The deposit was paid pursuant to a contract for sale of shares, ownership of which carried the right of exclusive occupancy of a "company title" home unit in a building, known as "Ashdown", at Elizabeth Bay. The first defendant (Ms Buckworth) was the vendor. The plaintiff (Gladio) was the purchaser. The second defendant (Ashdown) is the proprietor of the land, and is the company, the shares in which were the subject of the contract for sale. The cross-defendant (SCTM) was Ashdown's managing agent.
[3]
Gladio's primary case is that it rescinded the contract for sale pursuant to an express right to do so. It brings alternative cases against Ms Buckworth alleging misleading or deceptive, or unconscionable, conduct. Alternatively, it says, the contract for sale was frustrated. Ms Buckworth cross-claims against Gladio (for damages for breach of contract) and against Ashdown (for indemnity, in the event that Gladio succeeded against her).
[4]
Gladio says, alternatively, that Ashdown owed it, and breached, a duty of care in relation to communications. There was also an alternative case brought against Ashdown, alleging misleading or deceptive conduct.
[5]
Ashdown joined its managing agent, SCTM, as a cross-defendant. Ashdown says that if it had some liability to Gladio, that liability arises out of acts or omissions of SCTM. In addition, Ashdown raises issues of proportionate liability, involving not only the parties to the litigation but also a legal searcher, EYEON Group Pty Ltd (Eyeon), which caused to be carried out pre-contractual searches of the records of Ashdown maintained by SCTM.
[6]
Those disputes generated three versions of a statement of a claim, and responsive pleadings (and of course the cross-claim pleadings). The final articulation of Gladio's case is to be found in the Further Amended Statement of Claim (FASOC) filed on 12 May 2015. That is a prolix and absurdly over-complicated document. It comprised 16 prayers for relief and 142 paragraphs defined into 10 "Chapters", one of which was subdivided into four "Divisions".
[7]
The prolix and overly complex nature of the FASOC, and the corresponding complexity of the defences to it, make it impossible to attempt any more helpful distillation of the real issues in dispute than the brief and inadequate summary that I have given already. Thus, although with reluctance, I propose to deal with the matter by setting out the background (and mostly uncontroversial) facts, and then turning to the case against each of the defendants, and to the cross-claims. To the extent necessary, when I deal with the case against one or other of the defendants, and to the cross-claims. I will make such further findings of fact as are necessary to explain the conclusions to which I have come.
Gladio's proposed costs orders
Gladio sought the following orders:
1. that Ms Buckworth pay its costs, including of her cross-claim against it;
2. that those costs be assessed on the ordinary basis up to 27 August 2014, and on the indemnity basis thereafter;
3. that Ms Buckworth pay Ashdown's costs of her cross-claim against it;
4. that Ashdown pay SCTM's costs of its cross-claim against SCTM;
5. that Ms Buckworth pay Ashdown one-quarter of its costs, and all the costs payable by it to SCTM pursuant to the cross-claim; and
6. that Ashdown return to Gladio's solicitor the bank guarantees provided as security for Ashdown's costs.
Ms Buckworth's proposed costs orders
Ms Buckworth sought the following orders:
1. that she pay one-tenth of Gladio's costs, on the ordinary basis;
2. otherwise, that there be no order as to costs between her and Gladio;
3. that there be no order as to costs on her cross-claim against Ashdown;
4. that Ashdown pay SCTM's costs; and
5. that Gladio pay Ashdown's costs, including costs payable by Ashdown to SCTM.
Ashdown's proposed costs orders
Ashdown sought the following orders:
1. (a) that, subject to (b) and (c), Gladio pay its costs of the proceedings;
1. that Gladio and Ms Buckworth pay its costs in respect of (i.e., of bringing) the cross-claim against SCTM; and
2. that Ms Buckworth pay its costs on the second cross-claim;
1. alternatively, that Gladio pay its costs including costs in respect of the second and third cross-claims;
2. that Gladio and Ms Buckworth pay SCTM's costs (i.e., of defending Ashdown's cross-claim against it ); and
3. alternatively, that Gladio and Ms Buckworth indemnify Ashdown in respect of costs that it may be ordered to pay to SCTM.
SCTM's proposed costs orders
SCTM sought the following orders:
1. that Ashdown pay its costs of the cross-claim against it; and
2. that those costs be paid on the ordinary basis up until 30 March 2015, and on the indemnity basis thereafter.
The parties' submissions
The parties provided written submissions in chief, and in reply. That is to say, each party put on its written submissions at much the same time, and each party thereafter replied at much the same time.
