Integrated Securities No 3 Pty Ltd v Creatrix Web Development & Online Marketing Solutions Pty Ltd

Offer of Compromise

1. The offer of compromise (annexed to the Affidavit of Ms Ta'akimoeaka) is one made pursuant to the Uniform Civil Procedure Rules 2005 (NSW) ("the Rules"). The offer made was to pay the amount of $440,385.45 plus interest at the rate prescribed by s 100 of the CPA as at the date of the offer (i.e. $506,329.07) which is, subject to one matter, precisely what I have determined they should pay. The qualification is that the offer of compromise specified that the payment was to be made "upon settlement of the sale" of the Property, whereas in my judgment, there is no qualification of that kind - i.e. the amount awarded to the Plaintiff is payable in accordance with the CPA; i.e. within 28 days of the entry of judgment; namely, on 2 June 2021. The qualification is significant and, in my view, means that it cannot be said that the Defendants have done better, or at least as well as, the offer of compromise.
2. Integrated made other points concerning the form of the offer of compromise, asserting for example that it did not meet the requirements of the Rules because it did not distinguish between the outcome of Integrated's claim and the Defendants Cross-Claim. Given my conclusion in [10] above, I do not need to enter into consideration of these additional points.

The Calderbank Offer

1. The Calderbank offer is also annexed to the Affidavit of Ms Ta'akimoeaka, is dated 25 February 2021 and is in the same terms as the offer of compromise.
2. It has been made clear by the Court of Appeal in cases such as Leichhardt Municipal Council v Green [2004] NSWCA 341 and Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 that to be able to rely on a Calderbank offer, the party seeking to do so must establish not only that he or she has obtained a result by the Court's judgment at least as favourable to him or her as the offer made, but also that it was unreasonable for the offeree not to have accepted the offer. For the reasons already indicated, I do not think that the Defendants have obtained a result better or equal to the offer made in relation to the second requirement.
3. Dealing with the issue of unreasonableness, the offer constituted, in effect, an offer to pay one third of what Integrated was claiming and to do so only when the remaining lot was sold. Having regard to the size of the claim and the fact that the issues were of some complexity, I am not persuaded that Integrated acted unreasonably in not accepting the Defendants' offer.

