Miller v Guardian Royal Financial Services Pty Ltd
Smallwood v Guardian Royal Financial Services Pty Ltd
Smallwood v Guardian Royal Financial Services Pty Ltd
Source
Original judgment source is linked above.
Catchwords
Miller v Guardian Royal Financial Services Pty LtdSmallwood v Guardian Royal Financial Services Pty LtdSmallwood v Guardian Royal Financial Services Pty Ltd
Judgment (2 paragraphs)
[1]
Judgment
The defendant makes an application for an indemnity costs order after 15 July 2015 and for an ordinary costs order in his favour prior to that date. The plaintiff did not appear in the hearing in respect of costs. [1]
Proceedings were originally commenced in 2012, but were stayed for a time in connection with another proceeding between the parties. On 11 November 2014 the defendant filed a defence and on 9 July 2015 the defendant wrote a Calderbank letter to the plaintiff in the following terms:
"Without prejudice save as to costs
…
We reiterate our client's position that there are significant legal and evidential issues as to your client establishing liability, causation and loss. Based on the evidence your client has served in the proceedings, it is our view that:
1. there is no basis for your client's claim that that he suffered loss due to our client's actions.
2. the effect of the delay in obtaining Judgment against Mr Bouzanis and NCS has not been established. There is no evidence to confirm that if Judgment had been handed down earlier that your client would have been in a better position;
3. the assets of Mr Bouzanis and NCS were minimal, and there is no evidence to confirm that their financial positions were any different from 2008 to that in 2012; and
4. there appears to be no bar or preclusion for your client exercising his rights in accordance with various sections of the Bankruptcy Act 1966 (Cth) to recover assets, with one relevant example already raised being section 121.
Notwithstanding the above, without an admission of liability, our client makes an offer to settle the proceedings for a payment of $40,000 inclusive of legal costs and disbursements, on the terms that the proceedings are to be dismissed with no order as to costs and your client is to provide a release in favour of our client against the pursuit of any further claim ("Offer").
The Offer is open for acceptance until 5pm on 23 July 2015 and is made in accordance with the principles outlined in Calderbank v Calderbank [1975] 3 WLR 586. In the event that the Offer is not accepted, our client reserves his right to rely on this letter in respect of any application for costs, including an application seeking an order for indemnity costs."
The defendant referred to the well‑known principles in respect of Calderbank offers. [2] Principally, the offer needs to be a genuine offer of compromise and it must be unreasonable for the recipient of the offer not to accept it, in order for the entitlement to indemnity costs to be enlivened.
The defendant relied upon a number of circumstances to establish that the offer was genuine.
First, an offer of $40,000 was made relatively early in the proceedings.
Secondly, the offer necessarily entailed the defendant foregoing recovery of his costs. The defendant had filed a defence before the time of the offer.
Thirdly, the written reasons given for the offer are similar to the reasons given in the judgment as to why the plaintiff failed.
Fourthly, the comparison between the result in favour of the defendant, and the offer suggests that the monetary payment was significant and not a mere token amount.
The letter also referred to the difficulty in the plaintiff establishing "liability" although the defendant subsequently conceded liability, early in the trial. I do not regard this reference in the letter to be a positive assertion by the defendant that he was not negligent.
Taken together, these matters persuade me that the offer represented a genuine offer of compromise.
The second element of the entitlement to an indemnity costs order is that it was unreasonable for the plaintiff not to accept the offer. The matters already identified are relevant, in particular: that the outcome for the plaintiff was significantly less favourable than the offer made and that the proceedings failed for the reasons that were foreshadowed in the offer.
The Calderbank offer refers to the release required by the defendant. The effect of the defendant obtaining a judgment precludes the plaintiff from running the same point in other proceedings and thus has the same effect as a release. In all substantial respects, the offer was more favourable to the plaintiff than what was achieved in the judgment in the proceedings.
A third consideration relevant to an indemnity costs order is the public policy in encouraging parties to give proper consideration to settlement. An offer of settlement needs to be given serious consideration, a matter reinforced by the understanding that a subsequent adverse costs order could result from the non‑acceptance of an offer. There was no evidence from the plaintiff about any reasonable grounds for refusing the offer, or the extent to which the offer was considered.
