Marriner v Australian Super Developments Pty Ltd

1 On 17 June 2016, this Court published its reasons for dismissing the appeal.[1] This judgment deals with the costs of the appeal. As this judgment adopts the defined terms in the substantive judgment and does not summarise its factual and legal conclusions, the two judgments should be read together.

2 It was common ground that, as the appeal was dismissed, an order should be made that the Marriner parties pay ASD's costs of the appeal. However, the Marriner parties opposed ASD's application for an order that they pay part of those costs on an indemnity basis. ASD sought that order on the basis that the Marriner parties did not accept an offer to compromise that was served on them on 12 November 2015.

3 The offer to compromise was served in accordance with r 26.12 of the Supreme Court (General Civil Procedure) Rules 2005 ('2005 Rules') which relevantly provided:

26.12 Appeal to Court of Appeal

...

(3) Where on an appeal -

(a) a party has made an offer in writing to the other party (whether or not expressed to be without prejudice) to compromise the appeal on the terms specified in the offer;

(b) the offer was open to be accepted for a reasonable time, but was not accepted; and

(c) the party making the offer obtains an order on the appeal no less favourable to that party than the terms of the offer -

the Court of Appeal shall take those matters, and also the stage of the appeal at which the offer was made, into account in determining what order for costs to make in respect of the appeal or in respect of the appeal and the proceeding more generally.

(4) The Court of Appeal, in exercising its discretion as to costs in accordance with paragraph (3), may order that the party on whom the offer to compromise the appeal was served pay the costs of the party who made the offer, taxed on a basis other than the ordinarily applicable basis, from the commencement of the appeal, from the day the offer was served or from any other time that the Court thinks fit.

4 The offer to compromise offered to compromise the application for leave to appeal and any appeal resulting from the granting of leave (collectively 'the appeal proceeding') on the basis that:

(a) ASD would pay to the Marriner parties the sum of $20,000 by offsetting that amount against the amount of $167,920.73 payable pursuant to Sloss J's order dated 23 July 2015 in respect of damages and interest;

(b) the Marriner parties would discontinue the appeal proceeding and no party would seek from this Court an order as to the costs of the appeal proceeding; and

(c) the offer would have to be accepted within 14 days after it was served, namely, by 26 November 2015.

5 The offer to compromise was served under cover of a letter dated 12 November 2015. That letter stated that, if the Marriner parties sought to impugn the validity of the offer to compromise, ASD would rely on the letter and the offer to compromise as a Calderbank[2] offer.

6 The letter repeated the terms of the offer made in the offer to compromise with one exception that related to what was to be done in the event that the offer was accepted. Instead of stating that, in that event, the Marriner parties must discontinue the appeal proceeding with no party seeking an order as to costs, the letter stated that the Marriner parties 'will need to withdraw the [appeal proceeding] and not seek any order as to costs, and [ASD] will not seek any order as to costs either.'

7 The letter did not set out any reasons as to why the Marriner parties should accept the offer; instead, it relied on ASD's submissions in its written case as to why the appeal proceeding should be dismissed. The letter stated that if the offer was not accepted and the outcome of the appeal proceeding was no less favourable to ASD than the terms of the offer, ASD would rely on the offer in seeking costs on an indemnity basis as from the date of the offer or, alternatively, as from the date of expiry of the offer.

8 In the substantive judgment, we discussed in detail the principles dealing with the making of a special costs order in the context of an offer of compromise and a Calderbank offer.[3] We will not repeat that discussion here.

9 ASD submitted that, having regard to the matters set out in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority [No 2],[4] the Marriner parties acted unreasonably in not accepting the offer to compromise.[5] Those matters are as follows:

(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 indemnity costs in the event of the offeree's rejecting it.[6]

10 ASD contended that the offer was served at a stage of the appeal proceeding where the parties had filed their written cases and thus the Marriner parties were able to assess the strengths of ASD's submissions as to why the appeal proceeding should be dismissed. On the basis of the written case, ASD argued that the Marriner parties' prospects of success, assessed as at the date of the offer, were weak. ASD submitted that the offer was clear, the period for which it was open for acceptance was reasonable and an application for indemnity costs had been foreshadowed. On the question of the extent of the compromise offered, ASD submitted that its offer to discount its damages award by $20,000 and to bear its own costs of the appeal proceeding represented a genuine compromise.

