Patterson & Anor v Mamou t/as De Novo Conveyancing [2024] NSWDC 75 | Case summary

District Court of NSW|2024-03-18

Background

On 1 March 2024 I delivered reasons for deciding that the defendant should pay damages to the plaintiffs for the sum of $43,800 arising out of the plaintiffs' claim of professional negligence. [1] I had assessed the plaintiffs' loss as being the sum of $146,000 ([172]). But I accepted the defendant's argument that her liability should be limited by reason of the proportionate liability provisions in Part 4 of the Civil Liability Act 2002 (NSW) and, specifically, determined that her responsibility for the plaintiffs' loss was 30%; whereas the responsibility of the concurrent wrongdoer - the building inspector - was assessed at 70% ([147]-[159]).
I directed the parties to confer for the purpose of resolving disputes on remaining issues (including interest and costs) and if they did not agree, to supply the Court with further submissions.
The plaintiffs abandoned the claim for interest that had been pleaded in their statement of claim. The remaining dispute concerned costs.
The defendant seeks a special order that she pays the plaintiffs' costs (as agreed or assessed) up to 10 March 2023; and thereafter the parties bear their own costs. An alternative order sought was that there should be a 50% discount upon the plaintiffs' recovery of costs from the defendant after that date.

Evidence of the defendant's settlement offers

On 10 March 2023, the defendants' solicitor, Mr Maccallum, the principal of Maccallum Lawyers Pty Ltd, sent a Calderbank offer to the plaintiff and, contemporaneously, also sent an offer purporting to be made in accordance with r 20.26 of the Uniform Civil Procedure Rules 2005 (a "rules offer").
The rules offer featured the term that the defendant would pay the plaintiffs the sum of $40,000 plus costs (as agreed or assessed). After some explanatory comments, which were intended to persuade the plaintiff to accept the offer, the Calderbank offer also featured the term that the defendant offered to pay the plaintiffs $40,000 plus costs as agreed or assessed. Both forms of offer were open for acceptance for 28 days.
On 18 July 2023, Maccallum Lawyers sent another Calderbank letter, also enclosing an offer of compromise. The key terms of the rules offer and Calderbank offer on 18 July 2023 were relevantly the same as the offer of settlement made on 10 March 2023: the offers contained the same term that the defendant offered to pay the plaintiff the sum of $40,000 plus costs as agreed or assessed.
On 24 November 2023, Maccallum Lawyers sent another Calderbank letter, which enclosed another rules offer. Unlike the earlier rules offers, the principal term of the rules offer on this occasion was that the defendant offered to pay the plaintiffs the sum of $42,500 plus costs, as agreed or assessed.
It is notable that the explanatory commentary contained in each of the Calderbank letters of 10 March 2023, 18 July 2023 and 24 November 2023 was virtually identical. All of the Calderbank letters bore the heading "Without Prejudice Save as to Costs Calderbank letter". Within the explanatory commentary, express reference was also made to that decision and the defendant's intention to rely upon the principles of that decision should the relevant offer be rejected.

Submissions

The defendant submits that the Court should depart from the 'general rule' that costs follow the event, under r 42.1 of the Uniform Civil Procedure Rules 2005.
The defendant acknowledges that the amounts offered were all inferior (in a monetary sense) to the end result (a damages award of $43,800) that the plaintiffs obtained from the Court's judgment. However, they say, firstly, that had the plaintiffs accepted the monetary offers on each of the dates that settlement offers were made "would have saved (the plaintiffs) increasing building costs/reduced their loss"; and/or saved on the interest on the mortgage. In other words, they would have been better off if they accepted each of the offers when they were made than they are now. It was said that all of the offers were reasonable.
Secondly, she says that the plaintiffs were the cause of significant delay in the hearing of the claim; which increased their loss.
Thirdly, the defendant says that the plaintiffs could have commenced their claim in the Local Court.

