Cushman & Wakefield (NSW) Pty Ltd v Farrell

Appellant's claims for indemnity costs for part of the respective proceedings

1. The appellant's application for indemnity costs of the first instance proceedings from 17 March 2016 is premised on the service by it of a Calderbank offer on the respondent on 16 March 2016, offering to settle its claim and the respondent's cross-claim on the following basis: 1. The Plaintiff's Statement of Claim be dismissed and with an order that the Plaintiff pay fifty percent (50%) of the Defendant's costs of and incidental to the Statement of Claim, as agreed or assessed. 2. The Cross-Claimant's Cross-Claim be dismissed with no order as to costs, with the intent that each of the parties bear their own costs of the Cross-Claim.
2. That offer remained open for acceptance until 4pm on 25 March 2016. The respondent was notified that if he wished to have a fixed sum amount nominated in respect of the costs identified in paragraph 1 of the offer, such a figure could be supplied. The offer was not accepted.
3. The application for indemnity costs from 8 October 2016 in relation to the appeal is premised on the service by the appellant of a formal offer of compromise on the respondent on 7 October 2016, the appellant there offering to compromise the whole of the proceedings on terms that the appeal be allowed; that the orders made in the Court below be set aside; and that each of the amended statement of claim and amended cross-claim be dismissed with judgment made in favour of the defendant/cross-defendant respectively. The offer of compromise included terms that there be no order as to costs with the intent that each party bear its own costs of the Court below and that such, if any, moneys as had been paid into Court or to the respondent on account of the first instance judgment, be repaid within 28 days. At the time the offer of compromise was served the judgment debt had not been paid. However, it was paid in tranches during the period in which the offer of compromise was open for acceptance. The appellant also made clear that it relied on the Calderbank principles in relation to that offer.

Submissions

1. As to the costs at first instance, the appellant submits that the issues raised on the respondent's claim occupied the majority of the proceedings (compared to the issues raised on its cross-claim). It notes that the Calderbank offer was made at an early stage in the proceedings (and says this was prior to it incurring material costs). On the assumption that the respondent would ordinarily be liable to pay the costs of the unsuccessful claim at first instance, the appellant argues that it has now achieved a result materially better than that offered on 16 March 2016 (under which it was prepared to accept 50% of its costs as agreed or assessed).
2. As to the costs of the appeal, the appellant submits that its offer of compromise afforded an opportunity for the respondent to repay all of the moneys paid to him pursuant to the judgment in the Court below and otherwise not to incur any obligation to pay the appellant any of its costs in respect of the proceedings in the Court below. The appellant maintains that it has now significantly bettered the terms of that offer and that, even though the adverse costs order in the Court below in respect of its cross-claim remains undisturbed, the offer contained in the offer of compromise constituted a significant degree of compromise by the appellant.
3. The respondent argues that the orders of the primary judge in his favour in relation to the cross-claim should not be disturbed and that, both as to the balance of the costs of the hearing at first instance and as to the costs of the appeal, there should either be no order as to costs or alternatively there should be a significant reduction in the costs payable by him to the appellant (say, in the order of 40-50%). In essence this is put on the basis of the respondent's submission (disputed by the appellant) that the ground upon which the case was decided was not one that had been presented to the primary judge.
4. The respondent argues that neither of the offers made by the appellant alters that position or otherwise warrants the making of an indemnity costs order. He argues that the appellant's case was run on the basis of the "Initial Expiry Period" argument (i.e., that the additional termination payment was only to be calculated by reference to years of service with a Related Company after 2010) and that in those circumstances it was not reasonable for him to have considered the appellant's prospects to be strong and that this "infected" his assessment both of his own case and of the appellant's offers.
5. As to the particular offers, the respondent submits that, since the 16 March 2016 Calderbank offer was not divisible (but was expressed as a singular offer), it cannot be said that the appellant has relevantly bettered the offer so as to attract an award in indemnity costs because a comparison of the ultimate outcome on the statement of claim with this offer is not comparing like with like. He says that even if the appellant may have bettered a part of this offer (that relating to the claim made by him in the statement of claim) it has ultimately done worse on the other part (that relating to the appellant's own cross-claim). As to the offer of compromise in relation to the appeal costs, the respondent again submits that the appellant did not achieve a better outcome in the appeal than the terms of the appeal offer, since its appeal was only allowed in part and it was unsuccessful in overturning the costs orders made against it in relation to its cross-claim in the Court below.
6. Insofar as the offer of compromise in respect of the appeal required the respondent to accede to the dismissal of the amended cross-claim with no recompense for his costs of defending that cross-claim, the respondent submits that the precondition in r 42.14 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), as applied by r 51.48 of the UCPR, that the order or judgment on the claim be "no less favourable" than the terms of the offer, is not met (since the appellant's cross-claim was dismissed with costs).

