I gave judgment in this matter on 18 October 2019 ("the October reasons"): see Futurepower Developments Pty Ltd v TJ & RF Fordham Pty Ltd t/as TRN Group [2019] NSWSC 1554. These reasons should be read together with the October reasons and I shall use the same terminology.
Futurepower failed in all of its claims against TRN. TRN succeeded on its Cross Claim against Futurepower.
TRN seeks an order that Futurepower be required to pay TRN's costs on the ordinary basis to 10 August 2017 and thereafter on the indemnity basis, based on a letter of offer made on 9 August 2017 ("the August Letter"). Futurepower accepts that it must pay TRN's costs of the proceedings on the ordinary basis, but resists the indemnity costs order.
The letter of 9 August 2017 (annexed to the Affidavit of Mr Patrick Kaluski dated 24 October 2019 read on this application) is headed "without prejudice save as to costs" but it does not describe itself as a Calderbank letter and it does not expressly state that it will be relied upon in an application for an indemnity costs order should the offer contained in it not be accepted. It does set out the reasons why TRN believes that it will be successful in the litigation. It refers to the fact that TRN had been successful in the two adjudications leading to determinations in favour of TRN. It asserts that the views and opinions of Mr Smith for PEA and Mr Kennett for EMS are likely to be accepted over the views of Mr Strautins and it relies on the fact that Futurepower's Superintendent (Mr Harding) directed the additional work to be undertaken and that the amounts claimed are in accordance with the rates provided to the Superintendent "and in accordance with the terms of the Contract". The letter pointed out that complaints by Futurepower of Mr Harding's performance and failure to involve Mr Attard were issues as between Futurepower and the Superintendent.
The offer was framed as:
1. Futurepower to pay $251,192.20 (incl. GST), being the amount of the current determination (i.e. the second determination).
2. Futurepower to pay $90,000 (incl. GST), being a reasonable sum for current costs in TRN's favour and a reasonable sum for defending the Supreme Court proceedings.
3. All proceedings to be dismissed.
4. The parties enter into an appropriate Deed of Settlement and Release of all claims.
5. The offer was expressed to be open for acceptance until 24 August 2017, i.e. 15 days.
Barclays Law Group, the solicitors then acting for Futurepower, wrote back on 22 August 2017, making assertions about problems in TRN's case and making a counter offer.
Mr Hicks SC and Ms Carr appeared for TRN and provided written submissions on the costs hearing. Futurepower provided written submissions, but Mr Carbone who had, I infer, prepared the written submissions, advised the Court by email that he would not be attending on 1 November 2019 and that Futurepower would rely on the written submissions previously forwarded to TRN's solicitors and the Court. Mr Zarb, who is the solicitor on the record for Futurepower, did appear on 1 November 2019, but he was represented in his own right by Mr G. Gee of Counsel, because TRN had indicated that it would be seeking a personal costs order against him. When that claim was abandoned, Mr Gee withdrew and Mr Zarb did not seek to appear on behalf of Futurepower.
Futurepower contends that:
1. The letter is not a Calderbank letter and should not be treated as such because it does not state that it is such.
2. Even if the letter is treated as a Calderbank letter, it is not a genuine offer of compromise because it seeks payment of the $251,192.50 and $90,000 for costs.
3. The $90,000 claimed for costs was proven to be excessive.
4. TRN was using Senior Counsel (Mr Hicks) at every mention.
Calderbank letters are frequently described as such in the letter itself, and as G. E. Dal Pont's Law of Costs (LexisNexis Butterworths, 3rd ed, 2013) observes at 13.59, it has been said that a Calderbank offer is simply an offer "expressed to be without prejudice save [as] to the question of costs and an indication that the letter will be adduced into evidence on the question of costs": see MT Associates Pty Ltd v Aqua-Max Pty Ltd (No 3) [2000] VSC 163 at [125] per Gillard J, endorsed in Giller v Procopets (No 2) [2009] VSCA 72; (2009) 24 VR 1.
In Secretary to the Department of Business and Innovation v Murdesk Investments Pty Ltd (No 2) [2012] VSC 586, Emerton J said at [31]:
"In order to discern the offeror's intent, it is not necessary for an offer of compromise to be accompanied by a letter expressing the intention that the offer operate as a Calderbank offer if it is incapable of operating under the Rules. In the absence of an express statement of intention in a covering letter, the intention of the offeror may be discerned by reference to the form and content of the offer itself to ascertain whether it is capable of operating as an offer more generally, and whether it was intended to be made 'without prejudice save as to costs' and to be adduced in evidence on the question of costs if not accepted."
In my view, it is clear enough from the heading and content of the August Letter that it was intended to be adduced into evidence on the question of costs if the offer was not accepted.
Futurepower claims that there was no element of compromise in the offer, whereas TRN submits that there were two aspects of the offer that made it a compromise:
1. TRN was offering to give up its Cross Claim (worth about $24,000).
2. It was compromising on costs because it had incurred costs both in the adjudications and in defending the Supreme Court proceedings.