Mr Lucarelli of counsel, who appeared for Gladio, sought the opportunity to put oral submissions. Having regard to the amount at stake and the no doubt prodigious costs already incurred in this litigation, I did not think it appropriate to accede to that request. I proceed on the assumption that (with the qualification noted at [57] below) the parties have had an adequate opportunity to state their reasons for the costs orders they seek, and their reasons for contesting (to the extent they wished to do so) the submissions of the other parties.
I do not propose to summarise at length the whole of the submissions made. I will however refer, to the extent necessary, to particular submissions.
Decision: the orders sought by Gladio
The starting point, in my view, is to be found in the Court's general discretion as to costs (see s 98 of the Civil Procedure Act 2005 (NSW)). Of course, as s 98(1) makes clear, that discretion is subject to relevant provisions in (among other things) the Uniform Civil Procedure Rules 2005 (NSW). In the present case, relevant provisions of the rules include UCPR r 42.1 and r 42.34. The former rule provides that, subject to pt 42, costs should follow the event unless the Court thinks that some other order should be made as to the whole or part of the costs in question.
Rule 42.34 provides as follows:
42.34 Costs order not to be made in proceedings in Supreme Court unless Court satisfied proceedings in appropriate court
(1) This rule applies if:
(a) in proceedings in the Supreme Court, other than defamation proceedings, a plaintiff has obtained a judgment against the defendant or, if more than one defendant, against all the defendants, in an amount of less than $500,000, and
(b) the plaintiff would, apart from this rule, be entitled to an order for costs against the defendant or defendants.
(2) An order for costs may be made, but will not ordinarily be made, unless the Supreme Court is satisfied the commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted.
It follows from the terms of subr (2) that an order for costs should not ordinarily be made unless this Court is satisfied that it was appropriate to commence and continue the proceedings in this Court rather than in the District Court.
Mr Lucarelli submitted that it was appropriate for Gladio to commence proceedings in this Court. He gave three reasons. First, he submitted, this Court "is the exclusive venue for purchasers seeking relief from forfeiture of deposits". Second, he submitted, "rescission for innocent misrepresentation is an equitable remedy and it is highly doubtful the District Court has jurisdiction to entertain that claim". Third, he submitted, the tortious duties alleged against Ashdown "were not uncomplicated"; indeed, he said, "they were in some respects quite complex".
I do not regard any of those reasons as having any substance.
As to the first reason: the contract was one for the sale of shares, not for the sale of land. Accordingly, s 55 of the Conveyancing Act 1919 (NSW) had no application. True it is that relief against forfeiture under the general law might still have been available. However, Gladio's primary claim was that it had rescinded the contract pursuant to an express contractual entitlement to do so, based on what Gladio said was the failure of Ashdown to give its consent to the transfer of the shares within the contractually specified time. Mr Lucarelli's submissions recognised this: see at [35] below. That was the basis on which I held Gladio entitled to succeed.
The statement of claim was dressed up with numerous causes of action said to arise from the basal facts, and with numerous prayers for relief. One of those prayers invoked the Court's declaratory jurisdiction. However, with the greatest respect to those who drafted the statement of claim, declaratory relief added nothing of value. If Gladio succeeded on its contractual (or any other) claim, it would be entitled to recover the deposit. If it did not, there would be no right to declare. As I said at [401] of my earlier reasons:
[401]
Although Gladio sought declaratory relief as to its entitlement to have the deposit refunded, there is no utility in the grant of the declaration sought. Gladio's right to the deposit will be sufficiently vindicated by the judgment for $145,000 plus interest in its favour.
For essentially the same reasons, the second reason suggested by Gladio, as warranting the commencement of the proceedings in this Court, is not tenable. Even if its case were put as one of rescission for innocent misrepresentation (as opposed to rescission pursuant to an express contract entitlement), no question of equitable relief arose. Had Gladio made good that aspect of its case, then (as Mr Grieve of Queen's Counsel, for Ms Buckworth, submitted), its entitlement to recover the deposit followed as of course. There was no jurisdictional bar to the District Court's giving judgment for the amount of the deposit, had rescission (on any basis, including for equitable misrepresentation) been made good.
Mr Lucarelli's submissions on his third reason invoked the concept of vulnerability, in particular as discussed by the High Court of Australia in Brookfield Multiplex Pty Ltd v Owners Strata No 61288 (2014) 88 ALJR 911. If I may say so, there is an element of implausibility, verging on the disingenuous, in this submission.
