Reysson Pty Ltd v Roads and Maritime Services

(1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including: (a) costs that are reserved, and (b) costs in respect of any such application or step in respect of which no order as to costs is made, are to be paid and otherwise dealt with in the same way as the general costs of the proceedings.

(2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings. 4Thus, the normal rule is that costs are payable at the conclusion of the proceedings but the Court is empowered to depart from the normal rule by making an order that costs be payable forthwith. In Royal Australian Naval Reserve Rifle Club Inc v New South Wales Rifle Association Inc [2010] NSWSC 351 at [19] I said when sitting as an Acting Judge of the Supreme Court: Where a costs order is made before the conclusion of the proceedings, factors which have caused the courts to depart from the normal costs rule by ordering that costs be assessed and payable forthwith include the following:

(a) where the costs order is relevant to a discrete, separately identifiable aspect of the proceedings; (b) where there is some unreasonable conduct by the party against whom the costs have been ordered; (c) where there is likely to be a fairly long time before the proceedings are disposed of.

See Fiduciary Ltd v Morning Star Research Pty Ltd [2002] NSWSC 432, 55 NSWLR 1 at [11]-[13] (Barrett J); Hamod v State of NSW [2007] NSWSC 707 at [5] (Simpson J); ASIC v Rich [2003] NSWSC 297 at [86] (Austin J); Jazabas Pty Ltd v Haddad [2006] NSWSC 880 (Simpson J) (successful security for costs application: order that costs be payable to successful defendants forthwith); Perpetual Trustee Co Ltd v McAndrew [2008] NSWSC 790 (Harrison AsJ) (application for summary judgment doomed to failure); Herbert v Tamworth City Council (No 4) [2004] NSWSC 394, 60 NSWLR 476 at [30] (Sperling J). 5The applicant submits that the present case falls within the first and third of the three categories referred to in that case. That is, the costs order that they seek is relevant to a "discrete, separately identifiable aspect of the proceedings" and, secondly, "there is likely to be a fairly long time before the proceedings are disposed of". I accept that submission as far as it goes. Costs are, of course, in the discretion of the Court. This costs issue should be approached in the context of the general costs principle that "a claimant for compensation in respect of a compulsory acquisition should usually be entitled to recover the costs of the proceedings, having acted reasonably in pursuing the proceedings and not having conducted them in a manner which gives rise to unnecessary delay or expense": Dillon v Gosford City Council [2011] NSWCA 328, 184 LGERA 179 at [70]. I have earlier criticised the delay that has occurred since delivery of my judgment on the preliminary question, but that is not relevant to the question of the costs of the preliminary question. In my view, as sought by the applicant, the respondent should be ordered to pay the applicant's costs of the question for separate determination and leave should be granted to proceed immediately to assessment if they are not agreed within a reasonable time. 6That leaves the question of indemnity costs, which the applicant seeks on the basis of what it characterises as a Calderbank offer which was not accepted. This offer was expressed as follows in a letter from the applicant's solicitors to the respondent's solicitors of 10 October 2011, well before the hearing of the preliminary question: We therefore invite you to accept that the survey works referred to above constitute lawful physical commencement of the Reysson DA, thereby obviating the need for preliminary hearing.

We are instructed to advise that if your client accepts this position within 14 days of the date of this letter, our client will agree to an order that your client pay its costs of the separate question on the ordinary basis, less 10% of the sum as agreed or assessed. 7A good deal of correspondence between the solicitors followed. In a letter of 19 October 2011 from the applicant's solicitors to the respondent's solicitors, the offer was renewed and said to remain open until 27 October 2011. It was not accepted. 8In SWM Financial Services Pty Ltd v Lloyd (No 2) [2012] NSWSC 202 the successful defendants sought their costs on an indemnity basis on the ground that, inter alia, they had made offers of compromise on the basis that there would be a verdict in their favour and that each party would pay their own costs of the proceedings. Ball J held that that did not justify an order for indemnity costs. His Honour said at [13] - [14]: 13 In Leichhardt Municipal Council v Green [2004] NSWCA 341 at [23] Santow JA (with whom Bryson JA and Stein JA agreed) said: It is clear that an offer with no real element of compromise in it, which is designed merely to trigger the costs sanctions, will not be treated as a genuine offer of compromise. Thus an offer by a plaintiff demanding the full amount claimed was held not to be an offer of compromise attracting costs penalties: Tickell v Trifleska Pty Ltd (1991) 25 NSWLR 353.

