Joudo v Joudo

Overview of the position of the parties on costs

1. At [243] of the Primary Judgment, I expressed the view that, as Ronnie and Marie have been successful in the proceedings and Ravina has not, costs should follow the event, such that Ravina should be ordered to pay Marie's costs of the statement of claim and Marie and Ronnie's costs on the amended cross-claim. At [244] of the Primary Judgment, I expressed the view that the costs of the application for leave to amend the cross-claim which I determined on 7 February 2024, should be costs in the cause.
2. Neither party agreed with the position that I stated in the Primary Judgment.
3. Ravina contended that, "as a primary position", the Court should order that each party bear their own costs of the proceedings. No alternative position was put.
4. Ravina contended that Ronnie and Marie had acted unreasonably and therefore increased the costs and complexity of the litigation, which amounted to disentitling conduct and warranted departure from the usual order as to costs. The respects in which Ronnie and Marie were contended to have acted unreasonably principally concerned: 1. Propounding various iterations of the cross-claim and a lack of precision in relation to the claimed equitable interest in the Property, culminating in the application to amend the cross-claim, which was determined by me on 7 February 2024, two business days prior to the hearing. It was contended that this amended cross-claim represented a fundamental change to Ronnie and Marie's pleaded case, and did not simply re-frame or rearticulate a case already pleaded. The failure to properly plead the case unnecessarily increased costs in the proceedings and stifled genuine negotiations for settlement; 2. Ronnie and Marie's failure to produce key documents in a timely way in circumstances where there was no explanation provided for why the documents were provided at the eleventh hour.
5. Ronnie and Marie sought an order that their costs of the proceedings to 22 December 2023 be paid by Ravina on the ordinary basis and thereafter on an indemnity basis on the basis of an offer of compromise by a Calderbank letter, which was issued on 22 December 2023 (Calderbank offer). The Calderbank offer, in substance, proposed to settle the proceedings on the basis that Ronnie and Marie receive $150,000 of the monies presently held by the Court (being the net amount of the proceeds of sale of the Property after payment of certain amounts as explained in the Primary Judgment) and that otherwise the statement of claim would be dismissed and each party would bear their own costs.
6. Ronnie and Marie contended that it was unreasonable for Ravina to reject the offer at the time, given the weakness of her case and the strength of the evidence demonstrating the joint endeavour.

Relevant principles

1. The relevant principles in relation to costs are not in dispute. Section 98 of the Civil Procedure Act 2005 (NSW) provides that, subject to the rules of Court, costs are within the discretion of the Court. The discretion is a broad one. UCPR r 42.1 provides that "if the court makes any order as to costs the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to whole or any part of the costs".
2. In circumstances where one party seeks indemnity costs by reason of the rejection of a Calderbank offer, it is clear that the rejection does not give rise to a presumption that the offeree should pay the offeror's costs on an indemnity basis: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 (SMEC Testing); Jones v Bradley (No 2) [2003] NSWCA 258 per Meagher, Beazley and Santow JJA at [8]-[9]. Instead, the question is whether the rejection of the offer, in all the circumstances, justifies departure from the usual rule that party-party costs follow the event: SMEC Testing per Giles JA at [37]. The party seeking indemnity costs on the basis of such an offer must show that it was a genuine offer, which was capable of acceptance, and that it was unreasonable for the offeree not to accept it: E Group Security Pty Ltd v Chief Commissioner of State Revenue (No 2) [2021] NSWSC 1296 per Ward CJ in Eq at [61].
3. In Miwa Pty Limited v Siantan Properties Pte Limited (No 2) [2011] NSWCA 344 (Miwa (No 2)), Basten JA (with whom McColl and Campbell JJA agreed) at [12] adopted the following list of factors identified by the Victorian Court of Appeal in Hazeldene's Chicken Farm v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298, as the factors relevant to a consideration of whether the rejection of an offer was unreasonable: (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; (f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree's rejecting it.
4. It is clear that the question of unreasonableness must be assessed at the time that the offer was made, and not with the benefit of hindsight resulting from a known outcome, recorded in a judgment: see Miwa (No 2) at [11]. It is also clear that determining unreasonableness should not entail a detailed investigation into the state of preparation or knowledge of the offeree as at the date of the offer.