Some of the numerous pleaded causes of action were for negligence: obviously, said to have caused pure economic loss. Apparently, Gladio, (or those advising it) had not appreciated the significance of the concept of vulnerability, in the context of an action in negligence to recover pure economic loss. Despite the complexity and prolixity of the drafting of the further amended statement of claim (that is to say, of the third articulation of Gladio's claim), no attempt was made to plead or particularise matters going towards Gladio's supposed vulnerability ("supposed", for the purposes of costs submissions; most definitely, not for the purposes of the hearing).
Right up until the middle of the hearing, that concept does not seem to have suggested itself to Gladio or its legal advisers as something that needed to be grappled with for the purposes of its claim. It is, quite frankly, almost impossible to understand how, in the circumstances, the suggested complexity of the concept of vulnerability could have been relevant to Gladio's decision to bring and continue proceedings in this Court.
I should note that Mr Lucarelli submitted that the various causes of action were but different ways of formulating the legal characterisation, or outcome, of the same facts. I do not agree. It is self-evident that, for example, the claim in negligence requires (or should have required) attention to specific facts bearing on vulnerability and, more generally, on s 5B of the Civil Liability Act 2002 (NSW). Those facts would be irrelevant to the primary case asserting an entitlement to rescind pursuant to an express contractual right.
In my view, there was never any warrant for commencing or continuing the proceedings in this Court.
I accept, of course, that even where r 42.34 is engaged, the Court retains a general discretion as to costs (the words "will not ordinarily be made" appear to me to have this effect), even when the Court comes to the conclusion that I have just expressed. In this context, it might be thought that Ms Buckworth's apparent preparedness to submit to an order that she pay one-tenth of Gladio's costs might justify the Court's making such an order. Mr Lucarelli's submissions in reply expressly noted that the submissions for Ms Buckworth did not rely on r 42.34.
In the ordinary way, where there were oral submissions (either with or without preceding written submissions), it would be safe to assume that r 42.34 would be raised, and that Ms Buckworth's submissions would expressly embrace it as a reason for making no order as to costs. In the ordinary way, I would proceed on the basis that I am required to exercise the costs discretion according to my own view of what is proper in all the circumstances. The question is whether, in the circumstances that have arisen, it is proper to step outside the result suggested by r 42.34 in the circumstances of this case.
This aspect of Mr Lucarelli's submissions contained what is in my view a flawed analysis. He said that in all the circumstances, there was no "reason for departing from the general principle stated in UCPR r 42.1". I do not agree. That "general principle" is expressly made subject to other provisions of the Rules. Thus, it must be taken to be subject to r 42.34. Where the latter rule applies, it specifically limits the application of r 42.1.
Ms Buckworth's submissions in chief (more accurately, the draft costs orders accompanying them) suggested that she should be ordered to pay 10% of Gladio's costs. As I have noted, she did not resile from that position in the submissions in reply. Thus, Gladio was left to deal with the application of the rule in circumstances where it had not been relied upon expressly.
However, and having said that, the debate was conducted on the basis that Ms Buckworth accepted a liability for 10% of Gladio's costs (of course, as agreed or assessed). Mr Lucarelli was keenly aware of r 42.34, and addressed submissions in chief to it. Mr Grieve's submissions in chief did not refer to or rely upon the rule. His submissions in reply did not specifically refer to the rule, but did contest the reasons advanced by Mr Lucarelli for suggesting that the Court should make a costs order in Gladio's favour. However, even accepting that the submissions in reply did in substance, if not in terms, seek to support the application of the rule, they did not withdraw or vary the proposed orders as to costs.
In the event, I do not think that anything turns on the point that Ms Buckworth did not rely in chief on r 42.34. The simple fact is that Mr Lucarelli did appreciate the significance of the rule, and did have an ample opportunity, in chief and in reply, to address submissions to it. Thus, in a strict sense, to depart from the apparent concession offered in Ms Buckworth's submissions would not cause prejudice to Gladio.
Had the matter been dealt with in oral submissions, and had r 42.34 been mentioned at an early stage (as it would have been), it is reasonably likely, that Mr Grieve would have embraced it. It is reasonably likely, in consequence, that the apparent generosity of his client's stated position might not have persisted.
The issue was out in the open (whether or not Mr Grieve explicitly acknowledged it). At least by implication, Ms Buckworth's submissions in reply indicated that she was aware of and relied on the rule. Particular submissions were directed to the facts said (by Mr Lucarelli) to enliven the discretion to make a costs order.
