Guest v Karl Romandi & Helen De Luis Pty Ltd

Judgment 1THE COURT: On 13 April 2012 the Court dismissed the applicants' summons seeking leave to appeal and the respondent's cross-summons seeking leave to cross-appeal. It also made the following orders as to costs: (1)The applicants pay the respondent's costs of the summons seeking leave to appeal. (2)The respondent pays the applicants' costs of the cross- summons seeking leave to cross-appeal. 2When judgment was delivered, the parties indicated that each sought special costs orders as a result of the rejection of "without prejudice" offers made before the hearing of the summons and cross-summons. No notice of motion has been filed by either party under UCPR r 36.16(3A). However, written submissions have now been exchanged. Each party applies for a variation of the costs orders made on 13 April 2012. As the Court has determined that it is not appropriate to vary its existing orders, it is not necessary that any formal notice of motion be filed. 3The applicants seek to vary costs order (1) in [1] above to provide: (a)The applicants pay the respondent's costs of the summons seeking leave to appeal up to and including 7 March 2012. (b)The respondent pays the applicants' costs of the summons seeking leave to appeal from 7 March 2012. 4They rely on the rejection of a Calderbank offer made by letter dated 7 March 2012 to settle all of the proceedings between the parties as follows: "(1) That the Court of Appeal proceedings be discontinued in full; and (2) That order 3 of the judgment of Justice Fullerton made 21 September 2011 be set aside; and (3) Our clients to pay your clients the sum of $38,973.00; and (4) The defendants of the Supreme Court pay the plaintiffs costs to be taxed on a party/party basis; and (5) The proceedings between the parties be dismissed with no further orders as to costs." That offer was expressed to be open for acceptance until 12.00pm on 9 March 2012. Order 3 made by Fullerton J and referred to above was the order remitting the proceedings to the Local Court. 5Whether the rejection of a Calderbank offer justifies, in the exercise of the Court's discretion, a departure from the ordinary rule as to costs depends on whether the final judgment or outcome is no more favourable than the terms of the offer, whether the offer was a genuine offer of compromise and whether, in all the circumstances, the offeree's failure to accept the offer warrants departure from the ordinary rule. This last question is usually resolved by addressing whether the offeree acted unreasonably in refusing to accept the offer: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37]; Jones v Bradley (No 2) [2003] NSWCA 258 at [8]-[9]; Commonwealth of Australia v Gretton [2008] NSWCA 117 at [1], [43], [44], [117], [120]. 6The applicants' offer was not an offer confined to the disposition of the proceedings on the summons and cross-summons. It sought to dispose of the whole of the proceedings between the parties in a way which could not have been achieved by the disposition of the applications for leave to appeal. Because the disposition of those applications did not and could not have the consequence of disposing of the whole of the proceedings, it is not possible or meaningful to compare the outcome of those applications with the outcome proposed by the offer in order to assess whether the offer is more favourable than the outcome of the two applications. For that reason the principles which govern Calderbank offers can have no application to the applicants' letter of 7 March 2012. Put simply, it cannot be said that the result of the outcome of the applications is less favourable to the respondent than the offer. This conclusion makes it unnecessary to consider whether the offer involved a genuine offer of compromise and whether in the circumstances the respondent acted unreasonably in not accepting an offer which was only open for two days. 7For these reasons the rejection by the respondent of the applicants' Calderbank offer dated 7 March 2012 does not justify a departure from the ordinary rule as to costs in relation to the dismissal of the summons seeking leave to appeal. 8The respondent seeks to vary the costs orders in (1) and (2) in [1] above to provide that: (a) The applicants pay the respondent's costs of the summons seeking leave to appeal on the ordinary basis up to and including 22 February 2012 and on the indemnity basis from and including 23 February 2012; (b) The applicants pay the respondent's costs of the cross summons seeking leave to cross appeal, or alternatively that there be no order as to the costs of the cross-summons. 9The respondent relies on the rejection of a Calderbank letter dated 22 February 2012 which offered to resolve the proceedings on the summons and cross-summons as follows: "(1) That the Summons Seeking Leave and Cross-Summons Seeking Leave be discontinued; and (2) Each party is to pay its own costs." 10Addressing the matters referred to in [5] above, it is not obvious that the applicants are worse off than if the offer had been accepted. The respondent points out that had the offer been accepted, the applicants would not have become liable for the respondent's costs of the summons. That is correct. However, that comparison does not take any account of the position with relation to the cross-summons. In that respect the applicants are not worse off because the cross-summons has been dismissed and, unless the ordinary rule as to costs is departed from, they are entitled to have their costs of the cross-summons paid. 11It is also not obvious that the applicants acted unreasonably in not accepting the respondent's offer. The respondent must persuade the Court that it should exercise the costs discretion in its favour: Evans Shire Council v Richardson (No 2) [2006] NSWCA 61. As the applicants point out, there was a dispute between the parties as to whether the effect of the judgment of Fullerton J and the order remitting the matter was that the only task which the Local Court has to undertake is to make the calculations which follow from the primary judge's conclusion that the charges for the architectural assistant should be at a rate of $75 per hour. On the basis that this was the effect of the primary judge's judgment, the respondent sought by its cross-summons to have the order remitting the proceedings set aside and the necessary calculations undertaken by this Court or by Fullerton J. The applicants say in these circumstances that it was reasonable for them to refuse to accept the offer so that this dispute could be agitated before this Court when addressing the cross-summons rather than be left to the Local Court. In our view that was a justifiable reason for not accepting the offer. As matters turned out, this Court has made some observations as to the issues remaining to be determined in the Local Court. Those observations indicate that the Local Court will have to deal with questions which go beyond merely undertaking the calculations referred to above. In the circumstances we are not satisfied that the applicants acted unreasonably in not accepting the respondent's offer. 12The respondent also argues that the order for costs in relation to the cross- summons should be varied. It does not dispute that the cross-summons was a freestanding application in the sense that it was not made necessary by the filing of the summons or any other conduct of the applicants. The respondent submits that its application sought "no more than to bring the litigation to an end". On one view, that is correct. But it did so by a route which was perceived to be the best interests of the respondent. The position remains that the responsibility for the incurring of the costs which resulted from the cross-summons rests with the respondent. That application having been dismissed, no good reason has been identified for departing from the ordinary rule. 13For these reasons the Court dismisses the applications made by each party to vary the costs orders made on 13 April 2012. Because each application has been unsuccessful, there should be no order as to the costs of the parties in respect of each of them.