Global Alliance Network Pty Ltd v Sensis Pty Ltd [2007] NSWCA 268 | Case summary

Thursday 4 October 2007 GLOBAL ALLIANCE NETWORK PTY LTD v SENSIS PTY LTD (NO 2) Judgment 1 THE COURT: The substantive issues determined in this appeal are set out in the reasons for judgment of Tobias JA, concurred in by Mason P, in Global Alliance Network Pty Ltd v Sensis Pty Ltd [2007] NSWCA 163 delivered on 27 July 2007 (the appeal judgment). In essence, the respondent (Sensis) claimed from the appellant (Global) advertising costs totalling $98,811.92 in respect of four separate advertising contracts entered into by the parties with respect to listings in the 2003 Yellow Pages telephone directories for Brisbane, Sydney, Melbourne and Perth published by Sensis. At all material times Global admitted that it owed $20,513.90 in respect of the advertising costs for the Brisbane directory but denied that it owed Sensis in respect of advertising costs for the Sydney, Melbourne and Perth directories. 2 By majority, the Court upheld Global's contentions. It set aside the primary judge's orders in favour of Sensis and substituted an order that Global pay Sensis the admitted amount of $20,513.90. It further ordered Sensis to pay Global's costs of its claim in the District Court and of the appeal. 3 Global had instituted a cross-claim against Sensis in which it claimed the sum of $18,582.54 which it alleged related to unauthorised or incorrectly charged costs with respect to advertisements or listings published by Sensis in the 2002 White Pages directory for Sydney, Melbourne, Brisbane and Perth. By letter dated 17 June 2005 Sensis' solicitors wrote to Global's solicitors asserting that at least $16,951.44 of the amount the subject of Global's cross-claim had been credited to Global leaving a balance of only $1,631.10. Attached to that letter was a spreadsheet purporting to show to which accounts the various sums had been credited. It asserted that as Global had an intervening telephone service provider, namely, Macquarie Corp Telecoms, Sensis had passed all credits to that entity which should then have allowed them to Global in their bills. The letter concluded in the following terms: "Our client is prepared to credit the balance of $1631.10 to resolve the cross-claim issue now. Accordingly, in the event that your client [Global] now seeks to maintain its cross-claim our client [Sensis] will seek indemnity costs on this aspect of the matter." 4 The primary judge dismissed Global's cross-claim, a decision which was unanimously upheld by this Court. At trial Global prosecuted its cross-claim solely upon the basis that Sensis had admitted in its defence to the cross-claim that it owed Global the amount of $18,582.54. It relied on the fact that Sensis had pleaded in para 5 of that defence that it had paid $16,951.54 to Global's communications service provider and had admitted the amount of $1,631.10 "by way of set-off". The majority of the Court found that Sensis' defence to the cross-claim (including the amended cross-claim) made no such admission. On the contrary, the relevant allegations in the amended cross-claim were expressly denied: see [74] and [75] of the appeal judgment. This being so, the view of the majority of the Court was that the onus lay upon Global to establish that the amount that it claimed was owed, which it had failed to do. In other words, as Global had made no attempt to establish at the trial that Sensis owed to it the amount claimed in the amended cross-claim, the primary judge had correctly rejected Global's claim. In these circumstances the Court by majority ordered that Global pay Sensis' costs both in the District Court and on the appeal with respect to its cross-claim. 5 However, the Court also granted liberty to apply for a variation of the two costs orders if they were affected by any relevant Calderbank offer. The parties have now made submissions based on what they assert were Calderbank offers in respect of both Sensis' claim and Global's cross-claim. 6 As to Sensis' claim, Global relies upon a letter from its solicitors to Sensis' solicitors of 25 May 2006 which was relevantly in the following terms: "However, in order to avoid the inevitable legal costs which will likely be incurred in pursuing this matter up to and including a hearing, our client [Global] is prepared to make a final attempt to resolve the matter. Accordingly, we are instructed that our client will: 1. Release your client [Sensis] from any claims in respect of the cross-claim; 2. Pay to your client the sum of $20,519.30 being the sum owing in relation to the advertising contract for Brisbane on condition that your client [Sensis] agrees to release our client [Global] from any further claims that it may have against it ." (Emphasis added) 7 The relevant Calderbank letter with respect to the cross-claim is that of Sensis' solicitors of 17 June 2005 to which reference has been made in [3] above. 8 The effect of the appeal judgment with respect to the claim is that, prima facie, Sensis obtained a decision that was no more favourable to it than that which was offered in Global's solicitor's letter of 25 May 2006. As already indicated, it was never in issue that Global owed Sensis in respect of the Brisbane contract, a fact referred to in [20] of the appeal judgment. 9 Nevertheless, Sensis did not respond favourably to Global's offer. It nevertheless resisted the making of an order for indemnity costs generally on four grounds. First, it submitted that the offer was only open for acceptance for seven days notwithstanding that it was sent almost two months prior to the listed date of the hearing in the District Court. This was said to be unreasonable. Second, it did not specify that any cost penalty would flow from the non-acceptance of the offer although one would have thought that that was clearly implicit. 10 Third, and of greater significance, it submitted that the condition imposed by the letter that Sensis agree "to release [Global] from any further claims it may have against it" was not one which it was reasonable for it to accept. Sensis contended that that condition, properly understood, required it to release Global not only from any alleged indebtedness in respect of the Sydney, Perth and Melbourne contracts but also from any other past or future indebtedness of Global to Sensis. The decision of this Court, although in part being no more favourable than the offer, was in fact more favourable if the condition had the effect for which Sensis contended. 