Costs Generally

1. By their Amended Defence and Cross-Claim, the Defendants admitted much of Integrated's allegations concerning the Loan Agreement and the advances made, save that they asserted that both Mr Valerio and Ms Pejkic were debtors under the Loan Agreement (see paragraphs 23-28 of the Cross-Claim) and relied on the matters contained in their Cross-Claim, namely, the asserted breach of the Code and s 12CB of the ASIC Act.
2. The Defendants contend that the real fight in the case was not over whether the Defendants were liable to repay the monies actually advanced and interest at the rate determined in accordance with s 100 of the CPA, but rather, whether or not: 1. the Code and s 12CB of the ASIC Act applied and had been breached; 2. they were required to repay the total of the monies claimed (which included fees, charges and prepaid interest) and interest at the extraordinary high rate specified in the Loan Agreement; and 3. Integrated was entitled to enforce the mortgage and sell the Property to recover those much larger sums (which, at the time of filing the Amended Statement of Claim - that is, more than 10 months before judgment was delivered - totalled $1,061,523.48) plus further interest bringing the effective claim to approximately $1,500,000.
3. In support of their approach, the Defendants rely on Richard Walkom Linehans Real Estate Pty Ltd t/as Walkom Linehans First National Real Estate v Dhasmana [2009] NSWCA 241 ("Walkom").
4. Integrated, by the PCSR, makes the following submissions: 1. The ordinary rule is that the successful party should obtain its costs as they were required to commence proceedings and to proceed to judgment - the Defendants' position was that they were not liable to repay the sum of $30,000 and they have been ordered to repay it. 2. The Defendants did not accept liability to pay any interest and they have been held liable to pay pre-judgment interest of $70,740.22. 3. The Defendants did not tender repayments of any of the advances, nor did they plead any notional tender or willingness to pay. 4. The Cross-Claim was defensive in nature and reference is made to Interwest Ltd v Tricontinental Corp Ltd (1991) 5 ACSR 621 at 627. At paragraph 21 of the PCSR, the Plaintiff/Cross-Defendants advance the following submission: "While some orders were made on the cross-claim, it was unsuccessful in defeating the primary obligation to repay, which the plaintiff sued to enforce." 1. The Defendants' case at trial departed from their pleaded case. 2. The Defendants denied paragraphs [14]-[19] of the ASOC including default and that they owed any of the amounts sought. The PCSR asserts that there was no plea of illegality, partial tender or notional tender which were all matters "required to be pleaded by way of defence, if relied on": see [23] of the PCSR. 3. The Defendants were not wholly successful on their Cross-Claim. 4. The primary 'event' was the recovery of a monetary judgment against the Defendants. 5. The only relief that the Defendants sought against Mr Cacciola was a declaration that he has engaged in unlawful credit activities.
5. In relation to [18(1)], [18(2)] and [18(3)] the Defendants did not, by their Amended Defence, admit a liability to repay the $30,000 sum advanced pursuant to the Deed of Variation, nor a liability to pay any interest, nor did they tender repayment of any amount.
6. In relation to [18(4)], there is no question that the Cross-Claim is "defensive" in nature - it was brought to resist Integrated's claim and the Defendants' Amended Defence indicated in answer to the Statement of Claim that the Defendants "rely upon the matters pleaded in the cross-claim": see paragraph 11 of the Amended Defence. This does not assist Integrated, however, on this costs application.
7. The last point is relevant to [18(6)] - the Code and the ASIC Act were specifically pleaded in answer to Integrated's claim both by what is found at paragraph 11 of the Amended Defence and by the content of the Cross-Claim.
8. In relation to [18(7)] and the matters referred to in [19] above, it is true that the Defendants were not wholly successful on their Cross-Claim - they have to repay the $30,000 and to pay interest and all three Defendants are liable. I will take this into account in determining the appropriate costs order.
9. In relation to [18(5)], Mr Valerio and Ms Pejkic did admit that they had entered into the Loan Agreement which included a guarantee, but the combined effect of paragraphs 3, 4 (which is responsive to paragraph 6 of the ASOC) and 11 of the Amended Defence, and their Cross-Claim, is a denial that they were liable as guarantors of a debt of Creatrix. They also raised the Code and unconscionability by paragraph 11 of their Amended Defence. I am not persuaded that the Defendants contentions at the hearing departed from their Amended Defence or Cross-Claim, and no point was taken by Counsel for Integrated to that effect at the hearing.
10. In relation to [18(9)], the Defendants obtained no orders against Mr Cacciola personally. He is clearly as closely associated with Integrated as is possible, was the only witness for Integrated and he arranged for Integrated to enter into the two loans which have been set aside both on the grounds of breach of the Code and for unconscionability. These matters make it inappropriate to distinguish between him and Integrated save that he should not be required to pay any of the Defendants' costs.
11. As Ball J observed in Tzaneros Investments Pty Limited v Walker Group Constructions Pty Limited [No. 3] [2016] NSWSC 526, s 98 of the CPA grants to the Court a broad discretion to determine by whom, to whom, and to what extent costs are to be paid by a party: see also Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72. Ball J then referred to the Court of Appeal's decision Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38], which is in the following terms: "Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported). In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal. … Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed). A separable issue can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34]. Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272."
12. In Gray v Richards (No 2) [2014] HCA 47; (2014) 89 ALJR 113 at 113-114, the High Court, in refusing special leave, noted that where there are competing considerations, the disposition will involve a broad evaluative judgment of what justice requires. This is also reflected in Hodgson JA's exposition of what underlies the various costs decisions to which his Honour referred in Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145 [15]-[16] and [19] (with whom McClelland CJ at CL agreed) and with whom Mason P agreed in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121], that, namely, "the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs".
