Gayed & Anor v Yuan

1. Your Statement of Claim pleads that you voluntarily entered into a contract of sale, on 28 June 2019, for the sale of the property situate [sic] at 32 Lickens Crescent, Balwyn North VIC 3103 for $3,190,000.00.
2. The evidence will show that you had extensive negotiations about certain terms of the Contract, and that the form of contract agreed between the parties:

a. plainly provides for a deposit of a fixed amount of $319,000, being 10% of the purchase price of the Property;

b. there was no term of the Contract which provided for a 'split deposit' or any other arrangement;

c. was agreed to not be made 'subject to finance' and agreed that time was of essence.

1. You paid our client a deposit of $319,000 representing 10% of the purchase price, as clearly stated in the terms of the Contract. At the time of execution or payment, the parties did not characterise that payment as anything other than the 10% deposit sum.
2. That you may have paid a very small ($10,000) portion of this deposit amount prior to the Contract of Sale being entered into is immaterial to the construction of the deposit clause, and was merely a payment towards the full deposit sum. That payment was made during the cooling off period which you negotiated.

a. Our client was under no obligation to agree to new or additional terms upon receiving notice of your anticipated default (see paragraph 16 of your Reply to Defence);

b. you defaulted on the Contract of Sale for reasons totally unconnected with our client and entirely due to your own issues in obtaining a sale of your existing property and associated finance (see paragraph 16 of your Statement of Claim);

c. neither you nor your solicitors, either at the time of default or in this proceeding, denied that the Contract was repudiated by you.

6. Your arguments seeking to re-characterise the deposit sum come well after your repudiation of the Contract, and at no stage prior to issuing these proceedings did you make demand for repayment of the deposit (either by your solicitors or at all). On balance, it is more likely that your solicitors informed you that the correct legal position was you had forfeited the deposit by your failure to settle.

Your recent allegations of unconscionable conduct by our client, and claims of entitlement to relief on the grounds of estoppel are contained only in submissions and not pleaded and are therefore not properly before the Court. Even if they were permitted to be run, which is denied, there are no particulars or evidence of conduct of representations which could support such allegations.

Overall, your claim for re-payment of the 10% deposit sum (the forfeit of which, upon default, was agreed by you and is a common and uncontroversial term of the REIV and Law Institute of Victoria standard terms of sale of real estate) is doomed to fail.

On the basis of the foregoing, and in an attempt to resolve this matter commercially and at least cost to our client (whom, we note, continues to incur legal costs in defending this matter) we are instructed to put the following offer:

The Plaintiffs to discontinue the proceeding, with no order as to costs to either the Plaintiffs or Defendant.

This offer is reasonable in that the outcome of the proceeding is likely to be an 'all-or-nothing' result. Our client's offer is open for acceptance for 7 days. Should you not accept the above offers and fail to obtain at trial a judgment more favourable than the terms of this offer, our client reserves the right to produce this letter to the Court and seek an order for our client's costs of trial on an indemnity basis in accordance with the principles set out in Calderbank v Calderbank [1975] 3 AER 333 and Hazeldene's Chicken Farm Ltd v VWA (No.2) [2005] VSCA 298; (2005) 13 VR 435."

1. The plaintiffs did not accept this offer.
2. On 11 October 2023, being the second day of the trial, the defendant's solicitors sent a further letter to the plaintiffs. The letter stated that, on the evidence produced in the first two days of the trial, the plaintiffs' claim was unlikely to be successful. Accordingly, the defendant offered to settle the claim on the basis that the plaintiffs discontinue the proceeding and pay the defendant a sum of $30,000 in full and final settlement of the matter. This offer was open for acceptance until 10.15am on 12 October 2023. Again, if not accepted by the plaintiffs, the defendant reserved the right to produce the letter to the court and seek an order for indemnity costs. The defendant's solicitors received no response from the plaintiffs to this offer.
3. The defendant further submits that she conducted her defence reasonably and parsimoniously. She contends that did not advance unmeritorious grounds of defence, nor call a proliferation of witnesses. She submits that she only took steps in the proceeding which were reasonable and appropriate, that she made reasonable submissions and that she did not file an excess of material. Furthermore, the defendant says that she was put to expense in defending a proceeding which contained extensive allegations and wide-ranging cross-examination in a trial lasting four days.

