Roland Ofria v Robert William Cameron [2008] NSWCA 242 | Case summary

The plaintiff sued a client for $49,260.50 for unpaid fees and recovered judgment at trial for $39,123.87. The defendant had made a Calderbank offer before action of $30,000.00. On appeal judgment was entered for the defendant who applied for an order for indemnity costs of the trial. HELD: (1) The size of the claim and the risk that the costs of litigation would be disproportionate were relevant considerations to be taken into account in the exercise of the Court's discretion; (2) The Calderbank offer can be made before action; (3) The Court's obligations under ss 56 and 60 the Civil Procedure Act to facilitate the just quick and cheap resolution of the case at a proportionate cost were also relevant considerations; (4) The plaintiff should be ordered to pay the defendant's costs of the trial on an indemnity basis.

7 October 2008 ROLAND OFRIA v ROBERT WILLIAM CAMERON [No. 2] Judgment 1 THE COURT: On 1 July this year this Court, in an extempore judgment, allowed this appeal with costs, set aside the judgment of the District Court in favour of the respondent and entered judgment for the appellant defendant with costs. The respondent was granted a certificate under the Suitors Fund Act. 2 The appellant applied on 8 July for an order that the respondent pay the costs of the trial on an indemnity basis. 3 The respondent, a former barrister, had sued the appellant, his former lay client, for unpaid fees. The respondent, who had been retained by a solicitor on behalf at the appellant, had sent a costs agreement to the solicitor. The trial judge held that this entitled the barrister to recover his fees from the lay client and he gave judgment for the barrister for $39,123.87. 4 This Court held that there was no evidence of any contract between the barrister and the lay client outside the costs agreement, and this, on its true construction, was between the barrister and the instructing solicitor. 5 The litigation between the parties has a complicated history. The Deputy Commissioner of Taxation having sued the barrister in the District Court for unpaid income tax (No. 166 of 2005), on 16 March that year the barrister filed a cross-claim against the appellant and his wife claiming $51,740.50 for unpaid fees. The cross-claim was defended and the notice of grounds of defence filed on 5 July 2005 pleaded, among other defences, that there was no contractual relationship between the parties. The appellant (and possibly his wife) filed a cross-claim against the barrister alleging that he had practised without a current practising certificate and had been guilty of professional negligence and misleading and deceptive conduct. 6 On 12 December 2005 Phegan DCJ struck out the barrister's cross-claim and ordered him to pay the costs of the cross-claim and of the motion but he refused to make that order on an indemnity basis. He also ordered that any further proceedings by the barrister against the appellant (and possibly his wife) not be given a hearing date until the barrister had paid those costs. 7 The statement of claim in the present proceedings (No. 5504 of 2005), which was filed on 16 December 2005, maintained the claim for unpaid fees of $49,260.50 but only against the appellant. The appellant's defence filed on 12 January 2006 pleaded that there was no contractual relationship between the parties. There were also defences of part payment and limitation, and the appellant filed a cross-claim which repeated the allegations in the earlier cross-claim against the barrister. 8 The barrister's appeal against the condition imposed by Phegan DCJ that he should not be allocated a hearing date on any new claim until he had paid the costs of the cross-claim was successful [2007] NSWCA 37 and on 27 February 2007 the condition was set aside. The action, which came on for trial on 11 July 2007 before Hungerford ADCJ, was heard over five days, but at the end of the third day the barrister obtained an adjournment to enable him to call other evidence. This was granted on terms which included an order for costs in favour of the appellant but the Judge refused to make that order on an indemnity basis. 9 The appellant abandoned his cross-claim five days before the hearing and the trial judge made an order for the costs of the cross-claim in favour of the barrister. The defences of limitation and payment were rejected by the trial judge and were not pursued on the appeal. 10 The appellant bases his claim to indemnity costs on two matters: the fundamental weakness in the barrister's case exposed in the extempore reasons of this Court, and a number of Calderbank letters sent to the barrister's solicitors between 2005 and 2007. 11 On 5 July 2005, the day the defence to the cross-claim was filed, the appellant's solicitors wrote a letter, without prejudice except as to costs, to the barrister's solicitors claiming that the costs agreement was with the instructing solicitor, and offering "to settle this matter" on payment of $20,000. 12 On 9 August a similar letter was sent offering to pay $30,000 within seven days. It is not necessarily clear that the offer was to settle all claims between the parties but we consider that this was implied from the offer to pay the money. There has been no suggestion that the barrister and his legal advisers attempted to explore the meaning of the offer, and it was ignored. 13 The next offer made on 11 January 2006, the first made after action No. 5004 of 2005 was commenced, asserted payment of $64,180, not $53,490 as claimed in the letter of 9 August, and it set up the order for costs made by Phegan DCJ on 12 December 2005 which was said to be for $24,000. The actual order is not before us on this application. The letter claimed a balance in favour of the appellant of $12,000 which he was prepared to forego if each party would "walk away". 