It cannot be said that Gladio took its stance on the basis that it was entitled to at least 10% of its costs. That follows, if from nothing else, from the fact that its submissions and Ms Buckworth's submissions were effectively exchanged: the one prepared without reference to the other. Further, as I hope is apparent, the costs order that Gladio seeks against Ms Buckworth is far more ambitious than the costs order she was prepared to concede.
In all the circumstances, I conclude that I should deal with this question on the basis on which Mr Lucarelli debated it. Thus, it is appropriate to deal with the matter in terms of the rule.
For the reasons I have given, I do not think that the commencement and continuation of the proceedings in this Court was warranted. And in all the circumstances, I do not think it appropriate to exercise the residual discretion left by r 42.34 in favour of Gladio.
There is another point that requires attention. Mr Lucarelli's submissions suggested that Gladio was put in the position of being required "to litigate or wholly capitulate". He suggested that it was Ms Buckworth who "adopted and maintained an unreasonable and derisory attitude to [Gladio's] central contention that" there was no "effectual consent". I note that this submission correctly characterises the "central contention" advanced by Gladio. That supports the view that the various alternative ways in which Gladio's case was dressed up do not provide any justification for departing from the outcome suggested by r 42.34.
However, and returning to the submission, there is again an element of implausibility. On 27 August 2014, Gladio made a Calderbank offer. That is the offer on which Gladio relies in support of its claim for indemnity costs from 27 August 2014. That offer suggested that Gladio would settle on payment of $400,000.00 from the defendants. Such a payment (if made) would recoup Gladio $255,000.00 in addition to the amount of the deposit. Of that sum, $8,676.00 was said to be attributable to interest. The balance was said to be attributable to costs. Indeed, Mr Lucarelli submitted, with the inclusion of costs of $293,700.00 incurred to the date when the offer was made, Gladio's claim was in fact worth more like $450,000.00.
That Gladio had incurred costs of the amount stated at the time the offer was made suggests very strongly that the "unreasonable" party was Gladio itself. Essentially, a year or so after commencing proceedings to recover $145,000.00, Gladio had spent more than double that amount on costs. That seems to me to demonstrate an utter disregard for the concept of proportionality, as enshrined in s 60 of the Civil Procedure Act. Be that as it may, if the costs were to be assessed on the ordinary basis as at 27 August 2014, it is likely (I would have said, inevitable) that the recoverable value of its claim overall would not have exceeded $400,000.00, and indeed may well have fallen short of that figure.
When the offer is analysed, it demonstrates, to my mind, that the party with an unreasonable attitude towards the litigation, and with a derisory approach to its opponents' cases, was none other than Gladio itself. The offer that was made, so far from casting Gladio in a responsible light and as the party of sweet reason, suggests to me very strongly that it entertained an irrational and unjustifiable view of its own prospects of success, and that it was not prepared to compromise to any real extent.
Mr Lucarelli's submissions in reply addressed further instances of what he said was unreasonable conduct on the part of Ms Buckworth, in the course of preparing the matter for hearing. The affidavit in support of Gladio's costs application made it clear that Gladio had made attempts to have the matter resolved without the need for a hearing. There was a mediation on 29 May 2014. The matter did not settle. Thereafter, Gladio suggested further mediations. Ms Buckworth's solicitors rejected those overtures. Nonetheless, Gladio, Ashdown and SCTM discussed settlement among themselves.
I have to say that if Gladio's expectations of an outcome were of the kind suggested in its Calderbank offer of 27 August 2014, it is not unsurprising that the parties were unable to negotiate a compromise. It seems reasonably clear from the letter written by Ashdown's lawyers in response to the offer of compromise that Ashdown at least did not regard the offer as a genuine compromise (or indeed any compromise).
The parties' legal advisers exchanged correspondence from time to time which, in the usual way, advanced their competing contentions as to their respective client's prospects of success. Some of that correspondence could be described, most politely, as a little ill-considered: specifically, a letter from Ms Buckworth's lawyers that, in dealing with the proper construction of the email of 9 August 2013, referred the reader to the dissenting speech of Lord Atkin in Liversidge v Anderson [1942] AC 206. Although the specific page reference was not given, it was clearly intended to refer the reader to his Lordship's citation of "Alice Through the Looking Glass" at 361.
It is of course regrettable the parties were not able to resolve their differences. However, Ms Buckworth did participate in a mediation. There is no evidence (apart from some conclusory statements in the affidavit to which I have referred) that suggests that it might have been possible to negotiate a compromise had she participated in further mediations. Regardless, the Court is not in a position to decide who was right and who was wrong.