Percentage of costs to be awarded in respect of the appeal

1. At the time the appeal was determined, the Court indicated its tentative view as to the appropriate order in respect of the costs of the appeal (namely that the appellant be allowed 80% of its costs of the appeal - see [81] of the reasons). The appellant contends that it should be awarded a higher percentage of those costs, namely 90%. The respondent, as adverted to above, contends that a significantly lower percentage of the costs of both proceedings (if any costs at all) should be awarded - 40-50% - and says that to the extent that any special costs order is made in respect of indemnity costs by reference to the offers that were made by the appellant, such costs should be payable only as to that reduced proportion of the costs.
2. The basis on which the appellant argues for a higher proportion of its costs is its submission that the appeal was concerned with the proper construction of the employment agreement in the context of a claim commenced by the respondent and that its cross-claim (in respect of the moneys paid for the period from 2 January 2008 to 30 June 2010 pursued on appeal by ground 4 of the grounds of appeal) was "simply a mathematical consequence" of the construction of the employment agreement for which it had contended.
3. The appellant argues that the issue raised on its cross-claim did not involve any significant time or expense and says that no argument "of any substantive difference" would have been run either in the Court below or on the appeal had it not been seeking to re-coup moneys paid in respect of the period of the respondent's employment from 2 January 2008 to 30 June 2010. Referring, by way of comparison, to the length of the parties' written submissions in respect of the cross-claim as opposed to those relating to the substantive claim, the appellant submits that 90% would be a more accurate reflection of the proportion of costs attributable to each.
4. The respondent, on the other hand, argues that there should be no order for costs, or a significantly reduced amount payable by way of costs, on the basis of its contention (adverted to at [9] above) that the appellant's partial success on the appeal was not due to any argument advanced by the appellant at or prior to the appeal. The respondent says that if the construction point identified by this Court (i.e., that "service with a Related Company" did not cover service with a company which was not at that time a related company of the appellant) had been agitated by the appellant at first instance then the appellant might have won at that stage; and, similarly, that if that argument had been run at the appellate level, then he might have taken a different course (though the submissions leave unsaid precisely what course might in those circumstances have been taken). On that basis the respondent says he was prejudiced by the conduct of the case. The respondent submits that costs and time were wasted in dealing with the appellant's primary point (that the termination payment was to be calculated by reference to years of service after the Initial Expiry Period), on which point the appellant ultimately failed.
5. The appellant cavils with the proposition that its success on the appeal was achieved on an argument not run on the appeal or in the Court below. It submits that the issues presented to the primary judge for determination included both a construction of the contract whereby years of service with a Related Company were to be calculated (as this Court found) from 2 January 2008 and a construction whereby the relevant calculation was to be from 30 June 2010 (the appellant there referring to the respondent's schedule of issues dated 2 August 2016 as reflected in the respondent's written submissions in the Court below - at [1.6]). The appellant points out that it did present (albeit describing this as a "distant alternative argument") that the respondent's entitlements should be calculated from 2 January 2008 (see transcript of 5 August 2016 at 33.12-26) and says that the primary judge understood that this was the alternative argument being presented by the appellant (see transcript 5 August 2016 at 40.19-31).
6. Further, the appellant argues that the construction adopted by this Court was not materially different from the appellant's arguments on the appeal, save insofar as the appellant had argued for 30 June 2010 as the relevant starting point.

Interest on repayment of moneys

1. As to the orders sought by the appellant for interest in respect of the moneys to be repaid, the respondent maintains that interest on the amounts paid by the appellant to it in October 2016 is not appropriate. It says that steps are being taken immediately to repay the initial judgment sum (which included post-judgment interest).
2. In reply the appellant submits that the respondent's demands for payment of the first instance judgment (which it says included the service of a creditor's statutory demand) came with the consequence of an exposure to an obligation to re-pay with interest if the appeal were to be successful.

