Buono v Mazzella

The law on costs

1. The starting point is s 98 of the Civil Procedure Act 2005 (NSW). It relevantly reads: "98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. ..."
2. UCPR 42.1 and 42.2 read: "42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. … 42.2 General rule as to assessment of costs Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis."
3. Unless the court orders otherwise or the rules provide otherwise, costs payable to a person under an order of the court or the rules are to be assessed on the ordinary basis.

Indemnity costs

1. The general rule is that costs are payable on a party/party basis. A court should only depart from the general rule and award indemnity costs where the conduct of the party against whom the order is sought is "plainly unreasonable": see Sydney City Council v Geftlick [2006] NSWCA 280 per Tobias JA at [91] (Mason P and Hodgson JA agreeing). Indemnity costs orders should be reserved for the most unreasonable actions by unsuccessful plaintiffs: see Leichhardt Municipal Council v Green [2004] NSWCA 341 per Santow JA at [57] (Bryson and Stein JJA agreeing).
2. In Cat Media Pty Ltd v Allianz Australia Insurance Ltd [2006] NSWSC 790, Bergin J (at [9]) confirmed the relevant principles in relation to Calderbank offers (see Calderbank v Calderbank [1975] 3 WLR 586) by reference to Leichhardt Municipal Council, stating that the costs consequences attendant under the general law upon an offer of compromise made in a Calderbank letter are in the court's discretion, to be exercised having regard to all of the relevant circumstances of the case. Firstly, there is not a prima facie presumption in favour of an award for indemnity costs if the Calderbank offer is not accepted and is not bettered; secondly, a Calderbank offer that has no real element of compromise in it, which is designed merely to trigger costs sanctions, will not be treated as a genuine offer of compromise; thirdly, there is no rule that an optimistic offer is not a genuine offer. Whether or not it was reasonable to reject an offer is a question that may figure in the discretionary balance, but it is not a question which affects the genuineness of the offer; and fourthly, an applicant for an order for indemnity costs consequent upon an unaccepted Calderbank offer must show that the rejection of the offer was unreasonable.
3. Thus the questions for the court are (a) whether the offer was a genuine offer of compromise; and (b) whether it was unreasonable for the recipient of the offer not to accept the offer: see Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8].

Application for indemnity costs

1. The plaintiff seeks that her costs be paid on an indemnity basis and relies on an offer made on 2 December 2014 in a letter from her lawyers, CKB Associates, on her behalf to the defendant.
2. The substance of the offer made on 2 December 2014 was that the plaintiff offered to pay the defendant $50,000 inclusive of costs in settlement of all claims by him against the plaintiff and provided for:

• a payment of $5,000 by bank cheque within two business days of execution of a deed of release and provision by the defendant of a withdrawal of caveat;
• the defendant to vacate the premises within a further 51 days, providing vacant possession to the plaintiff; and
• the plaintiff to pay the balance of $45,000 to the defendant within one week of the defendant providing vacant possession.

1. The offer was expressed as being "Without Prejudice Save As to Costs" and was open for 14 days from 2 December 2014. Notice was given to the defendant that the plaintiff would rely upon the making of the offer in relation to applications for costs out of the proceedings proposed to be instituted in this Court. An application for indemnity costs was foreshadowed in the event that the defendant did not achieve any award more favourable to him than the amount of the offer.
2. A copy of the letter from CKB Associates to the defendant dated 2 December 2014 was emailed to the defendant's last known solicitor, Mr Di Donato. Subsequently the defendant retained a new firm of solicitors, Wood Marshall Williams. On 8 July 2015, Wood Marshall Williams wrote to CKB Associates rejecting the plaintiff's offer and made a counter offer without prejudice save as to costs in which the defendant offered to accept $500,000 by way of settlement secured by an equitable charge over the whole of the property.

Submissions

1. The plaintiff submitted that the position taken by the defendant in making a counter offer in the sum of $500,000 is an indication of the unreasonable attitude displayed by him throughout the litigation.
2. The plaintiff relied upon the following findings of this Court in further support of the submission that the defendant displayed an unreasonable attitude throughout the litigation:

• the defendant made exaggerated claims concerning his financial contributions ($160,000) and the hours of work that the performed (2000 hours) (J [52]);
• the court could not accept his evidence other than where it was undisputed or whether there was corroborating evidence to support it (J [54]); and
• the defendant conceded that the plaintiff never said that he could live in the premises forevermore, notwithstanding his statement to similar effect in paragraph 28 of his affidavit of 25 January 2016 (J [66] and [67]).

1. Additionally, the plaintiff submitted that the defendant's unreasonable attitude was demonstrated during cross examination when, confronted with discrepancies between his oral evidence and his affidavits, the defendant stated that he had not read his affidavits before he swore them (T109.11). The defendant was offered an opportunity to correct his evidence but chose not to take that opportunity (J [53]).
2. The plaintiff submitted that the offer made by her in the letter dated 2 December 2014 provided for the payment of a substantial sum of $50,000 to the defendant to settle the claim without the expense and inconvenience to the parties.
3. As to the events that have transpired, the plaintiff submitted that it is clear that the defendant should have accepted the offer rather than force the plaintiff to bring court proceedings to enforce her rights.
4. According to counsel for the plaintiff, it was unreasonable for the defendant not to accept the offer which, if accepted, would have provided the following benefits for him: payment to him of a substantial sum of $50,000; a first instalment of $5,000 which could be used by the defendant for expenses of moving premises such as rental bonds and moving costs; and a relatively generous time period of 51 days from receipt of the first instalment in which to move out. Although expressed to be an offer to pay $50,000 inclusive of costs, it was made at a time when no proceedings were on foot and therefore there were no party/party costs that could be claimed by either party.
5. Overall, the plaintiff submitted that she has been totally successful in the proceedings while the defendant has been totally unsuccessful.
6. The defendant's submission is brief. It is that he a disabled pensioner who is unable to pay the costs and that he has a bad financial situation.

Conclusion

1. I am satisfied that the offer made by the plaintiff is a genuine one. It was more favourable than the outcome the defendant obtained. The issue is whether it was unreasonable for the defendant not to accept it. The defendant had been represented until just before the hearing. He would have received legal advice as to his prospects of success, particularly at the time he instructed his solicitor to make the counter offer of $500,000. It is my view that the defendant elected to stay in the premises when, in light of his unreliable evidence, he was cognisant that he had no legal right to do so. In these circumstances it is my view that it was not reasonable for the defendant to reject the offer.
2. I make an order that the cross claimant pay the first cross defendant's costs of the cross claim on an indemnity basis and the defendant pay the plaintiff's costs of these proceedings on an indemnity basis up until 26 May 2016.

The Court orders that: (1) The cross claimant is to pay the first cross defendant's costs of the cross claim on an indemnity basis and the defendant is to pay the plaintiff's costs of these proceedings on an indemnity basis up until 26 May 2016.

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: 28 June 2016