I do not regard the correspondence and other matters to which Mr Lucarelli referred as offering any support for his proposition that Ms Buckworth should pay costs, on any basis.
In my view, as between Gladio and Ms Buckworth, there is no reason to depart from the primary position suggested by r 42.34. There should be no order as to costs. That applies both to Gladio's claim and to Ms Buckworth's cross-claim. The cross-claim was reflexive. It sought damages for what, on Ms Buckworth's view, was a breach of contract. It added nothing to the duration of the hearing (indeed, it was abandoned because no loss had been sustained that was not compensated by the deposit).
It follows that there is no need to consider the question of indemnity costs, the subject of Gladio's second proposed order.
I do not propose to deal now with the third, fourth and fifth proposed orders. Their subject matters will be considered later in these reasons.
As to the sixth proposed order, it will be seen that in my view Gladio should be ordered to pay Ashdown's costs. It follows that there is no basis for ordering return of the bank guarantee given as security for those costs.
Decision: the orders sought by Ms Buckworth
For the reasons I have given, I do not think there should be any costs order as between Gladio and Ms Buckworth, either in respect of Gladio's claim or in respect of Ms Buckworth's cross-claim.
As to Ms Buckworth's proposed order 3 (that there be no costs order in respect of her failed cross-claim against Ashdown), Mr Grieve submitted that the reason for the prosecution of the cross-claim "at least in part" was the failure on Ashdown's part properly to minute its decision in relation to the letter of 24 April 2009, and promptly to make a house rule reflecting the terms of that letter. He submitted that Ms Buckworth was entitled to act on the basis that Ashdown had complied with its statutory and other obligations, and that she should not be penalised in costs because of its failure to do so.
I do not agree. Any litigant who commences proceedings (and this applies just as much to cross-claimants as to plaintiffs) takes the risk that the facts will turn out other than he or she expected. In the ordinary way, the mere fact that the risk eventuates is not a reason for deflecting the prima facie position established by UCPR r 42.1. There may be circumstances, in any particular case, leading to the conclusion that the successful defendant (or cross-defendant) has behaved in such a way, with regard to the subject matter of the claim against it, that its success ought not be reflected in costs. To my mind, the present case is far removed.
Ms Buckworth chose to bring the cross-claim. She took the risk that the facts would turn out otherwise than as she expected. And in any event, the submission ignores crucial findings that I made in my earlier reasons. First, I found that the letter in question was in fact made available to Gladio's legal searcher before contracts were exchanged. Second, the cross-claim was in any event bound to fail, quite apart from the factual problems, for the reasons I gave at [270] to [282] of my earlier reasons. In short, in my view, that cross-claim was misconceived from its very filing.
Ashdown should have its costs of the second cross-claim.
I will address the fourth and fifth orders sought by Ms Buckworth in the next section of these reasons, dealing with Ashdown's proposed orders.
Decision: the orders sought by Ashdown
The first order sought is that Gladio pay Ashdown's costs of the proceedings against it. In the ordinary way, that would follow from the relevant event: failure of the claim.
Mr Lucarelli submitted, for Gladio, that there were circumstances that told against application of the presumption. Stripped of hyperbole (a process which reduces their length materially), those submissions were to the effect that the facts turned out otherwise than as Gladio had hoped might be the case. Mr Lucarelli strove industriously to construct a plausible argument to the effect that Ashdown had in effect invited the claim against it, by its conduct in relation to the letter of 24 April 2009 and the house rule required to give effect to that letter. All this ignores the plain fact that the letter was made available to Gladio's legal searcher before exchange of contracts.
One of the curious features of this aspect of Gladio's submissions is that its submissions in chief did not touch on the form of the costs order to be made as between it and Ashdown (except, perhaps, that it might be inferred from their silence on the topic that Gladio thought that such an order was not appropriate). Gladio's written submissions in chief did not explain why it was that there was no costs order proposed as between it and Ashdown.
Thus, Ashdown had no opportunity to respond other than by making the simple point that costs should follow the event. Gladio appears to have made a tactical decision not to address the point in any detail until its submissions in reply: at which stage, bearing in mind the regime for submissions that had been put in place, there was no opportunity for Ashdown (at least, without the leave of the Court) to make any further submissions, or to respond to the points belatedly made by Gladio.
In those circumstances, I think it would be unjust to Ashdown to permit Gladio to rely on matters that Ashdown should have been able to answer, but which, because of an apparent deliberate tactical choice made by Gladio, were kept back until the closing round (of submissions in reply).
