Boorer v HLB Mann Judd

Supreme Court of NSW|2012-12-18|Before: Adamson J, Basten JA

Introduction 1By judgment given on 6 December 2012, Boorer v HLB Mann Judd (NSW) Pty Limited [2012] NSWSC 1499, I ordered that there be judgment for the defendant and ordered the plaintiff to pay the defendant's costs of the proceedings but, since I had not heard argument on costs, granted liberty to apply if either party sought a costs order other than the one I had made. 2The defendant applied for a different costs order. The question of costs is determined by consideration of the written submissions made by both parties. 3The defendant's primary submission is that I should make an order for costs in the following terms: The plaintiff to pay the defendant's costs of the proceedings on the ordinary basis until 8 June 2011 and then on an indemnity basis from 9 June 2011. 4In the alternative, the defendant seeks an order in the following terms: The plaintiff to pay the defendant's costs on the ordinary basis until 10 August 2012 and then on an indemnity basis from 11 August 2012. 5The plaintiff opposes both of these orders and submits that there is no reason to depart from the usual order that costs follow the event and that they be on the ordinary basis.

Offers made by the defendant 6The bases for the defendant's application are two offers which were expressed to be without prejudice except as to costs. Neither was accepted by the plaintiff and both of which were bettered, as far as the defendant was concerned, by the result of the proceedings. 7The first offer was made on 25 May 2011, when the defendant's solicitors offered to settle the proceedings by a payment to the plaintiff of $5,000 on the basis that each party pay their own costs and the proceedings be dismissed (the First Offer). The First Offer was open for acceptance for 14 days. It foreshadowed an application for indemnity costs in the event the offer was rejected. 8The second offer was made on 13 July 2012, when the defendant's solicitors offered to settle the proceedings by a payment to the plaintiff of $250,000 on the basis that each party pay their own costs and the proceedings be dismissed (the Second Offer). The Second Offer was open for acceptance for 28 days. It foreshadowed an application for indemnity costs in the event the offer was rejected. 9Both offers were made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333. The appellant did not make an offer in accordance with the Uniform Civil Procedure Rules 2005 (NSW), r 20.26, which would have carried with it a presumptive entitlement to indemnity costs if a judgment were obtained no less favourable than the terms of the offer: r 42.14. 10The relevant principles to be considered when a party seeks an order that costs be paid on an indemnity basis are conveniently set out by Basten JA, with whom McColl and Campbell JJA agreed, in MIWA Pty Limited v Siantan Properties Pte Ltd [2011] NSWCA 344. Basten JA said, at [8]: The approach frequently adopted in this jurisdiction has been to ask two questions, namely whether - (a) there was a genuine offer of compromise, and (b) it was unreasonable for the offeree not to accept it. 11The answer to the first question requires a substantive assessment. As Giles J said in Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 at 368: Compromise connotes that a party gives something away. A plaintiff with a strong case, or a plaintiff with a firm belief in the strength of its case, is perfectly entitled to discount its claim by only $1, but it does not in any real sense give anything away, and I do not think that it can claim to have placed itself in a more favourable position in relation to costs unless it does so. 12An offer may be modest provided that it still contains a real element of compromise: Prosperity Advisers Pty Ltd v Secure Enterprises Pty Ltd [2012] NSWCA 192 at [109] per Tobias AJA, with whom Macfarlan and Barrett JJA agreed, but it must not be derisory and effectively require utter capitulation by the offeree. 13In answering the second question, whether it was unreasonable for the offeree not to accept it, the following principles guide the exercise of discretion: (1)The reasonableness of the offeree's response must be assessed at the time the offer was made, and not with the benefit of hindsight: Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 per Spigelman CJ, Beazley & McColl JJA at [33]; (2)It is undesirable that there be a detailed investigation into the state of preparation or knowledge of the offeree as at the date of the offer; MIWA Pty Limited v Siantan Properties Pte Ltd [2011] NSWCA 344 at [11] per Basten JA; (3)Relevant factors may include: (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 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 the offer was rejected. (Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; 13 VR 435, at [25] per Warren CJ, Maxwell P and Harper JA)

