Peter Vitek & Anor v Estate Homes Pty Ltd & Ors

EX TEMPORE Judgment 1REIN J: In this matter I handed down my reasons for judgment on 22 November 2013 (see Vitek v Estate Homes Pty Limited [2013] NSWSC 1764) holding Mrs Taheri liable to the plaintiffs as guarantor of the obligations of Estate Homes, which obligations have not been met, in the amount of $881,000 plus interest, calculated as of last week, leading to a total of $1,178,019. I will use the same abbreviations here as are contained in those reasons. The plaintiffs seek an order for indemnity costs on several bases: First on the basis of a letter sent on 31 January 2005, which I shall refer to in more detail in a moment; secondly, on the basis of a letter sent on 23 September 2013; thirdly on the basis of two notices to admit; fourthly there is an issue in relation to the costs of the proceedings before Bergin CJ in Equity. 2Dealing with the first offer of 31 January, 2005, it is a letter from the solicitors for the plaintiffs to Messrs Beazley Singleton. It has the heading "Re Peter Vitek and Shohana Vitek v Estate Homes Pty Ltd & Taheri Pty; 591 Elizabeth Street, Redfern." The letter is in the following terms: We refer to previous communication in relation to the above matter and advise we have now received instructions to commence proceedings for the recovery of the balance of the deposit payable in damages. Our client is prepared to settle the dispute on the following terms: 1. Your clients to pay the balance of the deposit, namely $210,000. 2. Your clients to pay our client's of and incidental to the contract for sale and its termination. 3. The above offer will be open for seven days. 4. Payment to be made by bank cheque within 14 days of acceptance. 3The plaintiffs rely on this letter as a Calderbank Letter, although the letter did not state that it was a Calderbank Letter and nor did it, as is usual in Calderbank Letters, state that if the offer was not accepted, it would be relied on to seek costs in the proceedings to be commenced. 4There are several issues which are raised by the defendant, Mrs Taheri, in relation to this, but it is at least clear that the $210,000 offered was considerably less than the $881,00, plus interest, for which Mrs Taheri was ultimately held liable. There can be no dispute that the plaintiffs have done better against Mrs Taheri than the offer of $210,000, even allowing for some uncertainty about what the costs referred to in item 2 in the letter amounted to. 5The issues in relation to this letter are; (1)Whether the letter should be treated as a Calderbank letter in light of the following: (a)The absence of a reference to it being a Calderbank Letter, and the absence of any reference to consequences of the failure to accept the offer, (b)the uncertainly about "costs of and incidental to the contract" and its termination, and (c)the short period for which the offer was open, namely seven days. (2)The letter was not addressed to Ms Taheri and there is no evidence before the court that Beazley Singleton were in fact acting for Mrs Taheri at the time that this letter was sent. 6Mr Zipser, in very detailed submissions, has pointed to the helpful consideration of Calderbank offers by Professor Dal Pont in his book Law of Costs, 3rd edition, at 13.59 in which the learned author states that a Calderbank offer is an offer: ...'expressed to be without prejudice, save as to the cost question of costs, and an indication that the letter will be adduced into evidence on the question of costs and that there are 'no other special features which make it a Calderbank offer', (MT Associates v Aqua-Max Pty Ltd (No 3) (2000) VSC 163 per Gillard J an approach endorsed in the Victorian Court of Appeal in Giller v Procopets (No 2) (2009) 24 VR 1; 2009 VSCA 72 at [13] See [123] of Aqua-Max 7The types of factors are discussed in paragraph 13.73: In exercising the costs discretion in this context, as in any other, the court must take into account all relevant consideration (and ignore irrelevant ones) which it is impossible to exhaust in a list. Some were discussed earlier in the context of offers that may not generate costs consequences, chiefly the extent of the compromise offered and the clarity with which the terms of the offer were expressed. Further relevant factors include the extent of disparity between the offer and the judgment amount (informed by the offerees prospects of success as at the date of the offer, the stage of the proceedings at which the offer was received, the time allowed to the offeree to consider the offer, how closely the offer complies with the formalities for rule based offers of compromise, the offeree's attitude to the offer and whether, if indemnity costs are sought, the application foreshadowed an application for indemnity costs). and Where the factors go both ways, the court engages in a balancing exercise according weight to the relevant factors. 8There was considerable argument about the question of whether or not Mrs Taheri was the recipient of this offer. There is no evidence that she had retained Beazley Singleton to act for her at the time - although a subpoena was issued to that firm, and answered, the Registry were unable to produce the documents for inspection and the plaintiffs did not wish to obtain an adjournment so that they could be located The plaintiffs claim that it should be inferred that Mr Taheri was Mrs Taheri's agent and she should be treated as having received the offer. The plaintiffs rely on the material referred to in my reasons for judgment in Peter Vitek & Anor v Estate Homes Pty Ltd & Ors [2013] NSWSC 1764, but also on paragraphs 1, 2, and 7 of Mrs Taheri's affidavit (see page 20 of Exhibit A), in which she says, in paragraph 4 that in respect of instructions given in the matter, she has relied on her husband, Mr Taheri, to provide instructions to her solicitors in respect of a defence of the claim which, "has been brought against me." That of course, is only since the commencement of the proceedings, but she also says she is aware that her husband obtained advice from Beazley Singleton solicitors in connection with the contract and she said that, acting on the advice of those solicitors, the contract, the subject of the litigation, was terminated. Mrs Taheri, in that affidavit, says that she did not attend on any conferences or negotiations relating to either the contract or the termination of the contract. The evidence of Mr O'Donnell at the hearing before me contradicts the assertions that she did not attend conferences relating to the contract. 9When one has regard to the material referred to in the reasons for judgment and that material to which I have just referred, and to the defence and cross-claim which Mrs Taheri filed in these proceedings, I think the inference is open, and I would draw it, that Mrs Taheri was either aware of the offer made by Mr Roth, on behalf of the plaintiffs, or left it to her husband to deal with that offer, on her behalf, as a guarantor. She has given no evidence on the application that she was not aware of the offer. Accordingly, I do not accept the contention made on her behalf that she was not on notice of the offer. 