In any event, as I have said, the hyperbolic nature of the submissions, and their apparent detachment from the reality of the case, suggest very strongly that I should give them no further attention than I have done.
In short, I do not regard Mr Lucarelli's submissions in reply as offering any arguable, let alone valid, reason for declining to order that costs should follow the event.
The second order sought by Ashdown deals with the second cross-claim - Ms Buckworth's cross-claim against it. For the reasons I have indicated, the costs of that cross-claim should follow the event of its failure.
The most contentious aspect of the orders sought by Ashdown relates to its third cross-claim, against SCTM. Ashdown submits, in essence, that the third cross-claim was prompted by Gladio's and Ms Buckworth's claims against it. Thus, Ashdown submitted, this is an appropriate case for those parties to pay the costs, and for Ashdown to be relieved of any responsibility to pay them.
Decision: the orders sought by SCTM
For the reasons I have given, the first order to be made in respect of SCTM's costs of the cross-claim (by Ashdown) against it is that Ashdown should pay those costs; there should be no Sanderson order. The question of a Bullock order has no application as between SCTM and Ashdown.
The second order sought by SCTM is that the costs so payable should be assessed on the indemnity basis from 31 March 2015. SCTM relies on offers made to settle.
Leaving aside evidence as to various conversations on the question of settlement, it is uncontested that SCTM made five offers of settlement to Ashdown. Each of them was, as Ms Horvath of Counsel for SCTM submitted, clear and unambiguous, and capable of immediate acceptance so as to give rise to a binding contract. Each of them involved genuine compromise, and (with a possible qualification as to the last two offers) was open for a reasonable time. Each was rejected, either expressly or by implication.
The first three offers can be considered together. They were made, respectively, on 30 March, 30 April and 25 May 2015. They offered either to pay a sum of money or to contribute in a stated share to any judgment against Ashdown (and costs). However, each of them required, among other things, that Ashdown provide SCTM with an indemnity. The scope of the requested indemnity was narrowed, but not removed.
The first offer articulated in detail the reasons why it was made and why it warranted acceptance. At least by implication, those reasons should be taken to apply equally to the second and third offers (and, for that matter, to the last two offers). In some cases, Ashdown made a reasoned response, and there was some debate as to the respective merits of the two parties' cases.
The first offer was made after the first day of hearing. On that day, each party (having provided a written outline of its case) was given the opportunity to open orally; some of them did so. The evidence of a witness, Ms Kritikos, who could not be available later in the year, was taken.
Thus, when the first offer was made, the parties had had the benefit of considering all the evidence in chief in the matter, the way in which each other party articulated its case, and the whole of the evidence of a key witness on one important factual question: namely, whether the records made available by SCTM to Gladio's legal searcher included the letter of 24 April 2009.
However, in my view, it was not relevantly unreasonable for Ashdown to reject those offers. It is clear that Ashdown was prepared in principle to compromise with SCTM. It is clear that Ashdown was prepared to compromise either on the basis of payment of an agreed sum or on the basis of an agreed percentage contribution to any adverse outcome. What Ashdown was not prepared to do was offer the indemnity sought by SCTM.
I do not think that it was relevantly unreasonable for Ashdown to decline to compromise on terms that might have exposed it to future liability arising out of the subject matter of the litigation. And the matters referred to at [86] and following below are relevant to the first three offers as well. They provide both cumulative and alternative support for the conclusion just expressed.
Orders
Before I make orders to reflect what I have said, there is one more matter that should be noted. The hearing on 2 March 2015 was necessitated because Ms Kritikos (a witness called by Gladio) could not give evidence when the hearing was fixed to commence on 15 June 2015. It was not suggested that her unavailability for that hearing could not have been ascertained before the original hearing dates were allocated. On the application of Gladio, I made 2 March 2015 available, and the hearing on that day proceeded as I have described it at [77] above. I did so on the basis that Gladio should pay the other parties' costs of that day in any event, and made an order accordingly, on 13 February 2015.
The orders that I am about to make must be taken to be in addition to the costs order in respect of 2 March 2015 (and, for that matter, in addition to any other costs orders made from time to time on interlocutory applications).
Accordingly, I make the following further costs orders:
1. as between the plaintiff and the first defendant: make no further order as to the costs of the plaintiff's claim against the first defendant and the first defendant's cross-claim against the plaintiff.
2. As between the first and second defendants: order the first defendant, as cross-claimant, to pay the second defendant's costs, as cross-defendant, of her cross-claim against it.
