Dymocks v Capral

Judgment (EX TEMPORE - REVISED 2 MAY 2013) 1HIS HONOUR: I am concerned today with a costs dispute between the plaintiff, Dymocks, and the second defendant, Dalton. For reasons that I gave on 16 April 2013 ([2013] NSWSC 343), I concluded that Dymocks was entitled to recover against each defendant an amount in excess of $764,000.00, together with interest. 2All issues arising out of those reasons as between Dymocks and Capral have been dealt with. Further, judgment has been entered for Dymocks against Dalton pursuant to those reasons, and Dalton has been ordered to pay Dymocks' costs. What is left is Dymocks' application for indemnity costs. 3The primary basis on which Dymocks seeks indemnity costs is that, on 25 June 2010, it made an offer of compromise to Dalton by which it agreed to accept, in settlement of its claim against Dalton but exclusive of costs, the sum of $550,000. Clearly enough, having regard to what I have just said, Dymocks seems to have bettered that offer. 4It should also be noted that, on the same day (25 June 2010) but approximately ten minutes earlier, Dymocks made a "Calderbank" offer to Dalton. By that offer, Dymocks said that it would accept either $550,000 plus costs "on a party and party basis as agreed or assessed" or, alternatively, $700,000 inclusive of costs. 5The Calderbank letter gave reasons why, in Dymocks' view, the offer was a reasonable one and should be accepted. 6It has not been suggested that the offer of compromise made on 25 June 2010 was anything other than an offer that complied with the rules. Nonetheless, it should be noted that the offer of compromise itself said, perhaps by way of greater precaution, that if the rules were held not to apply to it, it was to be treated as an offer, on the same terms and conditions, made in accordance with the principles stated in Calderbank v Calderbank [1975] 3 All ER 333. 7Since, as I have said, it has not been suggested that the offer did not comply with the rules, the prima facie position is that Dymocks is entitled to its costs, against Dalton, on the indemnity basis from 25 June 2010. However, Dalton opposes that outcome. It relies on three reasons. 8The first reason is, it is said, that Dalton had insufficient particulars to enable it fully to understand and consider the offer. 9The second reason is that the offer made to Dalton should be considered in conjunction with an offer in similar terms made to the first defendant, Capral, on the same date. Dalton says that when those offers are considered together (presumably, meaning $1,100,000), Dymocks has not done better. 10The third reason, which embodies two subreasons, is that the Court should "otherwise order". First, it is said, acceptance of the offer would not have brought the proceedings to an end. Secondly, it is said, there was a material change to Dymocks' claim after the offer was made. 11It is perhaps convenient to commence by setting out the relevant provisions of r 20.26. That rule, which is intended to encourage the early resolution of disputes, reads as follows: 20.26 Making of offer (cf SCR Part 22, rules 1A, 2, 3 and 4; DCR Part 19A, rules 1, 2, 2A, 3 and 4; LCR Part 17A, rules 2 and 5) (1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms. (2) An offer must be exclusive of costs, except where it states that it is a verdict for the defendant and that the parties are to bear their own costs. (3) A notice of offer: (a) must bear a statement to the effect that the offer is made in accordance with these rules, and (b) if the offeror has made or been ordered to make an interim payment to the offeree, must state whether or not the offer is in addition to the payment so made or ordered. (4) Despite subrule (1), a plaintiff may not make an offer unless the defendant has been given such particulars of the plaintiff's claim, and copies or originals of such documents available to the plaintiff, as are necessary to enable the defendant to fully consider the offer. (5) If a plaintiff makes an offer, no order may be made in favour of the defendant on the ground that the plaintiff has not supplied particulars or documents, or has not supplied sufficient particulars or documents, unless: (a) the defendant has informed the plaintiff in writing of that ground within 14 days after receiving the offer, or (b) the court orders otherwise. (6) An offer may be expressed to be limited as to the time it is open for acceptance. (7) The following provisions apply if an offer is limited as to the time it is open for acceptance: (a) the closing date for acceptance of the offer must not be less than 28 days after the date on which the offer is made, in the case of an offer made 2 months or more before the date set down for commencement of the trial, (b) the offer must be left open for such time as is reasonable in the circumstances, in the case of an offer made less than 2 months before the date set down for commencement of the trial. (8) Unless the notice of offer otherwise provides, an offer providing for the payment of money, or the doing of any other act, is taken to provide for the payment of that money, or the doing of that act, within 28 days after acceptance of the offer. (9) An offer is taken to have been made without prejudice, unless the notice of offer otherwise provides. (10) A party may make more than one offer in relation to the same claim. (11) Unless the court orders otherwise, an offer may not be withdrawn during the period of acceptance for the offer. (12) A notice of offer that purports to exclude, modify or restrict the operation of rule 42.14 or 42.15 is of no effect for the purposes of this Division. 