1. The legal principles in relation to Calderbank offers were conveniently and comprehensively summarised by Habersberger J in BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Industriewerke GmbH (No 3),[1] where he said:[2]

"Steuler next based its claim for indemnity costs in respect of part of the proceedings on the existence of seven separate offers of settlement, some of which were made in accordance with the decision in Calderbank v Calderbank_. There are a number of relevant principles regarding_ Calderbank offers of settlement which it is appropriate to note before examining each of the offers made by Steuler. The standard starting point for such an examination is the joint judgment of Warren CJ, Maxwell P and Harper AJA in Hazeldene's Chicken Farm Pty Ld v Victorian Workcover Authority (No 2) ("Hazeldene").

First, the fact that a less favourable result is achieved does not give rise to a presumption of a special costs order. The making of an offer and its rejection are "but two albeit important circumstances" to which the Court will have regard in the exercise of its costs discretion.

Secondly, the competing policy objectives relevant to the exercise of the costs discretion are principally the desirability of promoting settlement and reducing litigation costs as against the undesirability of discouraging potential litigants from bringing their dispute to the courts.

Thirdly, the critical question is whether the rejection of the offer was unreasonable in the circumstances. As the Court of Appeal said in Hazeldene_:_

In our view, these competing considerations can be sufficiently accommodated by applying a test of (un)reasonableness. The critical question is whether the rejection of the offer was unreasonable in the circumstances. We see no justification for a more stringent test such as "manifestly" or "plainly" unreasonable.

Fourthly, a court considering submissions that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:

(a) the stage of the proceeding at which the offer was received;

(b) the time allowed for the offeree to consider the offer;

(d) the offeree's prospects of success, assessed as at the date of the offer;

(e) the clarity with which the terms of the offer were expressed; and

(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.

Fifthly, as the determination of whether it was unreasonable for the offeree to have rejected the offer is made "as at the time, or within a reasonably short time after, the offer" was made, the Court should not too readily embrace submissions that it was inevitable that the proceedings would fail. As Hamilton J put it in Grynberg v Muller_:_

These submissions focus the bright light of hindsight. Hindsight sings a siren song of which Judges must be cautious ...

Sixthly, the onus lies on the offeror to demonstrate the unreasonableness of the offeree's rejection of the offer. This means that it is necessary to analyse what was proposed.

Seventhly, there is no general rule that the Calderbank offer must set out with specificity the basis for the offeror's contention that the offeree should accept the compromise. Whether there is a need to do so depends upon a consideration of all of the circumstances existing at the time of the offer.

Eighthly, it is not necessary for the applicant for an indemnity costs order to establish matters which might be relevant to other, well-recognised, grounds for indemnity costs. Such conduct is not a pre-requisite for a finding that the rejection of the Calderbank offer was unreasonable.

Ninthly, an "all in" offer is permitted in a Calderbank offer."[3]

1. In exercising its powers regarding costs, the court has an unfettered discretion which must be exercised judicially.
2. The first offer was made a week before trial and gave the plaintiffs seven days to accept the offer.
3. There is no doubt that:

(a) the outcome of the trial was less favourable for the plaintiffs than the offer contained in the defendant's letter dated 3 October 2023; and

(b) the plaintiffs rejected the offer.

1. The offer was made at a time shortly before trial when the parties should have been aware of the case each was presenting and the thrust of the case which each had to meet.
2. The time granted to the plaintiffs for consideration of the offer was seven days. While this is not an especially long time to consider an offer, a common period being 14 days, the offer was made at a time when the plaintiffs were preparing for trial and were familiar with the general nature of much of the evidence which was to be called at the hearing. By this, I mean that the plaintiffs knew that their evidence would be that:
   • they voluntarily entered the contract of sale for the Property;
   • they knew that the contract was not subject to finance;
   • they were obliged to pay a 10% deposit on the contract;
   • the deposit monies were at risk and liable to be forfeited if they did not complete the contract in accordance with its terms;
   • they agreed the vendor was under no obligation to grant them any extension or other indulgence on the contract;
   • the plaintiffs' default under the contract was unrelated to any conduct of the defendant vendor. The problem was wholly attributable to the plaintiffs and their inability to obtain finance in the requisite time; and
   • the plaintiffs did not contest that they repudiated the contract and the defendant accepted that repudiation.

To that extent, the defendant made the offer when the plaintiffs should not have required a great deal of time to assess its merit.

