Financial Integrity Pty Limited v Farmer and Bravium Pty Limited

Supreme Court of the ACT|2014-06-16|Before: Kirby P, Refshauge J

1. Order 1 of the orders made on 1 May 2014 be amended by omitting "$8,720.00" and substituting "$5,756.36".

2. The plaintiff pay the defendants' costs on a party and party basis up to and including 28 April 2010.

3. Each party pay their own costs of the submissions made in response to the order made on 13 August 2013.

1. Following the dissolving of an injunction made on 27 August 2007, application was made to me for an order assessing the damages occasioned as a result of the original making of the injunction.

2. On 1 May 2014, I ordered that there be judgment for the defendants in the sum of $8,720.00 which included damages of $3,700.00 and interest on that sum of $5,020.00: Financial Integrity Group Pty Ltd v Farmer (No 3) [2014] ACTSC 75.

3. The parties have now approached me with a submission that the interest then calculated is incorrect. The lawyers for the plaintiff prepared a calculation using the Court's interest calculator, showing the total interest as $2,056.36, that is $1,055.96 in respect of client HI and $1,000.40 in respect of client PQ.

4. On inspection of my notes and calculations, it is clear that I made an error by adding the principal, being the damages, to the calculated interest incorrectly identifying that total as the interest to be charged.

5. The effect of that was to add the amount of the damages twice to the judgment.

7. An order of the court can always be recalled and corrected before it is perfected by being reduced to a sealed order. See Burrell v The Queen [2008] HCA 34; (2008) 238 CLR 218 at 224. An inspection of the court records shows that the order of 1 May 2014 has not yet been sealed and perfected.

8. Even were the order of the Court to have been sealed, an error such as this could have been corrected under r 6906 of the Court Procedures Rules 2006 (ACT) which provides

6906 (1) This rule applies if -

(a) there is a clerical mistake in an order or certificate of the court or an error in a record of an order or certificate of the court; and

(b) the mistake or error resulted from an accidental slip or omission.

(2) On application by a party to the proceeding or on its own initiative, the court may at any time correct the mistake or error.

9. This rule, known as "the slip rule", would certainly permit the amendment sought. It amounts to a mathematical error, relevantly identical to a clerical error. See, for example, Agius v Agius [2010] FamCAFC 143 at [167]- [173].

10. Further, while the decision to include interest was a deliberate decision, the decision as to the amount was an accidental slip made by accidentally adding the principal to the interest calculated on it as the amount of interest. It was, thus, not a deliberate decision in the sense used in Expo Aluminium (NSW) Pty Ltd v Pateman Pty Ltd (No 2) (Unreported, New South Wales Court of Appeal, Kirby P, Samuels and Meagher JJA, 29 April 1999) which would prevent such a correction being made.

11. Accordingly, I will correct the error by amending the order to state the amount to be paid under the order of 1 May 2014 to be "$5,756.36" instead of $8,720.00". I will also issue a corrigendum to the reasons to correct paragraphs [139], [157] and [169] accordingly as they refer to the relevant amounts.

12. I sincerely regret the error and apologise to the parties for it.

13. I also invited the parties to make submissions as to costs. As no such submissions were received, I re-listed the matter so that this could be resolved.

14. The defendants applied for costs. That application was resisted in part by the plaintiff. I received evidence and heard submissions.

15. The plaintiff relied on an affidavit of its solicitor. It annexed correspondence between the lawyers for the parties.

16. To understand that correspondence, however, it is necessary to refer to a brief chronology:

27 August 2007 - Injunction made restraining the defendants from approaching the plaintiff's clients.

12 March 2010 - Letter from defendants' lawyers to plaintiff's lawyers listing eleven continuing and two former clients of the plaintiff whose failure to become the defendants' clients, or in a timely way, are the basis for the damages claim and quantifying the claim of $41,912.65. That letter was marked "without prejudice" but that privilege was waived by the defendants.

15 April 2010 - Letter from plaintiff's lawyers to the defendants' lawyers attaching statutory declarations from seven of those eleven clients stating that they had no intention of ceasing to be a client of the plaintiff.

12 July 2010 - Application filed by the second defendant for assessment of damages said to result from the making of the injunction.

14 July 2010 - Letter from plaintiff's lawyers to defendants' lawyers making offer in accordance with the principles of Calderbank v Calderbank [1976] Fam 93 to settle for $5,000 plus costs.

1 May 2014 - Judgment for the defendants in the sum of $3,700.00 plus interest.

17. As the terms of the letter of compromise of 14 July 2010 are relevant to the submissions I heard as to costs, I set it out in full as follows, omitting formal parts

We refer to your client's application in proceedings dated 12 July 2010.

Our client has instructed us to make the following offer to settle your client's claim for damages:

The plaintiff to pay your client the sum of $5,000.00; and
Our client to pay your client's costs of the application as agreed or assessed.

This offer is made in accordance with the principles of Calderbank v Calderbank and is open until 28 July 2010.