Consideration

1. I deal separately with the contentions advanced by Ravina on the one hand and Ronnie and Marie on the other.

Ravina's contentions

1. Dealing first with Ravina's contentions, I do not accept that the appropriate order is that each party bear their own costs of the proceedings.
2. The starting point - which Ravina accepts - is that Ronnie and Marie are considered the successful parties and costs should follow the event. Contrary to what is put by Ravina, there is no reason to depart from the usual rule.
3. The attempts made by Marie to plead the basis on which she (and subsequently Ronnie) was said to have an equitable interest in the Property are matters of record. The first cross-claim was filed absent a grant of leave and was thus rejected. A notice of motion was then filed seeking leave to file a cross-claim. After a contested hearing, leave was granted to file the cross-claim. It was filed one day late, necessitating a further court order for the filing. An amended cross-claim was then filed over objection on 7 February 2024. The conduct of Marie in this regard is not such as to warrant a departure from the usual rule. The factual substratum of the case remained the same throughout.
4. Whilst the amendments to the cross-claim introduced by the amended cross-claim pursuant to leave granted on 7 February 2024 introduced the notion of a joint endeavour this did not substantially alter the factual substratum of the case.
5. I do not accept the contention advanced for Ravina that the amended cross-claim presented a fundamental change to the pleaded case. It relevantly alleged a more precise legal basis for the claim already advanced.
6. Further, the fact that the amended cross-claim removed the claim for a life tenancy consequent upon the consent sale of the Property also did not substantially alter the factual dispute. Marie and Ronnie are not to be criticised for agreeing to sell the Property and thus no longer press their claim for a life tenancy in the Property. Whilst it was contended by Ravina that a portion of costs incurred have fallen away by reason of the sale of the Property, no detail was provided as to what those costs may be and that they were substantial. In my view, it is unlikely that any substantial costs have fallen away and even if there were such costs it would not be appropriate to deny Ronnie and Marie all of their costs.
7. Insofar as amendments to the cross-claim caused costs to be thrown away by reason of a new defence having to be prepared, these costs would be covered by the orders that I made on 7 February 2024 that those costs be paid by Marie and Ronnie.
8. I do not accept Ravina's contention that the failure to properly plead the cross-claim "necessarily" increased costs in the proceedings and stifled genuine negotiations for settlement. As to the first aspect - aside from the costs thrown away by reason of the amendment which was covered by the order I made on 7 February 2024 - nothing was pointed to by Ravina to support the submission.
9. As to the second aspect - again, no conduct was referenced to support the submission. The history of the negotiations also appears to suggest that the parties were each wedded to their own position as to the nature of the underlying agreement - lease or joint endeavour. Ravina rejected out of hand any contention that Marie (and later Ronnie) had any equitable interest in the Property. This position continued to the end of the case.
10. The late production of documents also does not warrant a departure from the ordinary rule as to costs. Whilst Ravina made attempts prior to the hearing for Marie to produce financial records, including through the use of subpoenas and notices to produce, nothing was done to compel production prior to the hearing. Insofar as there was not complete production again, no attempts were made at the hearing to compel production and to adjourn the hearing pending complete production.
11. Ravina also produced documents shortly prior to the hearing commencing. Both parties thus appeared to approach the case somewhat content to accept late, and perhaps, incomplete production of documents.
12. Ravina also contended that a cost order against her would be punitive given Ronnie and Marie's conduct in the proceedings to date. I understood this to be based on the matters I have dealt with above and accordingly I do not accept the contention for the reasons set out above.
13. Finally, it was contended by Ravina that a costs order against her would present as a significant financial burden to Ravina, who remains tasked with the care of Ronnie and Marie's daughter, Halanie and that the proceedings involved a small amount in dispute relative to the jurisdiction. These matters do not provide a basis to depart from the usual rule. The financial burden on Ravina is simply the consequence of the costs order and not a reason for making a different order. Further, the proceedings were transferred by consent to the Supreme Court.

Ronnie and Marie's contentions

1. I turn now to consider Ronnie and Marie's claim for costs to be paid by Ravina on the indemnity basis on and from 22 December 2023.
2. No objection was taken at the hearing to the documents being admitted into evidence or for the hearing to be adjourned to provide time to deal with the documents including by way of further discovery.
3. As set out above, the effect of the Calderbank offer was that Ronnie and Marie would receive $150,000 from the monies paid into Court, the statement of claim would be dismissed and each party would pay their own costs of the proceedings. The Calderbank offer also contained detailed reasons as to why the offer should be accepted, and contained the usual warning that indemnity costs would be sought if the offer was not accepted. The Calderbank offer was open until 19 January 2024.
4. There can be no issue that the Calderbank offer was open for acceptance for a reasonable period and offered a genuine compromise from Marie and Ronnie's best case. The outcome contained in the Primary Judgment was substantially better for Marie and Ronnie and substantially worse for Ravina.
5. Ravina contended that it was not unreasonable for her to reject the offer as it was predicated on a case which was not pleaded and for which supporting evidence was not provided.
6. Having regard to the circumstances as they existed as at the time that the Calderbank offer was made, I am not satisfied that Ravina's rejection of the offer was unreasonable. At this time the pleadings were still in a state of flux - no express claim that there existed a joint endeavour had been pleaded and Ronnie was not a party to the proceedings. These amendments were not made until very shortly prior to the hearing. They could and should have been made much earlier.
7. There were also documents that were produced shortly prior to the hearing - being the bank statements upon which Ronnie relied when he gave oral evidence at the hearing to prove the mortgage payments - which had not been produced by 22 December 2023. These records were of some considerable significance in my ultimate determination of the matter and in particular the determination of the mortgage payments made by Ronnie and Marie which was the single largest item of contributions.
8. Whilst those bank statements were for Ronnie's construction company, Zacron, and thus arguably not required to be produced in response to the notices to produce issued, the documents, and Ronnie's annotations of them, were clearly important evidence in support of the quantum of the contributions made and therefore should have been included as part of the affidavit evidence to be relied on in support of the cross-claim.
9. The absence of this material, as at 22 December 2023 when the Calderbank offer was made, would make it difficult to determine the quantum of contributions by each of the parties.
10. I also take account of the fact that the principal question on liability - whether lease or joint endeavour - depended to a considerable extent on issues on credit in relation to the key witnesses which needed to be assessed not only having regard to oral evidence given at the hearing but also by reference to all of the documentary material, including the late-produced bank statements.
11. The rejection of the offer does not, in all of the circumstances, justify departure from the usual rule that party-party costs follow the event.
12. For these reasons, I decline to order indemnity costs from 22 December 2023.

Costs of the application to amend the cross-claim

1. No party made any submissions directed at the costs of the application for leave to amend the cross-claim. At [244] of the Primary Judgment, I indicated that the appropriate order was that costs should be costs it the cause.
2. In the absence of any such submissions, I remain of the view expressed at [244] of the Primary Judgment and will so order.

Conclusion and orders

1. The orders of the Court are: 1. The costs of the application for leave to amend the cross-claim be costs in the cause. 2. The plaintiff pay the defendant's costs of the statement of claim, as assessed or agreed. 3. The cross-defendant pay the cross-claimants' costs of the amended cross-claim, as assessed or agreed.

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