13. I have referred to the Defendants' "real fight" submission. In Walkom, the Plaintiff sued the owner of the premises claiming an injury due to the condition of the premises. The owner cross-claimed against the managing agent (Walkom). The Plaintiff was unsuccessful and the owner sought costs of the cross-claim from Walkom on the basis that the Plaintiff had previously complained about the condition of the premises to Walkom and if there was any liability to be borne by the owner, it would have been passed onto Walkom. On the appeal, Walkom relied on what had been said by Beaumont J in Gladstone Park Shopping Centre v Wills (1984) 6 FCR 496 ("Gladstone Park"), which supported the contention that the owner should pay Walkom's costs since the owner had failed on his cross-claim (because the plaintiff had failed against him). Beaumont J did, however, identify an exception to the general rule: i.e. when the "real fight" which could be identified was between the applicant for a costs order and the otherwise successful party - and it was a contention of that kind which was accepted by Sidis DCJ and the Court of Appeal in Walkom. Another case of this kind is Edwards v Stocks [2009] TASSC 11 ("Edwards"), a unanimous decision of the Full Court of the Supreme Court of Tasmania. Edwards is also a case in which the plaintiff failed against the landlord (by reason of a limitations defence). That decision refers to the applicability of the "real fight" argument to multi-party litigation: see [10] and [11] of Edwards; see also Gladstone Park at 510 to which reference is made in [11] of Edwards.
14. Whilst the Walkom line of cases are not directly on point, it is, I think, appropriate to consider what was the real contest in the proceedings before me. I do not accept the contention of Integrated that this is determined by saying that Integrated wanted $1,500,000 (approximately) and obtained a judgment for $500,000.00 (approximately) and that, therefore, the only relevant "event" of the proceedings is an outcome by which an amount was awarded in favour of Integrated. There are cases in which the Court has ordered the successful party to pay the costs of an issue that was clearly dominant or severable. In James v Surf Road Nominees (No 2) [2005] NSWCA 296 the Court of Appeal said (at [31]-[33]): "[31] Costs orders in the Supreme Court are governed by the provisions of s 76 of the Supreme Court Act 1997 and the Supreme Court Rules. Section 76 provides, relevantly that subject to the Act and the Rules, costs shall be in the discretion of the Court: s 76(1)(A). Part 52A r 11 acts as a limited proscription of the Court's discretion conferred by s 76. Part 52A r 11 provides that, subject to Pt 52A, the Court shall order that costs follow the event "except where it appears to the Court that some other order should be made as to the whole or any part of the costs". [32] The effect of Pt 52A r 11 is that an unsuccessful party may be ordered to pay the entirety of the costs of the successful party, even though the successful party did not succeed on all issues. However, as is specified by the rule itself, the Court is entitled to make a different order. That may occur where there are multiple issues involved. This was the subject of comment in Waters v P C Henderson (Aust) Pty Ltd (unreported CA(NSW) Kirby P, Mahoney and Priestley JJA, 6 July 1994) where Mahoney JA said: "Where the proceedings involve multiple issues the application of the rule that costs follow the event may involve hardship where a party succeeds on some issues and yet fails on others. Particularly is this so where, for example, a defendant succeeds on issues that occupied the bulk of the time taken by the proceedings. Nevertheless, unless a particular issue or group of issues is clearly dominant or separable, it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed." [33] Similarly, Toohey J made the following observations in Hughes v Western Australian Cricket Association (1986) ATPR 40-748: "1. Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order. 2. Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed. 3. A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the party's costs of them. In this sense, "issue" does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law." (references omitted)" (emphasis added)
15. The key disputed question of fact and law in this case was whether the Code applied and whether Integrated had engaged in unconscionable conduct. I do note, however, that neither the Defendants' pleadings, nor the DOS, indicated that the Defendants were willing to pay interest at the Court rate and to repay the monies advanced together with interest at the Court rate within the period specified in the CPA.
16. I see a difference between the Defendants' position prior to the hearing and at the hearing, in that whilst they had by their pleadings resisted liability to repay the $30,000 under the Deed of Variation and the payment of interest of any amount, the former obligation was admitted in the DOS (see paragraph 36) and at the hearing they also accepted an obligation to pay interest at the rate prescribed by s 100 of the CPA.
17. I think that the fair result is that firstly, a distinction should be drawn between the pre-trial costs and the costs of the trial itself and that secondly, the orders should reflect the fact that the hearing was largely concerned with the issue of the Code and unconscionability on which the Defendants succeeded, but that it was not wholly concerned with those matters. I propose to make an assessment of the percentage of the costs of the hearing which the Defendants should recover.
18. I consider that the appropriate orders are as follows: 1. The First-Third Defendants to pay the Plaintiff's costs leading up to the hearing as agreed or assessed. 2. The Plaintiff to pay 80% of the First-Third Defendants' costs of the hearing as agreed or assessed. 3. The amount payable by the First-Third Defendants pursuant to order (1) to be offset against the amount payable by the Plaintiff pursuant to order (2). 4. No order as to costs in relation to the Second-Cross Defendant. 5. No order as to costs in relation to the Fourth Defendant.

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 2021