2863/02 MID-CITY SKIN CANCER & LASER CENTRE v ALI ZAHEDI-ANARAK
JUDGMENT
1 HIS HONOUR: I gave judgment in this matter on 13 September 2006: Mid-City Skin Cancer & Laser Centre v Zahedi-Anarak [2006] NSWSC 844. This judgment concerns the orders that should be made, and costs.
Procedural History
2 The proceedings were begun by summons on 24 May 2002. On 31 May 2002, the first and second defendants gave interlocutory undertakings, in terms set out at para [287] of my principal judgment.
3 Initially, the proceedings were against the first and second defendants only. The third and fourth defendants were joined when an Amended Statement of Claim was filed on 1 May 2003.
4 In some directions that the Registrar made by consent on 7 April 2005, it was noted:
"The plaintiff does not propose to adduce evidence of the quantum of its loss nor seek discovery from the defendants on the issue of damages or the defendants' alleged profit but reserves all rights to do so if the Court at final hearing orders an account ..."
5 The matter came before me for pre-trial directions on 11 April 2006. On that day I made an order that the hearing be on all issues, save for the quantum of any damages which might be payable for breach of contract, breach of the Trade Practices Act, or breach of any equitable obligation. I noted:
"that this order does not preclude the need for the plaintiff to establish that some damage has been sustained to obtain an inquiry as to damages."
6 Soon after that directions hearing, the plaintiff issued various subpoenas to the defendants. Those subpoenas were returnable on 30 May 2006.
7 The first and second defendants produced no documents that day, and the subpoenas were stood over, and eventually came to be stood over to the first day of the trial. On 7 June 2006 the third and fourth defendants wrote to the plaintiff in response to the subpoena which had been served on them, saying that they had nothing to produce.
8 On the first day of the trial, 13 June 2006, the first and second defendants each applied to set aside the subpoenas issued to them. Each had received a subpoena in identical terms. By 13 June 2006 the plaintiff did not press some paragraphs of the subpoenas, and other paragraphs of them were allowed by me only in a cutdown form. As ultimately allowed, the subpoenas to the first and second defendants sought:
"1. All documents and records, including printouts of any electronically recorded documents in relation to:
a. the employment and/or contractual relationship between Ali Zahedi-Anarak and Idameneo (No 123) Pty Limited including, but not limited to:
iv. Invoices, including tax invoices, issued to Ali Zahedi-Anarak by Idameneo (No 123) Pty Limited; and
v. Invoices, including tax invoices issued to Idameneo (No 123) Pty Limited by Ali Zahedi-Anarak,
from 1 March 2002 to date;
b. communications made or attempted by Ali Zahedi-Anarak and/or Idameneo (No 123) Pty Limited with former patients of the medical practice formerly known as "Sydney Skin Cancer Clinic" for the period from 1 March 2002 to date;
AND
4. All documents and records, including printouts of any electronically recorded documents, in respect of the names and dates of birth of the patients who saw Ali Zahedi-Anarak for the period from 1 March 2002 to 28 February 2003;
AND
6. Or copies of any or all of the documents referred to in paragraphs 1 to 5 inclusive above."
9 One of the documents produced pursuant to the subpoena was a listing of patients that Dr Zahedi had seen at the second defendant's premises. That listing, which eventually became Exhibit D in the proceedings, is a computer-generated document dated 24 May 2006. In other words, it had been generated before the return date of the subpoena, but was not produced to the plaintiff until after the trial had begun.
10 When the trial began, the plaintiff filed a Second Further Amended Statement of Claim. It alleged causes of action additional to those that I ruled on in my principal judgment. Against the first and second defendants, it made allegations of passing off and breach of section 52 Trade Practices Act 1974 (Cth) concerning the business name, and concerning the use of confidential documents that had originally come from the Kernot Company. Against the third and fourth defendants it made allegations of breach of section 52 Trade Practices Act 1974 (Cth), through various alleged pre-contractual misrepresentations. Those allegations were not new ones, and the amendment made by the Second Further Amended Statement of Claim was minor. They were, however, deliberately reiterated at the start of the hearing.
11 At the end of the third day of the trial (15 June 2006) the plaintiff's counsel indicated that it was more likely than not that the passing off and Trade Practices claims against the first and second defendants would be deleted. On the morning of 16 June 2006 a Third Further Amended Statement of Claim was filed in court, which actually deleted those passing off and Trade Practices claims against the first and second defendants. It continued to allege breach of section 52 against the third and fourth defendants. It was not until addresses that it became clear that that allegation against the third and fourth defendants was not pressed.
Pre-Trial Settlement Offers
12 Various settlement offers were made. On 9 July 2003 the first and second defendants' solicitors wrote to the plaintiff's solicitor offering to settle the proceedings for $8,000, and "parties to resolve outstanding issues associated with the business names the subject of the Proceedings."
13 Such an offer is not a Calderbank offer. It does not distinguish between the amount offered to settle the claim, and any offer there might be to pay costs. If one is to be able to tell, after a judgment has been given, whether an offeree has fared better or worse than the terms that were offered to him, it is necessary to be able to distinguish what is offered for costs, and what is offered for the claim itself: White v Baycorp Advantage Business Information Services [2006] NSWSC 910. As well, the proposal concerning the business names was not an offer - it was an invitation to negotiate. That letter leads to no consequences so far as costs are concerned.
14 The defendants made some other offers, which suffer from the same deficiencies.
15 There was, it seems, a mediation held, which had failed by 18 March 2005. On 18 March 2005 the solicitor for the plaintiff wrote to the solicitors for the first and second defendants, noting that the matter had not settled at mediation. The letter continued:
"My client is resolved to litigate this matter. I further note that all the defendants express the need to have the claim quantified. In order to do that discovery will be necessary."
16 However, the plaintiff came to agree that it would not seek discovery from the defendants on the issue of damages or profits, and the note set out at para [4] was made on 7 April 2005.
17 On 7 July 2005 Minter Ellison, on behalf of all the defendants, made an offer to the plaintiff to settle for $45,000, composed of $10,000 in satisfaction of the claim, and $35,000 towards the plaintiff's costs.
18 That offer was made at the conclusion of a very lengthy letter, which tried to point out to the plaintiff various alleged weaknesses in its case. The theme of the letter, however, was that, as well as some potential problems of liability, the damages the plaintiff could hope to recover were of the order of $7,500. The particular difficulties in proof of damage, which ultimately led to the failure of the plaintiff, were not identified. I do not conclude that the plaintiff, acting reasonably, should have simply accepted the arguments of the defendants about why the damages would be likely to be comparatively small, at a time when it had not had discovery. For that reason, I do not regard that letter as conferring on any of the defendants an entitlement to indemnity costs.
19 On 11 May 2006 all the defendants joined in serving on the plaintiff an Offer of Compromise, under rule 20.26 Uniform Civil Procedure Rules 2005. The defendants offered $10,000 plus costs as agreed or assessed.
20 On 16 May 2006, the solicitor for the plaintiff wrote back, acknowledging receipt of the Offer of Compromise, but saying:
"… considering:
1. This matter is listed for trial on liability only at this time;
2. The contents of the affidavit of Mr Tosh relied upon by my client; and
3. Documents in the possession of the Defendants that have not, at this time, been made available to my client, are required for my client to properly consider the offer,
it does not appear to me that my client is currently in a position to properly consider the offer made in the Offer of Compromise.
Further, it also appears to me that my client would not be in a position to properly consider the offer until well after the time for acceptance of that offer has expired.
Should you and the other defendants wish to put forward an Offer of Compromise expressed in terms of liability, you are hereby invited to make such an offer."