These proceedings were case managed by me as part of the Long Matters list.
In 2020, the plaintiff commenced proceedings against the defendant seeking damages for malicious falsehood. The plaintiff alleged that on three separate occasions, the defendant made statements to the effect that the plaintiff had committed sexual assault.
The matter came before me for case management on 10 December 2021. At that time, I made directions for the preparation of the matter for hearing and listed the matter for hearing for 5 days commencing on 28 November 2022. The matter came back before me for further case management on 8 July 2022. At that time, I made further case management directions, including directions so as to ensure that the matter was ready to proceed for hearing on 28 November 2022.
On 19 September 2022, the Registrar made orders by consent:
1. dismissing the plaintiff's claim;
2. ordering that the plaintiff pay the defendant's costs as agreed or assessed except for the plaintiff's cost of the Motion dated 10 May 2021;
3. ordering that the defendant pay the plaintiff's costs of the Motion dated 10 May 2021; and
4. in the event that costs could not be agreed or the parties sought any variation of costs, that is, indemnity costs, the parties should file written submissions as to any further costs order sought.
Subsequent to those orders being made, the parties sought an extension of time to file their written submissions. The final submissions were received on 14 March 2023.
The defendant seeks costs on an indemnity basis for the whole or, in the alternative, part of the proceedings, for the following reasons:
1. the action was commenced or continued in circumstances where the plaintiff, properly advised, should have known that he had no chance of success;
2. it can be inferred that the action was commenced or continued for an ulterior motive, or because of some wilful disregard of the known facts or the clearly established law;
3. the plaintiff's continuing breach of orders and directions that he file his evidence;
4. the fact that the plaintiff filed no evidence at all upon which he proposed to rely; and
5. the plaintiff's non-acceptance of Calderbank offers, being genuine offers of compromise, which were unreasonable not to accept, and given with ample opportunity to consider.
Peters v Gough [2023] NSWSC 361 | Case summary | Zoe
As set out in s 98(1) of the Civil Procedure Act 2005 (NSW):
1. costs are in the discretion of the Court, and
2. the Court has full power to determine by whom, to whom and to what extent costs are to be paid, and
3. the Court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.
The circumstances in which I am asked to make an order for indemnity costs are somewhat unusual in that the parties agreed to orders by consent dismissing the proceedings, with an order that the plaintiff pay the defendant's costs on an ordinary basis, as agreed or assessed. However, the parties must have contemplated that those consent orders would involve agreement as to the lump sum amount to be paid by the plaintiff to the defendant on account of costs because Order 4 provided for the defendant to seek indemnity costs (should there not be agreement with the plaintiff on the amount of the costs in accordance with Order 2) within 7 days of the consent orders being made.
Plainly, the parties must not have been able to reach agreement on the amount of the costs which the plaintiff would pay to the defendant, as the defendant has filed submissions seeking indemnity costs and the plaintiff has responded to those submissions. The plaintiff does not raise any fundamental objection to the course being proposed, which is that I would determine whether the circumstances are such that there should be an order for indemnity costs.
The basis on which the defendant seeks indemnity costs might be divided into three categories, being:
1. the action was hopeless. The plaintiff should have known as such and it must be taken to have been pursuing proceedings for an ulterior motive;
2. the plaintiff failed to comply with Court orders in terms of service of evidence; and
3. the plaintiff rejected an offer made in accordance with Calderbank v Calderbank [1975] All ER 333 ('Calderbank offer').
All of those circumstances may, in an appropriate case, give rise to an order for indemnity costs. As observed by French J (as his Honour then was) in J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 ('J-Corp'), indemnity costs may be ordered whenever it appears that an action has been commenced in circumstances where the applicant, properly advised, should have known that he had no prospects of success (see also Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; [1988] FCA 364.
As his Honour said in J-Corp (at 303):
Although there is said to be a presumption in such cases that the action was commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law, it is not a necessary condition of the power to award such costs that a collateral purpose or some species of fraud be established. It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case.
Whilst it may be that, as a matter of principle, the indemnity costs could be awarded in such circumstances, the problem for the defendant seeking costs in this case is that the matter was settled by consent on the basis of a dismissal of the proceedings. There has been no consideration of the evidence. In part, this is because the defendant says that the plaintiff never served any evidence. That may be so, but that is a different issue. I am not in a position to determine whether the plaintiff's case was so hopeless that it should never have been commenced.
Statements made by the solicitor for the defendant in correspondence with the solicitors for the plaintiff are not evidence. They are merely assertions made in relation to evidence of the hopeless nature of the case.
The second basis upon which the defendant seeks indemnity costs is that the plaintiff failed to comply with orders relating to the service of evidence. That appears to be so.
