[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
[2]
Judgment
THE COURT: By notice of motion filed 26 April 2022, the successful appellants have applied to vary the costs orders made on 11 April 2022 by this Court consequent upon their successful appeal. This Court allowed the appeal, set aside the judgment at first instance, substituted a judgment of dismissal of the respondents'/plaintiffs' claim, and ordered that the respondents pay the appellants' costs at trial and on appeal. The appellants now seek more favourable costs orders, because:
1. on 3 September 2018 (a year prior to the trial), they made a formal offer of compromise, in the amount of $600,000 plus costs, and
2. on 16 March 2022 (eight days prior to the appeal), they made a Calderbank offer to compromise the appeal by payment of $250,000, with the first instance judgment being set aside and each side bearing its own costs.
The parties have supplied affidavits (those of Ms Latham affirmed 22 April 2022, and Ms Banton sworn 16 May 2022) and submissions (each dated 30 May 2022) on the basis that the motion would be determined on the papers.
It is common ground that the application was made within the limits imposed by r 36.16 of the Uniform Civil Procedure Rules 2005 (NSW), allowing for the fact that 25 April 2022 was a public holiday. It is also common ground that the offer of compromise complies with the rules.
It will be convenient to refer to the first appellant CBRE (V) Pty Ltd and the second appellant, its employee Mr Nicodimou, by "CBRE". The primary judge found that CBRE had been negligent and engaged in misleading and deceptive conduct in preparing a valuation of land which was acquired by the second respondent Martha Cove Marina Pty Ltd (in liq), a wholly owned subsidiary of the first respondent City Pacific Ltd (in liq). The land was acquired some eight years after contracts were exchanged and three payments towards the acquisition of the land had been made. Accordingly, Martha Cove Marina's claims against CBRE for negligence and misleading and deceptive conduct were found at first instance to be statute-barred, and no challenge was made to the dismissal of its claims on appeal. However, the primary judge found that City Pacific, which had provided the funds for its subsidiary to acquire the land, had impliedly lent those funds to Martha Cove Marina, and that City Pacific's causes of action only accrued when the loan became unable to be repaid. On that basis, City Pacific Ltd succeeded at trial in obtaining a judgment of $6.9m excluding interest and costs.
CBRE's appeal was allowed on two bases. They were, first, that City Pacific's claim was statute-barred (see CBRE (V) Pty Ltd v City Pacific Ltd (in liq) [2022] NSWCA 54 at [21]-[61]), and secondly that City Pacific had not established that CBRE's negligence or misleading and deceptive conduct had caused the acquisition to take place: see at [72]-[91]. The appeal also extended to a challenge that there was no misleading or deceptive conduct, and no duty of care owed by CBRE. These grounds failed: see at [63]-[71].
[3]
The offer of compromise
The judgment obtained by CBRE was much more favourable to CBRE than its offer. CBRE ultimately obtained a judgment dismissing the plaintiffs' claim with costs, in circumstances where it had offered to pay $600,000 plus costs. CBRE is presumptively entitled to indemnity costs from 4 September 2018, the day after its offer was made: UCPR r 42.15A.
City Pacific and Martha Cove Marina put forward two principal matters which are said to warrant this Court ordering otherwise. The first is that the offer was not a significant compromise, in light of their claim for damages of just less than $20,000,000. They say that the offer of compromise was in substance an invitation to capitulate. The second is that they were not in a position at the time of the offer to make an assessment of the likely outcome of the litigation.
We do not accept there is any substance to either of those points. The critical consideration is that it was known at the outset that the monies paid away which formed the claimed entitlement to damages at common law and under statute had been paid away more than eight years before proceedings had commenced. A limitation defence had been pleaded. It was prima facie a good defence to the claims in negligence and for misleading and deceptive conduct. (It should perhaps be explained that the plaintiffs had also pleaded in their reply that some of their causes of action were based on fraud, and that there had been fraudulent concealment of other causes of action, on the basis of which the claims were not statute-barred. But those considerations formed no part of the reasoning which succeeded at trial, nor were they part of the appeal, and no reliance was placed on this aspect of the proceedings in support of this motion.)
