Solicitors:
Kemp Strang (Plaintiff)
Ashurst Australia (Defendants)
File Number(s): 2013/318007
[2]
Judgment
On 25 September 2015, I delivered judgment ([2015] NSWSC 1409) ("Judgment") in an appeal brought by the Plaintiff, Mr Garry Hopper, under s 1321 of the Corporations Act 2001 (Cth) from a decision of the liquidators of MF Global Australia Limited (in liq) ("MFGA") to reject his proof of debt dated 4 October 2012 and also not to allow his second proof of debt dated 29 October 2013. I held that the proceedings should largely be dismissed with costs, but indicated that I would allow the parties a short opportunity to consider whether any more qualified or other order was required, including in respect of an issue as to the calculation of Mr Hopper's long service leave. I directed the parties to bring in agreed short minutes of order to give effect to the judgment within fourteen days or, if there was no agreement between them, their respective short minutes of order and short submissions as to any differences between them.
The parties have reached a degree of agreement as to the orders that should be made in consequence of the judgment. The Defendants, Mr Christopher Campbell and others as liquidators ("Liquidators") of MFGA sought an order for indemnity costs against Mr Hopper based on a Calderbank offer dated 30 October 2013 ("2013 Offer") or alternatively based on an offer of compromise dated 1 August 2014 ("2014 Offer of Compromise"). The Plaintiff, Mr Hopper, accepted that there should be an order for indemnity costs against him from 2 August 2014 by reason that he did not accept the 2014 Offer of Compromise and that the Liquidators would obtain an order or judgment no less favourable than the terms of the offer as a result of my judgment. The issue between the parties is limited to whether there should be an order for indemnity costs in favour of the Liquidators from about 30 October 2013 to 1 August 2014.
By way of background, on 8 October 2013, the Liquidators partly allowed and partly rejected Mr Hopper's first proof of debt, allowing an amount of $385,702.89 in respect of company expenses, long service leave and redundancy pay (Judgment [52]). Mr Hopper filed his Originating Process in respect of his appeal against the Liquidators' decision partly to reject that proof of debt on 22 October 2013 and served an initial affidavit dated 22 October 2013 and made a revised proof of debt, in a larger amount, on 29 October 2013.
The 2013 Offer referred to the two proofs of debt by Mr Hopper dated 4 October 2012 and 29 October 2013 and other relevant documents, noted the Liquidators' determination that Mr Hopper was entitled to $385,702.89 under his initial proof of debt and indicated that:
"… In the interests of avoiding incurring costs litigating [Mr Hopper's] appeal against the Liquidators' decision, the Liquidators make the following offer to [Mr Hopper] in full and final satisfaction of [Mr Hopper's] right to appeal the Liquidators' decision and in compromise of all and any claims [Mr Hopper] may have in the liquidation of MFGA (which, for the avoidance of doubt, includes the claims made in both proofs of debt submitted by [Mr Hopper])."
The Liquidators there offered to admit Mr Hopper's first proof of debt in the amount of $624,879.24 and for the proceedings to be dismissed with no order as to costs. That offer was open for acceptance for nearly a month, until 27 November 2013, and referred to the principles in Calderbank v Calderbank [1975] 3 All ER 333.
The amount of $624,879.24 in the 2013 Offer was more favourable than the amount allowed, in respect of Mr Hopper's first proof of debt, so far as an additional amount for wages was allowed in the amount of $226,648.35 and an additional amount for a guarantee in the amount of $12,528. Mr Hopper was unsuccessful in the proceedings in respect of the latter amount, which was the difference between a guaranteed incentive amount for the first quarter in 2011 of $187,500 and the amount of $174,972 paid to him on 15 August 2011, by reason of the conversion rate between Australian dollars and US dollars, since it depended upon his claim to a contract formed in February 2011.
Mr Docker, who appears for Mr Hopper, correctly points out that the making of a Calderbank offer does not give rise to a presumption in favour of indemnity costs: Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [14]. Similarly, the fact that a plaintiff ultimately achieves a worse result than he or she would have achieved if he or she had accepted that offer, does not itself establish that the defendant should be awarded indemnity costs, unless it can be said that it was unreasonable for the plaintiff not to accept that offer, so as to warrant a departure from the general rule as to costs: Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816 at [9]-[11]; Jones v Bradley (No 2) [2003] NSWCA 258 at [8]-[9]; Perisher Blue Pty Ltd v Nair-Smith (No 2) above at [16].
The relevant principles were summarised by Ward J in Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) above at [9]-[15], to which Mr Docker refers, where her Honour observed that:
The rationale for the principles applied in relation to Calderbank offers was outlined in Commonwealth v Gretton [2008] NSWCA 117 by Beazley JA, her Honour noting (at [41]) that the public policy considerations underpinning the making of favourable costs orders where a Calderbank offer has been made (and not accepted) are the encouragement of settlement of disputes as soon as possible and the discouragement of wasteful and unreasonable behaviour by litigants.
