Lefty's Excavator & Drott Hire Pty Ltd v Samuel Edward Stratti and Ors

Industrial Relations Commission (NSW)|2004-03-17|Before: Schmidt J, Mr P

Industrial Relations Commission of New South Wales in Court Session

CITATION : Lefty's Excavator & Drott Hire Pty Ltd v Samuel Edward Stratti and Ors [2004] NSWIRComm 45 APPLICANT: Lefty's Excavator & Drott Hire Pty Ltd ACN 082 820 595

FIRST RESPONDENT Samuel Edward Stratti

SECOND RESPONDENT: PARTIES : Troy Kenneth Stratti

THIRD RESPONDENT: Detail Rock Tool Rentals Pty Ltd ACN 076 292 987

FOURTH RESPONDENT: Ocean Earthworks Pty Ltd (In Liquidation) ACN 067 274 220 FILE NUMBER: IRC 2060 of 2000 CORAM: Schmidt J CATCHWORDS : Costs - final orders - Calderbank offer - departure from usual costs orders considered - orders made

LEGISLATION CITED : Evidence Act 1995 CASES CITED : Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 HEARING DATES: 03/04/2004 DATE OF JUDGMENT: 03/17/2004

APPLICANT: Mr DH Murr SC with Mr JC Thompson of counsel SOLICITORS: RA Dunbier & Associates LEGAL REPRESENTATIVES: RESPONDENTS: Mr P Menzies QC with Ms N Obrart of counsel SOLICITORS: Norman Waterhouse

JUDGMENT: - 9 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: Schmidt J

DATE: 17 March 2004 MATTER NUMBER IRC 2060 OF 2000

LEFTY'S EXCAVATOR & DROTT HIRE PTY LTD v SAMUEL EDWARD STRATTI & ORS Application under section 106 of the Industrial Relations Act 1996

1 This judgment deals with the question of costs and the final orders in the proceedings. Judgment was given on 9 April 2003. The parties were directed to file orders reflecting the terms of the judgment. Disputes as to the proper calculation of the money orders arose and a supplementary judgment was given on 11 December.

2 Further disagreements arose in relation to the question of costs, which turned upon the terms of a Calderbank offer made by the respondents in 2001. Interest and whether orders should be made against the two individual respondents were also in issue.

3 The circumstances were that the claim was brought in May 2000, for a sum of $199,895.85. On 14 November 2001, an offer 'to settle the matter for the sum of $50,000 plus costs as agreed or assessed and on the basis that your clients will return the Stratti loan hammer' was made by the respondents. The respondents reserved the right to rely on the offer, in relation to the question of costs. There was no reply to the offer and in August 2002, the summons was amended, with the money claim being increased to $221,783.63. It was common ground that the money order flowing from the judgment, including interest to the date of the Calderbank letter, was $48,088.40.

4 The April judgment noted that the applicant's claim included sums due but unpaid for work performed and that the applicant had in his possession a loan hammer belonging to the respondents. That hammer was retrieved by the respondents during the course of the hearing. The outstanding sums have not as yet been paid to the applicant.

5 The case put for the respondents by Mr Menzies QC, appearing with Ms Obrart of counsel, was that the Calderbank letter offered had been made at an early stage of the proceedings; it was a genuine attempt to settle the matter and represented a realistic assessment of the likely outcome of the litigation. The offer was met with silence and a subsequent increase in the amount of the claim. It was argued that a proper exercise of the discretion in relation to costs would result in an order that the applicant bear the respondents' costs of the proceedings, on an indemnity basis from the date of the offer.

6 It was also argued that no order for interest would flow from the date of the offer, interest having accrued solely as the result of the applicant's own conduct in the rejection of the offer. The cause of the continuance of the litigation was solely the attitude adopted by the applicant. To do otherwise would have the perverse and unjust result of rewarding the applicant's unreasonable conduct and would be against the policy underpinning Calderbank letters, namely the promotion of early settlements.

7 It was also submitted that orders would not be made against the first and second respondents, no findings having been made against them.

8 The case put for the applicant by Mr Murr SC, appearing with Mr Thompson of counsel, was that there would be no departure from the ordinary rules as to costs. It was relevant that the Court's Rules for offers of compromise had not been utilised; that the offer had been open only for 9 days; that the letter had not indicated that indemnity costs would be sought; and that the case involved a myriad of issues and was hard fought. It was argued that in such circumstances, indemnity costs orders would only be made if the applicant's conduct had been plainly unreasonable.

