[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
[2]
JUDGMENT
THE COURT: On 24 July 2023, the Court delivered judgment and made orders refusing the appellants' notice of motion seeking to rely upon further evidence and dismissing the appeal. The Court also ordered that the respondent should file short submissions on costs within seven days and the appellant file short submissions in reply within fourteen days of the Court's orders.
The respondent filed submissions on costs on 28 July 2023. The respondent seeks an order that the appellants pay its costs on an ordinary basis until 21 March 2023 and on an indemnity basis thereafter. The respondent relies, in this regard, upon a global offer which was made on 6 March 2023 to resolve the appeal and two related bankruptcy proceedings ("the 6 March 2023 Offer"). The respondent accepts that the 6 March 2023 Offer would not necessarily, of itself, justify an order for indemnity costs. It submits, however, that the conclusion that an order for indemnity costs is appropriate is reinforced by the appellants' conduct of the appeal. In this regard the respondent submits that costs were wasted by the appellants in addressing a substantial number of appeal grounds that were ultimately abandoned at the hearing and in addressing an application for fresh evidence which, the respondent submits, had no prospect of success and would not have altered the outcome of the appeal even if successful.
The appellants, in submissions filed on 4 August 2023, contend that the appropriate order is that costs (read as referring to costs assessed on the ordinary basis) should follow the event, to be agreed or assessed. They contend, broadly, that nothing in their conduct was unreasonable. As to the 6 March 2023 Offer, they say it was neither reasonable nor genuine. In any event, they say, the bankruptcy matters are separate and distinct and should not be predetermined in a costs application.
By email dated 8 August 2023 the appellants also sent two documents to the Court, copied to the respondent's solicitors. These were described as an Affidavit of Mrs Edmonds dated 8 August 2023 and "Applicants' Submissions sealed on 8 August 2023". There was no leave to provide these documents to the Court. They were not identified or referred to in the appellants' submissions on costs. In these circumstances, the Court has not read them, or taken them into account in any way, on the question of costs.
[3]
Relevant Principles
There is no presumption that a party who does not accept a Calderbank offer and does not obtain a more favourable judgment will necessarily pay indemnity costs from the date of that offer: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [19] (Santow JA, Bryson and Stein JJA agreeing); Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124 at [9] (Bathurst CJ, Allsop P and Beazley JA agreeing).
Whether or not indemnity costs should be ordered where a party does not accept a Calderbank offer depends upon whether it was a genuine offer of compromise and whether the offeree acted unreasonably in all the circumstances in refusing the offer, tested as at the time the offer is made and not with the benefit of hindsight resulting from a known outcome recorded in a judgment: Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8], [11] (Basten JA, McColl and Campbell JJA agreeing); Krolczyk v Winner t/as J Winner Building Services [2022] NSWCA 196 at [217] (Griffiths AJA, White and Kirk JJA agreeing).
The relevant principles were summarised by Ward CJ in Eq (as her Honour then was) in E Group Security Pty Ltd v Chief Commissioner of State Revenue (No 2) [2021] NSWSC 1296 at [59]-[60]:
"59 The factors to be taken into regard when considering whether the rejection or non-acceptance of the offer was unreasonable include: the stage of the proceeding at which the offer was received; the time allowed to the offeree to consider the offer; the extent of the compromise offered; the offeree's prospects of success assessed as at the date of the offer; the clarity with which the terms of the offer were expressed; and whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it (see Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 at [25] per Warren CJ, Maxwell P and Harper AJA; Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398 at [8] per Buchanan and Tate JJA and Sifris AJA; Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 at [12] per Basten JA (with whom McColl and Campbell JJA agreed)).
60 The defendant has pointed in his submissions to various factors that in other cases have been found to be relevant in determining whether the rejection of a Calderbank offer was not unreasonable, and tending against such finding, including: all relevant evidence not having been served at the time of the offer (Vale v Eggins (No 2) [2007] NSWCA 12 at [22]); the full parameters of the dispute remaining uncertain at the time of the offer (Precision Products (NSW) Pty Ltd v Hawkesbury City Council (2008) 74 NSWLR 102; [2008] NSWCA 278 at [192]); the offeror's case changing after the making of the offer (South Eastern Sydney Area Health Service at [85]); the inclusion of conditions in the offer (Magenta Nominees Pty Ltd v Richard Ellis (WA) Pty Ltd (unreported, FCAFC, Spender, French and Lee JJ, 29 August 1995); and the issues in dispute in the proceedings being complex (MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 at 242D)."
