Borg v The Owners of Strata Plan 64425

CITATION: Borg v The Owners of Strata Plan 64425 (Costs) [2010] NSWDC 204

ACQ v Cook (No 2) [2008] NSWCA 306 Alamdo Holdings Pty Limited v Australian Window Furnishings (NSW) Pty Ltd [2008] NSWSC 7 Bartlett v Coomber [2008] NSWCA 282 Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (No 2) [2009] NSWCA 12 Booksan Pty Ltd v Wehbe (No 2) [2007] NSWCA 103 Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 Bullock v London General Omnibus Co [1907] 1 KB 264 Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109 Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Cook v Hawes [2002] NSWCA 120 Coombes v Roads and Traffic Authority (No 2) [2007] NSWCA 70 Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141 Degmam Pty Ltd (in liq) v Wright (No 2) (1983) 2 NSWLR 354 Dominello v Dominello (No 2) [2009] NSWCA 257 East West Airlines Limited v Turner (No 2) [2010] NSWCA 159 Elite Protective Personnel v Salmon [2007] NSWCA 322 Equity 8 Pty Ltd v Shaw Stockbroking Ltd [2007] NSWSC 503 Gould v Vaggelas (1985) 157 CLR 215 Grynberg v Muller; Estate of Bilfeld [2002] NSWSC 350 Hancock v Arnold (No 2) [2009] NSWCA 19 Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 Ingot Capital Investment v Macquarie Equity Capital Markets (No 7) [2008] NSWSC 199 Jones v Bradley (No 2) [2003] NSWCA 258 Keddy v Foxall [1955] VR 320 CASES CITED: King Network Group Pty Ltd v Club of Clubs Pty Ltd (No 2) [2009] NSWCA 204 Lahoud v Lahoud [2006] NSWSC 126 Leichhardt Municipal Council v Green [2004] NSWCA 341 Liverpool City Council v Estephan [2009] NSWCA 161 Lollis v Loulatzis [2008] VSC 35 Macquarie Radio Network Pty Ltd v Arthur Dent (No 2) [2007] NSWCA 33 Milosevic v Government Insurance Office (NSW) (1993) 31 NSWLR 323 Morgan v Johnson (1998) 44 NSWLR 578 Nationwide News Pty Ltd v Naidu (No 2) [2008] NSWCA 71 Oshlack v Richmond River Council [1998] HCA 11 PCRZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24 Ralston v Bell & Smith t/as Xentex Patch & Grout [2010] NSWSC 913 Re Hodgkinson [1985] 2 Ch 190 Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 Roads and Traffic Authority of NSW v Dederer [2007] HCA 42 Rolls Royce Industrial Power (Pacific) Ltd v James Hardie & Co Pty Ltd [2001] NSWCA 461 Russell v Edwards (No 2) [2006] NSWCA 52 San v Rumble (No 2) [2007] NSWCA 259 Sanderson v Blyth Theatre Co [1903] 2 KB 533 South Eastern Sydney Area Health Service v King [2006] NSWCA 2 Spedding v Nobles (No 2) [2007] NSWCA 87 Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, FCA, French J, 3 May 1991) Trikas v Rheem (Australia) Pty Ltd (1964) 81 WN (Pt 1) (NSW) 504 Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194 Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 Wentworth v Wentworth [1999] NSWSC 638 White ACT (in liq) v G B White [2004] NSWSC 303

23. The first five defendants resist the application insofar as it is based on the Offer of Compromise. Their first contention is that the offer was not a valid offer. Their second contention is that their failure to accept the offer was not unreasonable in that the case on which the plaintiff ultimately succeeded was significantly different from that which existed at the date of the offer: South Eastern Sydney Area Health Services v King (No 2) [2006] NSWCA 2 at [85].

