Groves v Matt O'Connor & Associates Pty Ltd

Supreme Court of NSW|2015-06-22|Before: Slattery J

Judgment

This is my second judgment in these proceedings. In the Court's first judgment given on 29 May 2015 the Court found that the defendants were successful in resisting the plaintiff's motion for summary judgment grounded upon the terms of a deed made on 1 March 2013 ("the Deed") between them: Groves v Matt O'Connor & Associates Pty Ltd [2015] NSWSC 664. This second judgment deals with costs. Events, matters and things are referred to in this judgment in the same way as they are in the Court's principal judgment.
The unsuccessful plaintiff, Mr Groves, concedes by his counsel Mr D'Arville, that he should pay the defendants', the O'Connor parties', costs of these proceedings. But the O'Connor parties contend for indemnity costs through their counsel Mr Reuben on two grounds: (1) that the action was commenced or continued in circumstances where the moving party, properly advised, should have known it had no prospects of success; and (2) that the result the O'Connor parties achieved bettered the Calderbank letters they served between September 2013 and April 2014 before the hearing of the proceedings. These reasons deal with each of these contentions.
The difference between the O'Connor parties succeeding on their first argument and Calderbank argument is mainly one of timing. If the first basis for indemnity costs were successful the O'Connor parties would be entitled to indemnity costs from July 2013, when they were first faced with Mr Groves' motion. If they were successful in relation to their second argument they would be entitled to indemnity costs from September 2013 or alternatively January or April 2014, when the Calderbank letters were sent, the hearing having taken place in August 2014.