18. Mr E Lucas, who appeared for the plaintiff submitted that the defendants should have their costs up to 28 July 2010 and that, thereafter, they should pay the plaintiff's costs on an indemnity basis on the basis of the principles set in Quirk v Bawden (1992) 112 ACTR 1.

19. He submitted that this was so because the offer contained in the letter of compromise exceeded the amount ultimately awarded.

20. The principal portion of the judgment, as I have noted above (at [1]), was $3,700.00. Interest, however, had to be added and this amounted, as at 14 July 2010, to $960.83, making the offer a total of $4,660.83, less than the compromise offer sum of $5,000.00.

21. Although Mr Lucas referred to Quirk v Bawden, the letter of compromise referred to Calderbank v Calderbank. Indeed, such letters of compromise are commonly referred to as "Calderbank letters". A considerable body of jurisprudence has grown up surrounding such letters.

22. It is worthwhile, however, to recall that, in that decision, the UK Court of Appeal refused to consider an offer that had been contained in a letter marked "Without Prejudice" and, instead, only relied on an offer contained in an affidavit that was, of course, not subject to the so-called "without prejudice" privilege.

23. It is also worth recalling that the order for costs there made was an order for costs on the usual party and party basis, not a special order, for indemnity costs, for example.

24. Quirk v Bawden was, of course, a decision of the Full Court of this Court. It held that when a plaintiff recovers more than is offered in a compromise by the plaintiff and the defendant has unreasonably rejected the offer, then the Court has a discretion to encourage serious consideration of such offers by an award of costs on a more favourable basis, usually on the basis of indemnity costs. While that was an option, the court held (at 6) that there is not a presumptive entitlement to a special costs order (such as for indemnity costs) but rather a discretion as to how the order should be made. Higgins J, with whom Miles CJ and Gallop J agreed, said (at 6)

Accordingly, I believe that this court should apply an appropriate costs sanction where a party has declined to accept or to make, as the case may be, a reasonable offer of settlement. It may, in some cases, be sufficient to deprive an otherwise successful party of all or part of the costs that otherwise would follow the event. In other cases, it may be appropriate to award some or all costs of an action on a more favourable than usual basis to a party who has been put to the expense of continuing litigation that ought reasonably to have been earlier settled.

25. There is no doubt that the compromise letter, headed "Without prejudice save as to costs" (AMEV Finance Ltd v Artes Studios Thoroughbreds Pty Ltd (1988) 13 NSWLR 486 at 487), and in clear terms such that its acceptance would create a binding contract (Perry v Comcare [2006] FCA 33; (2006) 150 FCR 319 at 335; [56]) and not "inclusive as to costs" (Van Zonneveld v Seaton [2005] NSWSC 175 at [6]) was of the kind that has been recognised to justify an order for costs that had consequences other than the usual order for costs. Thus, unless it was disabled for some recognised reason, it should have consequences for the costs order I should make.

26. Challenges often made are that it was not a realistic compromise, or that the time allowed for acceptance was insufficient or that it was made too early, that is before the sufficient evidence or identification of the issues had occurred to enable the offeree to make an informed decision about whether it should be accepted.

27. None of these objections were really pressed and, it seems to me, none were really sustainable.

28. As Basten JA said in The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120; (2006) 67 NSWLR 706 at 708; [8], "[i]t is well established that an offer which does not involve a real and genuine compromise will not be taken into account in relation to costs". In this case, the claim was for $41,912.65. The plaintiff at all times denied that any damages were payable and at the hearing submitted that the claim should be dismissed entirely. That was supported by the evidence in the statutory declarations supplied under cover of the letter of 15 April 2010. In the compromise offer, the plaintiff was prepared to pay some, if limited, damages plus costs. It seems to me that there was a real or a genuine compromise in this offer.

29. The time allowed for a response was fourteen days. That is a usual period of time that is commonly permitted. A more limited time, such as four days, may result in the court concluding that there is no realistic opportunity to assess it as in Collex Pty Ltd v Roads and Traffic Authority (NSW) [2007] NSWLEC 433; (2007) 154 LGERA 95 at 103; [46]. I consider the period for which the offer of compromise was open for acceptance was reasonable.

30. It is important that the offeree to such a compromise can reasonably assess it. For this reason, it is sometimes said that it is not unreasonable to reject the offer if the information is not available on which the offeree can make an informed choice.

31. As Johnson J said in Globaltech Pty Ltd v Pareek [2006] WASC 30 (S) at [27]

In making an offer of this type at an early stage of the proceedings, the prospects of successfully seeking an order for indemnity costs would be increased if the offer had set out the strength of the plaintiff's case so that the defendant was informed of the degree of risk involved in proceeding. Indeed, if at this early stage the plaintiffs were aware of the proposed evidence of Beale, including the circumstances pertaining to him, it would have been prudent to include that information in the offer. In my view, if the plaintiff had been made aware of that evidence and the other strengths of the plaintiffs' case then the risks of proceeding would be substantially increased making it more likely that an order for indemnity costs would be made. An allegation that the defendant's case is without merit does not equate to identifying the strengths of the plaintiff's case.