Determination

1. The principles applicable when considering applications for special costs orders (both under the relevant rules in relation to offers of compromise made under the rules and where the offer is made as a Calderbank offer) are well-known and need not here be restated.
2. In the present case, there is no basis on which to deprive the appellant (which was successful in challenging the order requiring it to pay a substantial additional amount by way of a termination payment based on years of service with another entity from 1991) of the benefit of the general rule that costs follow the event (subject to the qualification that insofar as the restitutionary claim pursued in its cross-claim is a separate "event" for the purposes of the ordinary rule, the respondent should have its costs in relation to that event).
3. The fact that this Court reached the conclusion that the respondent's principal claim should have failed at first instance on the basis of reasoning that was not on all fours with the argument as run by the appellant at first instance does not make it unjust that the respondent should now bear the costs of proceedings commenced by him to recover a substantial sum of money in respect of which he was ultimately unsuccessful. The issue before the Court, both at first instance and on appeal, was a relatively discrete issue as to the proper construction of the relevant contract. As the appellant has pointed out, the temporal aspects of the operation of the contractual clause in question were well and truly in issue. For the respondent now to say that the case (or he) might have taken a different course had the appellant argued in the way that this Court ultimately reasoned is a matter of speculation. The respondent's argument that it would be manifestly unfair for him to bear what are the ordinary cost consequences of bringing unsuccessful proceedings in the Supreme Court cannot be accepted.
4. Neither, however, should the appellant's claim for indemnity costs of the proceedings at first instance proceedings be accepted.
5. The Calderbank offer made in March 2016 was, in essence, a call for capitulation by the appellant. It was made some 4 months after the filing of the statement of claim (before the filing of the amended statement of claim or affidavits) and about a month after the filing of the appellant's defence and its cross-claim. It was clear that the issue was a discrete one of contractual construction. It required the respondent to give up his claim to a substantial sum of money and to pay 50% of the costs of the proceedings in respect of that claim; in return for which the appellant was prepared in effect to abandon its claim for recovery of a much smaller amount it claimed to have overpaid the respondent, with no order as to the costs of that claim.
6. The appellant, when serving the offer, asserted that abandonment of the cross-claim was a significant element of compromise on the part of the appellant as was its offer to pursue only recovery of 50% of its costs of the proceedings commenced by the respondent. At that stage, however, one could only assume that the costs of the cross-claim (which had only just recently been filed) would not have been significant. Moreover, if the costs for which the respondent would have been liable on acceptance of the offer were 50% of the solicitor/client costs of the proceedings (as opposed to 50% of costs assessed on a party/party basis) then the element of compromise in relation to the principal claim may well have been of reduced significance.
7. That said, accepting that there was an element of compromise in the offer, and that it may be looked at as a whole, in circumstances where the issue was a simple one as to contractual construction and there were different views reasonably available on that issue, the rejection or non-acceptance of the Calderbank offer was not unreasonable so as to trigger the imposition of indemnity costs.
8. However, the position in relation to the offer of compromise served in the appeal proceedings is in a different category. There was no suggestion by the respondent that this was not a valid offer of compromise in accordance with the rules.
9. Acceptance of that offer would have had the result that the respondent would have been required to repay any moneys paid to him as a consequence of the primary judgment (as he is required to do following the successful appeal) and would not have been required to repay the claimed overpaid amounts for the period from 2008-2010 (again as is the case following this Court's decision). The relevant difference is that under the offer of compromise he would not have to bear any of the appellant's costs of the appeal or of the proceedings at first instance (as would ordinarily be the case on a successful appeal) but would have to give up the benefit of the costs orders in his favour in relation to the cross-claim.
10. As at the time that the offer of compromise was made, some 6 weeks after the primary judgment had been delivered, the respondent must have been in a reasonable position to form an assessment of the costs implications of acceptance of such an offer. It is difficult not to conclude that the costs separately referable to the appellant's cross-claim would have been outweighed by the costs in relation to the respondent's primary claim. Hence, albeit only in relation to costs, it can be seen that this offer comprised a genuine element of compromise.