31. For these reasons I find that the plaintiff's Offer of Compromise made on 9 June 2009 was valid, and that it triggered the operation of r 42.14. Once the plaintiff recovered her judgment, which was no less favourable to her than her Offer of Compromise, she became prima facie entitled to indemnity costs from the beginning of 10 June 2009: Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109 at [32]. The onus in on the offeree to establish a basis for displacing the presumption: [33] - [35].

35. There was no suggestion that the period for acceptance of this Offer of Compromise was unreasonable, or that it did not involve a compromise. It is clear that the plaintiff's offer represented or formed part of a genuine attempt to reach a negotiated settlement: Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (No 2) [2009] NSWCA 12 at [19].

37. Thus, an Offer of Compromise may reasonably be rejected where the full parameters of the dispute were still uncertain at the time of the offer: Equity 8 Pty Ltd v Shaw Stockbroking Ltd [2007] NSWSC 503 at [42]; or where the offeror's case changes after the offer: South Eastern Sydney Area Health Service v King [2006] NSWCA 2006 NSWCA 2 at [85]. This determination is an evaluative judgment requiring a consideration of the facts and circumstance specific to the case: Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (No 2) [2009] NSWCA 12 at [19]; King Network Group Pty Ltd v Club of Clubs Pty Ltd (No 2) [2009] NSWCA 204 at [11].

44. The discretion to order that costs be paid on an indemnity basis, although absolute, must be exercised judicially: Degmam Pty Ltd (in liq) v Wright (No 2) (1983) 2 NSWLR 354; Milosevic v Government Insurance Office (NSW) (1993) 31 NSWLR 323. It used to be said that the court should only order indemnity costs in exceptional circumstances: Leichhardt Municipal Council v Green [2004] NSWCA 341. See, however: Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 at [111].

45. The bulk of the recent cases where indemnity costs have been awarded, other than pursuant to Offers of Compromise or Calderbank letters, fall into certain recognised categories. But it has been emphasised that the categories are not closed: PCRZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24 at [35] - [36]; Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, FCA, French J, 3 May 1991); Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; 118 ALR 248 at 233-234 (FCR). Those categories are:

48. As to the dangers of assessing "hopelessness" in the "bright light of hindsight", see Grynberg v Muller; Estate of Bilfeld [2002] NSWSC 350 at [48].

49. The other matters relied upon by the plaintiff seem to me to be assertions of unreasonable conduct sufficient to ground an order for indemnity costs: Oshlack v Richmond River Council [1998] HCA 11 at [44].

50. There appears to be no fixed rule or rationale as to when the discretion might be exercised: Harrison v Schipp [2001] NSWCA 13 at [139], except that it requires a "sufficient or unusual feature": Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233 - 234, or some "relevant delinquency": Oshlack v Richmond River Council [1998] HCA 11 at [44]. Relevant delinquency, however, does not mean moral delinquency or some ethical shortcoming, but delinquency bearing a relevant relation to the conduct of the case: White ACT (in liq) v G B White [2004] NSWSC 303 at [11], cited in Ingot Capital Investment v Macquarie Equity Capital Markets (No 7) [2008] NSWSC 199 at [24]. See also Liverpool City Council v Estephan [2009] NSWCA 161 at [95].

56. The effect of an outcome whereby the parties to litigation are to bear their own costs is that no party/party costs are payable: Re Hodgkinson [1985] 2 Ch 190; Trikas v Rheem (Australia) Pty Ltd (1964) 81 WN (Pt 1) (NSW) 504. Such costs as the parties may have incurred themselves, or any liability to pay practitioner/client costs, lie where they fall: Wentworth v Wentworth [1999] NSWSC 638. (Thus, an order that each party pay their own costs is inappropriate, the better order being that each party bear their own costs: Liverpool City Council v Estephan [2009] NSWCA 161 at [75].)

60. The concept of success is not to be confused with the concept of compromise. In Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [28] - [30] the Court of Appeal said:

62. What is ultimately required is that the offer contain some real benefit to a plaintiff, something more than total capitulation: see Bennette v Cohen (No 2) [2009] NSWCA 162 at [38]. See also Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Ltd (No 2) [2009] NSWCA 336 at [17] - [21].