The respondents' submissions acknowledge that "a limitation defence was pleaded, but without particulars and without having identified the substance of the successful arguments". But it was obvious that insofar as their causes of action accrued when the monies were paid or when Martha Cove Marina acquired an interest in the land valued by CBRE, they would be statute-barred. Further, as noted at [26] of this Court's judgment, the claim that City Pacific should be found to have lent funds to Martha Cove Marina was not pleaded until an amendment was permitted on the third day of the trial (being an amendment which was evidently driven by the limitation period). It is not to the point to submit that the limitation defence was unparticularised and did not identify the substance of the arguments upon which it was based in circumstances where the claims in negligence and under statute were prima facie statute-barred, and the attempts to circumvent that outcome were not articulated by the plaintiffs until the trial.
The essential position therefore is that the only claims which found success at trial were prima facie statute-barred from the outset, and a year before the trial commenced, CBRE made a significant offer of compromise involving payment of $600,000 plus payment of the plaintiffs' costs. The fact that that reflects a small percentage of the amount claimed is not to the point in circumstances where there was prima facie a limitation defence available to CBRE.
The respondents' written submissions also refer to the fact that the plaintiffs were companies in liquidation, and assert that "the liquidators, acting reasonably, would have been required to recommend to the Court and/or creditors that a settlement in that amount be approved" and that the offer "did not make allowance for that to occur". There are two answers to this. One is that the offer was open for 28 days, and if court approval were required, there is nothing to suggest that it could not be obtained within that timeframe. A second is that the claims in negligence and under statute were claims for damages, not for debt, and court approval is not required, as Barrett J explained in Re HIH Insurance Ltd [2004] NSWSC 5 at [12].
The respondents' written submissions also refer to the fact that they have succeeded in significant aspects of their case, including establishing that the valuation was negligently prepared. But they have been found to have failed on causation and their claims are statute-barred. The fact that CBRE incurred costs defending other aspects of the claim brought on which it did not succeed does not warrant departing from the ordinary course mandated by the rules when a defendant makes an offer of compromise which (in hindsight) should have been accepted by the plaintiff.
For those reasons, no basis has been established to depart from the default position prescribed by UCPR r 42.15A(2).
[4]
The Calderbank offer
Here the position is different. First, the offer was a Calderbank offer, rather than an offer of compromise under the rules. CBRE does not enjoy a default entitlement to a favourable costs order. Instead, the question is whether the respondents' failure to accept CBRE's offer warrants, in all the circumstances, a departure from the ordinary rules as to costs.
The offer was made eight days before the appeal was heard. It was open for acceptance for seven days. It invited the appellants to give up a judgment for $6,900,000 plus interest plus the probability of a favourable order as to the costs of the trial, in exchange for $250,000 with no order as to the costs of the appeal or of the trial (at the time the offer was made, judgment on costs was reserved). Acceptance of the offer would plainly have a material impact upon the winding up. It would involve surrendering a judgment and orders already obtained worth many millions of dollars, albeit subject to an imminent appeal, in exchange for $250,000. There is force in the submission that it would be impracticable for the companies in liquidation to accept the offer, even if they had been advised to do so, in the week before the appeal was heard.
We are unpersuaded that the offer warrants any departure from the ordinary rule in UCPR r 42.1.
[5]
Orders
It is necessary to deal with the costs of the motion. The result is that CBRE has succeeded in relation to its offer of compromise, but failed in relation to its Calderbank offer. The former is by far the more significant in terms of value (being the difference between ordinary and indemnity costs of the year preceding a five day trial, as opposed to the difference between ordinary and indemnity costs of the week preceding a one day appeal). However, the costs of litigating the two issues raised by the motion were unaffected by the quantum involved. It seems likely that, broadly speaking, each side's costs of the motion were shared roughly equally between the application for a re-exercise of the costs discretion at first instance based on the offer of compromise, and the application for a re-exercise of the costs discretion on appeal based on the Calderbank offer. In those circumstances, there should be no order as to the costs of the motion, with the intent that the parties bear their own costs of the motion.
The Court's orders are:
Vary order 2 made on 11 April 2022 so that it provides:
"Set aside the judgment made on 9 August 2021, and orders 1 and 2 made on 22 March 2022, and in lieu thereof, order that the proceedings be dismissed and the plaintiffs pay the defendants' costs on the ordinary basis up to 3 September 2018 and on an indemnity basis thereafter."
No order as to the costs of the motion filed 26 April 2022 with the intent that the parties bear their own costs of the motion.
[6]
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Decision last updated: 09 June 2022