed to fail and it was one that was carefully argued and required consideration at the end of the day. Accordingly, I do not think it is appropriate to order indemnity costs from the commencement of the proceedings." 5 I see no basis to conclude that her Honour erred in approaching the matter in this way. No error has been demonstrated.

6 The appellant complains about the way her Honour dealt with the costs in relation to the fifth and first to third defendants.

7 Her Honour noted that on 1 November 2007 the solicitors for the fifth defendant made an offer that he would pay $12,000 in settlement of the action and each party to pay its or his own costs. Her Honour dealt with the matter in [9] of her reasons as follows: "[9] In relation to the fifth defendant's offer of compromise, even though it is for a very small amount, the fifth defendant was in a position where the claim against the fifth defendant was the weakest of the claims that have been made. It has been pointed out, particularly in the context of the suggestion that there has been a duplication of costs by reason of separate representation during the hearing, that the various defendants were in a different position and in different capacities. I think that there was a possibility for conflicts to arise as between the positions of the respective defendants, and that it was not inappropriate that the defendants who were separately represented should have been separately represented during the course of the hearing. I think that the appropriate order in relation to the fifth defendant is that the fifth defendant's costs be paid on a party/party basis up to the date of the making of the offer on 1 November 2007 and on an indemnity basis from 1 November 2007 up to the date of judgment." 8 The appellant submitted that her Honour, having found that there was at least an arguable case on the construction of the lease as well as estoppel, should have considered that $12,000 was a sum representing a capitulation and not a commercial settlement and thus not truly an offer genuinely meant to settle the case other than to activate the Uniform Civil Procedures Rules 2005 (UCPR). The offer was not one under UCPR r 20.26 because it dealt with costs otherwise than in a fashion contemplated by UCPR r 20.26(2). Therefore, the question is whether it was unreasonable for the plaintiff not to accept this offer. Her Honour did not specifically address this question. In my view, given the paltry sum and her Honour's view of the arguable nature of the claim, a conclusion that it was unreasonable cannot be maintained. I would set aside the order for indemnity costs in favour of the fifth respondent. 9 As to the first, second and third defendants, an oral offer was made in unusual circumstances. An offer of $180,000 was made after a settlement conference. The evidence concerning this and the unusual circumstances of it are recounted in affidavits that were before her Honour. The offer was made on 24 January 2008 and rejected on 8 February 2008. Her Honour noted in [4] of her reasons that there were difficulties in relation to various of the defendants' financial positions at the time of it being made such that it could not be seen to be a genuine offer, but her Honour did not deal with this evidence in her reasons. 10 The appellant submitted that her Honour should not have given weight to the offer as it lacked specificity in terms of when it would be paid, by whom it would be paid and because it was never reduced to writing and was made in the context of an investigation of a company involving some of the named defendants who were alleged to have sustained serious losses as a result of the company being wound up. 11 The offer was plainly not one under the Rules. The question was whether it was unreasonable in conducting the litigation not to accept it. 12 In my view, her Honour should have addressed the evidence that was before her about the background to the offer. It threw considerable doubt upon both the genuineness of the offer and the ability of the offerors to make good upon any offer. There was a settlement conference on 24 January 2008 between the solicitor acting on behalf of the appellant and a solicitor (Mr Gavagna) who represented the first defendant Mr Hoban as well as Mr Rossi. The file note from the conference revealed that Mr Hoban and Mr Rossi had "a lot of capital" tied up in a company called "Capital Access". Capital Access was a reference to Capital Access Holdings Pty Ltd which was wound up. Documents produced by the Federal Police as well as newspaper articles demonstrated that Capital Access was conducting a scheme which may have been an unregistered managed investment scheme. Annexure B to the affidavit of Sheridan Levy demonstrated that Mr Hoban's father was a creditor of the scheme as were Jason Lussick, Mr Rossi, Mr Spadina and the Rossi Super Fund in significant amounts. At the settlement conference, Mr Hoban and Mr Rossi said they needed six months to pay the $180,000. The other defendants through Mr Gavagna did not say anything about needing time to pay. Mr Gavagna in an affidavit said the offer was made on behalf of all defendants. Mr Gavagna's affidavit says that Mr Hoban also made an offer of $50,000 if he could be let out then. 13 It is unnecessary to draw the conclusion that the offer was not genuine. The material, however, drives one to the conclusion that it was reasonable of the appellant (then plaintiff) not to accept it. It was made in a background and in circumstances which could reasonably throw doubt on the likelihood of the offer being made good. 14 In my view, the orders made by her Honour should be set aside in relation to the first, second and third defendants also. 15 For the above reasons the orders below should have been that in respect of the first, second, third and fifth defendants, the plaintiff pay their costs of the proceedings on a party/party basis. As to the appeal the appellant should pay the respondents' costs. 16 Therefore, the additional orders that I would make are as follows:

1. Set aside the orders of the Court made on 3 December 2009 in relation to the costs of proceedings below and in lieu thereof order that the plaintiff pay the first, second, third and fifth defendants' costs of the proceedings.

2. The appellant pay the respondents' costs of the appeal, with the exception of the argument as to costs of the proceedings below and in respect of the costs of that matter, the first, second, third and fifth respondents pay the appellant's costs. 17 MACFARLAN JA: I agree with Allsop P. 18 HANDLEY AJA: I agree with Allsop P.

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