Further, the parties signed consent orders proposing that costs unconnected with liability should be paid on an indemnity basis from the date of the Calderbank offer.
With a Calderbank offer, the onus lies upon a defendant to establish that the plaintiff's refusal was unreasonable.
Matters to which I have referred are sufficient to persuade me that it was unreasonable of the plaintiff not to accept the offer. Accordingly, the entitlement of the defendant to a special costs order is enlivened.
It is not however clear that the defendant should obtain an indemnity costs order in respect of the whole of the proceedings. The defendant failed to admit a breach until partway through the trial. The Court found the negligence to be gross. Further, in the proposed consent orders, the defendant recognised that he should not recover costs "incurred in relation to the issue of breach of duty".
In my view, the failure to accept the Calderbank offer and the terms of the consent orders support an indemnity costs order in favour of the defendant from 10 July 2015. But the order in respect of costs should take account of the failure of the defendant to admit negligence until the trial, which inevitably had the result of causing unnecessary costs to be incurred by the plaintiff on an issue which the defendant realised was so weak that it should be abandoned. There was no evidence from the defendant as to the reasonableness of keeping the question of breach of duty in issue until the time of the trial. Nor is there evidence as to what proportion of the costs up to the date of trial was attributable to the issue of breach of duty rather than causation and damages.
In my view, the proper course is to divide the defendant's costs into three time periods: the first being up to and including 9 July 2015, when the offer of compromise was served, the second being from thereafter until the time of the abandonment of the breach of duty point, and thirdly, the remainder of the costs which are principally the costs of the trial.
As to the date between the second and third periods, or the date of the abandonment, I have adopted the first day of the trial because, although the admission was foreshadowed before that date, it was not formalised until the second day of the trial. Thus, the first day of the trial and the period thereafter shall be included in the third component of the costs to be recovered.
As to the period up to and including, namely, the date of the offer, 9 July 2015, ordinarily, and as indicated by the proposed consent orders, the defendant would be entitled to a costs order on the ordinary basis. But the plaintiff should be given some credit for costs incurred in relation to the issue of liability. If the defendant was responsible for all of the plaintiff's costs in respect of duty and breach of duty incurred up to that date, and those costs were about a quarter of the total costs, then the appropriate order might arguably be for the defendant to receive half his costs, half because he would not receive his costs for that quarter attributable to the carved out issue, and he would also be responsible for the plaintiff's costs of that quarter. The costs of duty and breach might well be greater than one quarter, but the defendant was successful overall, and in the circumstances, I propose to make an order in respect to the first period up to the date of the offer, that the defendant receive 50% of his costs.
From the date of the offer until the date up to, but not including, the first day of the trial, the position is the same save that there is a genuine offer of compromise, which has been unreasonably rejected. The defendant is entitled to some benefit from the offer. In my view, the proper costs order for that period is that the defendant receives 50% of his costs assessed on an indemnity basis.
The defendant should have his costs on an indemnity basis thereafter.
For those reasons, the orders of the Court are:
1. Plaintiff to pay 50% of the defendant's costs up to and including 9 July 2015 assessed on an ordinary basis.
2. Plaintiff to pay 50% of the defendant's costs from 10 July 2015 to 29 May 2017 inclusive assessed on an indemnity basis.
3. Plaintiff to pay the defendant's costs of the trial and thereafter, that is, costs from 30 May 2017 to today inclusive on an indemnity basis.
[2]
Endnotes
See Mal Owen Consulting Pty Limited v Ashcroft (No 2) [2017] NSWDC 443.
See Cunningham v Guardian Royal Financial Services Pty Ltd; Miller v Guardian Royal Financial Services Pty Ltd; Smallwood v Guardian Royal Financial Services Pty Ltd; Smallwood v Guardian Royal Financial Services Pty Ltd; Visini v Guardian Royal Financial Services Pty Ltd [2017] NSWSC 1057
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: 05 November 2018