11 Fourth, it was submitted that it was reasonable for Sensis to reject the offer given the strength of its case against Global. 12 The principles relating to Calderbank offers are well established. It is unnecessary to repeat them. One of the factors that need to be taken into account is whether the party to whom an offer of compromise is made has failed to act reasonably in declining to accept the offer. Whether or not that is so depends upon the strength or weakness of that party's case. In the present case there was clearly justification for Sensis to pursue its claim as evidenced by the fact that the decision of this Court was by majority, Hodgson JA dissenting with respect to Sensis' claim. His Honour would have dismissed the appeal and thereby confirmed the correctness of the primary judge's decision to uphold Sensis' claim in full. The fourth ground relied on by Sensis as justification for rejecting Global's offer is in our view established. 13 Accordingly, we are not prepared to exercise our discretion in favour of ordering Sensis to pay Global's costs of the claim on an indemnity basis on and from the date upon which the offer contained in the letter of 25 May 2006 expired. The Court's order referred to in [2] above will stand unamended. 14 There is no doubt that the letter of Sensis' solicitors of 17 June 2005 relating to Global's cross-claim contained a Calderbank offer which was made over a year prior to the first day of the trial (1 August 2006). The cross-claim was originally filed on 30 November 2004 and contained the allegations that are referred to in [22] of the appeal judgment. The course taken by the parties with respect to the cross-claim is set out in [23]-[25] of that judgment. 15 Global submitted that it acted reasonably in declining the offer contained in that letter given that it in effect contained an admission that at least $16,951.44 was owing to it by Sensis albeit that that amount had been credited to Global in the manner set out in the letter. Furthermore, the letter contained an admission as to the balance of $1,631.10. Global therefore submitted that in order for the payment of the $16,951.44 to be a valid discharge of Sensis' indebtedness to it in that sum, Sensis would be required to lead evidence to demonstrate the fact that payment of that amount to a third party unrelated to the obligations between Global and Sensis was accepted by agreement as being a payment to Global. No such facts or agreement was alleged in the letter. Furthermore, it submitted that no basis was set out in the letter as to how or why the credit was passed on to Macquarie Corp Telecoms as an intervening telecommunications service provider. 16 Accordingly Global submitted that the letter of 17 June 2005 offering to resolve the cross-claim suffered from significant uncertainty and assumed facts which were not and could not be established at least by Global. It therefore submitted that its refusal to compromise the cross-claim was reasonable with the result that the Court's discretion should not be exercised in favour of Sensis by ordering Global to pay the costs of the cross-claim in the District Court and on the appeal on an indemnity basis. 17 One of the difficulties in accepting Global's submissions arises out of the manner in which it pleaded its case on the cross-claim and sought to establish it at the trial (unsuccessfully) in reliance upon alleged admissions contained in Sensis' defence to the cross-claim and the amended cross-claim. As we have indicated in [4] above, at no time did Global attempt to establish that Sensis was actually indebted to it. After all, by letter dated 20 June 2005, Sensis' solicitors wrote to Global's solicitors stating that the only matters in issue between the parties on the cross-claim related to a specific number of credits contained in a letter of 27 March 2003 and whether the specific credit claims had been paid. The spreadsheet referred to in the letter of 17 June 2005 revealed that a total of $16,951.44 had been credited to Levasta Pty Ltd, which presumably traded as Macquarie Corp Telecoms. 18 In these circumstances there is no reason to assume that Global would not have been able to verify the assertion contained in Sensis' solicitor's letter of 17 June 2005 that at least $16,951.44 had been credited to it in accordance with the spreadsheet. 19 No time limit for acceptance of the offer contained in the letter of 17 June 2005 was specified, although no doubt it could have been withdrawn if it were not accepted within a reasonable time. However, it has not been suggested in the submissions that have been made that the offer was in fact withdrawn prior to the hearing at first instance. 20 In the foregoing circumstances in our view the failure of Global to accept Sensis' offer was unreasonable given that it would have resulted in a more favourable outcome to Global on its cross-claim than its total dismissal at trial. Accordingly, we would propose that Global should pay Sensis' costs of the cross-claim on an indemnity basis as and from the expiry of a reasonable time after 17 June 2005. In our view the offer contained within that letter ought to have been accepted within three months of its date, that is, on or prior to 17 September 2005. It is from that date that Sensis' costs with respect to the cross-claim should be paid on an indemnity basis. 21 However, the order for indemnity costs should only apply to the costs of the trial. It was in our view reasonable for Global to include the cross-claim in its appeal particularly where, as was the case, the offer to settle the cross-claim was not renewed at any time after the primary judge's decision at trial. 22 Accordingly, the Court makes the following orders:

Global Alliance Network Pty Ltd v Sensis Pty Ltd

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Judgment (14 paragraphs)

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