HER HONOUR: Mr Victor Lahoud and Mr Joseph Lahoud are brothers. Earlier this year I determined a summons and cross summons between them relating to the determination of the Costs Review Panel, dismissing both the summons and the cross summons, for the reasons stated in my judgment Lahoud v Lahoud [2018] NSWSC 5.
The precise orders made reflect the fact that, in each case, I granted leave to appeal on only one of a number of grounds; further, in each case, the appeal was dismissed on the ground in respect of which leave was granted. I otherwise refused leave to appeal on any of the grounds raised. At the conclusion of the judgment I indicated that, unless any party wished to be heard otherwise as to costs, the orders I proposed were that, leaving aside the costs of a third party, each of the brothers and his related entities should bear his or its own costs of the summons and the cross summons.
Perhaps predictably, having regard to the history recited in the primary judgment, one of the parties did wish to be heard otherwise. The application before the Court today is the application of Joseph Lahoud for an order that Victor Lahoud (or the Victor parties, as they have been referred to in the proceedings) pay the costs of the Joseph parties of the summons and the cross summons from 29 April 2016 on the indemnity basis.
The basis for the application is the fact that, on 14 April 2016, the Joseph parties sent the Victor parties a Calderbank letter. The letter is attached to the submissions in support of the application. It makes an offer in the following terms:
"The defendants/cross claimants make the following offer to settle these proceedings:
1. Summons dismissed.
2. Cross-Summons either not filed (if this offer is accepted before the date for filing same) or dismissed.
3. The plaintiffs/cross defendants and the defendants/cross claimants each to bear their own costs of the proceedings, except that if the offer is accepted after the filing of the Cross-Summons your clients are to pay the filing fee.
4. As a result of the above the Certificates issued by the Third Review Panel are to stand."
Lahoud v Lahoud [2018] NSWSC 179 | Case summary | Zoe
The offer was expressed to be open for a period of 14 days. It included a warning that, if the offer was not accepted and the Joseph parties obtained a result at least as favourable as the terms of the letter, the letter would be relied upon to support the application that we find now made. It did not set out any argument as to the alleged hopelessness of Victor Lahoud's claim.
The position of the Victor parties is to oppose the application and to contend that the Court should make the orders proposed at the conclusion of the principal judgment.
The principles applicable to the exercise of the Court's costs discretion in the case of a Calderbank offer that has not been accepted were not in dispute. They were set out in careful detail in the written submissions of each of the parties. It is enough, for present purposes, to refer to the principle the existence of which was common ground that a failure to accept a Calderbank offer does not create a presumption in favour of indemnity costs even where the party making the offer receives a result more favourable than that offered. The authority cited for that principle in the submissions of the Victor parties was Jones v Bradley (No 2) [2003] NSWCA 258 at [8] (citing SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37]). In the circumstance of a Calderbank offer having been made and not accepted, the offer is a factor to be taken into account as part of the totality of the relevant considerations.
It was further submitted on behalf of the Victor parties that the party seeking an order for indemnity costs has the burden of showing the Court why an order for indemnity costs should be made in his or her favour and that this generally means that party is required to persuade the Court that the refusal to accept the offer was unreasonable. It was submitted on behalf of the Victor parties that the practical outcome of the Court's adjudication in the present case was not less favourable to them than the terms of the Calderbank offer. It was further submitted that the offer, in effect, sought a complete capitulation on behalf of the Victor parties.
It is clear enough from the terms of the letter that, leaving aside one issue of some complexity (namely, the question of interest), that is largely right. The letter offered to settle the proceedings on the basis that the summons would be dismissed. It further included a term that the cross summons would either not be filed or, if already filed, would be dismissed. It was dismissed. Thirdly, the letter contemplated that, in that event, the parties would each bear their own costs of the proceedings except that if the cross summons had been filed by the time of acceptance of the offer, Victor should pay the filing fee, and it was contemplated that the certificates issued by the third review panel would stand. That is precisely the result achieved in the proceedings. The present application must be determined on the premise that, leaving aside the question of interest, the Calderbank letter effectively invited a complete capitulation.
Mr Tassell resisted the contention that the letter did not entail any genuine element of compromise, on two grounds.
First, he submitted that the Joseph parties, in making the offer, were agreeing to forego their costs up to the time of the letter. The summons was filed on 9 December 2015 and the date of the Calderbank letter is 14 April 2016. It is common ground that the offer came at a stage before the parties had undertaken the bulk of the work in the proceedings. There was no attempt to quantify the costs said to have been foregone on that account but it would appear to be a small proportion of the overall costs of the proceedings.
Secondly, Mr Tassell noted that the offer included an offer to forgo the cross claim. For the reasons stated in the principal judgment, I regard that to have been a weak claim and the extent of compromise on that account must, in my view, be regarded as small.
The principal difference when comparing the outcome upon acceptance of the offer with the outcome of the proceedings is the question of interest. During oral submissions this morning, I was inclined to the view that, given that acceptance of the offer would have brought the proceedings to an end at the time of the offer, whereas interest has continued to run, that was an indication of some benefit which would have been achieved had the offer been accepted. Upon analysis, I think that is a wrong approach. Had the Joseph parties offered to compromise their entitlement to interest by foregoing some component of it, the position might have been different. Similarly, had the Joseph parties offered a compromise on a basis that in some way reduced the amount of liability of the Victor parties in accordance with the third review panel's determination, the position might have been different.
Upon a careful analysis of the submission put by Mr Philips on behalf of the Victor parties, I think I have to accept that the Calderbank offer, in effect, only invited capitulation without any real element of compromise and that it is a weak factor in the costs determination.
Separately, I have given consideration to whether the Victor parties should pay the Joseph parties' costs for a different reason not agitated on behalf of the Joseph parties but arising from my own assessment of the merits of the claim in accordance with the principle that a party will pay costs on an indemnity basis if it has acted unreasonably. The difficulty with that approach in the present case is that each party brought what I regard to have been a weak claim and, as submitted by Mr Philips on behalf of the Victor parties, each ultimately had an identical measure of failure in their respective proceedings between each other. Mr Philips resisted the proposition suggested by me during argument that the proceedings were unreasonably brought by reference to the fact that, in each case, I did grant leave to appeal on one of the grounds relied upon in the summons and cross summons respectively. I do not think that derogates from the conclusion that the proceedings were unreasonably brought.
But in any event, my reflection upon that issue has led me to conclude that my first instinct expressed at the conclusion of the principal judgment, that each party should bear his or its own costs, reflects the fair outcome in these proceedings. The conduct of the proceedings has some resonance with Zeno's Dichotomy Paradox. It appears that, so long as there are costs orders between Victor Lahoud and Joseph Lahoud, the litigation between them will never come to an end; they will fight about the costs, and then costs of the fight about the costs, and so on. Neither party, in my assessment, has paid appropriate regard to the interests of proportionality or to the value of the Court's time in their endless costs disputes.
For those reasons, I consider the appropriate order is that foreshadowed at [104] of the principal judgment, namely, that leaving aside the position of the party not present today, each party bear his or its own costs of both the summons and the cross summons. For the same reasons and in anticipation of an application that the Joseph parties pay the costs of today's argument, I indicate that I decline to make any order in respect of the costs of today's argument.
[2]
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Decision last updated: 10 May 2018