3. As between the second defendant and the plaintiff: order the plaintiff to pay the costs of its claim against the second defendant.
4. As between the second defendant and the cross-defendant to the third cross-claim: order the second defendant as cross-claimant to pay that cross-defendant's costs of that cross-claim.
5. Order the plaintiff and the first defendant jointly and severally to indemnify the second defendant for costs payable by it as cross-claimant to the cross-defendant on the third cross-claim, but only in respect of the period from the date of service of that cross-claim up until and including 30 March 2015.
6. Otherwise, and as between all parties, make no further order as to costs.
Amendments
16 October 2015 - Amendment to formatting of paragraph [13].
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Decision last updated: 16 October 2015
I should start by saying that I do not think that this is an appropriate case for a Sanderson order. Ashdown instituted the third cross-claim. That third cross-claim failed. As everyone appears to accept, SCTM is entitled to have its costs of that cross-claim. Prima facie, those costs should be paid by the cross-claimant, i.e., Ashdown.
If the order sought by Ashdown were made in the form in which it is sought, the consequence would be that SCTM could look only to Gladio and Ms Buckworth for payment of its costs. If, for whatever reason, it did not recover its assessed costs in full from them, it would be left out of pocket. That would not be just.
There are of course alternatives. One is to fashion an order to the effect that Gladio and Ms Buckworth pay SCTM's costs, and to the extent that they do not do so (up to whatever might be the assessed or agreed figure), Ashdown should do so. That would remove a degree of circuity. Another alternative would be to make a Bullock order. An order of that kind would give SCTM direct recourse to the cross-claimant against it, but would give that cross-claimant the right of indemnity against those who, on its argument, effectively prompted the cross-claim in question. Such an order being made, it would be Ashdown as the unsuccessful cross-claimant rather than SCTM as the successful cross-defendant who would bear the risk of non-payment.
I should make it perfectly clear, at this point, that I am not suggesting that either Gladio or Ms Buckworth would be unable to pay the costs of SCTM (or, for that matter, Ashdown) if ordered to do so. I am addressing what is, on the facts, a hypothetical scenario. Nonetheless, hypothetical or not, it is something that must be dealt with.
The real dispute however is as to whether Gladio or Ms Buckworth (or both) should, one way or another, bear the responsibility for SCTM's costs.
I conclude, as was submitted for Ashdown, that its cross-claim against SCTM was a reasonable, and in my view entirely predictable, response to the claims against it by Gladio and Ms Buckworth. Thus, in the ordinary way, I would consider that Ashdown should have some relief from the burden of costs, in the form of a Bullock rather than a Sanderson order. However, there is in this case a complicating factual question.
SCTM's submissions show, by reference to an affidavit sworn in support of them, that SCTM had made repeated attempts between 30 March and 11 June 2015 to settle the third cross-claim. Those offers were each made in the form of Calderbank letters. Whether or not they should have the consequence for which SCTM contends is a matter that I shall consider in the next section of these reasons. Their present significance is that Ashdown did not seek to discuss any of those offers either with Gladio or (so far as the evidence goes) with Ms Buckworth. It rejected each of the offers. In consequence, SCTM remained a party to the proceedings, and was required either to defend itself, or to capitulate. It can hardly be blamed for taking the former course; and its confidence in its success was justified by my conclusion that the cross-claim against it failed.
I do not know what might have happened had Ashdown revealed to those from whom it now seeks (partial) indemnity as to SCTM's costs the fact of the offers and of their rejection. Nonetheless, it seems to me to be inherently unjust for Ashdown, having rejected the offers and having (as will appear) failed by a substantial margin to better them, should nonetheless be entitled to be indemnified in costs for the whole of the period up until the delivery of judgment (and including the current argument over costs).
In my view, the appropriate order to make in the circumstances is that Ashdown should pay SCTM's costs, and that Gladio and Ms Buckworth should indemnify it for such of those costs as were incurred up until 30 March 2015: the date of the first offer. An order in those terms would reflect:
1. the outcome of the third cross-claim;
2. the fact that the third cross-claim was a reasonable and predictable response to the claims made against Ashdown by Gladio and Ms Buckworth; and
3. the failure of Ashdown to communicate the offers to those who, it said, effectively forced it to bring the first cross-claim, let alone its failure to invite any participation from them in the appropriate response to be given to any of those offers.
The fourth offer was made on 10 June 2015. It offered payment of $100,000.00, and also a contribution of 30% of any costs that might be ordered against Ashdown (with presently irrelevant exceptions). There was no request for an indemnity. It did however require judgment in SCTM's favour on the cross-claim.
