Cutler v Derwent Howard Media Pty Ltd, in the matter of Derwent Howard Media Pty Ltd

REASONS FOR JUDGMENT 1 The only remaining issue in this matter is that of costs. On 19 August 2011 I delivered my principal reasons, in which I concluded (as set out at [167] of those reasons) as follows: - (i) Mr Cutler has no entitlement to wages in lieu of notice, (ii) Mr Cutler has no unpaid long service leave entitlements, (iii) Mr Cutler is entitled to payment on account of accrued annual leave in the amount of $21,982.36, and (iv) Mr Cutler is not entitled to payment of any unpaid expenses. As a result, I determined that Mr Cutler's appeal against the administrator's decision to reject his proof of debt should be allowed to the extent that the proof of debt should have been admitted in the additional sum of $21,982.36 on account of his unpaid accrued annual leave. I directed the parties to confer and to submit agreed or competing proposed orders, including as to costs, reflecting my reasons for judgment. 2 The plaintiff has submitted proposed costs orders which, in effect, provide for the second and third defendants to pay one-fifth of the plaintiff's costs of the proceeding. There is no particular precision about the one-fifth figure; in accordance with the relevant authorities on the nature of the discretion as to costs, this is appropriate. It can be surmised that the figure of one-fifth is intended to represent the compensation (in respect of costs) that should be paid to the plaintiff having regard to the fact that the defendants had denied Mr Cutler's entitlement to payment of his accrued annual leave and that Mr Cutler was successful in relation to that claim, but was unsuccessful in relation to the balance of his claims. The plaintiff's fallback position is that each party should pay its own costs of the proceeding. 3 The defendants' position is somewhat more complex. The defendants say that all previous costs orders should be vacated, that the defendants should pay the plaintiff's costs of the proceeding up to and including 25 January 2011, and that the plaintiff should pay the defendants' costs of the proceeding on an indemnity basis from 26 January 2011. The reason for this proposed costs order is that, on 25 January 2011, the solicitors for the defendants sent a letter to the solicitors for the plaintiff on a "without prejudice save as to costs" basis. The letter, accordingly, constituted a form of Calderbank offer (see Calderbank v Calderbank [1975] 3 All ER 333). The offer was to the effect that the administrators would be prepared to offer to treat as a priority creditor's claim within the meaning of the relevant deed of company arrangement that part of Mr Cutler's claim representing his accrued but untaken annual leave, together with his costs of the proceeding - with such costs limited, however, to the sum of $15,000. The offer was expressed to remain open for acceptance until close of business on Friday, 28 January 2011. The offer set out the reasons for the defendants' position that they should succeed on the balance of the plaintiff's claims, but acknowledged sufficient ambiguity in relation to Mr Cutler's claim for unpaid but accrued annual leave to make it commercially expedient for there to be an amicable resolution of this aspect of the matter by a payment by the defendants to Mr Cutler in that regard. 4 The defendants say their offer to settle the proceeding was in clear and certain terms and was made at a time when all the evidence in the proceeding had been filed and served and that, accordingly, the relatively short period given to the plaintiff to consider his position was reasonable. The defendants also say the offer set out with sufficient particularity the reasons the plaintiff was bound to fail on the balance of his claims, and that my principal reasons for judgment conform to what was set out in the letter (in short, that the plaintiff did ultimately fail for the very reasons set out therein). 5 On this basis, referring to decisions in GM Holden Ltd v Paine (No 3) [2011] FCA 693, Keays v J P Morgan Administrative Services Australia Limited (No 2) [2011] FCA 547 (in particular at [18] and [19]) and Australian Executor Trustee Limited v Propell National Valuers (WA) Pty Ltd (No 2) [2011] FCA 966 (Propell) (specifically at [14]-[16]), the defendants say that it was imprudent or unreasonable for the plaintiff not to accept the offer of compromise. In particular, the defendants point to the observations at [16] in Propell, which are to the effect that in determining the question of imprudence or unreasonableness in not accepting an offer to settle a proceeding the Court should consider, "among any other relevant circumstances, the strengths and weaknesses of the applicants' case, looking at the claim prospectively at the time the offer was made." According to the defendants it should have been plain to the plaintiff that, as set out in the letter of 25 January 2011, the plaintiff's claims insofar as they extended beyond his claim for payment of his accrued annual leave were doomed to failure. 6 The plaintiff, for his part, contends that the letter of 25 January 2011 should not be given any weight in the assessment of costs for the following reasons: (1) The offer was made on Tuesday 25 January 2011 and was open until Friday 28 January 2011, with the Australia Day public holiday falling on 26 January 2011; thus, the offer was open for an extremely short period of time. (2) The offer included costs capped in the sum of $15,000; however, for the plaintiff to have known whether the offer was reasonable there would have needed to have been an assessment or taxation of the costs that the plaintiff had incurred to that date. (3) At the time the offer was made the matter was to proceed to trial on 4 February 2011; however, that hearing was vacated and associated costs orders made because of the defendants' proposal to amend their defence. The ultimate second further amended defence included questions which, in effect, were not raised in the defence as it stood at the time the offer was made. (4) In any event a Calderbank offer, even if valid, does not create a presumption as to the payment of costs but is merely a relevant discretionary factor. In circumstances where the defendants always denied the plaintiff's entitlement to his unpaid accrued annual leave - with the exception of the offer of 25 January 2011 of a payment of that amount and a payment of costs capped at $15,000 - the plaintiff's position is that he was forced to come to Court to establish his entitlement to the payment of his accrued annual leave and a costs order in his favour in that regard. 7 It is not easy to resolve the question of costs in this proceeding. I am persuaded that this is not an appropriate case for the making of an indemnity costs order based on the letter of 25 January 2011. My reasons are twofold. First, the offer was open for a very short period of time. That short period of time of itself means that the failure to accept the offer while it was open cannot be classed as imprudent or unreasonable. Secondly, as the plaintiff has submitted, the offer included payment of costs limited to the amount of $15,000 in circumstances where I do not know what costs the plaintiff might otherwise have been entitled to as at 25 January 2011. On this basis I accept that the letter of 25 January 2011 cannot create any presumptive right to indemnity costs in the defendants. I do not wish to say that the letter is therefore entirely irrelevant, because it is part of the factual context within which this matter proceeded to hearing. That said, the critical factors in this matter also include the fact that the plaintiff was forced to come to Court in order to obtain his right to his accrued annual leave. In the ordinary course, if that had been the only claim the plaintiff made, he would have been entitled to the usual order as to costs in his favour. However, the plaintiff also made a number of other claims in respect of which the defendants were successful. These other claims absorbed substantially more of the hearing than the claim on which the plaintiff ultimately succeeded. 8 In light of these factors, the appropriate exercise of discretion in this case is to order that each party pay its own costs of the proceeding. In circumstances where the plaintiff had to come to Court in any event, it does not seem to me that it would serve the overall compensatory purpose of a costs order for the plaintiff to succeed on his claim in the amount specified - the sum of some $22,000 - but to otherwise be subject to a costs order for the additional claims on which he failed. While the defendants succeeded on those claims, the defendants, as the plaintiff puts it, defended their position in Court that the plaintiff was not entitled to unpaid accrued annual leave. In these circumstances, each party should pay its own costs of the proceeding. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.