The respondent bears the onus of demonstrating that the appellants' failure to accept the 6 March 2023 Offer was unreasonable in all the circumstances.
[4]
The respondent's offer of compromise
The 6 March 2023 Offer was made in respect of:
1. the appeal to this Court ("the Appeal Proceedings");
2. an application by Mr and Mrs Edmonds (the appellants in Appeal Proceedings) to the Federal Circuit and Family Court of Australia for review of a decision by Registrar Morgan to dismiss their application to set aside a Bankruptcy Notice which is said to be based on the judgment debt arising out of the primary judge's decision in these proceedings ("the Review Proceedings"); and
3. proceedings arising out of a creditor's petition by Barrington Winstanley Group Pty Ltd (the respondent in the Appeal Proceedings) against Mr and Mrs Edmonds in the Federal Circuit and Family Court of Australia ("the Petition Proceedings").
The respondent's submissions on the appeal were filed on the same day that the 6 March 2023 Offer was made.
The 6 March 2023 Offer was as follows:
"1) That your clients pay $800,000 ("Settlement Sum") to our client within 30 days of acceptance of this offer, in satisfaction of our client's following judgement debts including interests (interests not specified) against your clients:
i. $801,116.89 under the final court order dated 20 May 2022 by Darke J in NSWSC case 2021/00112414; and
ii. $21,315.29 under the final court order dated 1 March 2022 in the NSW Local Court case no. 2022/00058352; and
iii. $25,856.86 under the costs order dated 30 August 2022 in the FCFCOA case BRG273/2022.
2) Each party bear their own costs in the Current Proceedings.
3) The parties otherwise release and discharge each other from and against all claims, liabilities, obligations, transactions, judgements and orders in respect of and in relation to the brokerage services provided by BWG to the Edmonds.
4) Upon signing of a Deed of Settlement incorporating the above terms and receipt of the Settlement Sum, each party file relevant notices with the court to discontinue the Current Proceedings."
The offer was not an offer that complies with Uniform Civil Procedure Rules 2005 (NSW), r 20.26. The respondent thus does not have a default entitlement to an indemnity costs order.
The offer was open for acceptance for 14 days, until 5pm on 21 March 2023. It was expressed to be an offer "made in accordance with the principles stated in Calderbank v Calderbank [1975] 3 All ER 333." The letter conveying the 6 March 2023 Offer set out that "[i]f this offer is not accepted and our client subsequently obtains a judgment more favourable than the terms of this offer, our client will rely on this letter in seeking indemnity costs against your client." The letter did not set out which judgment this was referring to, although in context, this would be construed as a reference to judgment in the Appeal Proceedings.
By way of context, the primary judge in these proceedings ordered that judgment be entered against the appellants in the sum of $801,116.89 including interest, and that the appellants pay the respondent's costs of the proceedings.
[5]
Determination
We reject the appellants' characterisation of the 6 March 2023 Offer as not genuine. It is plainly a genuine offer. As regards the Appeal Proceedings, it was also timely in the sense that it was made at the same time as the respondent filed its submissions on appeal, so the appellants were well able to appreciate the issues arising on the appeal and the hurdles they had to overcome. Viewed simply from the standpoint of the Appeal Proceedings, the 6 March 2023 Offer was a substantially better outcome than the appellants achieved on appeal, as it released the appellants from any liability for the costs of the proceedings before the primary judge and for interest since the date of judgment upon payment of a sum just short of the sum the primary judge ordered that the appellants' pay. It also provided for each side to bear their own costs of the Appeal Proceedings which on any view is an outcome better for the appellants than they will now achieve.
The difficulty for the respondent in satisfying the Court that the appellants' failure to accept the 6 March 2023 Offer was unreasonable arises from the Court's inability to form any reliable assessment of the appellants' prospects of success in either the Review Proceedings or the Petition Proceedings. These proceedings are ongoing. Moreover, the Court has only very limited reliable information about those proceedings.