1. The defendant's offer did not represent a major compromise. Rather, it demanded capitulation from the plaintiffs. The compromise was limited to the defendant not requiring the plaintiffs to pay her costs of the litigation. The offer was affected by the nature of the litigation whereby it was likely to be an "all-or-nothing" outcome.
2. The plaintiffs' prospects of success at the time the offer was made were, in my view, not strong. By October 2023, the plaintiffs knew or should have known that their own evidence was not particularly supportive of the case which they sought to advance. I have set out above important aspects of their evidence which they were aware of at the time. The plaintiffs' evidence did not reveal what advice, if any, they received from Helen Henshall before she ceased acting for them but any competent solicitor should have told them that, on the basis of the evidence they were adducing, they did not have a compelling case.
3. The offer was expressed clearly and without ambiguity. The plaintiffs would have understood what was being offered and the terms upon which the proceeding could be settled.
4. The offer foreshadowed the application for indemnity costs in the event that the plaintiffs rejected the offer.
5. A major consideration is whether it was unreasonable for the plaintiffs to reject the offer at the time it was made.
6. There is no general rule that a Calderbank offer should set out in detail the reasons why the offeree should accept the offer of compromise. However, in my view, it strengthens the position of the offeror if they supply cogent reasons, especially if the court's decision reflects an acceptance and adoption of those reasons (whether wholly or in part). It increases the likelihood that a court might find the offeree acted unreasonably in rejecting the proposed compromise.
7. In the present case, I have concluded that the plaintiffs acted unreasonably in rejecting the defendant's offer. I do so for the following reasons.
8. First, the defendant made an offer at a time when the plaintiffs were aware of the evidence which they would give at trial. They knew, or should have known, that their evidence, taken at its highest, had to be strong enough to create a good prima facie case in their favour. The plaintiffs' own evidence was not compelling.
9. Secondly, the plaintiffs' default under the contract of sale was wholly self-inflicted in the sense that it was unrelated to any contributory conduct by the vendor.
10. Thirdly, the plaintiffs knowingly took a risk and unfortunately, the problems with obtaining finance have cost them dearly. Nonetheless, this was a possibility of which they were aware and they chose to accept that risk.
11. Fourthly, the plaintiffs knew or should have known from the solicitor who acted for them in the conveyancing transaction that the authorities did not overwhelmingly support a favourable outcome for them in this litigation. Indeed, the various arguments for and against the grant of relief sought by the plaintiffs were, on the case law, notably more against the plaintiffs rather than in their favour.
12. The result has been that the plaintiffs, perhaps believing that they had nothing to lose, thought they should exhaust all avenues in an effort to recover their deposit. As a result, the defendant vendor, who has continued to act fairly since June 2019, and who has been inconvenienced by the repudiated contract and the consequences of its failure, has become embroiled in a lengthy litigation process. This has created obvious problems for the defendant including expense, inconvenience and worry.
13. Overall, I consider that the plaintiffs' conduct was unreasonable because they should have appreciated that the circumstances were such that it was unlikely they would succeed. The offer to walk away, made on the basis that the defendant should succeed, was soundly based in precedent and represented a good outcome for the plaintiffs.
14. The defendant sent the second offer to the plaintiffs on 11 October 2023, being the second day of trial. The defendant gave the plaintiffs less than one day to accept the offer of paying the defendant $30,000 towards her costs and otherwise discontinuing their claim.
15. I have discussed above a number of the discretionary factors which courts often take into account when considering these questions. Much of what I have already written applies with even greater force to the second offer. The plaintiffs knew how their evidence came out in court and how well they had responded to cross-examination. This was important because the plaintiffs knew precisely what evidence they gave and the extent to which their evidence was affected by the cross-examination. Other important facts were unchanged: the plaintiffs' default was not due to the vendor; the plaintiffs took a risk and their bank did not provide the finance which they hoped for; there was no argument about the plaintiffs' repudiation of the contract of sale or its acceptance by the vendor; there was no suggestion of unlawful, misleading or unconscionable conduct by the defendant.
16. Although the plaintiffs had only a limited amount of time to consider the second offer, in my view it was sufficient. Only after the defendant gave her testimony in court would the plaintiffs have been better informed. At the time of this offer (and indeed at the time of the first offer), the plaintiffs' case was clear and the documents revealed the major elements of the context. Even though at trial the plaintiffs were self-represented, not assisted by lawyers, and the offer required the plaintiffs to capitulate, I regard the plaintiffs' refusal of the offer as unreasonable.

(a) the plaintiffs' claim be dismissed and there be judgment for the defendant;

(b) the plaintiffs pay the defendant's costs of the proceeding, including reserved costs, such costs to be taxed on a standard basis up to and including 6 October 2023 and thereafter, on an indemnity basis.

[1] [2012] VSC 414