11. The judgment ultimately obtained on appeal by the appellant was no less favourable to the appellant than the terms of the offer it made to the respondent, assuming the appellant obtains an order for the costs of the appeal that would outweigh it having to pay the respondent's costs of the cross-claim in the Court below. The fact that the appeal was only allowed in part thus does not change the overall characterisation of the position under the offer of compromise as one that would have been less favourable to the appellant than the outcome of the appeal.
12. In those circumstances, the appellant should have the appropriate proportion of its costs of the appeal on and from 8 October 2016 on the indemnity basis.
13. As to the proportion of the appeal costs that the respondent should bear (80% as this Court indicated in its initial judgment, 90% as the appellant contends, or 40-50% as the respondent contends), the apportionment of costs to reflect the overall success of the respondent in circumstances where there was success on the most significant aspect of the appeal but failure on the lesser component of the appeal is largely one of impression. Counting pages of submissions referable to this or that issue is one measure that might be relevant in certain cases to take into account. In the present case, it can be accepted that aspects of the claim for restitution were bound up in the arguments that would have been run in any event in relation to the appeal on the pre-2008 component of the claim. Thus it can be accepted that the arguments would not necessarily have been substantially different on the part of either party had the restitutionary aspect of the proceedings (the appeal in relation to the cross-claim) not been raised. Nevertheless, there was a not insignificant aspect of the matter on which the appellant's appeal failed and this Court remains of the view that 80% is the appropriate discount to reflect this.
14. Finally, the Court considers that interest should be paid on the judgment sum that now has to be repaid. The respondent has had the benefit and use of those moneys that were paid to him on or about 19 October 2016 and the appellant has lost the benefit and use both of those moneys and of the other amounts paid to the respondent's solicitors trust account on or about that date. To the extent that moneys paid into the respondent's solicitors' trust account were not released to the respondent, neither party has had the benefit or use of those moneys in the intervening period.
15. In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (No 2) [2014] NSWCA 425, this Court awarded interest on an amount to be repaid following a successful appeal at the pre-judgment interest rate usually applied under s 100 of the Civil Procedure Act 2005 (NSW), approaching the matter on the basis of the question whether the claimant's right more closely approximated that of a claimant for pre-judgment interest (see [11]). By contrast, in Heydon v NRMA Ltd (No 2) (2001) 53 NSWLR 600; [2001] NSWCA 445 at [32]), reference was made to the practice of awarding restitutionary interest at the rate payable on judgments unless special circumstances exist (see Mason P at [32]). More recently, in Secure Parking Pty Ltd v Woollahra Municipal Council (No 2) [2017] NSWCA 51, this Court (Beazley P, Meagher and Ward JJA) followed the approach in Mount Bruce Mining (see discussion at [11]-13]).
16. In the present case, the judgment sum was paid (with post-judgment interest) about one month after the primary judgment was delivered. The case approximates that of a claimant for pre-judgment interest. Interest at that rate would fairly compensate the appellant for the loss of use of its money over the relevant period (there being no evidence as to any special loss suffered in that regard). However, insofar as moneys were paid to and retained in the respondent's solicitors' trust account (presumably as a result of an arrangement between the parties, perhaps to secure those moneys in the event of the requirement that they be repaid), the fairest course would be for the appellant to have the interest accrued thereon and for there to be no further order for interest.
17. Accordingly the orders that the Court now makes are as follows: 1. The respondent (being the plaintiff in the Court below) pay the appellant/defendant's costs of and incidental to the amended statement of claim on the ordinary basis (but for the avoidance of doubt not any costs of the cross-claim in the Court below). 2. The respondent pay 80% of the appellant's costs of the appeal on the ordinary basis up to and including 7 October 2016 and on the indemnity basis thereafter. 3. The respondent pay to the appellant: 1. the amount of $226,755.72, which was paid by the appellant to the respondent's nominated account on or about 19 October 2016, plus interest upon that amount calculated in accordance with section 100 of the Civil Procedure Act 2005 (NSW) for the period from 19 October 2016 until the date of repayment; and 2. the amount of $241,158.71, which was paid by the appellant to the trust account of the respondent's solicitors on or about 19 October 2016, plus any interest accruing upon that amount while in the respondent's solicitors trust account for the period from 19 October 2016 until the date of repayment and, in relation to any of that money which has been disbursed out of the respondent's solicitors trust account to the respondent, interest upon that amount calculated in accordance with section 100 of the Civil Procedure Act 2005 (NSW) from the date of disbursement to the respondent until the date of repayment. 1. Each party pay its own costs of the submissions made in relation to consequential orders following the judgment handed down on 24 February 2017 in this Court.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 March 2017