Novelly v Tamqia Pty Ltd

Application to vary costs order

1. Mr Novelly seeks a variation of order (4) made by this Court in relation to the costs of the appeal. His notice of motion filed 26 July 2024 was within the 14-day period specified in r 36.16(3A) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). He seeks a special costs order that the costs of the appeal be assessed on an indemnity basis from 28 February 2024, although in submissions, that order was sought from 29 February 2024. He relies upon the non-acceptance of an offer to settle the appeal which was expressed to be a Calderbank offer: see Calderbank v Calderbank [1975] 3 All ER 333; [1976] Fam 93.
2. The Court has received written submissions on the motion from both parties and an affidavit by Mr Mark Fraser, Mr Novelly's solicitor. The respondents objected to Mr Novelly relying on those parts of the Fraser affidavit which referred to oral and written communications between counsel on the ground that reference to counsel-to-counsel communications was contrary to r 122, Legal Profession Uniform Conduct (Barristers) Rules 2015 (NSW). In his reply submissions, Mr Novelly indicated that he did not read pars 4-6 of the Fraser affidavit or rely on the annexures referred to in those paragraphs, and that this material should be disregarded by the Court. Mr Novelly formally withdrew his submissions-in-chief dated 25 July 2024 and provided a redacted version of those submissions which did not refer to this material.
3. Since the hearing of the appeal, Meagher JA has retired from the Court. The parties have consented to the motion being dealt with by the remaining members of the Court pursuant to s 45AA(1) of the Supreme Court Act 1970 (NSW). The Court informed the parties that the motion would be dealt with on the papers.

The offer

1. The circumstances in which a special costs order is sought are as follows.
2. The notice of appeal was filed on 6 December 2023. Pursuant to directions given by the Registrar on 31 January 2024, Mr Novelly was required to file and serve his written submissions in support of the appeal by 28 February 2024. He did not do so. His submissions were filed on 13 March 2024.
3. On 28 February 2024, Mr Novelly's solicitors sent a letter by email at 6:02 pm to the respondents' solicitors which (i) referred to an oral offer to settle the appeal made by senior counsel for Mr Novelly to senior counsel for the respondents on 16 February 2024, (ii) identified the terms of that offer and that counsel for the respondents had informed counsel for Mr Novelly by email the previous day that the offer was rejected, (iii) gave the respondents a "further opportunity" to accept Mr Novelly's offer to settle the appeal, which if accepted, would be given effect by consent orders in the following terms: 1. Order 2 made in Supreme Court proceedings 2021/00365919 on 8 September 2023, as varied by order made on 18 October 2023 is set aside, and replaced with the following: "2. Each party is to pay his and her own costs of the plaintiff's contempt application." 2. The Appeal is otherwise dismissed. 3. Each party is to pay her and his own costs of the Appeal.
4. As an alternative to the proposed order, the letter stated that should there be any jurisdictional or other issue with the parties on appeal seeking to set aside an order of the Supreme Court, Mr Novelly would be content with an agreement with the respondents that they would not enforce order 2 made in the underlying proceedings on 8 September 2023 as varied by order made on 18 October 2023.
5. As indicated, the offer contained in the 28 February letter was expressed to be made in accordance with the principles in Calderbank v Calderbank. The offer was open for acceptance until 5:00 pm on 1 March 2024. No response was received from the respondents' solicitors.
6. We proceed on the basis that, notwithstanding the respondents' objection to the disclosure by Mr Novelly of the counsel-to-counsel communications, no objection was taken by the respondents to the admissibility of the material in the 28 February letter described in (i) and (ii) of [7] above which referred to counsel-to-counsel communications.

The competing position as to costs

1. Mr Novelly submits that it was unreasonable of the respondents not to have accepted the offer in the 28 February letter because (i) the terms of the offer were reasonable, (ii) the respondents did not assert contemporaneously that two days was an unreasonable period, nor could they have done so in the circumstances, (iii) the respondents' senior and junior counsel were "well acquainted with the case and the applicant's submissions falling due", and (iv) the 28 February letter set out cogent reasoning as to why the primary judge had erred and why the offer should be accepted, notwithstanding that those reasons "did not dovetail precisely with the Court's reasons for judgment".
2. In opposing a special costs order, in addition to complaining that the motion and submissions failed to identify the relevant rule upon which the application was made, the respondents say that no explanation is given by Mr Novelly as to why he did not foreshadow in his written submissions on the appeal or at the hearing of the appeal that he wished to be heard on costs, and that no "special circumstances" have been identified by Mr Novelly why he seeks leave to make costs submissions after the outcome is known. Reference was made to Fuller v Albert (No 2) [2021] NSWCA 183 at [31]; Black Head Bowling Club Ltd v Harrower (No 2) [2023] NSWCA 317 at [25]; State of New South Wales v Hollingsworth (No 2) [2023] NSWCA 283 at [19].
3. It is also said that it was not unreasonable for the respondents not to have accepted the offer given the following matters. First, the offer in the 28 February letter was only open for two days, which was not a reasonable period. Second, whilst the respondents accepted that the outcome Mr Novelly obtained on appeal is better than the offer made by Mr Novelly, it is by no means the clearest case, noting that this Court has remitted the determination of the contempt proceedings to the primary judge. Third, the offer was made prior to the filing and service of Mr Novelly's written submissions on the appeal and whilst some reference was made to the substance of Mr Novelly's position in the 28 February letter, the respondents were not on full notice of his contentions on the appeal when the offer was not accepted.
4. In reply submissions, Mr Novelly clarified that he relied upon UCPR, r 36.16(3) and/or r 36.16(3A). He submitted that "special circumstances" are not required to be demonstrated to obtain a special costs order in all cases.

