Nepean Country Club Ltd v Paterson & Roberts [2009] VSC 436

2 The jurisdiction of this Court to determine an appeal from the Tribunal is limited to questions of law.[1] It is thus essential to identify a question of law that is the subject matter of the appeal in order to enliven the jurisdiction of the Court.[2] The question must be a pure question of law. It is not enough that it may involve a question of law or that it may be a mixed question of law and fact.[3] The appellant submitted that the questions of law are whether the Tribunal:

(a) took into account an irrelevant consideration, namely the period of time (14 days) provided for a formal settlement offer pursuant to s 114(2) of the Victorian Civil and Administrative Tribunal Act 1998 ("VCAT Act");

(b) failed to take into account a material consideration, namely that the Calderbank letter had the express purpose of avoiding escalation of the dispute;

(c) failed to take into account a material consideration, namely the relative simplicity of the proposition in the Calderbank letter that in order to avoid escalating the dispute and the incurring of further legal expense, each party should terminate the dispute then and there and not pursue their claims any further;

(d) failed to take into account a material consideration, namely that a refusal to order costs in favour of the successful applicant would mean that it has been effectively denied the fruits of benefit of the Tribunal's decision in its favour; and

(e) unreasonably found the time limit for acceptance of the Calderbank offer (namely seven days) was too short.

3 Those questions do not, in my view, enliven the Court's jurisdiction and the appeal should be dismissed. The questions are not questions of law when the matters raised by the appeal are analysed and they are not turned into questions of law merely by using formulaic language for grounds of judicial review.[4] They are grounds supporting a challenge to the merits of the exercise of discretion by the Tribunal on the award of costs and no identifiable error of law in the way in which that discretion has been exercised has been shown.

4 The general principle in VCAT is that each party must bear its own costs. This is legislated in s 109(1) of the VCAT Act. The Tribunal may award costs[5] "only if satisfied that it is fair to do so, having regard to"[6] a number of factors listed in s 109(3) of the VCAT Act. The terms of s 109(3) require the Tribunal to take each of the factors listed in that subsection into account and to give weight to them as a fundamental element in making its determination.[7] The factors listed include:

(e) any other matter the Tribunal considers relevant.[8]

It was not contended that the Tribunal had failed to take into account any of the factors that it was bound to take into account under s 109(3). Rather, it was argued that the Tribunal failed properly to have regard to the fact and content of the Calderbank offer in circumstances where the appellant would effectively be denied the fruits and benefits of the award in its favour, if it was not awarded the whole of its costs.

5 The Tribunal held that it would not be fair to require the respondents to pay costs to the appellant pursuant to s 109(2) of the VCAT Act because the respondents had rejected the Calderbank offer. The Tribunal reasoned as follows:

1. I see this submission as relating to costs incurred after 2 November 2006, probably the last date upon which a Calderbank offer remained open for acceptance.
2. The applicant sent a Calderbank letter to the respondents on 25 October 2006. The letter contained an offer to settle the proceedings on the basis that the claim and counterclaim be withdrawn, and that both parties pay their own costs. The respondents did not accept the offer, and ended up with the order of 2 June 2008 which required them to pay substantial sums of money to the applicant.
3. A Calderbank letter is written communication that includes an offer of settlement. The letter usually recites that, in the event that the offer is rejected and the party rejecting the offer ends up with a less favourable outcome, the letter will be produced to the court or tribunal on the question of costs: see Calderbank v Calderbank [1975] 3 All ER 333. The applicant's Calderbank letter included a paragraph more or less in those terms.
4. The letter also stated that if the offer "is not accepted within 7 days from the date of receipt of this letter, it will thereafter be irrevocable [sic] withdrawn".
5. The last specified factor that can be taken into account in deciding whether it is fair to make a costs order pursuant to s.109 of the VCAT Act is "any other matter the Tribunal considers relevant": s.109(3)(e). The making of the Calderbank offer, followed by the less favourable outcome, are relevant matters to take into account in assessing whether "it is fair" to make a costs order in the present case.
6. In the absence of the fairness test in s.109(3), the test would be whether it was "unreasonable" to reject a Calderbank offer: see Hazeldene's Chicken Farm v Victorian Workcover Authority [2005] VSCA 298; (2005) 13 VR 435 @ 440. Of course, unreasonable rejection of an offer might make it fair to make a costs order pursuant to s.109.
7. The Court of Appeal in Hazeldene's Case set out @ 442 several factors that should be taken into account in determining whether it was unreasonable to reject an offer. One of those factors caused me considerable concern in the present case, namely "the time allowed to the offeree to consider the offer".
8. As I have mentioned, the offer in the present case remained open for seven days.
9. There are detailed provisions in the VCAT Act about the making of settlement offers: sections 112 to 115. If an offer is made in accordance with those sections, and rejection is followed by a less favourable outcome, the party who made the offer "is entitled to an order [for] all costs incurred ..... [sic] after the offer was made", unless the Tribunal orders otherwise: s.112(2).
10. The Calderbank offer made in the present proceedings was not made in accordance with the provisions to which I have just referred, because it did not remain open for at least 14 days: see s.114(2). However, s.114(2) provides a useful comparison, in terms of reasonableness, as to the minimum time that should be allowed for acceptance of an offer.
11. Having taken into account the complexity of the dispute between the parties, a dispute involving hundreds of documents and thousands of transactions, I find that to require acceptance within seven days was to require acceptance within an unreasonably short period of time. In turn, I find that the respondents did not act unreasonably in rejecting the offer, and that it would not be fair to require them to pay costs to the applicant pursuant to s.109(2) because they rejected the offer.