11 The Marriner parties sought to resist ASD's application for indemnity costs on the following bases:

(b) the Marriner parties did not act unreasonably in not accepting the offer to compromise because:

(i) as at the time the offer to compromise was made, the Marriner parties had real prospects of success; and

(ii) the offer to compromise did not contain a sufficient compromise.

12 In relation to the clarity of the offer to compromise, the Marriner parties submitted that the inconsistent statements in the offer to compromise and ASD's covering letter about costs and how the appeal proceeding would be brought to an end rendered the offer incapable of acceptance. This was said to be because, if the offer were accepted, it would not be clear whether the Marriner parties would be required to withdraw the appeal proceeding and neither they nor ASD would be entitled to seek any order as to costs, or whether the Marriner parties would be required to discontinue the appeal proceeding and agree that there be no order as to costs.

13 In relation to the Marriner parties' prospects of success, they submitted that the fact that this Court granted leave to appeal indicated that they had 'real' prospects of success. According to the Marriner parties, as at the date of the offer to compromise, each ground of appeal was reasonably arguable notwithstanding that ultimately they were all rejected by this Court.

14 In relation to the extent of the compromise offered, the Marriner parties submitted that the offer was unattractive because a reduction of $20,000 from an award of $167,920.73 represented a discount of only 12 per cent in the $167,920.73 damages and interest awarded by Sloss J with no allowance for the millions of dollars spent in the litigation. They claimed that the costs awarded by Sloss J reduces the effective quantum of the offer (assuming the taxed costs awarded by Sloss J in respect of the 20 day trial before Byrne J, and the 6 day trial before Sloss J, to be in excess of $1 million) to under 2 per cent (and probably much less) of the total sum at stake in the appeal. The Marriner parties also contended that acceptance of the offer would have required them to give up an opportunity to vary Sloss J's order which required them not only to bear their own significant costs of the two trials but also to pay ASD's costs of those trials.

15 In our opinion, there is no substance to the Marriner parties' contention that the offer to compromise was unclear. That offer was self-contained and was not intended to be read subject to the covering letter unless the offer was invalid. The offer to compromise complied with r 26.12 of the 2005 Rules and was valid. There was nothing ambiguous about the statement that, if the Marriner parties accepted the offer, they would need to discontinue the appeal proceeding and no party would seek an order as to costs.

16 Even if it were necessary to read the offer to compromise in conjunction with the covering letter, the inconsistency in the language used in those documents was of no consequence. The 2005 Rules did not provide for withdrawal of a proceeding in the Court of Appeal; they only provided for discontinuance. Rule 64.29 relevantly stated:

64.29 Discontinuance of application or appeal

(1) By filing a notice of discontinuance in appropriate terms, an applicant or appellant may, at any time, discontinue an application (including for leave to appeal, or an appeal) ...

...

(4) Unless the Court of Appeal constituted by one or more Judges of Appeal otherwise orders or the parties otherwise agree, an applicant or appellant who ... has filed a notice of discontinuance of the whole of an application or appeal shall pay the costs of each party to the application or appeal.

17 It should have been obvious to the Marriner parties' lawyers that the covering letter was referring to discontinuance in accordance with r 64.29 of the 2005 Rules. In any event, any difference between withdrawal and discontinuance could not affect the substance of what ASD proposed, namely, that if the Marriner parties accepted its offer, they would be required to take steps to bring the appeal proceeding to an end in accordance with the 2005 Rules and that the parties would bear their own costs of the appeal proceeding.