9 It was also argued that the amount of the offer was uncertain, given the requirement that the hammer be returned and the difficulty in calculating its value. The basis of the offer was also faulty and the period for which it was open did not adequately provide time for the applicant's advisers to consider the matters dealt with in the respondents' affidavits, then also served. It was also relevant that the offer had bettered the judgment by only a small amount. That the offer of compromise process provided by the Rules would also be considered. The Calderbank procedure should not be permitted to bypass this system. There was no reason why the offer should not have been available for 28 days. Indeed, it could have been made under the Rules, given the time at which it was made. Another effective way of concluding the proceedings would have been by paying a cheque. The money was undeniably due.

10 It was also argued that there was a real doubt as to the respondents' willingness and ability to give effect to their offer. It did not provide for judgment to be entered in favour of the applicant. The respondents had a long history of non-payment and had repeatedly and wilfully breached their obligations to the applicant. In later evidence there was no proper explanation for the failure to pay money due to the applicant.

11 It was also argued that regard would be paid to the basis of the claim advanced and the way in which the claims had been determined. The irony was that the applicant's success in overcoming difficulties confronting it as the result of the respondents' conduct served to substantially reduce the quantum of the claim upon the respondents. In those circumstances there was no basis upon which there would be a departure from the ordinary approach to interest. The Court could make a proper assessment of all the circumstances lying between the parties to determine what the applicant had been reasonable in no accepting an offer and proceeding with litigation.

12 As to the position of the individual respondents, it was submitted that the judgment was replete with findings as to their responsibility for the unfairness visited upon the applicant. The affairs of the corporate respondents were within their day-to-day control. It followed that they should be jointly and severally responsible for the orders. The circumstances of the corporate respondents were also such that it was not fair that the applicant be place at risk of the judgment relying upon the now precarious financial position of the corporate respondent.

13 For the respondents it was further submitted that the offer was clear. That the claims were complex was undoubted but so was the fact that in the main they failed. The amount of the offer but beyond doubt that it was a reasonable one. There was no suggestion that the time available for its consideration was inadequate. There was no evidence that it was even considered. The making of the offer on a Calderbank basis was no different to an offer of compromise and neither required the drawing of a cheque.

14 On its face, the fact that the respondents made an offer to settle the litigation for a sum which ultimately exceeded the amount which the applicant is entitled to receive under the judgment, gives rise to a need to consider whether in this case, as a matter of discretion, there should be any departure from the Court's ordinary approach to the question of costs. That the offer was not put in the form of an offer of compromise under the Rules is not a reason for refusing to consider the exercise of the discretion. The way in which the making of such an offer is to be approached in a case such as this, has now oft been discussed by the Court and requires no repetition here.

15 Like an offer of compromise, an offer put in the form of a Calderbank letter, serves an important public interest, namely the early and proper settlement of litigation brought before the Court. The provisions of s131(2)(h) of the Evidence Act 1995, which expressly provide that such a communication is relevant to determining liability for costs, reinforces this conclusion.

16 As discussed by the Court of Appeal in Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721, nowadays legal practitioners advising parties to proceedings in this Court, will be well advised to consider the consequences which might flow from the rejection of either an offer of compromise, or an offer made in some other form, such as a Calderbank letter. The two are not the same, but each might in particular circumstances lead the Court to depart from the usual order as to costs in proceedings such as this. A complete failure to consider an offer when made, may also of course have other consequences in the litigation, including for a parties' advisers.

17 Here, the fact that the applicant offered a sum greater than that recovered under the judgment, is a factor which must be considered when costs orders are determined. The applicant complains that this has in part flowed from its successful endeavours to address the difficulties which resulted from the respondents' failures, reducing the quantum of the orders made in its favour in the proceedings. It must of course be recollected that this result flows from the statutory requirement that money orders be limited to what is just in the circumstances of a particular case. Such a consideration includes matters such as mitigation. (See s106(6).)

18 That the offer made by the respondents was only open for 9 days, is a relevant consideration, as is the fact that it was made at the same time as the respondents' affidavits were served. There was, however, no evidence that the time limit imposed provided the applicant with any difficulty in a proper assessment of the offer. Nor was there a request for an extension of the time. Indeed, to the contrary, there was no response and the following year the summons was amended and the claim significantly increased.

19 The offer made was, contrary to the applicant's submissions, a clear one. It provided the applicant with the sum of $50,000, plus costs as agreed or assessed and required the return of the respondents' hammer. This was in circumstances where the applicant had been owed some $45,000. It had been agreed that in lieu of payment, certain equipment would be provided and that a hammer would be loaned to the applicant, while a new hammer was procured by the respondents. Neither the new hammer nor the money was paid and the respondents continued using the loan hammer.

