Gunner v Lawrence [2015] NSWSC 1229
- NMFM Property Pty Limited v Citibank Limited [2001] FCA 480
Source
Original judgment source is linked above.
Catchwords
Gunner v Lawrence [2015] NSWSC 1229
- NMFM Property Pty Limited v Citibank Limited [2001] FCA 480
Judgment (3 paragraphs)
[1]
Solicitors:
ERA Legal (Plaintiff)
Websters Lawyers)
File Number(s): 2015/233459
[2]
Judgment
On 4 March 2016, I delivered judgment ([2016] NSWSC [376]) in which I held that an application to set aside a creditor's statutory demand ("Demand") brought by the Plaintiff, Webster Consolidated Holdings Pty Ltd ("Company") should be transferred, at its request, to the Family Court of Australia for determination. Those orders were made in circumstances that the Demand had been issued by one of the Company's shareholders, Mr Anthony Webster, on the basis of a loan that he claimed to have made to the Company, and the Company sought to raise the existence of a dispute as to that loan by reference to matters which were then in issue between Mr Webster and the other shareholder in the Company, Ms York, in proceedings in the Family Court of Australia.
The parties sought an opportunity to be heard as to costs and I made orders for submissions in that respect. By its submissions dated 18 March 2016, the Company submitted that costs of the application should follow the event and that Mr Webster should pay the Company's costs of and in relation to the motion as agreed or assessed on an ordinary basis, at a minimum. The Company also submitted that Mr Webster should pay the Company's costs on an indemnity basis from 22 October 2015, the date on which the Company served a "Calderbank" [Calderbank v Calderbank [1975] 3 All ER 333] letter, or otherwise from 6 November 2015 which was the end of the 14 day period for which the offer in that letter was open.
By its letter dated 22 October 2015, the Company offered a resolution of the proceedings by which it invited Mr Webster to consent to the motion to transfer the proceedings to the Family Court of Australia; to consent to withdraw the Demand; and that each party should bear its own costs. That letter drew attention to matters that were said to be in contest in the Family Court proceedings in respect of, inter alia, the Company, its accounts and the status of loans allegedly owed to the Company, referred to affidavits of Mr Webster and Ms York in the Family Court proceedings addressing those issues, and noted that joint instructions have been given to an accounting expert in the Family Court proceedings in respect of those issues. That letter went on to state that:
"We further invite your client to withdraw the Statutory Demand before further costs are incurred. Other than the genuine dispute evident in the Family Court evidence about the debt alleged in the Statutory Demand, we consider that the Family (or Supreme) Court will also set aside the Statutory Demands on the grounds set out in s 459J [of the Corporations Act]; that is, on the basis that it was issued for an improper purpose and as an abuse of process."
The Company contends that that letter contained two offers, first that Mr Webster consent to the motion to transfer the proceedings to the Family Court of Australia, and second that Mr Webster withdraw the Demand, which would have rendered the motion irrelevant. The Company contends that the letter made clear that these were, in effect, alternative offers.
Mr Leong, who appears for the Company, submits, by reference to authority, that the question of the effect of the letter is one of discretion, and that the court is not deprived of a discretion to make a more favourable costs order merely because there is some deficiency in the manner in which the Calderbank offer has been expressed, and that it would have been open to the solicitors for Mr Webster to seek further information if they wished to do so. Mr White, who appears for Mr Webster, responds that the question is whether Mr Webster's failure to accept the offer contained in that letter, in all the circumstances, warrants a departure from the ordinary rule as to costs: SMEC Testing Services Pty Ltd v Campbelltown City Council [2009] NSWCA 323; Jones v Bradley (No 2) [2003] NSWCA 258 at [8]-[9]. Mr White submits that the letter was framed so as to relate not only to the notice of motion but also to withdrawal of Mr Webster's substantive claim, the Demand, a matter which was not before the Court in determining the motion for transfer of the proceedings to the Family Court of Australia. Mr White alternatively submits that ambiguities in the offer may justify an offeree in reasonably rejecting it and relies on Lahoud v Lahoud [2011] NSWSC 1186 at [21]-[28] in that respect. Mr White submits that the letter was not a genuine offer of compromise, on the basis that it required Mr Webster not only to consent to the motion but also to withdraw his substantive claim.
In reply, Mr Leong repeats the proposition that was already put by the Company in chief that the letter contained two alternative offers and points to the logical inconsistency in both withdrawing the Demand and transferring proceedings to set it aside to another Court. He also submits, and I accept, that the decision in Lahoud v Lahoud above is readily distinguishable where the offer made by the Company lacked the complexity of the offer at issue in that case. Mr Leong also sought to advance, for the first time in reply, reasons why the conduct of the matter by Mr Webster was unreasonable. Those matters were not properly raised in reply, in a manner that would have deprived Mr Webster of any opportunity to respond to them.