32. In this case, however, the plaintiff had provided a significant number of statutory declarations from the very clients whose likely transfer of business from the plaintiff to the second defendant was relied on by the defendants to prove their damages. In these declarations the clients expressly declared that they would not make such a transfer. It cannot be said other than that this was significant information undermining the defendants' claim permitting the defendants to make a reasonable decision about the appropriateness of the compromise.

33. Accordingly, none of these objections to the compromise letter as having the effect of a "Calderbank letter" can be sustained.

34. The objection most strongly pressed by the defendants was that the offer was not explained. There was, they submitted, no explanation of how the offered sum of $5,000.00 had been calculated. This, it was submitted, meant that it was difficult for the defendants to evaluate the offer.

35. No authority was identified which supported this approach. The only authority to which Mr J A Larkings, counsel for the defendant, referred me was Ari v Decevic (No 2) [2014] NSWSC 85. That case, however, referred (at [12]) to the question of whether "the offer was made before the substantive evidence was filed in the proceedings".

36. In that case, an affidavit that was very important in the proceedings had not been filed by the offeror by the time the offer expired. Slattery J described the affidavit and its effect at [16] as follows:

a detailed and thoroughly drawn piece of evidence which, in my view, did fully illuminate a record system that until then had resembled a checkerboard of light and darkness. The Court understands how Mrs Decevic and her lawyers would have had trouble assessing the bank's internal record keeping practices and operating systems without that evidence, which was not served until after the expiry of the [compromise] letter.

37. That is a far cry from the position here, where the statutory declarations supplied by the plaintiff were directed towards the essential issue in the proceedings.

38. In any event, this is not authority for the proposition that an offeree must explain how the offered sum is calculated. As a matter of the psychology of negotiation, it may be sensible to explain why the offer is made and how the offer has been calculated, as noted by Johnson J in Globaltech Pty Ltd v Pareek.

39. It remains an offer, however, even if the sum is simply plucked by the offeror "out of the air" as a means of resolving the dispute. It remains, as such, a valid offer.

40. The need for an understanding of whether it should be accepted and whether it is reasonable to do so relies fundamentally on the assessment to be made by the offeree of the prospects that he, she or it may secure a more favourable result at trial. That does not depend on how an offeror has calculated what he, she or it, is prepared to offer.

41. Here, of course, the defendants had received the statutory declarations which showed a most significant evidentiary indication of the strength of the plaintiffs' case in any event.

42. The challenge to the letter of compromise as a "Calderbank letter" must be rejected and I do so.

43. The primary issue then is the way in which I should now exercise my discretion. In this regard, I note that there was no reference in the letter of compromise to seeking indemnity costs. In SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37], Giles JA considered that, among the factors relevant to determining whether costs should be awarded on an indemnity basis, where a "Calderbank offer" has been made, include whether the letter of compromise explicitly stated that the offer was made in Calderbank terms, the exact conditions of the offer, and whether indemnity costs would be pursued if the offer was rejected.

44. As Talbot J said in Collex Pty Ltd v Roads and Traffic Authority (NSW) at 104; [47]

The failure to make it clear and specific that the applicant would pursue an application for indemnity costs if the respondent did not accept is also a fact that weighs against the making of a special costs order.

45. It might reasonably be said that the consequences of failing to accept an offer of compromise contained in a "Calderbank letter" are well known. The fact is, however, that, unlike many rule-based compromise schemes, the device of the "Calderbank letter" leaves the court at all times with a wide discretion.

46. I also note that the ultimate result for the defendants was less than the offered sum but not very substantially.

47. In my view, it is not appropriate to make a special costs order, but the defendants should pay the plaintiff's costs from 28 July 2010.

48. There is, however, one other matter raised by the defendants. On 13 August 2013, I raised the question of whether the plaintiff had, when the injunction was originally granted given the usual undertaking as to damage. See Financial Integrity Group Pty Ltd v Farmer (No 2) [2013] ACTSC 166. I invited submissions on the issue. Both parties made submissions.

49. Ultimately, I held that an undertaking, though not perhaps recorded in the express terms that would have been desirable, had been given by the plaintiff. See Financial Integrity Group Pty Limited v Farmer (No 3) at [39].

50. In that respect, the defendants succeeded on an issue in the proceedings which was a necessary pre-condition to them ultimately recovering the damages. The defendants submitted that, despite the "Calderbank letter", they should receive the costs relating to this response to that issue.

51. There is no doubt that a court can make different costs orders in respect of different issues in proceedings even where one party has been successful overall. See, for example, Westpac Pty Ltd v Allied Westralian Finance Ltd (1994) 123 FLR 1 at 70.

52. In this case, the question of what should be done about that particular issue is a difficult question, for the issue arose well after the "Calderbank letter" was received. Thus, had the offer, which I regard as a reasonable one, been accepted, then there would have been no need for that issue to be addressed.

53. Doing the best I can, it seems to me that the defendants should not be required to pay the costs of the response to the issue of whether an undertaking as to damages had been given but not to receive its costs of that issue.

54. I will make the necessary orders to dispose of this matter.

I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Refshauge.

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