20 The summons sought the recovery of the outstanding money. In those circumstances it is difficult to see that the question of the value of the loan hammer arose, or that a request that it be returned properly raised any difficulty. The applicants could not properly have expected to both keep the hammer and recover the outstanding money. Indeed, the loan hammer was, in any event, returned during the course of the hearing.

21 There were certainly a myriad of claims later pursued by the respondents in the hearing. Many of them foundered on the evidence. The pursuit of extravagant claims, which also require the exercise of a discretion in favour of an applicant, rather than a consideration of existing rights or even an order for restitution, ought not to provide a proper basis for the rejection of a reasonable offer of settlement. Nor should an applicant be sheltered from a proper consideration of what impact its own conduct will have upon the claims advanced. At the time of the offer, the respondents' affidavits had been served. The applicant was on notice of the case which would be run against it, including in relation to its own alleged breaches of the parties' contractual relationship. The Court is obliged to consider such matters pursuant to s106 of the Act. This is not a question of parties or their legal advisors being obliged to have perfect foresight, but rather to require a proper consideration of the respective cases advanced, when settlement offers are made.

22 In this context, it is also relevant to observe that in this jurisdiction, unlike many others, parties have access to a member of the Court in conciliation proceedings where their respective cases are explored. This had occurred prior to the offer here in question.

23 All of these matters tend to lead to the conclusion that there should be a departure from the usual order as to costs in this case. I am, however, well satisfied that these circumstances are not such as to warrant any indemnity costs order in favour of the respondents. The circumstances in which such an order will be made are limited and have been oft discussed by this Court. A rejection of an offer, per se, is in my view not a sufficient basis upon which such an order will be made.

24 I am also satisfied that in this case, there are also some other circumstances which need consideration, in the proper exercise of the costs' discretion. The April judgment dealt with the circumstances in which the parties' disagreement arose. They included the respondents' failure to pay money due to the applicant for work done; to provide equipment purchased and to provide work promised. The offer put, if accepted, would have resulted in the applicant receiving a money sum greater than that which has flowed to the applicant from the judgment. Nevertheless, the result of the making of the offer, its rejection and the parties' further conduct, are also matters which require consideration. This included that while the respondents' hammer was recovered from the applicant, the money indisputably owed to the respondent for work already performed, was not paid by the applicant. Indeed, it still remains outstanding.

25 I am satisfied that a just exercise of the discretion as to costs could not permit these matters to be ignored. Having weighed all of these circumstances, I am satisfied that the proper conclusion is that there should be a departure from the usual costs order, but on a limited basis, namely, that the respondents should bear the applicant's costs of the proceedings up to the time of the expiry of the respondents' offer and thereafter, each party should bear its own cost of the proceedings.

26 I am satisfied that this will achieve justice as between the parties.

27 As to the respondents' claim in relation to interest, I am satisfied that there is no proper basis for such an order. Firstly, the Calderbank letter did not express itself as having any relevance to the question of interest. Secondly, the provisions of s131(2) of the Evidence Act 1995 do not appear to make such communications relevant or admissible to that question. (See the discussion in Odgers' Uniform Evidence Law, Fifth Edition at p434). Thirdly, such an approach would work real injustice in a case where the sum in question has regard to money due and not paid for work performed; to promises made, but not honoured for the provision of work and to an adjustment for equipment provided on loan, as well as equipment paid for but not provided. The respondents have had the use of the money in the period in question. It follows that justice requires that interest should be paid on the sum to the date of judgment.

28 As to the question of orders being made against the individual respondents, the April judgment makes amply clear the views reached in relation to their causal connection with the unfairness found. I am well satisfied that this is a case where joint and several orders should be made against the respondents, including the individuals, given their connection with and involvement in the unfair contract and conduct dealt with earlier.

29 The parties were otherwise in agreement as to the calculation of the judgment amount, in relation to the correction of the names of the corporate respondents and in relation to the correction of a figure which appears in the April judgment. This matter was earlier dealt with in the December judgment. A daily figure for further interest was agreed - $9.23 per day. A further 14 days interest at that rate (a total of $129.22) thus needs to be added to the figures agreed to be due as at the date of hearing - $55,681.87. This results in a total figure of $55,811.09.

30 For the reasons given, I make the following orders: 1. The agreements the subject of these proceedings are declared unfair and are varied as from 30 March 1999, to require payment to the applicant of the amounts referred to below.

The April judgment is amended in paragraph [116] by removing the figure $149,412 and replacing it with the figure $285,722.75.

Judgment is entered in favour of the applicant against the first, second and third respondent in the sum of $55,811.09.

The first, second and third respondents are to bear the applicant's costs of the proceedings as agreed or assessed to 23 November 2001. Thereafter, the parties are each to bear their own costs of the proceedings.

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.

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