This application does not raise a question of any particular complexity or novelty as to the circumstances in which costs should be awarded on an indemnity basis in accordance with the principle in Calderbank v Calderbank above. I should nonetheless briefly refer to the scope of that principle, to which I have had regard. In NMFM Property Pty Limited v Citibank Limited [2001] FCA 480; (2001) 187 ALR 654, Lindgren J identified matters which were relevant to the assessment of an offer made in a Calderbank letter and drew attention, particularly, to the question whether the non-acceptance of the offer was imprudent or plainly unreasonable. His Honour also drew attention to the fact that it may be relevant, in determining the significance of an offer, whether the party who had received it should have recognised the obvious correctness of the position which was being put to it. In Nu Line Construction Group Pty Limited v Fowler (aka Grippaudo) [2012] NSWSC 816 at [9]-[14], Ward J reviewed the authorities, pointed to the public policy considerations which supported awards of costs having regard to Calderbank offers, including encouragement of settlement of disputes and the discouragement of wasteful and unreasonable behaviour by litigants, and also observed that a party seeking to rely on a Calderbank letter would need to establish the unreasonableness of the offeree's rejection or non-acceptance of the offer, having regard to the relevant circumstances at the time the offer fell to be considered. Her Honour identified the relevant question as whether, in all the circumstances, the failure to accept the offer warranted departure from the ordinary rule as to costs. In Lawrence v Gunner; Gunner v Lawrence [2015] NSWSC 1229 at [26], Stevenson J similarly observed that:
"If a Calderbank offer is made, but not accepted, the court's discretion to make a special order is enlivened. The court's discretion is an open one, but is commonly enlivened if (a) the party that made the offer achieves a better result than the amount offered, (b) the offer was a genuine offer of compromise, and (c) it was unreasonable of the offeree not to accept: for example Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [7]-[8]."
In Re Hair Industrie Penrith Pty Ltd, Hair Industrie Merrylands Pty Ltd [2015] NSWSC 1905, I observed, by reference to authority, that:
"The fact that a plaintiff ultimately achieves a worse result than he or she would have achieved if he or she had accepted a Calderbank offer does not itself establish that the defendant should be awarded indemnity costs, unless it can be said that it was unreasonable for the plaintiff not to accept that offer, so as to warrant a departure from the general rule as to costs: Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816 at [9]-[15]; Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [14], [16]."
It seems to me that the letter from the Company's solicitors dated 21 October 2015 should be read as containing two alternative offers, the first to consent to the motion for the transfer of the proceedings to the Family Court of Australia, and the second to withdraw the Demand, each on the basis that each party bear their own costs. That reading of the letter is the only reading that allows it sensible operation, where there would be no occasion to transfer proceedings in respect of a Demand that had been withdrawn to the Family Court of Australia. At the least, Mr Webster's solicitors could have clarified that matter with the Company's solicitors, if they were in any doubt about it.
However, even reading that letter in that way, the letter amounted, in substance, to an invitation to Mr Webster to surrender his resistance to the transfer of the proceedings to the Family Court of Australia, with the modest inducement that costs would not be sought against him. It seems to me that it was not unreasonable for Mr Webster not to accept that offer, where matters of substance could be, and were, put in opposition to the transfer of the proceedings to the Family Court of Australia, including the possibility that the determination of the proceedings would be significantly delayed by such a transfer. In the event, Mr Webster was unsuccessful in resisting the application for transfer of the proceedings to the Family Court of Australia, but that was not inevitable, and it does not seem to me that it was unreasonable for him to seek to have a determination of that matter on its merits, rather than accepting the Company's invitation to surrender without such a determination.
For these reasons, an order for indemnity costs should not be made in the Company's favour. It seems to me that Mr Webster has been put to additional, unnecessary costs because that application was made, and that costs should follow the event in respect of that application. The parties may be able to agree to an offset, at least in part, of the orders I make in favour of each of them, but that will be a matter for them. If they cannot, that issue can otherwise be addressed in an assessment of those costs.
Accordingly, I make the following orders:
Mr Anthony Webster pay the costs of Webster Consolidated (Holdings) Pty Ltd of and incidental to the determination of the Notice of Motion filed 1 October 2015, up to and including 4 March 2016 on the ordinary basis, as agreed or as assessed.
Webster Consolidated (Holdings) Pty Ltd pay Mr Webster's costs of and incidental to the costs application on the ordinary basis, from 5 March 2016 up to and including 31 March 2016, as agreed or as assessed.
[3]
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Decision last updated: 07 April 2016