During the hearing of the appeal Mr Smits, solicitor acting for the appellants, informed the Court that bankruptcy notices and a petition had been issued and that "it's on the back of the money judgment". Mr Smits also informed the Court that there had not been a sequestration order as the proceedings had been listed but had been adjourned pending the outcome of the appeal.
An affidavit sworn on 17 October 2022 by Mr Smits, in relation to the Petition Application, was included in the material before the Court in the Appeal Proceedings. That includes a statement that the "Petition is founded predominantly upon the Money Order made" by the primary judge in these proceedings. Mr Smits then sets out that he has filed a Notice of Grounds of Opposition to the Petition. Mr Smits on a number of occasions within that affidavit contends that "sufficient other cause" to dismiss the petition appears from the notice of appeal (in the Appeal Proceedings) and from the affidavit itself. He says that the grounds of appeal in the Appeal Proceedings "provide the essential foundation for dismissal of the Petition". He adds that, for various reasons, as at 17 October 2022 he had not had "any real or adequate opportunity to investigate or adduce any other or new evidence in support of that contention" other than that which was contained in the court book before the primary judge in these proceedings. He also states that his affidavit is not intended to constitute submissions, which will be filed as directed by the Court. The affidavit concludes by asking the Court to dismiss the petition to avoid stultification of the Appeal Proceedings and irreversible loss and injustice.
The Court also has some further, albeit limited, information about the Review and Petition Proceedings in the affidavit sworn on 15 October 2022 of Mr Edwards, a barrister who at some points in time has acted for the appellants. This was included in the material before the Court on the Appeal Proceedings. In that affidavit Mr Edwards says that he provided some advice, and prepared documents and appeared for the appellants in the Review Proceedings. He describes the bankruptcy notice in issue in those proceedings as being "based primarily upon the Money Order made by Justice Darke" at first instance in these proceedings. He says that he also performed some legal work in relation to the Petition Proceedings but does not set out the issues arising in those proceedings.
On the basis of this limited information, it appears that both the bankruptcy notice in issue in the Review Proceedings and the petition in the Petition Proceedings are at least in part (and likely substantially) related to the appellants' obligation to pay the sum that they were ordered to pay at first instance in these proceedings. It is also apparent from Mr Smits' affidavit, described above, that prior to the judgment of this Court in the Appeal Proceedings, the appellants were relying upon the grounds of appeal in the Appeal Proceedings, and the fact of the extant appeal, in the Review Proceedings. This Court does not, however, know what matters will ultimately be relied upon by the appellants in either the Review or Petition Proceedings. This Court does not even know what, if any, arguments may be available to the appellants given the dismissal of their appeal in the Appeal Proceedings. As neither the Review nor the Petition Proceedings have yet been determined, there is no "outcome" to which the 6 March 2023 Offer can be compared. Thus, whilst it may be that the dismissal of the appeal in the Appeal Proceedings will be fatal to the appellants' case in both the Review Proceedings and the Petition Proceedings, the Court cannot reliably predict that this will be the case.
In these circumstances we are not satisfied that the appellants' failure to accept the 6 March 2023 Offer is unreasonable.
We also do not consider that the appellants' conduct of the appeal, of itself, crossed the threshold of unreasonableness for an indemnity costs order. Whilst the appellants did advance multiple grounds of appeal which were ultimately found to have no merit, those grounds were only faintly pressed in the appellants' written submissions, the respondent in its written submission dealt with those grounds only relatively briefly and no time was taken up in oral argument in dealing with these grounds. We do not consider that this, of itself, constitutes unreasonable conduct of the appeal proceedings. The appellants' application to adduce fresh evidence, whilst unsuccessful and time consuming, was not so lacking in merit as to amount to conduct meriting an indemnity costs order. This was particularly so given that it was to some extent interwoven with the appellants' ground of appeal that there was a denial of procedural fairness at first instance. Nor do these matters, considered cumulatively, or considered cumulatively with the failure of the appellants to accept the 6 March 2023 Offer, justify such an order.
In the circumstances, we would not make an order for indemnity costs.
[6]
Conclusion
We do not consider that the need for the parties to advance short written submissions on costs after delivery of judgment warrants any other order. In the circumstances, the following order should be made
1. The appellants should pay the respondent's costs of the appeal, including on the issue of costs, to be assessed on the ordinary basis if not agreed.
[7]
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: 22 August 2023