GRUNDY -v- CASSAR [No 2] [2012] WASC 103 (5 April 2012)

GRUNDY -v- CASSAR [No 2] [2012] WASC 103 (5 April 2012) - WASC 2012 case summary — Zoe

[26]

A Calderbank offer will not justify an award of indemnity costs unless its rejection was unreasonable. See Jones v Bradley (No 2) [2003] NSWCA 258 [7] - [9]; Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 [4]; Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 [23]; Berrigan Shire Council v Ballerini (No 2) [2006] VSCA 65 [10]; Ofria v Cameron (No 2) [2008] NSWCA 242 [20].

All of the relevant facts and circumstances must be considered in determining whether a party's rejection of a Calderbank offer was unreasonable. See SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 [37]; Jones v Bradley (No 2) [7] - [9]; Leichhardt Municipal Council v Green [2004] NSWCA 341 [46]; Hazeldene's Chicken Farm [23]; Berrigan [10]; Ghunaim v Bart (No 2) [2006] NSWCA 82 [23].

The mere fact that the recipient of a Calderbank offer is ultimately worse off than he or she would have been had the offer been accepted, does not mean that its rejection was unreasonable. See SMEC [37].

As the Court of Appeal of Victoria noted in Hazeldene's Chicken Farm, deciding whether conduct is 'reasonable' or 'unreasonable' always involves matters of judgment and impression [24]. Although it is neither possible nor desirable to enumerate exhaustively all circumstances which must be taken into account, in a particular case, in deciding whether the rejection of a Calderbank offer was unreasonable, the Court of Appeal said that, ordinarily, regard should be had to, at least, the following:

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

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

(c) the extent of the compromise offered;

(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's rejecting it. [25].

...

The party who makes a Calderbank offer that is rejected bears the onus of satisfying the court that it should make an award of indemnity costs in his or her favour. See Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 [26]; Ghunaim [25]; Commonwealth of Australia v Gretton [2008] NSWCA 117 [46], [74].

[51]

'A decision to accept or not an offer of this kind will ordinarily be based upon the offeree's perception of its ultimate chances of success, that is, it involves a prediction as to the likely outcome of the trial. At the time the debate about costs occurs the trial will normally be over; the event will have demonstrated that the prediction which underlay the decision was not fulfilled, that it was erroneous or even imprudent (Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 228, per Sheppard J). I put to one side the case where the decision was one based on factors other than the prospect of success. A decision to commence or to press on with litigation which is based on the desire to grind a less resourced opponent into capitulation or to put it out of competitive business could hardly be countenanced by the court. If an offeree sought to justify its decision to refuse an offer by reference to some consideration other than the prospect of success, this would be a matter for it to raise, leaving always the ultimate onus on the issue upon the offeror. In the same way that the failure to achieve a more advantageous result will not automatically put the offeree at risk, so too it is not sufficient for it to avoid the consequence of its erroneous prediction that it says only that the outcome was uncertain. The outcome of almost all litigation is uncertain. The erroneous prediction may not, however, be an unreasonable one if the predictor was not, at the time, for good reason in possession of sufficient information to make an assessment or if the circumstances upon which it was based later changed. It must be acknowledged that it is part of the ordinary function of a lawyer to make predictions of this kind. The lawyer must make them at the outset and during the litigation in order to enable the client to make responsible and informed decisions to commence the litigation, to pursue it and to make the various decisions in the course of the proceeding's progress to trial and judgment [13].'

[70]

In that factual context, I return to s 215(2) of the Legal Practice Act. The first question that arises for my consideration is the nature of the task performed by the court under that section, and, in particular, the question which the court is required to address. Before the court can make an order under the subsection, the court must form an opinion which has two components. The first is that 'the amount of costs allowable in respect of a matter under a legal costs determination is inadequate', and the second is that the inadequacy arises because of the 'unusual difficulty, complexity or importance of the matter'.

The question posed to the court under s 215(2) will almost always arise before taxation has occurred. It is of course the responsibility of the taxing officer to tax the bill and identify with precision the amount that should be allowed in respect of the particular claim for costs. Section 215(2) also falls to be construed in the context of the well-known principle that at least in respect of costs as between party and party, the principle is that the successful party should be compensated by the unsuccessful party for their costs (see O 66 r 1, Rules of the Supreme Court 1971 (WA)).

Those two considerations provide a guide to the proper approach to be taken to the question posed to a court when an application is made under s 215(2). The policy considerations that should guide a court when addressing an issue under s 215(2) are, firstly, that the court should not usurp the role of the taxing officer and, secondly, that at least where party and party costs are concerned, the court should make an order that would give effect to the general principle of allowing the successful party to be compensated for their costs by the unsuccessful party, where appropriate.

...

It therefore seems to me that the requirement of inadequacy will be demonstrated if the applicant shows that there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit that would be imposed by the relevant costs determination. Of course, as I have pointed out, that is only the first question which the court must address. The second question is whether that inadequacy arises because of the unusual difficulty, complexity or importance of the matter.

...

Another consideration that appears to me to be significant to the construction and application of s 215(2) also arises from the time at which that determination is to be made. Because it is a determination which will ordinarily be made in advance of taxation, it should be made as a matter of impression rather than as a matter of detailed evaluation. An approach which would require an applicant to demonstrate that a limit is inadequate by reference to a detailed evaluation of a draft bill for taxation would carry the risk that what has elsewhere been described as 'satellite litigation' (and which I would describe as parasitic litigation), might assume a life and dimension of its own, disproportionate to its significance.

Such an approach should be discouraged, because it is in the interests of the parties and of the public for disputes with respect to costs to be resolved as quickly and as efficiently and as inexpensively as possible.

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