Bodycorp Repairers Pty Ltd v AAMI Ltd & Anor [2015] VSCA 85

Court of Appeal (Vic)|2015-05-07|Before: Mr P, Warren CJ, Beach JA

COSTS - Indemnity costs - Calderbank offer - Rejection of Calderbank offer - Whether rejection unreasonable - Rejection unreasonable - Calderbank v Calderbank [1976] Fam 93 and Hazeldene's Chicken Farm Pty Ltd v Victoria Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 applied.

2 Upon the dismissal of the appellant's appeal, the respondents foreshadowed an application for a special order for costs. Directions were given by the Court concerning the filing and serving of material in support of any such application and the filing and serving of material in response to any such application. Subsequently, the respondents filed and served material in conformity with the Court's directions. While the appellant indicated its opposition to any special costs order being made at the time we delivered judgment, it has not filed any material in opposition to the respondents' application. The time for the filing of such material has now expired.

3 After the parties were advised that judgment on the respondents' application would be delivered this morning, the Court received an email from the solicitor for the appellant seeking an extension of time for the filing and serving of the appellant's submissions in response. No explanation was proffered, by the appellant's solicitor, for the appellant's failure to comply with the order of the Court limiting the time for responding to the respondents' material on the application; nor was any explanation given for making the application for an extension of time after the time for submissions had expired. In the circumstances, we do not see any basis for granting the appellant leave to file submissions out of time.

4 The respondents seek an order that the appellant pay their costs of the appeal to be taxed on a standard basis up to and including 9 June 2014, and thereafter to be taxed on an indemnity basis. The application is made on the basis of a rejection by the appellant of a Calderbank offer[3] made by letter ('the letter') dated 26 May 2014.

5 The letter offered to settle the appeal on the following terms:

(b) security for costs that had been given in an amount of $134,500 in respect of the principal proceeding was to be returned to the appellant;

(c) the sole director of the appellant and one of his companies was to be released from undertakings given to the Court in the principal proceeding to be liable for the costs of the respondents, and the costs of the fifth defendant in the event that the appellant was unable to pay those costs;

(d) the respondents and the fifth defendant would abandon costs orders that had been made in their favour against the appellant; and

(e) the parties would bear their own costs of the appeal.

6 The letter was sent after the parties had filed their written submissions in the appeal and after a mediation in the appeal had taken place. The letter set out, in summary form, the reasons why the respondents contended that the appeal would fail. The appellant was given 14 days from the date of receipt of the letter within which to accept the offer. The letter concluded with a standard form reference to Calderbank and gave notice that should judgment be entered on terms no more favourable to the appellant than the offer, then the letter would be produced by the respondents in support of an application for indemnity costs.

7 The Calderbank offer was rejected by the appellant. The critical issue in this application is whether that rejection was unreasonable.

8 As this Court said in Hazeldene's Chicken Farm v Victorian Workcover Authority (No 2),[4] in considering whether the rejection of a Calderbank offer was unreasonable, a court should ordinarily have regard to at least 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;

(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; and

(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.[5]

9 The Calderbank offer was made some eight months after the commencement of this appeal. Outlines of written submissions had been exchanged and a mediation had been held. The issues were well defined and known in detail to the parties. In our view, a period of 14 days within which to consider the respondents' offer was more than adequate.

10 Similarly, we do not see any basis for concluding that the appellant could not properly assess its prospects of success at the time the offer was made and during the period within which the offer was open. In order to succeed upon the appeal, the appellant had to succeed in respect of at least one of only two grounds.[6] In respect of both of those grounds, the appellant, by the time of the letter, had already conceded that there was no error in the trial judge's analysis of relevant legal principles.[7]

11 The extent of the compromise offered in this case was significant. This was a proceeding that had been on foot for many years before it came on for trial.[8] The trial occupied some 15 sitting days. By reason of its failure at trial, the appellant incurred a very substantial liability to the respondents (and the fifth defendant) for costs. That liability was to be forgiven as part of the terms of the Calderbank offer, if the offer was accepted.

12 A substantial part of the appellant's case on appeal involved propositions not put or run at trial. It could never have been said that the appellant enjoyed particularly good prospects of success in respect of these matters. Further, properly analysed, the appellant's prospects of success on appeal should always have been seen as weak.

13 When one has regard to all of the circumstances of the case (including the matters specified in Hazeldene) one is driven to the conclusion that the rejection of the Calderbank offer was unreasonable. Accordingly, there will be an order that the appellant pay the respondents' costs of and incidental to the appeal to be taxed on a standard basis up to and including 9 June 2014, and thereafter on an indemnity basis.

[1] Bodycorp Repairers Pty Ltd v Australian Associated Motor Insurers Ltd & Anor [2015] VSCA 73 ('Appeal Reasons').

[2] In fact the solicitor for the appellant said that he was unable to advance any submission why costs should not follow the event.

[3] Calderbank v Calderbank [1976] Fam 93 ('Calderbank').

[7] Appellant's outline of submissions dated 3 March 2014, [6] and [18].

[8] See Bodycorp Repairers Pty Ltd v Australian Associated Motor Insurers Ltd [2015] VSCA 59 [1]-[3].

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