Mainteck Services Pty Ltd v Stein Heurtey SA

Judgment 1THE COURT: By orders made on 6 June 2014, the Court dismissed Mainteck's appeal and directed (in accordance with Stein Heurtey's request) that the parties be heard further as to costs on the papers by the exchange of short submissions: [2014] NSWCA 184 at [255]. That has now occurred, by submissions dated 20 and 30 June 2014 filed in accordance with the Court's directions. 2It is agreed that Mainteck should pay Stein Heurtey's costs of the appeal which this Court dismissed. In addition, Stein Heurtey seeks, and Mainteck opposes, (a) orders that Mainteck pay, on an indemnity basis, either its costs of the whole appeal, or the costs it incurred after 30 October 2013, and (b) that, instead of assessment, Stein Heurtey's costs be the subject of a gross sum order, made either by this Court or else remitted to the Equity Division where there is a pending undetermined application for a gross sum costs order of the costs at first instance.

Indemnity costs 3Mainteck commenced this litigation, and, after 45 hearing days between October 2010 and October 2012, obtained judgment in the amount of $159,813. That was a tiny fraction of what it had sought. On 2 July 2010, Stein Heurtey made a Calderbank offer in the amount of $1,000,000, as a result of which Mainteck was ordered to pay its costs at first instance on an indemnity basis after 2 July 2010. That costs order was the subject of ground nine of the appeal, and was addressed at [246]-[254] of the Court's judgment delivered on 6 June 2014. 4The first basis on which Stein Heurtey seeks an indemnity costs order for its costs of the appeal relies on the Calderbank offer before trial (as well as an earlier, non-compliant offer of compromise). Although "[g]enerally, if an offer is not renewed (either in the same or different terms) prior to the appeal, the Court will not make a special costs order in respect of the appeal", the fact of a pre-trial offer is relevant to the costs of the appeal, especially if the issues are in substance the same: see Rosebanner Pty Ltd v EnergyAustralia (No 2) [2011] NSWCA 150 at [11] and [19]. 5The present case is different. Although there was a deal of commonality between the issues at first instance and on appeal, there were also significant differences between the basis on which the 2010 Calderbank offer was put and the issues on appeal. Those differences included differences arising from (a) the referee's determination that there was no contract, (b) the death of Mainteck's principal witness shortly before the hearing commenced, (c) a narrowing of issues on appeal (notably, the misleading and deceptive conduct claim was abandoned). 6Stein Heurtey also relies on some aspects of Mainteck's submissions which were criticised in this Court's reasons. However, many (although not all) of those criticisms were addressed to submissions which were not pressed, or only barely pressed, orally, during the course of the hearing of the appeal over four days. The majority of the time of the hearing of the appeal was occupied by submissions which were reasonably arguable. 7Accordingly, neither the 2010 Calderbank offer (or the earlier offer of compromise) nor the submissions advanced on appeal warrant departure from the ordinary order as to costs. 8Stein Heurtey's second basis for seeking a special costs order turns on its solicitor's letter dated 30 October 2013 which is expressed to be "without prejudice except as to costs". At that time, the position on the principal judgments of the primary judge was known, and although his Honour had not made an order for indemnity costs by reason of the 2 July 2010 Calderbank letter, the analysis of costs proceeded, correctly as it turns out, on the basis that such an order would be made. At that stage, Stein Heurtey's solicitor-client costs exceeded $7,600,000 excluding interest. The letter observed that Stein Heurtey was not entitled to all of its costs on an indemnity basis, that the amount recoverable on assessment would be smaller still, and the relatively small judgment obtained by Mainteck would have to be deducted. Making those allowances, the letter said that the total amount of recoverable costs and interest was some $7,929,062. 9It is perfectly possible that there was a measure of over-statement in the calculations in Stein Heurety's solicitor's letter dated 30 October 2013. As to that it is not necessary to express a view. It suffices for present purposes to observe that as things stood on 30 October 2013, subject to Mainteck's pending appeal, Stein Heurtey would on any view be entitled to many millions of dollars by way of costs orders in its favour. 10In those circumstances, Stein Heurtey offered to compromise "all outstanding claims and costs orders in the NSWSC Proceedings and the Appeal Proceedings on the basis of a payment of $2,000,000 by your client to our clients". The offer was open until 15 November 2013. It expressly invoked Calderbank principles. 11Plainly enough, Stein Heurtey's offer represented a real compromise. It was left open for a period of around two and a half weeks, which in the circumstances was a reasonable period of time for its consideration (Mainteck did not submit to the contrary). Although Mainteck did not at the time have Stein Heurtey's written submissions on the appeal, it had the benefit of advice from solicitors and counsel who had been involved in the litigation for years. Moreover, the nature of appeals is that relatively few are dismissed by reason of completely novel arguments which are difficult to anticipate in advance of the respondent's written submissions, and Mainteck's appeal did not fall within rare class. The most important issues, in terms of the quantification of Mainteck's claim, were those of contractual construction and causation for the claim for delay and disruption, and these issues were well and truly familiar to the parties. In those circumstances, it was unreasonable for Mainteck to reject Stein Heurtey's offer. 12In accordance with ordinary principles, the offering by Stein Heurtey of a significant compromise which was unreasonable for Mainteck not to accept leads to the discretion as to costs being exercised such that Mainteck should pay Stein Heurtey's costs of the appeal on an indemnity basis after 30 October 2013.