Omar v Quit4good Pty Ltd

Local Court of NSW|2015-05-29

JUDGMENT

On 27 March 2015 the plaintiff's claim was dismissed after hearing. An order was made that the plaintiff pay the defendant's costs and the matter was stood over for argument as to the basis of those costs.
The defendant applies for a costs order: 1. up to 22 September 2014 or 25 September 2014 on the ordinary basis and thereafter on an indemnity basis; 2. for appearing on a return of subpoena on 4 February 2015 on an ordinary or indemnity basis; and 3. for this application on an indemnity or ordinary basis.

Evidence

The defendant relies upon the affidavit of its solicitor Mr Janoyan sworn 17 April 2015. The plaintiff relies upon the affidavit of his solicitor Mr Simons sworn 8 May 2015.
Mr Janoyan's evidence is that on 22 September 2014 he sent a Calderbank letter to the defendant and an identical letter again on 25 September 2014. Mr Simons denied receiving the second letter. The defendant did not seek to cross-examine Mr Simons on the issue. I cannot resolve the conflict of fact in favour of the defendant. I will consider the Calderbank letter dated 22 September 2014 in these reasons.

The history of the proceedings

On 29 January 2014 the proceedings were listed for a defence call-over. Standard directions were made in accordance with Local Court Practice Note Civ 1 ("PNC1"), the matter was fixed for review on 6 May 2014 and for hearing on 4 June 2014. All evidence was to be served by 15 April 2014.
On 6 May 2014 on the application of the plaintiff the hearing date was vacated. The plaintiff was ordered to pay the defendant's costs of $250. The parties were directed to serve all evidence by 18 July 2014, the matter was fixed for review on 19 August 2014 and for hearing on 22 September 2014.
On 19 August 2014 the parties' solicitors appeared and the hearing date was confirmed. The Court noted the parties said that all evidence could be served immediately.
On 22 September 2014, the hearing day, on the defendant's application the hearing was vacated. The defendant was ordered to pay the plaintiff's costs in the sum of $250.The matter was fixed for hearing on 13 October 2014. Directions were made for the service of evidence. A notice to produce was adjourned to 13 October 2014.

The defendant's offer to settle

By letter dated 22 September 2014 the defendant offered to settle proceedings on a "walk away" basis. The offer was stated to be open for 14 days. Reference was made to Calderbank v Calderbank [1975] 3 All ER 333.
The plaintiff responded to the offer by letter dated 22 September 2014. In that letter the plaintiff sought further particulars of the case made by the defendant and the production of documents. Reference was made to Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124. There is no evidence that the parties did anything to compromise the proceedings after this exchange of letters. The defendant did not answer the plaintiff's letter.
The proceedings had been fixed for hearing on 22 September 2014. At the review on 19 August 2014 the Court had been informed by the parties that the matter was ready to proceed. That statement is understood to mean that all evidence has been served and each side is able to assess the likely result on the basis of the evidence and legal principle.
The plaintiff's claim was for payments due under a contract for the provision of medical advice over the phone. The plaintiff asserted an agreement of an hourly rate. It was an all or nothing claim. The defendant denied the hourly rate and asserted that (prior to litigation) the plaintiff had accepted an amount from the defendant in full satisfaction of his claim. The defence was an all or nothing defence.
In this application for costs the defendant and the plaintiff each prepared written submissions and made an oral argument developing those submissions.
In summary the defendant submitted that the letter dated 22 September 2014 was a good Calderbank offer and that it would not be adequately compensated for costs and expenses incurred in the proceedings if a special order is not made. The solicitor's evidence was that the defendant's costs of the proceedings are in the order of $47,000.
The plaintiff submitted that it was not unreasonable for him to have not accepted the defendant's offer because the defendant did not reply to his request for further information about the defendant's case. The plaintiff submitted that the costs should be capped in accordance with Part G of PNC1.

The costs discretion in the Local Court

A magistrate's discretion to order costs following judgment derives from s 98 of the Civil Procedure Act 2005 (NSW) ("the CP Act"). Part G of PNC1 which provides for maximum costs orders in proceedings in which the amount claimed is less than $20,000 is a matter to be taken into account by a magistrate in exercising the s 98 discretion. Part G does not fetter the magistrate's discretion: Ada Evans Chambers Pty Ltd v Santisi [2014] NSWSC 538.