12Dalton relies on subr (4). It says that it had not been given sufficient particulars of Dymocks' claim, nor copies of documents, that were necessary to enable it to consider the offer. For the purposes of subr (5), Dalton relies on a letter written by its lawyers to Dymocks' lawyers on 30 June 2010. 13Dymocks submits that the letter was written in response to the Calderbank offer and not in relation to the offer of compromise. I think that this is taking an unduly narrow view of things. First, the letter of 30 June 2010 referred expressly to both letters of 25 June 2010: the letter enclosing the offer of compromise and the letter making a Calderbank offer. Secondly, as I have noted, the offer of compromise itself invoked, as it were in the alternative, the Calderbank principle. 14I think it is appropriate to treat the letter of 30 June 2010 as setting out Dalton's position and, to the extent that it does seeking information, in relation to the offer generally, r 20.26 character and its Calderbank character. 15Nonetheless, I do not think that the letter of 30 June 2010 engages r 20.26 (5). 16First, the letter of 30 June 2010 addresses the question of ownership of the building. It sets out Dalton's position in relation to ownership. I interpose to note that this was a position that I dealt with, and resolved in Dymocks' favour, in my reasons given on 16 April 2013. 17Although, in this context, the letter of 30 June 2010 makes reference to the absence of discovered documents and the like, it is undoubtedly the fact that when considering categories of documents for discovery, Dalton had not troubled to raise anything in relation to ownership. An email of 16 October 2009 suggested that Dymocks should discover reports by the clerk of works, reports as to roof maintenance, communications with those involved in the construction, communications with an expert, Dr Wallwork and plans and drawings. Nothing was said about documents relating to ownership. 18The inescapable inference is that Dalton thought it was in a position to run its arguments, on the question of ownership, on the basis of the material that had been discovered. 19In truth, I think, this aspect of the letter of 30 June 2010 is aimed not so much at requesting information or documents for the purposes of r 20.26 (5), but, rather, at reiterating Dalton's position on the issue of ownership, and advancing this as a reason why the offer was not one which Dalton ought reasonably to accept. 20The next issue raised in the letter deals with the alleged breach of duty. Dalton's position was in essence that the design specified by it was authorised by the applicable Australian Standard, AS 1562. I dealt with this at length (perhaps excessive length) in my reasons. It is correct to say that, read alone, AS 1562 did not suggest that contact between the metals in question, stainless steel and aluminium, was inappropriate. But, as became clear, and as my reasons detail, there were other relevant documents. 21Mr Peter Dalton, the principal of Dalton, had considered those other documents. For the reasons that I gave, on the whole of the material which was available to Mr Dalton and, according to him, considered by him, he should have designed otherwise than he did. 22Thus, although the case changed in its articulation and emphasis, the fundamental case seems to me to be the same. It is inappropriate, in assessing the offer of compromise, to focus on the narrow issue of AS 1562 when Mr Dalton's own evidence made it clear that his investigations had gone much further. 23The next issue raised dealt with the question of reliance on asserted representations. So far as I can understand it, Dalton was asserting that it was reasonable for it to rely on advice given by others. Since I have found that no such advice was given (and thus, a fortiori, relied upon), this goes nowhere. 24The other issues raised go to the limitation question and to the quantification of Dymock's costs. They seem to me to have nothing to do with r 20.26 (5). 25Standing back and looking at the matter at a level of some generality, what happened was that: (1) Dymocks made two offers; (2) the Calderbank offer in effect gave reasons why one or other of the offers (including the offer of compromise) should be accepted; and (3) Dalton's response gave reasons why it was reasonable for Dalton not to accept either of the offers. 26In those circumstances, I do not think that the first ground of opposition to indemnity costs has been made out. I say that notwithstanding that there was apparently no reply to the letter of 30 June 2010. Dymocks' solicitor explains that, in a way which although it may say something about the record keeping practices of his firm, does not involve any need for further investigation. 