Leichhardt Municipal Council v Green was applied in Baresic v Slingshot Holdings Pty Ltd (No 2) [2005] NSWCA 160 at [13] and was cited with approval by Hodgson JA (with whom McColl JA agreed) in The Uniting Church v Takacs (No 2) [2008] NSWCA 172 at [14] and by Basten JA in the same case at [22]. In that case, Hodgson JA referring to the offer said (at [14]): I do not make any adverse findings as to the bona fides of the Trust; but the offer in this case does have the appearance more of a procedural move to trigger costs consequences than of a genuine attempt to reach a negotiated settlement ...

Basten JA took a similar approach, although his Honour stated that the question was not the purpose for which the offer was made, but whether, in the circumstances of the case, it can be regarded as a genuine offer of compromise. Similarly, in Council of the City of Liverpool v Turano (No 2) [2009] NSWCA 176 at [57], Beazley, Hodgson and McColl JJA said: In Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 the Court referred to the authorities that established there must be a genuine offer of compromise which would be unreasonable for the appellant not to accept in order to trigger the favourable exercise of the costs discretion and noted (at [5]) that: "The general approach adopted in this Court is that where an offer involves "no real element of compromise" but merely "invites capitulation by the appellant" it will not result in a variation of the usual costs order: see, eg, Townsend v Townsend (No 2) [2001] NSWCA 145 (Giles JA) at [5]."

14 In my opinion, the offers made by the first and second defendants in this case were not genuine offers of compromise. They sought a verdict in favour of the defendants. It is true that the defendants agreed to give up their claim for costs. However, the first and second defendants concede that their assessed costs would have been small at that stage. The offer, in effect, invited capitulation. That is not a genuine offer of compromise; and if the first and second defendants are to recover costs on an indemnity basis in those circumstances, they must establish that the claim was so obviously hopeless that it was unreasonable of the plaintiffs to bring it. 9The applicants, as I understand it, seek to distinguish SWM on the basis that the costs were there described as small at the stage the offer was made, whereas in the present case, at the stage that the offer was made, the applicant suggests that a significant amount of work had been done and costs incurred. It seems to me that at the stage the offer was made in the present case the costs were still not large, relatively speaking. In any event, the present is a stronger case for declining to order indemnity costs than SWM given that all that the applicant was offering in return for capitulation was a discount of 10 per cent on costs on the ordinary basis. I am satisfied that it was not unreasonable, in the circumstances, for the respondent to have refused the capitulation which the applicant required under the threat of an indemnity costs order. 10It is unnecessary to revisit the question which I raised but did not answer in Al Amanah College Inc v Minister for Education and Training (No 4) [2012] NSWLEC 26 at [17] as to whether Calderbank principles, which operate outside the rules of court, have room to operate in cases of this type. I am prepared to proceed, as I did in that case, on the assumption that they apply and to decide the case on the basis that in the circumstances it was not unreasonable for the offer not to have been accepted. 11Accordingly, the order of the Court is that the respondent pay the applicant's costs of the question for separate determination on the ordinary basis with leave to proceed immediately to assessment if they are not otherwise agreed within a reasonable time. 12Counsel have now conferred and agreed on directions to progress this matter to the point where a hearing date can be fixed. Accordingly, by consent I make orders in accordance with short minutes of order dated 30 April 2012. I note that the matter will be before the Court to obtain a hearing date and for further directions on 27 July 2012. 13Finally, the respondent seeks its costs of the applicant's notice of motion which I have heard today. As previously mentioned, four of the five substantive paragraphs in the notice were not pressed at the hearing. It is unnecessary to go into their detail except to comment that: (a) one paragraph inappropriately sought a declaration to the effect of the answer to the preliminary question; and (b) another paragraph sought an order for entry of judgment to the effect of the answer to the preliminary question and I am not satisfied that an order is necessary nor that the respondent did any more than question whether a need for entry of judgment arose. The applicant has, however, achieved a substantial measure of success on the costs prayer. I think the appropriate order is that the respondent is to pay 50 per cent of the applicant's costs of the notice of motion, with such proportion to be the applicant's costs in the cause. The exhibits may be returned. 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: 03 May 2012