10My difficulty with the letter is that it does not mention that it is a Calderbank Letter, it does not use the words "without prejudice to costs" and it does not indicate that it will be relied on to seek an order for indemnity costs in the future. I do not think it is properly characterised as a Calderbank Letter since it has none of the features identified by Aqua-Max to which I have referred. 11I think it is important that solicitors who make offers of compromise, make it clear, even if they do not use the words "Calderbank letter", that the letter is "without prejudice save as to costs" and will be relied on to seek indemnity costs at the conclusion of the hearing if the offer made is not accepted and the plaintiff is successful so that the recipient is clearly on notice that that is what will be sought if the offer is not accepted. There is no reason why such a letter cannot be sent in advance of proceedings as this letter was, but with such a warning. The plaintiff seeks to rely on the letter to produce a costs result different to the usual result but, the letter falls short of what is required for a Calderbank letter and, therefore, I do not accept that the letter of 31 January 2005 can be treated as such even taking into account the fact that it was sent to solicitors and that the offer was a very realistic one that, had it been a Calderbank letter, it would have been unreasonable for Mrs Taheri not to accept. 12 I also think it is preferable that letters proposing a compromise of proceedings, enable the recipient to know exactly what is being sought and if an aspect of the offer is capable of being quantified, that it be quantified. In this case there was no amount specified for the costs attendant on drawing the contract or in terminating the contract and whilst the amount is likely to have been relatively small, it does raise the problem for the recipient that it is not a clear amount which can be accepted. I would not be inclined to reject letter as a Calderbank letter for that reason alone particularly if there was no request for clarification of the amount for the incidental costs but it would be a relevant factor. 13I turn now to the second basis asserted for an order for indemnity costs which is the letter of 25 September 2013 (see Exhibit A, page 46). This letter, although not using the word "Calderbank", does make it clear that the plaintiffs would rely on this letter on an application for indemnity costs. However the letter in its terms is ambiguous and, on one of the available alternative readings of it, the plaintiff has not done better than the offer contained in it. Because it is ambiguous, I do not think it is open to be relied on as it would not have been clear to the recipient what amount was being sought and it is not clear that the plaintiffs have bettered the offer made. 14I turn now to the issue of the notices to admit. Rule 42.8(2) of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") provides: (2) Unless the court orders otherwise, the disputing party must, after the conclusion of proceedings in which a fact in dispute is subsequently proved or is subsequently admitted by the disputing party, pay the requesting party's costs, assessed on an indemnity basis, being costs incurred by the requesting party: (a) in proving the fact, or (b) if the fact has not been proved-in preparation for the purpose of proving the fact. And rule 42.9(2): (2) Unless the court orders otherwise, the disputing party must, after the conclusion of proceedings in which the authenticity of a document in dispute is subsequently proved or is subsequently admitted by the disputing party, pay the requesting party's costs, assessed on an indemnity basis, being costs incurred by the requesting party: (a) in proving the authenticity of the document, or (b) if the authenticity of the document has not been proved-in preparation for the purpose of proving the authenticity of the document. It was submitted on behalf of Mrs Taheri that it was not unreasonable for her to not admit the various matters that she was asked to admit. One of the notices related to an admission sought from Mrs Taheri (see Exhibit B-1 in the main proceedings) that, inter alia, the value of the property on 22 October, 2004 was $1.979,290 as found by Barrett J in his judgment dated 31 March 2010. Mrs Taheri did not admit that fact and the plaintiffs incurred costs in having to pursue the valuer, who had given evidence before Barrett J, Mr Richard Foley-Jennings and of obtaining further evidence from him. 15At the hearing Mrs Taheri agreed that the amount for which judgment was entered against Estate Homes was the correct amount. I can see no reason why the plaintiffs should not have, on an indemnity basis, the costs of having to establish the facts which were not admitted in response to that notice. It does not include, however, the costs of some further evidence which was to be called from Mr Foley-Jennings which did not go to that precise issue. 16The second notice to admit is one to admit authenticity of documents, in particular documents 16 and 16A in the notice to admit (see pages 27 to page 39 of exhibit B-1), in particular, at page 29. Mr Cameron, who appears today for Mrs Taheri, argued that it was not unreasonable for the defendant to not admit these matters, given that she disputed that she had signed the documents. 17The notice did not seek any admissions as to who had signed the document but only that it they were authentic copies of what was handed over as the counterparts on exchange of contracts and I can see no reason why the plaintiffs should not have the costs on an indemnity basis of having to establish the authenticity of those two documents. 18The final matter which has been raised is the question of the costs of the proceedings before Bergin CJ in Eq. In my judgment at [74] I indicated that it was inappropriate for me to deal with those costs. They were not costs related to the proceedings before me. Mr Zipser has argued that if I accepted the validity of what is put as a Calderbank letter, made on 31 January 2005, then the order should include the costs of the proceedings before Bergin CJ in Eq. As I have indicated, I do not think the letter of 31 January 2005 can be relied on so the issue does not arise. I will say however that even had I formed the view that the letter was a Calderbank offer and, therefore, could be relied upon to support an order for indemnity costs, in my view that would not include the costs of the proceedings before Bergin CJ in Eq. Those proceedings, and the facts on which they were based, had not arisen at the time that the offer was made and they, in my view, are discrete proceedings arising out of discrete events, which would not fall within the order for indemnity costs in these proceedings if it was otherwise appropriate to be made.