The Court of Appeal in Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 recently reiterated the public policy objectives of special costs orders in the context of offers of compromise. Basten JA (with whom McColl and Campbell JJA agreed) referred at [6] to the objects underlying the formal offer of compromise procedures under the then court rules that were identified in Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 as including:
1. To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff's real claim which can be placed before its opponent without risk that its "bottom line" will be revealed to the court;
2. To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and
3. To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances, that party should ordinarily bear the costs of litigation.
The onus is on the party seeking to rely on a Calderbank offer (in this case, the defendants) to satisfy the Court that it should exercise the costs discretion in its favour (Evans Shire Council v Richardson (No 2) [2006] NSWCA 61). An indemnity costs order will not automatically follow from the fact that a genuine offer of compromise more favourable than the final judgment was made nor is there any presumption to that effect (Cat Media Pty Ltd v Allianz Australia Insurance Ltd [2006] NSWSC 790; Rolls Royce Industrial Power (Pacific) Limited v James Hardie & Co Pty Limited [2001] NSWCA 461). What must be considered is the reasonableness of the offeree's rejection or non-acceptance of the offer, having regard to the relevant circumstances at the time that the offer fell to be considered (ie, here, as at September 2006) (citing MGICA (1992) Pty Limited v Kenny & Good Pty Limited [1996] 70 FCR 236 per Lindgren J). The question is whether, in all the circumstances, the failure to accept the offer "warrants departure from the ordinary rule as to costs" (SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 per Giles JA at [37]). …
Save where there is a special costs order by reference to the procedure provided for under the Rules or in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333; 3 WLR 586, it has been said that a court should depart from the general rule (and award indemnity costs only where the conduct of the party against whom the order is sought is "plainly unreasonable" (Sydney City Council v Geftlick [2006] NSWCA 280; Dunstan v Rickwood (No 2) [2007] NSWCA 266). In Leichhardt Municipal Council v Green [2004] NSWCA 341, Santow JA (at [57]) said that indemnity costs orders should be reserved for the most unreasonable actions by unsuccessful plaintiffs.
In that regard, it remains to be seen whether the exhortation in the above cases as to the category of case in which conduct by an unsuccessful plaintiff would warrant an indemnity costs order is to be reconsidered having regard to the regime now in place in relation to the conduct of litigation in this Court and, in particular, the recognition in s 56(5) of the Civil Procedure Act that non-compliance with the statutory objectives provided for in that legislation may be taken into account in the exercise of a discretion as to costs. …
In Perisher Blue Pty Ltd v Nair-Smith (No 2) above at [14], to which Mr Docker also refers, Gleeson JA and Tobias AJA in turn observed that there is no presumption that an offeree who does not accept an informal offer and does not obtain a judgment more favourable than the offer, will necessarily pay indemnity costs from the date of the offer. The Liquidators also refer to Lawrence v Gunner; Gunner v Lawrence [2015] NSWSC 1229 at [26] where Stevenson J observed that:
"If a Calderbank offer is made, but not accepted, the court's discretion to make a special order is enlivened. The court's discretion is an open one, but is commonly enlivened if (a) the party that made the offer achieves a better result than the amount offered, (b) the offer was a genuine offer of compromise, and (c) it was unreasonable of the offeree not to accept: for example Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [7]-[8]."
Mr Hopper rightly accepts that the 2013 Offer was a genuine offer of compromise so far as it was significantly more favourable to him than the amount which had been allowed in respect of his first proof of debt. Mr Hopper also accepts that, although the 2013 Offer did not provide for his recovery of his costs of the proceedings, that matter was of little significance where the proceedings had been commenced shortly before it was made and only the Originating Process and affidavit had been filed.
The primary question in dispute is therefore whether it was unreasonable for Mr Hopper to reject the 2013 Offer at the time it was made. Mr Pike, who appears with Mr Foreman for the Liquidators, submits that it was unreasonable for Mr Hopper to reject that offer because the case turned on events which occurred at a meeting on 18 February 2011, at which he was present and at which the Liquidators were not present, and he was in a position to assess the strength of his case from the moment he commenced the proceedings. I do not accept that submission, which seems to me to over-simplify the issues in the proceedings and the matters which Mr Hopper would have had to assess. No doubt, Mr Hopper had a recollection of what occurred at that meeting, which was the subject of his evidence in the proceedings, and which was to a significant extent corroborated by other evidence. However, the question whether a contract in the terms for which he contended in the proceedings existed depended, in significant part, on subsequent dealings between the parties, which were admissible to determine whether such a contract was established. Mr Hopper did not then have access to the documentation, which the Liquidators put to good use in cross-examining him, which was inconsistent or potentially inconsistent with the case which he propounded.
