Core Building Group Pty Ltd v Devoy

Federal Court of Australia|2022-11-28|Before: Goodman J

The respondents are to pay the applicant's costs of the proceeding in so far as those costs relate to issues other than the assessment of damages. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 On 1 September 2022, at the commencement of the final hearing of this proceeding, I was informed that the proceeding had settled save as to the question of costs. On 5 September 2022, I made an order by consent for the entry of judgment in favour of the applicant in the sum of $170,000. 2 These reasons for judgment address the question of costs. For the reasons set out below, the appropriate order is that the respondents pay the applicant's costs in so far as those costs relate to issues other than the assessment of damages.

submissions 9 The initial submissions of the parties did not address the fact that there had been no determination of the merits of the proceeding. The Court drew the attention of the parties to the observations of McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 and the New South Wales Court of Appeal in Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84; (2018) 97 NSWLR 681 as to the limited circumstances in which costs are ordered when there has been no determination of the merits of the proceeding, and invited further submissions. The parties provided further submissions which addressed the above-mentioned observations. 10 The applicant's position, shortly stated, is that the respondents should pay the applicant's costs because: (1) the respondents did not accept the 20 April 2021 Offer and the respondents achieved a lesser result than they would have achieved if that offer had been accepted; (2) both liability and the assessment of damages were in dispute until 29 April 2022, when the respondents admitted liability; (3) the assessment of damages was resolved on 5 September 2022 for an amount exceeding the 20 April 2021 Offer; (4) in these circumstances, the respondents: (a) acted unreasonably in defending the proceeding; and (b) following lengthy and contested litigation, surrendered or capitulated. 11 The applicant also contends that the respondents' non-acceptance of the 21 April 2021 Offer provides a basis for costs to be awarded on an indemnity basis. 12 The respondents' position, shortly stated, is that there should be no order as to costs because: (1) the respondents did not act unreasonably; and (2) the entire proceeding resolved by consent (albeit in two stages) and without a trial on the merits.

The discretion where there has been no determination of the merits 13 Section 43 of the Federal Court of Australia Act 1976 (Cth) provides the Court with a broad discretion as to costs. An important consideration in the exercise of that discretion in the present case is that there has been no determination of the underlying merits of the proceeding. The principles which inform the exercise of the costs discretion in such circumstances are well-established and were conveniently summarised by Stewart J in Bridging Capital Holdings Pty Ltd v Self Directed Super Funs Pty Ltd (Costs) [2022] FCA 361 at [16]: The general principles that apply to the determination of costs where there has been no adjudication on the merits of the proceeding are well-established. There is no dispute about the plaintiff's characterisation of those principles as follows: (1) the court has no ability to try a hypothetical action between the parties; (2) however, in an appropriate case, the court may make an order for costs where there has been no adjudication on the merits and the moving party no longer seeks to proceed with the action; (3) examples of circumstances in which the court may be satisfied it is appropriate to make such an order include where the court is able to conclude that: (a) one of the parties has acted so unreasonably as to justify a court order against it; or (b) despite both parties having acted reasonably, one party would almost certainly have succeeded if the matter had been tried; (4) it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement removes or modifies the subject of the dispute such that no issue remains between the parties except as to costs although no party can be said to have won. In the former type of case, the exercise of the court's discretion will usually justify the award of costs to the successful party; and (5) where it appears to the court that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the discretion will usually mean the court will make no order as to costs. (See Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; 186 CLR 622 at 624-625 per McHugh J; One.Tel Ltd v Commissioner of Taxation [2000] FCA 270; 101 FCR 548 at [5]-[6] per Burchett J; Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84; 97 NSWLR 681 at [27]-[30] per Payne JA, Meagher JA agreeing.) 14 As noted above, the applicant contends that a costs order against the respondents is justified because: (1) the respondents behaved unreasonably; and (2) the respondents capitulated after litigating for some time.

Unreasonable conduct? 15 The applicant's submission concerning unreasonable conduct is based upon the respondents' non-acceptance of the 20 April 2021 Offer. The applicant made two contentions. 16 The first contention was that the applicant made a valid Offer of Compromise under r 25.01 of the Federal Court Rules 2011 (Cth); that offer was not accepted; the applicant obtained a judgment which was more favourable than the terms of the offer (as $170,000 exceeds $130,000); and thus, by dint of r 25.14(3) of the Rules, the applicant is entitled to an order that the respondents pay the applicant's costs on an indemnity basis from the second business day after the offer was served. This contention fails at the outset. As noted at [6] above, no Offer of Compromise compliant with r 25.01 was served, despite the 20 April 2021 Letter having referred to such an offer. 17 The applicant's second contention was that the 20 April 2021 Offer should be regarded as an offer of the kind made in Calderbank v Calderbank [1976] Fam 93, and that the respondents behaved unreasonably in not accepting it. I do not accept this submission. The 20 April 2021 Offer was expressed to be open until 28 April 2021 and was made at a time before the applicant had completed the service of its evidence; and the respondents had not served their evidence. Further, the extent of the compromise was modest, in that the applicant offered to accept $130,000 (plus costs of $83,615.57) in compromise of a claim described in the 20 April 2021 Offer as having a value of $158,817.00. In all of these circumstances, I do not consider the non-acceptance of the 20 April 2021 Offer to be conduct so unreasonable that it warrants an award of costs (much less an award of indemnity costs) against the respondents.

Capitulation? 18 The applicant contends that the respondents capitulated to the claims made by the applicant, by dint of their consent to the orders made on 29 April 2022 and 5 September 2022. 19 In my view, the respondents' consent to the 29 April 2022 order represented a capitulation by the respondents on all issues other than the assessment of damages in circumstances where all issues had been contested since the respondents' Defence was filed on 2 December 2020. Had the respondents conceded liability when their Defence was filed, it is likely that the applicant would not have incurred significant costs in seeking to prove that issue. 20 However, I do not regard the respondents' consent to the order made on 5 September 2022 for the entry of judgment for the applicant against the respondents in the sum of $170,000 as a capitulation by the respondents on the assessment of damages. Rather, it was a compromise reached between the parties on the first morning of the hearing in a context which included the evidence filed by both parties on the quantum of damages, and the competing submissions of the parties as to the amount to be paid by the respondents to the applicant (see [7] above). 21 In summary: (1) I am not satisfied that the respondents failure to accept the 20 April 2021 Offer to be conduct so unreasonable that it warrants an award of costs against the respondents; and (2) I am satisfied that the respondents capitulated on all issues other than the assessment of damages. 22 In those circumstances, the appropriate exercise of the discretion is to order the respondents to pay the applicant's costs of the proceeding in so far as those costs relate to issues other than the assessment of damages. I will make an order accordingly. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Goodman.

At a glance

Court

Decision date

Before

Source

Judgment (7 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (6)