Dragon Property Development & Investment Pty Ltd v 183 Eastwood Pty Ltd

Supreme Court of NSW|2022-07-27|Before: Peden J, Ward P, Gummow JJ, Beazley JA, Mason P, Gleeson JA, Mason CJ, McColl JA

Judgment

On 6 July 2022, I delivered an ex-tempore judgment in this matter (Dragon Property Development & Investment Pty Ltd v 183 Eastwood Pty Ltd [2022] NSWSC 910). The sole issue in the proceedings was whether the defendant had given a rogue, Scott Chan, any authority to enable him to persuade the plaintiff that he was acting as the defendant company in entering into a contract and taking the plaintiff's money. I found the defendant had done so, and therefore awarded the plaintiff $1,672,000.
At [82] of my reasons, I ordered that the defendant pay the plaintiff's costs on the ordinary basis as agreed or assessed, unless a party sought a different costs order.
The plaintiff has sought a special costs order on the basis of a Calderbank offer.
The defendant has not contested the plaintiff's application.

Calderbank offer

On 13 January 2022, the plaintiff sent the defendant a letter, which made reference to the principles of Calderbank v Calderbank (1975) 3 All ER 333. The plaintiff offered full and final settlement of the dispute if the defendant paid $1,600,000 to the plaintiff. The letter noted that the plaintiff had already incurred costs of approximately $70,000.
Just recently, Ward P summarised the well-known principles in relation to costs in Abdi v Abdi (No 2) [2022] NSWSC 582 at [19]-[30]: [19] It is well-recognised that there is a broad discretion as to costs (see s 98 of the Civil Procedure Act 2005 (NSW); Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (Oshlack)) but that it must be exercised judicially (see Oshlack at [22] per Gaudron and Gummow JJ) and having regard to the overriding statutory purpose mandated by s 56 of the Civil Procedure Act. The usual order is that costs follow the event (see r 42.1 of the UCPR); unless the Court considers that some other order ought to be made (see Commonwealth of Australia v Gretton [2008] NSWCA 117 (Commonwealth v Gretton) at [38] per Beazley JA, as Her Excellency then was (with whom Mason P agreed)). [20] The purpose of costs awards is primarily compensatory not punitive (see Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [37] per Gleeson JA, with whom Meagher and Barrett JJA concurred, his Honour there citing Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 542 per Mason CJ; and see also Ohn v Walton (1995) 36 NSWLR 77). The discretion to be exercised in a manner which is primarily directed to the position of the successful party. [21] However, it is also well known that there are circumstances in which special costs orders are warranted. Leaving aside cases of relevant delinquency (see Fountain Selected Meats (Sales) Pty Ltd v Universal Produce Merchants Pty Ltd (1988) 81 ALR 397; [1988] FCA 364; Dunstan v Rickwood (No 2) [2007] NSWCA 266 at [44] per McColl JA), special costs orders are commonly sought where the offer of compromise procedure under the UCPR is validly invoked or where the Calderbank principles are applicable. The public policy underlying the making of special costs orders in such circumstances is the interest in encouraging settlement of litigation and discouraging wasteful and unreasonable behaviour of litigants (see Leichardt Municipal Council; Maitland v Fisher (No 2) (1992) 27 NSWLR 721 at 724 per the Court).

Whether offer was valid

I consider that the offer in the present case was in the form of a valid offer. The offer stated: "[t]his formal offer of settlement is made pursuant to the principles of Calderbank v Calderbank [1975] 3 WLR 586". Although it was not explicitly apparent in the terms of the offer that it would be relied on for the purposes of a special costs order, the letter does state that it is "without prejudice save as to costs". I consider this sufficient to constitute a valid offer: Assaf v Skalkos [2000] NSWSC 935 at [110] (Carruthers AJ); Geoffrey Andrew Smith v Robert Gould [2014] VSCA 138 at [156] (Warren CJ, Osborn and Beach JJA); Farlow v Farlow [2009] FamCA 46 at [26] (Mushin J); Becker v Queensland Investment Corporation (No 2) [2009] ACTSC 147 at [12] (Refshauge J).
The offer was all-inclusive in that it made no separate reference to a costs component. It has been said that a settlement offer which is 'inclusive of costs' is not suited to being an effective Calderbank offer, because it does not allow the Court to decide whether the offeree obtained a worse outcome in the judgment: Van Zonneveld v Seaton [2005] NSWSC 175 at [6] (Campbell J). The offer in this case, however, specifies the approximate legal costs already incurred by the plaintiff to the date of the offer. Such an offer may constitute a Calderbank offer, because it is possible to know that the combination of $1,600,000 and $70,000 was less than the total sum claimed and in fact awarded: Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [143] (Basten JA, with whom Beazley JA agreed).

Whether rejection was unreasonable

In terms of the unreasonableness of the defendant's rejection of the offer, the plaintiff pointed to the timing of the offer. It said that, at the time of the offer on 13 January 2022, the defendant had the benefit of the plaintiff's Reply filed on 13 December 2021, which squarely pleaded the issue of ostensible authority and drew attention to relevant particulars. Further, the offer was made at a time when all the affidavit evidence had been served.
The plaintiff also submitted that the offer pointed out the likely findings that would be made at hearing, which proved correct.
There is no question that the terms of the offer were more favourable to the defendant than the terms of my judgment. The plaintiff obtained judgment in the sum of $1,672,000, which is $72,000 more than the sum in the offer. Further, as a result of my judgment, the defendant has an adverse costs order against it, which it could have avoided.
Finally, the plaintiff submitted that there was ample time for the defendant to consider the offer. The offer was open for 14 days, which, although not a generous time, is not so short as to be unreasonable: Brymount Pty Ltd v Cummins (No 2) [2005] NSWCA 69 at [15] (Beazley JA, with whom Ipp and McColl JA agreed). In circumstances where all the evidence was available, the plaintiff had outlined the merits of its case, and the matter only concerned an application of the general principles of agency law to largely uncontested facts, I consider that 14 days was a reasonable time for the defendant to assess its position.
On balance, and in the absence of contrary submissions from the defendant, I consider that the defendant unreasonably rejected the plaintiff's offer and, therefore, the plaintiff is entitled to a special costs order based on the offer.

Orders

The Court orders that: 1. The order made as to costs in the principal judgment is set aside. 2. The defendant is to pay the plaintiff's costs on the ordinary basis as agreed or assessed up to 13 January 2022 and on an indemnity basis thereafter.

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: 27 July 2022

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