That offer was expressed to be open for two days. However, it was rejected the day after it was made, on 11 June 2015. The fact that Ashdown was able to consider and reject the offer would suggest that, even though the time allowed for acceptance was short, it was sufficient.
In response to the rejection, SCTM made the fifth offer, on 11 June 2015. Relevantly, it increased the offer to contribute to costs from 30% to 50% (with the same exceptions).
The fifth offer was open for one day. It was rejected on 12 June 2015. Again, I infer that although the time allowed for acceptance was short, it was sufficient.
Mr Izzo, for Ashdown, submitted that even though the requirement for indemnity had been removed, it was not unreasonable for Ashdown to reject the fourth and fifth offers, because, if it did accept one or the other, it would remain embroiled in the proceedings at the suit at Gladio, and as a cross-defendant at the suit of Ms Buckworth.
The fundamental question between Ashdown and SCTM was whether the latter had made the letter of 24 April 2009 available to Gladio's legal searcher. I concluded that it had. But at the time all the offers were made, the only testimonial evidence on the point that had been tested in cross-examination was from Ms Kritikos, who was the human agency by whom the search was carried out. Her evidence was to the effect that the letter had not been among the records that she remembered seeing; and that, had she seen it, she would have remembered it because of its subject matter.
Ultimately, after detailed analysis of the evidence given by SCTM's witnesses (including in cross-examination), the documentary evidence and Ms Kritikos' evidence, I concluded, on the balance of probabilities, that the letter had been among the records made available to Ms Kritikos. However, it cannot be said that this must have been obvious to Ashdown at the time, had it considered the position objectively and dispassionately. On the contrary, as I see it, Ashdown was entitled to take the view, based on the evidence of Ms Kritikos, that its prospects of success as against SCTM were good.
Mr Izzo elaborated on that theme in his submissions. It is not necessary to go to the detail. I should however record that Ms Horvath's costs submissions, did not analyse why it was that, as she contended, it was relevantly unreasonable for Ashdown to have rejected the offers.
There is however another aspect of Mr Izzo's submissions that, in my view, is correct, and that does bear mention. At the time the fifth offer was made, it is likely (on the basis of the evidence that has been served on the costs question) that Gladio's costs, on the ordinary basis, would have been of the order of $400,000.00. Of course, the parties did not know that back in June 2015. But that is not the point.
The point is, rather, that acceptance of the fourth or fifth offers would have left Ashdown (had it lost) with a liability to pay in excess of $50,000.00 by way of damages (allowing for interest, and allowing for the offer of $100,000.00) and with a liability for costs. With the benefit of hindsight, the latter liability can now be recognised as having been of the order of $200,000.00, subject to assessment.
Mr Izzo submitted that a settlement along those lines did not reflect the view that Ashdown was entitled to take, based on the evidence that had been given, of the strength of its case against SCTM. In my view, that submission is substantially correct. And it is correct even if one substitutes, for the seemingly precise quantification, the words "many thousands of dollars".
The question, whether or not it was unreasonable to reject an offer of settlement, cannot be answered without attention to the particular facts of the case. In this case, the two matters to which I have referred justify the conclusion that it was not relevantly unreasonable for Ashdown to reject the offers. First, acceptance of them (any of them) would not have removed it as a party to the proceedings. It would have continued to be involved in any event. All that settlement would have done was buy off the prospects that (as happened) it might lose against SCTM.
That reason is not, of itself, a particularly powerful justification for the conclusion that rejection of the offers was not relevantly unreasonable. That is because, in my view, the question of reasonableness should be assessed with particular reference to the particular dispute, in connection with which the offers to settle were made. Although that particular dispute was one conducted in the context of the overall litigation, nonetheless, it was a confined dispute between Ashdown and SCTM, based on confined facts.
However, in my view, the second reason has much force. Although the offers put by SCTM were genuine offers of compromise (and Mr Izzo did not submit otherwise), the fact is that, at the time each was made, Ashdown was entitled to take the view, reasonably, that its prospects of success were good. Ms Kritikos' evidence would give support to such a view.
As things turned out, the evidence overall led to a different conclusion. But looking at the offers (in particular, the last two) at the time they were made, and looking at the position that Ashdown would have been in had it accepted the offers and then lost as against Gladio, I do not think that the implied view as to Ashdown's prospects of success vis à vis SCTM, as manifested by its rejection of the offers, was in any way unreasonable.
I conclude that SCTM should not have any part of its costs assessed on the indemnity basis.