14 The next offer was made on 1 March 2006. Apart from re-agitating the merits and the quantum of the barrister's claim, the letter asserted that the appellant had costs orders against the barrister in No. 166 of 2005 for $26,196.87, and another for the costs of a motion in the Court of Appeal for $7,876. It is clear that there had been no assessment in either case. The letter offered to forego the appellant's claims against the barrister for costs, and not to pursue his cross-claim provided the barrister discontinued No. 5504 of 2005, and his proceedings in the Court of Appeal. This offer was made at an early stage of No. 5504 of 2005, 16 months before the trial. 15 Counsel for the barrister submitted that none of these letters were Calderbank offers but that is what they purport to be. Apart from the ambiguity in the letter of 9 August 2005, which in our view is resolved by construction, there is no obvious reason why they should not be treated as Calderbank offers. The first two were made in earlier proceedings on the same cause of action and their relevance will be considered in due course. 16 The barrister is substantially worse off as a result of this Court's decision than he would have been if he had accepted any of the Calderbank offers. If he had accepted the offer of $30,000 in the letter of 9 August 2005 he would not have incurred his own and the appellant's costs of the proceedings before Phegan DCJ on 12 December 2005, of the motion in the Court of Appeal in 2006, the trial before Hungerford ADCJ, and of the leave application and the subject appeal to this Court. 17 Presumably the barrister obtained an order for the costs of his earlier successful appeal to this Court but that will merely reimburse him for part or all of the costs he incurred in those proceedings. This is also the position with the order made by Hungerford ADCJ in respect of the costs of the cross-claim against him. 18 It is not necessary to form any view as to the likely quantum of the assessed costs under the order against the barrister in No. 166 of 2005 or in the Court of Appeal in 2006. Each of the offers made the point that there was no contractual relationship between the parties and the costs agreement was with the solicitor, not the lay client, the points on which the appellant ultimately succeeded. 19 Two other points are taken on behalf of the barrister. The first is that the offers of July and August 2005 were made in other proceedings, and the second is that a Calderbank offer does not create any prima facie presumption in favour of an order for costs on an indemnity basis. 20 The settled principle established by decisions of this Court is that a Calderbank offer will not justify an indemnity costs order unless its rejection was unreasonable: Jones v Bradley (No. 2) [2003] NSWCA 258. 21 The material considerations are that the barrister has ended up worse off than if the offers of 5 July and 9 August 2005 had been accepted and the difference is not marginal. It is substantial in relation to a claim for $49,260.50 for which he only recovered judgment $39,123.87. Thus the offer of $30,000 on 9 August 2005 represented almost 75% of the barrister's claim at its highest. 22 The refusal of this offer was followed by two hearings in the District Court, one for five days, two motions in the Court of Appeal and two appeals, all over $39,123.87. The amount of judicial and other time invested in the dispute was out of all proportion to the difference of $9,123.87. 23 The result in this Court turned on the construction of the Legal Profession Act and the barrister's costs agreement. These issues were identified by the appellant's solicitors at an early stage, and nothing relevantly changed. They always formed part of the appellant's core defence. There were no surprises, and no unexpected developments. The merits of the core defence could be evaluated without difficulty by the barrister and his advisers in 2005 and 2006. In our judgment the barrister's conduct in rejecting the cash offers in 2005 was wholly unreasonable. 24 An important consideration in the present case is the relative modesty of the barrister's claim. The courts must encourage the settlement of modest claims and should give proper weight to a Calderbank offer in such cases. This approach is mandated by the Civil Procedure Act which commenced on 15 August 2005, but applied to existing proceedings unless the Court otherwise ordered: Sch 6 cl 5. 25 Section 56 states that the overriding purpose of the Act and rules is to facilitate the just, quick, and cheap resolution of the real issues. Section 60 provides that the practice and procedure of the Court should be implemented with the object of resolving the issues so that the cost to the parties is proportionate to the subject matter of the dispute. 26 An order for costs at the end of the proceedings cannot achieve these objectives in the subject litigation. However a general awareness in the legal profession that in a case such as this the Court will treat the size of the claim as a relevant factor when considering whether the rejection of a Calderbank offer was unreasonable will tend over time to achieve the objectives the Parliament has given the Courts in ss 56 and 60. 27 The first two offers were made in the course of other proceedings but this does not make them irrelevant. The offers were in respect of the same cause of action and they would, if accepted, have obviated the need for the subject proceedings. We cannot discern any reason for ignoring them, and in our view they should be given as much, if not more, weight than an offer made in the course of pending proceedings. The courts treat as relevant tenders of payment and other conduct by the defendant before action such as admissions and offers of undertakings and in our view Calderbank offers should be treated in the same way. 28 In our judgment therefore the appellant's application should succeed. The following orders are made: (1) Order 2 made by this Court on 1 July 2008 is varied by adding the words "on an indemnity basis but without affecting any other order for costs in the proceedings."

Roland Ofria v Robert William Cameron

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