The Plaintiff had already undertaken to pay $36,733.88 pursuant to a previous undertaking (see orders made by Hammerschlag J on 24 March 2017).
Futurepower contended that TRN was not successful in obtaining a cost order for $90,000. Not only was no evidence adduced to support that contention but the submission misunderstands the contents of the letter. TRN's solicitors were asserting that TRN's costs of both the adjudications and the costs of the Supreme Court proceedings to date were $120,000. That TRN recovered $33,000 (according to Futurepower's submissions) for the adjudication costs does not establish that the $90,000, or even the $120,000, was excessive, as Futurepower contends. By August 2017 Futurepower had filed its evidence, i.e. that of Mr Carbone, Mr Boutros, Mr Strautins and a Mr Baradan. TRN's evidence had been ordered to be served by 21 July 2017 (although it was later extended).
On a claim for indemnity costs following a Calderbank letter the offeror must establish that it was unreasonable for the offeree not to accept the offer: see Leichhardt Municipal Council v Green [2004] NSWCA 341.
On the issue of appearances by Mr Hicks SC, I have examined the Court file and my understanding from that is that Mr Hicks took silk in 2017, having already been involved in the case for some time. When I heard an interlocutory dispute about subpoenas shortly before the hearing, Mr Hale SC appeared for Futurepower against Mr Hicks. Other than the subpoena dispute, there appear to be eight occasions prior to the hearing when Mr Hicks appeared as Senior Counsel. However, the matter is in the Technology and Construction List and a significant amount of money was at stake. I do not think that TRN's use of Mr Hicks as Senior Counsel was unreasonable, particularly since he had already been substantially involved in the matter before taking silk.
I accept that TRN's offer was not a generous one, as it was seeking to retain all of the adjudication amounts in its favour and an amount for costs incurred, but it did give up its Cross Claim for return of $24,000, to which amount I have found it was entitled. It already had a costs order in its favour that Futurepower pay $36,733. In forming a view about this aspect, I take into account my conclusions concerning the Plaintiff's case. The strength or weakness of the offeree's case is a relevant matter in assessing whether the offer should have been accepted: Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2005] NSWSC 481 at [38] per McDougall J, and see Baygol Pty Ltd v Foamex Polystyrene Pty Ltd [2005] FCA 1089 cited in Dal Pont (supra) at 13.67-68. In my view, Futurepower's case was very weak and, as I sought to demonstrate in the reasons for judgment, seemed to suffer from confusion about TRN's role and who Futurepower might have a claim against, and to ignore the reality of the Superintendent's position and Mr Carbone's dealings. In my view, the offer by TRN to abandon its Cross Claim contained a real (albeit limited) element of compromise and the offer was one that should have been accepted by Futurepower acting reasonably.
[2]
Issue of Interest
TRN sought interest on its costs (the case having commenced in 2016) as an order in the form made in Lahoud v Lahoud [2006] NSWSC 126 at [82], [84]-[87] per Campbell J (as his Honour then was), and see also Leda Pty Ltd v Weerden (No 2) [2007] NSWCA 283 at [7]-[9].
The submission of Futurepower was that it was not appropriate to order interest at this stage and that the cost assessor could deal with that at a later time. As Lahoud and Leda establish, the appropriate time for consideration of whether an order should be made for interest on costs pursuant to s 101(5) of the Civil Procedure Act 2005 (NSW) is now. On the question of whether such an order is appropriate, I accept the observations of Dal Pont (supra) at 19.13:
"Under 101(4) of the Civil Procedure Act 2005 (NSW), the court may order that interest is to be paid on any amount payable under an order for the payment of costs. By phrasing any order for interest on costs purely within the court's discretion, this provision differs from its counterparts elsewhere in Australia, which confer a right to interest, whether or not subject to a contrary order by the court. In turn, this generated differing views in New South Wales courts as to what circumstances should trigger the exercise of the curial discretion to award interest on costs.
One view was that interest on costs should be confined to cases outside the ordinary, usually punctuated by excessive delay. The competing, and ultimately prevailing, view denies any need for a court to be satisfied of special or exceptional circumstances to trigger an order to pay interest on costs. It dictates that ordinarily a party that obtains a costs order will also obtain, should it seek one, an order for interest on those costs, in the absence of any countervailing discretionary factor. It has been judicially observed, to this end, that not much, if any, evidence is required in support of an application. It can be inferred from the nature of commercial litigation that parties are likely to have had to pay some amounts of costs as the litigation progresses."
(Footnotes omitted)
Given the amount of time that the proceedings have been on foot and the commercial context of the dispute, I assume that fees have been paid by or on behalf of TRN over that extended period. I conclude that an order for interest should be made in the form sought by TRN in its submissions.
[3]
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Decision last updated: 29 November 2019