The circumstances in which the First Offer was made 14At the time the defendant made the First Offer, the parties had engaged in discovery (by categories). 15The plaintiff had served his own affidavits dated 16 December 2010, 16 March 2011 and 30 March 2011 and an affidavit of Neville Christie sworn 30 March 2011. 16The defendant had served affidavits from the following deponents: (a) Mariana Von-Lucken sworn 11 March 2011; (b) Sven Anthony Fittler sworn 11 March 2011; (c) Bruce Rose sworn 10 March 2011; (d) Brian Dougherty sworn 8 March 2011; (e) Dennis Mattiske sworn 8 March 2011; (f) Ben Lyons sworn 22 March 2011; and (g)Cassandra Woolley sworn 24 March 2011. 17At the time of the First Offer the plaintiff knew the following: (1) The documents of retainer did not support the broad retainer of the defendant by Techontap for which the plaintiff contended; (2) At no time did the plaintiff ask the defendant to advise, warn or counsel Techontap about its solvency; (3) Techontap had not provided the defendant with the books and records needed so as to advise the plaintiff about Techontap's solvency; (4)the defendant's evidence was that the Form 484 had been submitted to ASIC on the plaintiff's express instructions; (5)the evidence that the plaintiff had given to each of ASIC and the AAT was, at least to some extent, inconsistent with the plaintiff's case against the defendant; and (6)the defendant proposed to apply for an indemnity costs order if the offer was not accepted. 18The defendant submitted that although the offer was not for a significant sum, it still represented a compromise: Prosperity Advisers Pty Ltd v Secure Enterprises Pty Ltd [2012] NSWCA 192 at [110] since on any view by the date of the offer the defendant must have incurred significant legal costs in drafting a defence, complying with its discovery obligations, reviewing the plaintiff's discovery and lay evidence and serving evidence in response. In making an offer that 'each party pay their own costs' the defendant was giving up the benefit of what would have been a significant costs order. 19The defendant submitted that the First Offer contained a genuine compromise and the plaintiff's refusal of the offer was unreasonable. 20The plaintiff submitted that the First Offer effectively required total capitulation and did not contain any element of real and genuine compromise. 21Although I accept that the First Offer contained at least a formal element of compromise, I do not consider that the amount offered, together with the defendant's offer to bear its own costs contained a real and genuine compromise. 22Furthermore although it was unreasonable, with the benefit of hindsight, for the defendant to refuse the offer, particularly having regard to the substantial amount which it could be inferred that the defendant had spent on costs when the First Offer was made, I do not consider that it is appropriate, in all the circumstances, to order the plaintiff to pay the defendant's costs on an indemnity basis from the time of the First Offer. For it to have been unreasonable for the plaintiff to have refused the First Offer, must have been unreasonable for the plaintiff to continue to pursue the proceedings. I do not consider that the amount offered was such that it was unreasonable for the plaintiff to refuse it.

The circumstances in which the Second Offer was made 23At the time the defendant made the Second Offer: (a) all evidence (both expert and lay) had long been served with the plaintiff's evidence in reply having been served by 10 April 2012; (b) the plaintiff had served the affidavit of Len King sworn 7 October 2011; (c) the defendant had incurred additional legal costs by reason of the engagement of an expert; (d) discovery had long since concluded; (e) the plaintiff had also obtained additional documents from the defendant pursuant various notices to produce, with the last documents provided to the plaintiff 18 October 2011. 24The plaintiff properly conceded in written submissions that the defendant's offer not only to pay the plaintiff $250,000 and also to bear its own costs represented a real compromise, particularly since it had incurred additional costs by reason of the engagement of an expert. 25The plaintiff opposed the alternative costs order sought by the defendant on the basis of the Second Offer on the basis that: "[the] plaintiff at that time was justified in thinking that he had good prospects of success, armed as he was with the affidavit of Len King which deposed of [sic] an admission by the defendant of wrongdoing. There was no reason for the plaintiff to apprehend that the evidence of Len King would be rejected." 26Although the plaintiff had served the affidavit of Len King, he knew that the "admissions" said to have been made by Ms Von-Lucken to which Mr King deposed were disputed by Ms Von-Lucken. The plaintiff also knew that in May 2005 Brett King had informed him that the register incorrectly recorded him as a director of Techontap and that he had done nothing about it, although he had undertaken to do so. The plaintiff knew that he had not served an affidavit from Brett King which might otherwise explain or modify the stark effect of the email exchange in May 2005. He also knew that neither ASIC nor the AAT was aware of this exchange. He ought to have appreciated that the exchange would be likely to affect his credibility. 27The plaintiff also opposed the alternative costs order sought by the defendant on the basis of the Second Offer on the basis that he had an accountant's report which was said to support his claim for over two million dollars. However, in my view, the plaintiff, of all people, knew that the level of his historical earnings did not support a claim of such magnitude. He also knew of the circumstances in which the contract between his company and the Western Australian Chamber of Commerce had come to an end. He was aware that the accountant's calculation of his damages depended entirely on the assumptions he had provided, including as to his maintainable income, which he ought to have appreciated were unreasonable. 28The plaintiff also submitted that the breadth of the defendant's retainer "was always hard-fought and was a matter that required adjudication by the Court". Although the breadth of the retainer was hard-fought, there was no real factual dispute about the documents which were sent at its commencement, or what was done by the defendant to perform it. In these circumstances, I do not consider that the plaintiff could have been in any real doubt as to the risks he was running in pursuing a claim based on a broader retainer. 29In these circumstances, I consider that it was unreasonable of the plaintiff to refuse the Second Offer, which was for a substantial sum, having regard to the plaintiff's actual historical earnings and also the risks associated with the litigation, including that Ms Von-Lucken's version of disputed conversations would be accepted.

Order 30For the foregoing reasons, I make the following orders: (1) Vacate the order made on 6 December 2012 that the plaintiff pay the defendant's costs of the proceedings. (2) The plaintiff to pay the defendant's costs of the proceedings on the ordinary basis until 10 August 2012 and then on an indemnity basis from 11 August 2012.

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: 18 December 2012

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