Consideration

None of the defendant's submissions are persuasive on the question whether the Court should depart from the usual rule.
It may be accepted that costs questions fall within the discretion of the Court (Civil Procedure Act 2005, s 98(1)(a)). But the discretion is guided by Court rules, including, specifically, the general rule that costs follow the event and the rules regulating the costs consequences where rules offers are rejected by an offeree, as well as the more general considerations under ss 56-60 of the Civil Procedure Act.
The defendant's first point draws the Court's attention to what might be thought of as the net effect of the plaintiffs' decision (as offerees) to reject the defendant's settlement offers on the offerees' financial position on the dates they were made respectively made. No authority was posited by the defendant that would support that approach of taking the economic consequences of an offeree's rejection of a purely monetary offer of settlement into account as a matter of principle. The conventional practice is that when evaluating the reasonableness of settlement offers, whether they be by way of Calderbank offers or rules offers (when it comes to the question of any discretion to depart from the presumptive operation of rules that are attached to rules offers, under rules 42.14 - 42.15A), courts do so by way of a simple comparison between the result (the amount of the damages) that an offeree ultimately obtains against the monetary sum referred to in the settlement offer. There is nothing to indicate any requirement for the Court to go behind that comparison to evaluate the overall economic effects upon an offeree in their rejection of a monetary offer for settlement at the time the offer is made. It is not hard to see that if there was any such requirement, judicial officers would likely be inundated by further disputes brought by unsuccessful offerors after litigation has concluded. Successful parties would likely be subjected to inquiries from unsuccessful parties as to how much they really were better off as a result of rejecting offers. Such approach is not consistent with the case management and dispute resolution objects under ss 56-60 of the Civil Procedure Act 2005 (NSW) since they would likely result in extra time to resolve disputed costs questions and at extra cost once the underlying substantive dispute between the parties has been resolved. The approach is a recipe, in short, for satellite litigation.
There is also force in the plaintiffs' submissions that even if such approach was condoned, it was unproven that their acceptance of the settlement offers would have enabled them to rectify the damage to the property or that they could or should have foreseen that building costs would increase; although it is unnecessary to express a concluded view on that; which, as indicated, would entail further factual enquiry.
Adopting the conventional measure for comparison, clearly, in this case, the plaintiffs did obtain a more favourable monetary outcome than what was offered in any of the settlement offers.
The defendant's second point was substantially a reprise, or perhaps variant of her unsuccessful arguments deployed to reduce her damages exposure at the hearing about the plaintiffs' failure to mitigate, or, alternatively causation. Having failed with those arguments (see [134] in relation to causation and [193] in relation to mitigation) in the hearing on substantive issues, it would be inappropriate to allow the defendant to re-agitate them now as a reason to depart from the general rule as to costs.
As to the defendant's last point, it is correct that there are circumstances where this Court can disallow a successful plaintiff its costs if the plaintiff does not reach a threshold and the same award of damages could have been recovered in the Local Court (UCPR, r 42.35). But this argument does not assist the defendant since the plaintiffs, in this case, exceeded the threshold under the Court rule ($40,000). But even if they did not exceed the threshold, the Court has a discretion to award costs if it is satisfied that the plaintiff's commencement and continuation of the proceeding in this Court, rather than the Local Court, was warranted. That discretion would have been properly exercisable here, given the complexity of the proceeding which, in no small measure, was attributable to the defendant taking issue with most aspects of the plaintiffs' claim in relation to both liability and damages.
There is no other reason to deprive them of their costs, wholly or in part.

Order

The defendant's application for a special costs order is refused.
The Court orders as follows: 1. Judgment for the plaintiffs for $43,800 2. The defendant is to pay the plaintiffs' costs of the proceeding, as agreed or assessed.

Endnote

Patterson & Anor v Mamou t/as De Novo Conveyancing [2024] NSWDC 47

Amendments 18 March 2024 - Replaced 'they say' with 'she says' in paragraph [12] Inserted 'it was unproven that' in paragraph [17] Amended 'defendant's' to 'defendant' in paragraph [20] 18 March 2024 - Inserted 'into account' in paragraph [16] 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: 18 March 2024

Patterson & Anor v Mamou t/as De Novo Conveyancing

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