6 It was submitted that the Tribunal should not have used the minimum period specified in s 114 of the VCAT Act as a measure of what is a reasonable period for accepting a settlement offer. It may be accepted that the reasonableness of the period of time stipulated for acceptance of such an offer may differ according to the particular facts and circumstances. However, the Tribunal was cognisant that the time specified for acceptance of the offer is a factor that may be relevant to the exercise of discretion and, in my view, it was open to the Tribunal to have regard to s 114(2) as a comparator.

7 Further, it is evident from the reasons of the Tribunal that the Tribunal did not determine the reasonableness of the time stipulated for acceptance simply on the basis of s 114(2). The reasons reflect the Tribunal's consideration of the complexity of the dispute[9] which showed, in the Tribunal's view, that the conduct of the respondents in not accepting the offer within the stipulated time was not plainly unreasonable.

8 It was submitted that the reasons do not address the simplicity of the proposition made by the Calderbank offer. This submission, in essence, amounted to a challenge to the determination of the Tribunal that the conduct of the respondents in not accepting the offer within the stipulated time was not plainly unreasonable. Whether the conduct was reasonable or unreasonable is a question of fact, not of law, and raises no question of law capable of determination in this appeal.

9 Finally it was submitted that the Tribunal failed to address the submission that was put to it that the refusal to order costs in favour of the appellant, in the circumstance where the respondents had not accepted the offer, would effectively deny it the fruits and benefit of the Tribunal's decision in its favour. However, the Tribunal did not accept the proposition that the respondents had acted unreasonably in not accepting the offer and there was, in my view, no legal error in failing to take this factor into account having regard to the Tribunal's conclusion.

10 Accordingly I will order that the appeal is dismissed.

[1] Section 148(1) Victorian Civil and Administrative Tribunal Act 1998.

[2] TNT Skypak International (Aust) Pty Ltd v FCT [1988] FCA 119; (1988) 82 ALR 175.

1. [3] Comcare v Ethridge [2006] FCAFC 27; (2006) 227 ALR 75; Birdseye v Australian Securities and Investment Commission [2003] FCAFC 232 (Unreported, Branson, Marshall and Stone JJ, 21 October 2003).

[4] Comcare v Ethridge [2006] FCAFC 27; (2006) 227 ALR 75; Birdseye v Australian Securities and Investment Commission [2003] FCAFC 232 (Unreported, Branson, Marshall and Stone JJ, 21 October 2003).

[5] Section 109(2) Victorian Civil and Administrative Tribunal Act 1998.

[6] Section 109(3) Victorian Civil and Administrative Tribunal Act 1998.

[7] R v Hunt; ex parte Sean Investments Pty Ltd [1979] HCA 32; (1979) 180 CLR 322, 329 (Gibbs J).

[8] Section 109(3) Victorian Civil and Administrative Tribunal Act 1998.