71. These differences are addressed in detail in a comprehensive extra-curial paper delivered in 2008 by the Hon Justice Beazley AO (see the Supreme Court website at Speeches). See in particular her discussion of the advantages of an Offer of Compromise over a Calderbank offer at paras 60 - 67: see also Macquarie Radio Network Pty Ltd v Arthur Dent (No 2) [2007] NSWCA 339. One such distinction is that a Calderbank offer may be made on an inclusive of costs basis: Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194 at [25] - [29]. See for example: Elite Protective Personnel v Salmon [2007] NSWCA 322 at [7], and Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141 at [29].

72. An offer of compromise which does not conform to the Court rules may nevertheless be considered under the Calderbank principles: Cook v Hawes [2002] NSWCA 120, provided the offer discloses an intention to make a genuine offer: Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194 at [27]. The intention must however, be made clear: Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141 at [34].

76. Where a plaintiff sues more than one defendant and is unsuccessful as against one or more of those defendants an order for costs will usually be made that the plaintiff is to pay the costs of the successful defendant/s. The Court may, however, exercise its discretion to make other, special orders, commonly referred to as Bullock or Sanderson orders: Gould v Vaggelas (1985) 157 CLR 215. A Bullock order requires the unsuccessful defendant to pay the plaintiff by way of reimbursement any costs the plaintiff has paid to the successful defendant: Bullock v London General Omnibus Co [1907] 1 KB 264. A Sanderson order is more direct and simply requires the unsuccessful defendant to pay the costs of the successful defendant, leaving the plaintiff out of the process entirely: Sanderson v Blyth Theatre Co [1903] 2 KB 533, thus eliminating unnecessary administrative and procedural steps: Coombes v Roads and Traffic Authority (No 2) [2007] NSWCA 70 at [42].

77. Bullock and Sanderson orders may only be made where two pre-conditions are satisfied: first, that it was reasonable for the plaintiff to proceed against the successful defendant, and secondly, that the conduct of the unsuccessful defendant made it fair to impose liability upon it for the costs of the successful defendant: Gould v Vaggelas (1985) 157 CLR 215. The conduct must be more than a denial of liability. It does not need to amount to misconduct, but it must be conduct sufficient to make it fair to make the order: Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [29], such as creating circumstances of uncertainty as to who is the proper defendant: Dominello v Dominello (No 2) [2009] NSWCA 257, citing RTA v Palmer (No 2) [2005] NSWCA 140 at [35].

78. There is no additional pre-condition to the effect that the cause of action must be substantially connected or interdependent: Nationwide News Pty Ltd v Naidu (No 2) [2008] NSWCA 71 at [16] - [18]; ACQ v Cook (No 2) [2008] NSWCA 306. Properly understood the interdependence of claims against two defendants or the need to join both in circumstances where only one may be liable, but the plaintiff is unable to determine which, are examples of circumstances which may demonstrate the reasonableness of the plaintiff joining the successful defendant.

81. This was not a case where the unsuccessful defendant changed its position, or its tactics forced the plaintiff to join the additional defendant: see Roads and Traffic Authority of NSW v Dederer [2007] HCA 42 at [189] - [192]. I see nothing in the conduct of the unsuccessful defendants other than a vigorous defence of the plaintiff's claim, on the consistent basis that they exercised no control over the cracked tile. That does not make it fair to impose liability upon them for the costs of the successful 6th defendant. (See also a recent discussion of this issue by Hislop J in Ralston v Bell & Smith t/as Xentex Patch & Grout [2010] NSWSC 913 at [40].)

82. In Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141 at [43] the Court of Appeal warned that care must be taken not to unduly deter parties from bringing or defending proceedings for fear that they will retrospectively be found to have not been justified in doing so:

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