Coregas Pty Limited v Penford Australia Pty Limited

JUDGMENT 1MEAGHER JA: I agree with Hoeben JA. 2HOEBEN JA: Nature of dispute The principal judgment in this matter was delivered on 1 November 2012 (Coregas Pty Limited v Penford Australia Pty Limited [2012] NSWCA 350). The effect of that judgment was to allow the appeal in part. The appellant's challenge to the liability finding was dismissed but the respondent's damages were reduced by 25 percent ($117,410.31). Accordingly, the judgment in favour of the respondent at trial of $234,820.63 was set aside and in lieu thereof judgment was entered for $117,410.31 plus pre-judgment and post-judgment interest plus the costs of the trial. The respondent was ordered to pay 50 percent of the appellant's costs of the appeal. 3After judgment was delivered, the appellant sought an order that the costs order in respect of the appeal be vacated and that in lieu thereof, the respondent pay the appellant's costs of the appeal on an indemnity basis. Submissions and consideration 4By letter dated 8 November 2011 the solicitors for the appellant made an offer in accordance with the principles discussed in Calderbank v Calderbank (1975) 3 All ER 333. The contents of that letter were: "1. A Notice of Intention to Appeal was filed out of the Supreme Court of NSW, Court of Appeal on 27 October 2011. 2. The Appeal has to be filed by 30 December 2011. It is my client's intention to try to resolve the matter informally without the need to proceed with the Appeal. Our client's issues with the judgment are with the findings on liability and apportionment. 4. In an effort to resolve the matter my client is willing to settle the matter as follows: 4.1 Payment to your client in the principle (sic) of $122,106.73 (being 26% of $469,641.27) plus interest plus costs of the District Court proceedings. 4.2 Interest is calculated as follows: ..." (Thereafter a calculation of pre-judgment interest was set out amounting to $22,109.88.) "5. In accordance with the above, the formal orders that our client proposes are as follows: 5.1 Appeal allowed. 5.2 Verdict and judgment in the Court below for the respondent be set aside. 5.3 Substitute the verdict and judgment in the Court below for a verdict and judgment in favour of the plaintiff in the sum of $122,106.73 plus interest from the date of the judgment in the Court below. 5.4 The appellant pay the respondent's costs at the District Court proceedings, as agreed or assessed. 5.5 Each party to pay its own costs of the appeal. 6. The above offer is made in accordance with the principles in Calderbank v Calderbank and is made on a without prejudice, save as to costs, basis. 7. The offer for acceptance until 4pm 30 November 2011. 8. In the event that the offer is not accepted, our instructions are to file a Notice of Grounds of Appeal, together with an offer of compromise reflecting the above. 9. We look forward to hearing from you." 5That offer was not accepted. On 10 April 2012 the respondent made an offer in accordance with the principles discussed in Calderbank v Calderbank. The terms of that offer are not relevant to this application and need not be set out. The respondent's offer was not accepted. That appears to have been the only response to the appellant's offer. 6The appellant submitted that the offer had been made in a "Calderbank" form because: (i) No appeal had yet been commenced so that an offer of compromise was not available. (ii) Settlement before the commencement of an appeal was the most effective means of achieving the overriding purpose of s56 Civil Procedure Act 2005. (iii) Commencing an appeal and then serving an offer of compromise would have needlessly increased costs for one or both of the parties. (iv) There had been and continues to be uncertainty about the correct form of an offer of compromise as a result of some recent first instance and appeal decisions. (The appellant referred to a number of those decisions which it is not necessary to set out.) 7The appellant submitted that the Court should exercise its discretion in its favour because the result of the appeal had been more favourable to the appellant than the basis upon which it was prepared to settle and if the respondent had accepted the appellant's offer, the appeal would not have proceeded and no costs would have been incurred (Commonwealth v Gretton [2008] NSWCA 117 at [12]). 8The respondent submitted that the party making a Calderbank offer carried the onus of satisfying the Court that it should exercise the costs discretion in its favour (Evans Shire Council v Richardson (No 2) [2006] NSWCA 61). It submitted that the settled principle in NSW is that a Calderbank offer will not justify an indemnity costs order unless it embodied a compromise and its rejection was unreasonable (Jones v Bradley(No 2) [2003] NSWCA 258). 9The respondent submitted that at the time the Calderbank offer was made on 18 November 2011 the appellant had done no more than serve a Notice of Intention to Appeal. The letter containing the offer set out no basis for the appeal other than indicating that the appellant had "issues" with the "findings on liability and apportionment". It submitted that those "issues" were not identified and accordingly that needed to be taken into account when assessing the "reasonableness" of the offer and the respondent's response. 10The respondent submitted that the offer in the Calderbank letter at para 5.3 was for the sum of $122,106.73 "plus interest from the date of judgment in the Court below". It made no allowance for pre-judgment interest despite providing calculations for such interest in para 4.2. The respondent submitted that the recipient of an offer should be able to understand what is being offered so that it can assess the reasonableness of the proposal. The respondent submitted that at best the letter of 18 November 2001 was uncertain and it was not unreasonable to reject it. 11The respondent submitted that the appellant should be bound by the terms of its offer. Because the offer made no reference to pre-judgment interest and implicitly excluded it, the result achieved by the respondent in the appeal exceeded the amount offered by the appellant in its letter, i.e. judgment for $117,410.31 plus pre-judgment interest of $21,347.52 plus post-judgment interest plus the costs in the Court below. 12I am of the opinion that the respondent's submissions should be accepted. If a party wishes to rely upon a Calderbank offer, the terms of the offer should be clear. In this case, although calculations of pre-judgment interest had been set out in the letter, the offer itself made no reference to pre-judgment interest and, as the respondent submitted, in its terms implicitly excluded it. To accept the offer in the terms in which it was expressed, would have produced a result less favourable to the respondent than that achieved in the appeal. That is sufficient to dispose of the application. 13The other issue raised by the respondent, however, does require some comment. There is considerable force in the appellant's submission that the Calderbank procedure was used to communicate the offer in order to minimise costs. That, of course, is a laudable aim. That having been said, some indication should have been given in the covering letter as to the basis of the proposed appeal. A brief elucidation of the principal issues to be raised by the appeal would not have significantly increased costs but would have allowed the respondent and this Court to properly assess the reasonableness or otherwise of the offer. 14Accordingly, I would dismiss the appellant's application with costs. 15BERGIN CJ in EQ: I agree with Hoeben JA.