CARR & ANOR v FISCHER & ORS [2005] NSWSC 31 | Case summary

JUDGMENT (Application for indemnity costs - Calderbank letter mid-hearing - rejection not unreasonable) 1 This is an application by the defendants for an order for indemnity costs. On the 16th of November 2004 (NSWSC 1079) I delivered my judgment in the action and entered a verdict and judgment for the defendants. The hearing of the action had taken place on the 2nd, 4th, 5th and 6th of December 2002 and the 3rd, 4th, and 5th of February 2003. 2 At the outset one matter should be eliminated as playing no part in the resolution of the application. Notice of the application was given by letter dated the 22nd of November 2004 following my judgment on the 16th of that month. No doubt because of the protracted history of the litigation and its hearing, I formed an unfounded view that the defendants had been dilatory in giving notice. I find the position to be the contrary. It was not unreasonable for the defendants to have regard to the terms of the judgment and thereafter with appropriate promptitude to give notice of this application. 3 The application is founded upon a letter dated the 29th of January 2003 which is a without prejudice communication stating: "We are instructed to make a Calderbank offer of settlement in the sum of $200,000 plus costs. The offer remains open for acceptance until 10am on Friday 31st January 2003 at which time it will lapse if not accepted." 4 The deadline was extended until 4pm on Friday, 31 January 2003 at the request of the solicitors for the plaintiffs by reason of Mr Zacharatos, the solicitor who had the carriage of the matter, being involved in Court. 5 For the defendants it is asserted that their entitlement rests upon the failure of the plaintiffs to accept the offer being unreasonable in relation to several matters. 6 First, by reference to findings I made in the course of my judgment, which was described, if my recollection serves me correctly, as one that brought about a comprehensive loss to the plaintiffs. Particularly, however, attention was paid to my findings in relation to credit, as to retainer, breach, reliance and the plaintiffs' own commercial conduct. Trite though it is to say, all those matters are looked at now, that is at the end. My reasons for judgment speak for themselves and no doubt for whatever purpose there could be debate as to whether it was a comprehensive loss on every conceivable aspect of the litigation as far as the plaintiffs were concerned or whether the ultimate verdict and judgment was consequent upon reasons tempered by what have been described in Wellingtonian terms as "near run things". Of course the occasion for determining an application for indemnity costs, of its very nature, must be at the conclusion of the battle. It would be dangerous, however, to permit perceptions as to the outcome unduly to be persuasive by themselves. 7 The second basis on which the defendants rely in asserting it was unreasonable for the plaintiffs not to have accepted the offer is the date and timing of it. The timing of this offer, in my view, is critical. It was mid-trial. It was after four days of evidence. It was at a point, I have been reminded but have not otherwise been in a position independently to check, where evidence of the plaintiff himself, that is Mr Carr, had not concluded. I can only go so far as to say that my recollection is that he was in and out of the witness box during the course of the hearing. It was at a point where an expert for the plaintiff had been called but leave had been given for a further report to be prepared by that expert. 8 The defendants say it was also at a point when it really did not know its position vis-à-vis the quantification of the plaintiffs' claim for damages because of the plaintiffs' asserted deficiencies in proof and in the provision of information at that stage. If that has any relevance, and if it be the case that there were deficiencies or difficulties in proof, that could as well impinge upon the plaintiffs' position to determine their reaction to the letter. By itself I think it irrelevant when viewed only from the point of view of the defendants. 9 The third matter on which the defendants rely to say that the plaintiffs were unreasonable to reject the offer was that it was an offer of substance, it was a real offer, it was not a go-away letter; it was not a letter of the kind I happen to recall having been tendered in the course of this trial as part of exhibit 21, being a letter dated the 19th of October 2000 which, in effect, said 'if you sue and lose we will ask for indemnity costs'. This letter I find to be one of substance though the computation of the amount of the offer, $200,000, can only be a matter of speculation. Nonetheless, discretely as a sum of money it is sufficient to characterise the letter as one of an offer of substance. More significant is it that the offer was "plus costs" which in itself, viewed discretely, is a matter of substance. Viewed barely in terms of the progress of the case it cannot be dismissed as insubstantial and certainly is not one that creates any ambiguity or uncertainty as to what the offer was that in fact was being made. One's general knowledge, however, of the conduct of litigation does make available a consideration that no doubt any litigant would have regard, in the context of "plus costs", to the quantum of solicitor/client costs. 10 Overall, however, point 3 in the defendants' submissions is made out to the extent that this is a substantial and real offer to compromise the litigation. 11 Point 4 is the delinquency, so it is said, of the plaintiffs in their conduct relating to the plaintiffs' attitude to the provision of financial records, the apparent concealment of six bank accounts and failure to produce evidence in proper form. Point 4, whilst well articulated, in my view becomes blurred in the end with so much of the defendants' submissions as related to point 1 and adverse findings in the judgment. 12 Point 5 in support of the application is made by reference to the undoubted matters of policy that call for mechanisms for the promotion of the settlement of litigation. Trite though it is to say, an offer conforming with that policy doesn't automatically mean that a non-acceptance amounts to an offence against the policy. 13 In the end the real issue is the reasonableness of the offeree's conduct. In making the observations I have hitherto made I have had regard to the most recent examination of this area of the law in the Court of Appeal in this State in Leichhardt Municipal Council v Green [2004] NSWCA 341 at [20], [23] and [51]; Jones v Bradley (No 2) [2003] NSWCA 258 at [13]; Walter Construction Group Ltd v Walker Corporation Ltd [2001] NSWSC 359 at [24]; John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (Hill J, Federal Court of Australia, 10 August 1994 - BC9405929) at pp12 and 14; and Smallacombe & Others v Lockyer Investment Co Pty Ltd (1993) 114 ALR 568 at 573. 14 Ultimately, whether to award indemnity costs is a matter for the exercise of my discretion. There have been submissions and factors referred to by both sides that have not made any easier the decision to which I must come. By that I mean each side has referred to elements that must be weighed before the discretion is exercised and which lead to its exercise. The most impressive on the part of the defendants of course is that it was a real offer of compromise. The most impressive and ultimately the most persuasive on the part of the plaintiffs is the point of time at which this offer was made. In real terms it was but a couple of days before the anticipated resumption of a lengthy, complex hearing at which time costs had been incurred by the plaintiffs, at which time, there being no other material to the contrary, the stakes for the plaintiffs, taking into account costs, would have been measurable in at least 1.5 million dollars if not more than two million dollars, and at a time when there had been no forensic disclosure sufficient to form a judgment one way or the other as to the strength of the defendants' case. 15 When one merges together points 1 and 4 of the defendants' submissions, the delinquency with the adverse findings as to litigious conduct, and being in no position to say that the former or both added to costs; when one notes the fifth matter, which is mainly a restatement of the question of policy which attends all such exercises, one is left with weighing, as I have said, the fact that it was an offer of substance against the time at which it was made in the context of the litigation of the dimensions this one had by then attained and which, as we know, at the end had been vastly increased. 16 In those circumstances I am not persuaded that the conduct of the plaintiffs in either rejecting or not complying with the time limit as extended was unreasonable and the defendants' application for indemnity costs is dismissed with costs. **********

CARR & ANOR v FISCHER & ORS

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