18 We reject the Marriner parties' submission that, as the obligation imposed by r 64.29(4) of the 2005 Rules on the discontinuing party to pay the other parties' costs could be displaced either by an order of the Court of Appeal or an agreement of the parties, the offer to compromise failed to make clear the consequences of acceptance of the offer. Both the offer to compromise and the covering letter provided that acceptance of the offer would involve the parties agreeing not to seek an order as to costs. Such an agreement necessarily meant that 'the parties otherwise agree[d]' for the purposes of r 64.29(4).[7]

19 We now turn to consider the two bases upon which the Marriner parties contended that their failure to accept the offer to compromise was not unreasonable.

20 The first of those matters, the offeree's prospects of success, must be assessed as at the date of the offer, in the context of the matters then known to the offeree, rather than as at the date of the court's decision in the proceeding. As the court's decision is made at a subsequent time and may be based on different or additional matters to those known to the offeree at the time of the offer, the decision may not be a fair or reliable indicator of the offeree's prospects of success at the time of the offer. That is not to say, however, that the court's decision will be necessarily irrelevant in assessing the offeree's prospects of success.

21 In the present case, this Court granted leave to appeal because it concluded that the application for leave to appeal had a real prospect of success in accordance with s 14C of the Supreme Court Act 1986. However, a determination that an application has a real prospect of success means no more than that the prospect of success is not fanciful.[8] Accordingly, the fact that this Court determined that the prospect of the application for leave to appeal succeeding was not fanciful does not provide any meaningful assistance in assessing the Marriner parties' prospects of success as at the date of the offer to compromise.

22 In the substantive judgment, we concluded that, in the light of the previous decision of this Court on 3 August 2012, Mr Marriner was at considerable risk of being found liable to ASD in the amount of $80,000.[9] That risk materialised when Sloss J found Mr Marriner liable for that amount. At the time they received the offer to compromise, the Marriner parties had the benefit of this Court's previous decision, Sloss J's detailed reasons for decision and ASD's written case in opposition to the appeal proceeding. In the context of this information, the Marriner parties' prospects of success as at the date of the offer to compromise, viewed objectively, could only be assessed as very weak.

23 The extent of the compromise offered must be considered in the context of the history of the proceeding, the significant costs that the parties had already incurred, the small amount ($167,920.73) that was at stake in the appeal proceeding and the significant costs that the parties would incur in pursuing that proceeding. Viewed as a matter of substance in this context, the offer was a genuine and sensible commercial offer which a reasonable litigant, cognisant of his or her overarching obligations under the Civil Procedure Act 2010, would have readily accepted.[10]

24 It follows from the above that the Marriner parties acted unreasonably in not accepting the offer to compromise.

25 For the above reasons, we will make an order that the Marriner parties pay ASD's costs of the appeal proceeding, such costs to be assessed:

(a) on the standard basis insofar as they were incurred up to and including 26 November 2015; and

(b) on the indemnity basis insofar as they were incurred after 26 November 2015.

[1] Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141 ('substantive judgment').

[2] Calderbank v Calderbank [1976] Fam 93.

[3] Substantive judgment [228]-[236], [266], [269].

[4] [2005] VSCA 298; (2005) 13 VR 435 ('Hazeldene's').

[5] Those matters are relevant to consideration of the unreasonableness of refusal of an offer to compromise an appeal made pursuant to r 26.12 of the 2005 Rules as well as refusal of a Calderbank offer. See Settlement Group Pty Ltd v Purcell Partners [No 2] [2014] VSCA 68 [9]; Sandri v O'Driscoll [No 2] [2014] VSCA 109 [3]-[4].

[6] Hazeldene's [2005] VSCA 298; (2005) 13 VR 435, 442 [25].

[7] It is therefore unnecessary to consider a submission made by ASD that an offeree has an obligation to seek clarification if he or she does not understand any aspect of an offer.

[8] Kennedy v Shire of Campaspe [2015] VSCA 47 [12].

[10] As to the relevance of the Civil Procedure Act 2010 on the question of the unreasonableness of a failure to accept a Calderbank offer, see para 266 of the substantive judgment.