Decision

1. It is only necessary to consider the application by reference to r 36.16(3A). It was not suggested by Mr Novelly that r 36.16(3) would lead to any different outcome. UCPR, r 36.16(3A) provides: 36.16 Further power to set aside or vary judgment or order … (3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered.
2. There is no dispute as to the relevant principles. A Calderbank offer does not automatically result in the Court making a special costs order. The relevant question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs. That the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure from the ordinary rule as to costs: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37] (Giles JA); Jones v Bradley (No 2) [2003] NSWCA 258 at [8]-[9] (Meagher, Beazley and Santow JJA); Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8] (Basten JA).
3. The parties' submissions raise two issues: (a) whether an application to vary costs orders under UCPR, r 36.16(3A) requires leave or is confined to cases where there are "special circumstances", and (b) whether it was unreasonable for the respondents not to have accepted the offer of 28 February 2024.
4. As to (a), the respondents' submission involves a misreading of the authorities referred to at [12] above. An application for a special costs order after judgment has been delivered relying on r 36.16(3A) does not require leave, nor is the power conferred by r 36.16(3A) subject to a requirement that "special circumstances" be shown. That is not to deny the force of the statements in many cases on costs following an appeal, that it is good practice for the parties to mention on the hearing of an appeal, where appropriate, that depending on the outcome of the appeal the parties may seek to be heard on an application for a special costs order.
5. The reference to "special circumstances" in Fuller v Albert (No 2) was made in the context of an application to reopen an appeal on the ground that the unsuccessful respondents were denied procedural fairness because they had no opportunity to argue costs on the appeal. The Court rejected that submission in circumstances where the respondents had not taken advantage of the opportunity on appeal to make submissions about costs. That was the context in which the Court said that a grant of leave to reopen the appeal required the respondents to show "special circumstances". That is very different from the present case.
6. Black Head Bowling Club is distinguishable. It involved an application following the disposition of an appeal to vary a costs order made at trial. That was the context it was said at [24]-[25] that the power conferred by UCPR, r 36.16 should be exercised "sparingly and with caution" and that: The power in r 36.16 is not intended to give litigants who chose not to advance written or oral submissions on a point raised on appeal a further opportunity to do so after judgment has been delivered and orders made. The Club had a full opportunity in writing and orally to identify the relief which it sought.
7. By contrast, Mr Novelly seeks to vary the costs order made in relation to the appeal itself in circumstances where the outcome was not known at the time of the hearing in this Court.
8. Nor does the similar statement in Hollingsworth at [19] that the power conferred by r 36.16(3A) should be "exercised with great caution having regard to the importance of the public interest in the finality of litigation", referring to Lawrence v Ciantar (No 2) [2020] NSWCA 186 at [7], import any "special circumstances" requirement when with respect to an application under r 36.16(3A).
9. As to (b), an assessment of the reasonableness of a party's conduct in not accepting an offer is to be made on a summary basis: Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [148] (Basten JA). The factors relevant to the question whether a rejection of an offer is unreasonable include whether the offeree had an adequate opportunity in terms of time and information to enable it to consider and deal with the offer: Elite Protective Personnel v Salmon at [99] (McColl JA) citing Donnelly v Edelstein (1994) 49 FCR 389 at 396.
10. Here, the time allowed for acceptance of the 28 February offer was unreasonable in all the circumstances. The time allowed was only two days. Mr Novelly's submission that the time allowed should also be taken to include the previous 12-day period when an earlier offer by counsel was open for acceptance cannot be accepted. There is no evidence that the earlier offer made between counsel was a Calderbank offer, and Mr Novelly has not shown that the respondents had adequate information to enable them to consider the earlier offer at the time it was made.
11. It is not to the point that the respondents' counsel were acquainted with the case, having appeared at the trial. At the time of the 28 February letter Mr Novelly had not served his written submissions on the appeal. Further and contrary to Mr Novelly's submission, on a fair reading of the 28 February letter, the letter did not adequately explain why Mr Novelly's offer was reasonable having regard to the strengths and weaknesses of each party's case on appeal: Vale v Eggins (No 2) [2007] NSWCA 12 at [22] (Beazley JA, McColl JA agreeing). It is sufficient to observe in this regard that there was no reference in the 28 February letter to the dispositive matters referred to in this Court's reasons for judgment concerning (i) the test of appealability at [30]-[31] and [67]-[89], (ii) the application of that test by reference to the matters such as those referred to at [41]-[47], or (iii) the characterisation error referred to at [51]-[54].
12. In the circumstances, it was not unreasonable for the respondents not to accept the 28 February 28 offer, and no costs consequences should flow from that non-acceptance.

Conclusion

1. Mr Novelly has not made out a case for a special costs order with respect to the appeal. Costs of the motion should follow the event.
2. Accordingly, the orders of the Court are that the appellant's notice of motion filed 26 July 2024 is dismissed with costs.

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: 27 August 2024