27The next basis of opposition to indemnity costs was that the two offers of compromise should be considered together, and that when they were, Dymocks had not bettered the combined offer. 28I do not think that this argument has any substance. Rule 20.26 empowers one party to proceedings to make an offer, by notice in writing, to any other party to compromise any claim in the proceedings. That may be compromise in whole or in part, as the rule says. 29Dymocks sued Dalton in tort and Capral in contract. The claim against Dalton arose out of what I found was the retainer by Dymocks of Dalton. The claim against Capral arose out of a separate deed under which Capral warranted, on certain conditions, the performance of the roof. 30In circumstances where the offers were made to the individual defendants to compromise the several claims against them (it can not be suggested that the claims were in any way joint, because they had different legal sources), the proposition that an offer complying with the rules has not been bettered because, when that is considered in conjunction with a second offer, the overall position was not bettered, seems to me to have the potential to destroy the utility of r 20.26. 31It would have been open to Dymocks to settle with Capral and to proceed against Dalton. Equally, it would have been open to Dymocks to settle with Dalton and proceed against Capral. In those circumstances, there may well have been questions as to whether, and if so to what extent, recovery under the hypothetical settlement should be brought to account in assessing damages against the other defendant, in the event that Dymocks succeeded against it. But that does not seem to me to be a basis for saying that, where offers made in accordance with the rules are rejected and where, as against each offeree, the offeror has bettered the position offered, the rule should not apply. 32If Dalton's argument were correct, it would seem to follow necessarily that Dymocks should have made but one offer, addressed to each defendant. As has been pointed out (see for example Vieira v O'Shea (No 2) [2012] NSWCA 121), an offer addressed to two defendants is likely to be ineffective if it can not be accepted by either defendant acting alone. In those circumstances, Dymocks had no course but to act as it did. As I have noted, if Dalton's submissions were to be accepted, it would seem to follow that a plaintiff who sues several defendants could not engage r 20.26 to settle as against one of them, or to transfer the risk of indemnity costs. As I have indicated also, that is not a construction of the rule that should be adopted. 33Thus, in my view, the second ground of opposition fails. 34The third ground of opposition, asking that the Court otherwise order, relies, as I have said, on two separate arguments. Dalton notes that there were cross-claims in existence between it and Capral. It submits that if it had accepted Dymock's offer, nonetheless the proceedings would have continued for the purposes of adjudication on the cross-claims. That does not seem to me to go anywhere. What would have been left in the proceedings was the question of contribution. That may have raised, as an issue, whether in all the circumstances it was reasonable for Dalton to settle (assuming it had done so) in the way that it did. That goes no further. It certainly does not seem to me to be sufficient to deflect the cost consequences of non acceptance of the offer. Further, it seems to me, the submission ignores the fact that the rule expressly authorises the making of offers to settle "any claim in the proceedings, either in whole or in part". That is precisely what the offer did. 35The next matter relied on in this context is what is said to have been a material change to Dymock's claim. That is said to arise because the claim, both in relation to the relevant standards and other documents and in relation to the points of dissimilar metal contact, had expanded after 25 June 2010. 36It may be accepted that the articulation of the case changed somewhat. However, as has been pointed out, these were in effect changes in the nature of further particularisation. Ward J said so much when allowing amendments to the relevant paragraphs of the list statement (Dymocks Book Arcade Pty Ltd v Capral Ltd [2011] NSWSC 1423 at [31]). 37Further, for the reasons I have given in relation to the reliance on AS 1562, it was Mr Dalton's evidence that his enquiries had travelled further. Thus, although the expert evidence focused not only on this standard but also on other authoritative documents (I will not repeat what I have said in my earlier reasons), the fact is that on Mr Dalton's evidence, he had gone further than the Standard. 38Thus, in reality, I do not think that there was any material change in, or widening of, the case that Dymock's brought. 39For those reasons I order that the costs payable by the second defendant to the plaintiff be assessed on the ordinary basis up to 25 June 2010 and on the indemnity basis thereafter.