Indemnity costs

In respect of a Calderbank offer the onus is upon the offeror to persuade the court to exercise discretion in its favour. The offeror must demonstrate that the offer was a genuine offer of compromise: Leichhardt Municipal Council v Green [2004] NSWCA 341; and that the rejection of the offer was unreasonable: County Securities Pty Ltd v Challenger Group Holdings Pty Ltd (No 2) [2008] NSWCA 273. The determination that an offer was a genuine offer of compromise requires consideration of whether it represented a genuine attempt to reach a negotiated settlement "rather than merely to trigger any costs sanctions": Leichhardt Municipal Council v Green (at 39).
The defendant's Calderbank letter did not set out any argument with respect to the facts or legal principle as to why it was likely that the defence would succeed. The evidence is that the plaintiff sought particulars from the defendant in respect of the basis of the offer and the defendant did not reply to that request. There is no evidence that the defendant followed up its offer by a phone call or email pressing the settlement on the plaintiff. Taking these matters into account I am not satisfied that it was a genuine offer of compromise rather than an attempt to trigger a costs sanction. I dismiss the application for indemnity costs on the basis of the Calderbank letter.

Ordinary costs

The defendant's argument included an alternative claim for costs on the ordinary basis rather than as limited by the maximum costs orders in Part G of PNC1.
Clause 36.2 of Part G of PNC1 applied so that when a defence was filed in the proceedings on 7 November 2013 an order was taken to be made that if the defendant is successful then the maximum amount of costs that can be awarded to the defendant is $4,244 (being 25% of $16,972.35). The plaintiff was entitled to conduct the proceedings on the basis that $4,244 was his exposure to costs but for the s 98 discretion.
Clause 36.3 of Part G of PNC1 provides that a party may file and serve a motion and supporting affidavit seeking to vary the maximum costs order at any time up until two weeks prior to the first review date. Clause 36.5 provides that the supporting affidavit must explain why it is appropriate to vary the maximum costs order in light of the importance of the subject matter of the proceedings and the complexity of the proceedings, and include an estimate of the costs of the party on an ordinary basis.
Assuming compliance with PNC1, two weeks before the review date all evidence would be served and parties would be able to make an assessment of the likely outcome of a case. Also the parties would be in a position to argue by reference to the evidence and legal principle that in light of the importance of the subject matter and the complexity of the proceedings, and by reference to an estimate of costs on an ordinary basis, that the Court should vary the standard order.
The reference in cl 36.5 of PNC1 to importance and complexity as the test for varying the standard order is an allusion to s 60 of the CP Act which provides: 60 Proportionality of costs In any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute.
Section 56 of the CP Act provides: 56 Overriding purpose ... (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule.
In the exercise of the s 98 discretion on the claim for costs on an ordinary basis, I am required to consider the overriding purpose of the CP Act and the proportionality of costs.
The case involved a question of fact as to what was the term for payment agreed to by the parties, there being no relevant documentary evidence. The case involved a question of fact as to what was said and done when the defendant gave the plaintiff a cheque prior to litigation. The legal issue was whether there was an accord executory.
The issues in the proceedings are not of general importance, although of course important to the parties. The factual and legal issues were not complex. I am not satisfied that an order other than the standard order in Part G of PNC1 should be made in the proceedings.
Had I been satisfied that the importance and complexity of the proceedings required another order to be made it would have been necessary to consider fairness to the plaintiff in the making of that order on the conclusion of the proceedings rather than at an earlier time. The Court is obliged to exercise its discretion according to rules of reason and justice: Williams v Lewer [1974] 2 NSWLR 91.
A determination about fairness would require the defendant to adduce evidence and provide an explanation as to why an application for a variation was not made two weeks prior to the first review date or at some other time prior to the hearing. The defendant did not call any evidence in this application to explain its failure to make the variation application to the Court. The defendant's application would have failed for want of that evidence.

Costs of the subpoena

The defendant seeks a special order for costs for its appearance in the subpoenae list on 4 February 2015. Mr Janoyan's evidence about his appearance that day is set out in paragraphs 11 to 21 of his affidavit. Mr Simons' evidence about his conversation with Mr Janoyan that day is set out on page 3 of his affidavit. There is a conflict between the solicitors as to whether Mr Simons offered to mention the defendant's appearance that day. Such an offer was the appropriate course. The defendant did not seek to resolve that conflict by cross-examination. I cannot make a determination as to the fact. I dismiss the application for costs of that appearance on any basis.

Costs of this application

The ordinary rule is that costs follow the event. The defendant has failed in each application for costs that he has made.
The defendant should pay the plaintiff's costs of this application. Like Adamson J in Ada Evans v Santisi I say that the lack of proportionality between the costs and the issues in these proceedings is gross. It is high time that these proceedings were concluded.
I estimate that the plaintiff's costs in defending this application as follows: preparation of the affidavit and written submissions two hours, the appearance to make the argument on 29 May two hours and to attend to take this judgement half an hour, at $300 per hour, on the ordinary basis, to be 75% of $1350, being $1013. This appears to be a reasonable figure on the ordinary basis as the defendant's evidence is that its costs of this application are $1,800. I will make that order unless it is opposed by either party in which case I will refer the costs order on this application for assessment.

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: 02 December 2015

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