While I accept that, as Mr Pike and Mr Foreman point out, the Liquidators had been required to act quasi-judicially in determining Mr Hopper's proof of debt, and provided him with detailed reasons for their decision to reject part of his claim which included the proposition that no binding agreement was made with MFGA as asserted by Mr Hopper, the correctness of those reasons turned on that proposition. It does not seem to me that it was unreasonable for Mr Hopper to consider that he had reasonable prospects of establishing the contrary, at least at that early point.
Mr Docker, who appears for Mr Hopper, submits, and I accept, that the question whether it was unreasonable for Mr Hopper not to accept the 2013 Offer is to be assessed at the time it was made, and without hindsight. The relevant matters include the then stage of the proceedings, the time allowed to Mr Hopper to consider the offer, the extent of the compromise offered by the Liquidators, Mr Hopper's prospects of success, assessed as at the date of the offer, the clarity with which the offer was expressed, and whether the offer foreshadowed an application for indemnity costs if Mr Hopper rejected it.
In the present case, the 2013 Offer was made at an early stage of the proceedings and prior to the filing of pleadings. Mr Hopper submits, and I accept, that he would not have been in a position to assess the strength of the Liquidators' defence to his claim at the time the offer was made, since he then had knowledge of his own involvement in the matter, but not of the documentation that existed within MFGA's files in respect of the matter. As Mr Docker points out, those documents were not led in evidence in the proceedings until several months after the 2013 Offer had expired and, as Mr Docker also points out, those documents were ultimately of considerable significance in the proceedings, so far as aspects of them did not support Mr Hopper's perception of the relevant events.
I accept that a reasonable time was allowed to Mr Hopper to consider the 2013 Offer. The extent of the compromise offered by the Liquidators was significant in monetary terms, but was a relatively small part of Mr Hopper's disputed claim, since the agreement for which Mr Hopper contended would have led to a substantial increase in the amount of wages, long service leave and a redundancy payment due to him. Mr Docker submits, and I accept, that, so far as Mr Hopper's prospects of success were concerned, as assessed at the date of the offer, any suggestion that Mr Hopper should then have understood that his case was weak would depend on hindsight. The issues addressed in the judgment were not straightforward, either in factual or legal terms. Many of the matters that led me not to accept Mr Hopper's account of events depended on a close review of contemporaneous correspondence, to which Mr Hopper then did not have access. I should not assume that Mr Hopper would himself necessarily recall that correspondence, even where it was copied to him, at the time he was providing initial instructions to his legal representatives in respect of his case.
It seems to me that the 2013 Offer does not support an order for indemnity costs against Mr Hopper, from 30 October 2013, where it was made at a very early point and where he did not then have access to the documentation which would have allowed a fuller assessment of the merits of his claims, and where, although it involved a real element of compromise on the Liquidators' part, it would have required the surrender of very substantial claims on his part. In those circumstances, it was not unreasonable for him not to accept that offer.
Mr Hopper advanced a further contention that it was not unreasonable for him not to accept the 2013 Offer because its terms would have required that he compromise any other claims he might have in the liquidation of MFGA, and his submissions refer to other claims in respect of profits in his trading accounts. The parties devoted significant attention to this question in their submissions. The Liquidators submit that the reference in the 2013 Offer to "all and any claims [Mr Hopper] may have in the liquidation of MFGA (which, for the avoidance of doubt, includes the claims made in both proofs of debts submitted by [Mr Hopper]" should have been understood as the proceedings commenced on 22 October 2013 in relation to the first proof of debt and the second proof of debt that had been lodged on the day before the 2013 Offer was made and, implicitly, not as extending more widely. Mr Docker responds that the words "compromise of all and any claims" would, in their natural construction, extend not only to the claims made in both proofs of debt, but to any other claim. There is substantial force in that submission, since the terms of the 2013 Offer appear to have been expressly directed to extend beyond the proofs of debt to any other claim of Mr Hopper. Having said that, there is little evidence of substance as to the existence of any other claims which could have given rise to concern to Mr Hopper in respect of the terms of that offer. It seems to me that, in any event, Mr Hopper's contention as to the scope of that release has limited weight since, if there was any issue as to whether the effect of the 2013 Offer would have extended to claims other than those in Mr Hopper's first and second proofs of debt, his solicitors could readily have clarified that matter with the Liquidators' solicitors. However, it is not necessary for me to express a concluded view as to that issue, where it does not seem to me that it was unreasonable for Mr Hopper not to accept the offer, even if it had the more limited operation for which the Liquidators contend.
Accordingly, the orders that I make are:
The proceedings be dismissed.
Subject to order 3 below, the Plaintiff pay the Defendants' costs on the ordinary basis until 1 August 2014 and thereafter on an indemnity basis, as agreed or as assessed.
The Defendants pay the Plaintiff's costs of submissions as to costs on an ordinary basis, as agreed or as assessed.
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Decision last updated: 30 October 2015
Parties
Applicant/Plaintiff:
Re MF Global Australia Ltd (in liq); Hopper
Respondent/Defendant:
Campbell in his capacity as liquidator of MF Global Australia Ltd