I am in receipt of an affidavit of the solicitor for the plaintiff dated 14 March 2023. The plaintiff's explanation for failing to comply with orders in respect of the service of evidence is that the plaintiff wanted to have an informal settlement conference and, further, the plaintiff had not been provided with evidence that would be relied on against him. This is really no explanation for a failure to comply with Court orders. It need hardly be said that the parties are not merely entitled to ignore Court orders because they want to settle a case. The very purpose of making orders for the exchange of evidence prior to a mediation or settlement conference is to ensure that the parties can approach the settlement fully informed of the other party's evidence.
Having said that, these proceedings have settled. I am being asked to make an order for indemnity costs after the event of settlement. All that is known by me is that the plaintiff agreed to a dismissal of his case. The defendant could not have done any better than that. Whilst the failure of the plaintiff to serve evidence in accordance with Court orders is unsatisfactory, in circumstances in which the application for indemnity costs is made (that is, after the fact of settlement) it is not appropriate to award indemnity costs in respect of the preparation of the matter.
The final basis upon which indemnity costs is sought is the service of Calderbank offers. The defendant served a Calderbank offer on 25 June 2021 ('the first Calderbank offer'). The defendant offered to accept a notice of discontinuance at that time, with no orders as to costs and existing costs orders being vacated. The offer was available to be accepted for 28 days.
In a letter dated 25 June 2021, the solicitors for the defendant set out in some detail the arguments that they would advance at the hearing and the reason why the plaintiff's prospects were poor. Further, the solicitors identified that the plaintiff was unable to establish any loss arising from the plaintiff's allegations.
As far as I can determine, the plaintiff did not respond to this offer. As submitted by the defendant, the offer was made at a time after the Court had made remarks as to the issues confronting the plaintiff and after there had already been costs orders in respect of amendments to the statement of claim.
There were further negotiations and offers made. According to a letter from the solicitors for the plaintiff dated 16 July 2022, an offer was communicated through Counsel on 15 July 2022 to the effect that the proceedings be dismissed and the plaintiff pay the defendant's costs incurred (in the sum of $77,000) ('the second Calderbank offer'). The plaintiff responded to that offer on 16 July 2022 rejecting it but offering to accept a dismissal on the basis that the plaintiff pay the defendant's costs in the amount of $12,000.
Then, on 25 July 2022, the defendant made a further offer ('the third Calderbank offer') in which it offered to accept a notice of discontinuance with a deed of release on the basis that the plaintiff pay the sum of $63,000 on account of costs.
On 25 August 2022, the plaintiff responded, in effect, suggesting that the defendant should pay his costs in the sum of $12,555. Thereafter, the defendant made a further offer on 6 September 2022 essentially in the terms of the consent orders made by the Registrar.
It is surprising that neither party invoked the offer of compromise procedures. Further, it is always difficult for a Court to assess the reasonableness of an offer which purports to be in accordance with Calderbank when a precise sum is attached to it in respect of costs. For example, the Court is not in a position to determine whether the figure of $63,000 on account of the defendant's costs is a reasonable sum. Plainly, it had not been assessed.
It does not seem to me that I could make any order for indemnity costs based on the second and third Calderbank offers. However, the first Calderbank offer was put on the basis of a dismissal with no orders as to costs.
The first offer of compromise was made at a very early stage in the proceedings. In general terms, an offer, whether it be an offer of compromise or a Calderbank offer, must involve a real and genuine element of compromise. [1]
The only compromise offered by the defendant at the time of the first Calderbank offer was to bear his own costs. However, as observed in Fabre v Lui (No 2) [2015] NSWCA 312 at [7], whilst an offer by a party to bear its own costs could constitute a compromise, that would not be so when no significant costs had been incurred. This is because the party making the offer is not offering to forego anything of substance.
In assessing whether indemnity costs should be ordered consequent to a Calderbank offer, I should adopt the same principles as the Court does to an offer of compromise made in accordance with the Uniform Civil Procedure Rules 2005 (NSW).
Further, as I have said, the context in which I am being asked to make an order for indemnity costs is most unusual. This is because the parties have reached an agreement as to dismissal of the proceedings with such an agreement including that the plaintiff would pay the defendant's costs on a party/party basis, unless they could not reach agreement on the amount of the costs, in which case the defendant could approach the Court for an order.
The difficulty with this approach is that the Court has not made any determination which places the defendant in a better position than its first Calderbank offer. All that has happened is that the parties have agreed to consent orders. It seems as if the parties have been content to settle the matter but left it open for one party to seek a better result on costs by approaching the Court, even in circumstances in which the Court has made no determination which required the settlement of the matter. It does not seem to me that this is an approach which should be encouraged by the Court.
For the reasons I have advanced, I do not consider it appropriate that there be any order for indemnity costs in favour of the defendant and I reject the defendant's application for indemnity costs.
[2]
Endnote
Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) (2006) 67 NSWLR 706; [2006] NSWCA 120 at [8].
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Decision last updated: 28 April 2023