Indemnity Costs Based Upon Calderbank Letters

The O'Connor parties made Calderbank offers to Mr Groves before the hearing of August 2014. The O'Connor parties rely upon three Calderbank offers, the first on 18 September 2013, the second on 20 January 2014 and the third on 7 April 2014. The O'Connor parties contend that they achieved a better result in the proceedings than had been offered in each of these letters and that Mr Groves would have been better off accepting one of them.
The applicable principles of law in relation to Calderbank letters may be shortly stated. An unreasonable rejection of a Calderbank offer, where the final result is less favourable to the offeree, enlivens the Court's jurisdiction to award indemnity costs, although it does not create a prima facie right to such an order; rather the question becomes whether the rejection of the offer was unreasonable: Chief Commissioner of State Revenue v Platinum Investments Management Ltd (No. 2) [2011] NSWCA 197 at [9]. The Court must give proper weight to Calderbank offers and encourage settlement, particularly in cases involving modest claims: Ofria v Cameron (No. 2) [2008] NSWCA 242 at [24]. A formal warning of an intention to claim indemnity costs in the Calderbank letter will make the awarding of indemnity costs more likely: Huntsman Chemical Co Australia Pty Ltd v International Pools Australia Pty Ltd (1995) 36 NSWLR 242. The offeree's alleged unreasonableness in not accepting the Calderbank offer is to be assessed at the time the offer was made, having close regard to the terms of the offer and without resort to the benefit of hindsight: Meldov Pty Ltd v Bank of Queensland (No. 2) [2015] NSWSC 740 ("Meldov") at [6]. Ordinarily, if indemnity costs are to be granted following a Calderbank offer it is appropriate for the order to operate from the date of expiry of the offer: Meldov at [5].
Different considerations apply to each of the three offers, the offer of 18 September 2013, the offer of 20 January 2014 and the offer of 7 April 2014. The O'Connor parties relied on two other letters of 9 August and 14 August 2014. But it was conceded at the hearing that those August 2014 letters, which were sent during the hearing, were not true Calderbank letters. No more now needs to be said about them.
The O'Connor parties' 18 September 2013 offer (Exhibit B) was expressed to be "without prejudice, save as to costs" and apart from referring to Calderbank v Calderbank [1975] 3 All ER 333 and similar authorities provided as follows: "We are instructed to making the following offer, on a without prejudice and without admission basis, in full and final settlement of the Plaintiffs extant notice of motion filed 1 July 2013 (as amended):- 1. The Defendants pay to the Plaintiff the sum of $20,000.00 inclusive of any GST (if any) 2. The Defendants pay to the Plaintiff the sum of $7,000.00 (inclusive GST) on account of the Plaintiffs costs; 3. The motion otherwise be dismissed with no order as to costs; 4. The earlier costs order made in favour of the Plaintiff on 30 August 2013 by Justice Darke be costs as agreed or assessed; 5. Upon acceptance of this offer, the parties will enter into a Deed of Mutual Release; and 6. The Defendants will settle payment with the Plaintiff in accordance with the terms of the Deed of Mutual Release. The offer remains open for acceptance, in writing, until 4:00pm, Wednesday, 25 September 2013, after which this offer will lapse without further notice."
The O'Connor parties' letter of 20 January 2014 (Exhibit D), similarly expressed itself to be "without prejudice, except as to costs" referred to Calderbank principles and provided as follows: "We refer to the above and offer to settle the proceedings (with mutual releases & discharges to be provided by all parties) on the following terms: 1. Proceedings dismissed and the Plaintiff's extant notice of motion (as amended) dismissed; 2. Each party pay their own costs and any existing costs orders to be discharged; 3. Parties to execute a Deed of Settlement & Mutual Discharge & Release which Deed is to provide for full and complete mutual releases including with respect to all alleged causes of action be they at law, statute or equity and any alleged choses in action arising in any way from the initial and then later dealings between the parties. Such Deed to include a clause or clauses rendering it capable of being raised as a bar to any proceedings being brought by the Plaintiff including with respect to the allegations raised in the Plaintiff's evidence. The offer remains open for acceptance, in writing, by 4:00pm on Friday 31 January 2014 after which this offer will lapse without further notice."
The O'Connor parties' letter of 7 April 2014 (Exhibit D) was similarly structured and offered as follows: "This notwithstanding, as the Defendants are currently desirous of adopting a commercial approach to this matter, and in a spirit of compromise, the Defendants make the following offer in full and final settlement of the Motion / Points of Claim and all disputes and claims (both past, present and future) as follows:- 1. Proceedings dismissed and the Plaintiffs extant notice of motion (as amended) dismissed; 2. The Plaintiff to pay the Defendants' costs in the agreed sum of $30,000 plus GST (which would be by way of verdict and judgment for the Defendants in this amount); and 3. Parties to execute a Deed of Settlement, Mutual Discharge & Release which Deed is to provide for full and complete mutual releases including all alleged causes of action be they at law, statute or equity and any alleged choses in action arising in any way from the initial and then later dealings between the parties. Such Deed to include a clause or clauses rendering it capable of being raised as a bar to any proceedings being brought by the Plaintiff including with respect to the allegations raised in the Plaintiff's evidence. The offer remains open for acceptance, in writing, by 4:00pm on Monday 5 May 2014 after which this offer will lapse without further notice."
One consideration as to whether or not it is reasonable to accept a Calderbank letter is the period of time that the offer is open for acceptance. No issue was taken in the course of argument that the offerees, the O'Connor parties had allowed insufficient time for acceptance of the Calderbank letters. The issue of whether it was reasonable or not to accept these Calderbank letters may be made on other grounds. These reasons will deal with each of the three letters in turn.
The first Calderbank letter was sent on 18 September 2013. The second Calderbank letter was served by email on 20 January 2014.
As Mr D'Arville persuasively pointed out, the main difficulty with the O'Connor parties relying upon the first and second Calderbank letters was that their principal evidence in the proceedings was not served until March 2014, after the offers in both these letters had expired. Mr Groves did not know what the O'Connor parties' answer to his case was when he was considering whether the first two Calderbank offers should be accepted or not. It is well established that if a party does not have all the necessary evidence to assess a Calderbank offer, it would be reasonable for that party to wait until it had seen that evidence before agreeing to compromise the case: Chint Australasia Pty Ltd v Cosmoluce Pty Ltd [2008] NSWSC 768. Mr Reuben on behalf of the O'Connor parties sought to answer this contention by saying that the O'Connor parties did not have all the evidence from Mr Groves' side of the case either. Whilst that may be true, it does not assist the O'Connor parties. All the submission serves to show is that the case developed considerably on both sides after the first two Calderbank letters were served.
This disposes of the O'Connor parties' arguments based on the first and second Calderbank letters. The O'Connor parties serve their third Calderbank letter by email on 7 April 2014.
The third Calderbank letter does not found an order for indemnity costs. The third Calderbank letter of 7 April 2014 offers to have the proceedings dismissed and offers that Mr Groves pay the O'Connor parties' costs of these proceedings in the sum of $30,000. On the evidence now before the Court it is not clear that the O'Connor parties did better than the third Calderbank letter. To prove they had bettered the offer in the third Calderbank letter they would had to show their legal costs at the date of the offer were less than $30,000. They have not adduced evidence to show that. When this issue emerged in the costs argument Mr Reuben applied for leave to adduce such evidence. But the Court declined to allow that, on the bases that the indemnity costs issues had long been well known, that the evidence should have been adduced much earlier and that these proceedings relate to a transaction which is approximately six years old. They should be brought to finality without further adjournments on costs issues.

Conclusions and Orders

The O'Connor parties have been unsuccessful in demonstrating that they should have an order for indemnity costs on either of the bases they have propounded. The Court will order Mr Groves to pay the O'Connor parties' costs of the proceedings on the ordinary basis. But the O'Connor parties should not have their costs of their application for indemnity costs. So the orders of the Court will be as follows:
Subject to Order 2, order the plaintiff to pay the defendants' costs of these proceedings.
Order the defendants to pay the plaintiff's costs of the defendants' application for indemnity costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 25 June 2015

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Judgment (5 paragraphs)

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Cases Cited (8)