HER HONOUR: This is a judgment on indemnity costs.
Mr Helwani seeks that his costs be paid on an indemnity basis. The Roudes object to such an order.
On 26 February 2020, I handed down judgment in Roude v Helwani [2020] NSWSC 123. I made orders dismissing the appeal, affirming the decision of the Magistrate dated 9 November 2018 and dismissing the amended summons dated 5 September 2019. The Magistrate had entered judgment in favour of Mr Helwani in the sum of $86,071.50. I also made an order that the plaintiff pay the defendant's costs on an ordinary basis. As I had not heard from the parties on costs, I granted leave for them to make submissions in relation to an application for an order for indemnity costs. I now have these submissions.
[2]
The law
The starting point in awarding costs is s 98 of the Civil Procedure Act 2005 (NSW). It relevantly reads:
""98 Courts powers as to costs
(1) Subject to rules of court and to this or any other Act:
(a) costs are in the discretion of the court, and
(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and
(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.
(2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court.
..."
Rules 42.1 and 42.2 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") read:
"42.1 General rule that costs follow the event
Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.
…
42.2 General rule as to assessment of costs
Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis."
Division 4 of the UCPR refers to offers of compromise. Rule 20.26 relevantly reads:
"20.26 Making of offer
…
(1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms.
(2) An offer under this rule -
(a) must identify -
(i) the claim or part of the claim to which it relates, and
(ii) the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment, and
(b) if the offer relates only to part of a claim in the proceedings, must include a statement -
(i) in the case of an offer by the plaintiff, as to whether the balance of the proceedings is to be abandoned or pursued, or
(ii) in the case of an offer by a defendant, as to whether the balance of the proceedings will be defended or conceded, and
(c) must not include an amount for costs and must not be expressed
to be inclusive of costs, and
(d) must bear a statement to the effect that the offer is made in accordance with these rules, and
(e) if the offeror has made or been ordered to make an interim payment to the offeree, must state whether or not the offer is in addition to that interim payment, and
(f) must specify the period of time within which the offer is open for acceptance."
[3]
The Calderbank offer
On 5 July 2018, 20 days before the hearing of the trial before the Magistrate, Mr Helwani (by his solicitor Mr Brendan Miller of Garland Hawthorn Brahe Lawyers) put on a Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586 ("Calderbank") offer for $78,000.00 with no order as to costs.
In order to be relied upon in an application for costs, a Calderbank offer must offer a genuine compromise, be open for a reasonable period of time and state that the offer is made without prejudice save as to costs.
The letter dated 5 July 2018 relevantly reads:
"'Without prejudice except as to costs'
…
The evidence of my client clearly proves his claim against your clients in contract, on a quantum meruit basis or an account stated basis. Of particular relevance are the statutory declarations your client swore admitting the debt due to my client.
Notwithstanding the above, my client is willing to compromise his claim and resolve the pleadings on the basis that:
1. Judgment be entered for my client in the sum of $78,000.00; and
2. There be no order as to the costs of the proceedings.
…
This offer is open for a period of 14 days."
The letter did not stipulate that the offer of compromise was made pursuant to UCPR 20.26(2)(d).
[4]
Ettingshausen
Both parties referred to Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 ("Ettingshausen") (Gleeson CJ and Priestley JA with Kirby P dissenting). Ettingshausen concerned the meaning and effect of the Supreme Court Rules 1970 relating to offers of compromise and indemnity costs. In an offer of compromise made before the first trial in that case, Mr Ettingshausen had offered to settle his entire defamation claim against the Australian Consolidated Press for $85,000. The offer was not accepted. At the hearing, Mr Ettingshausen was awarded damages substantially higher than those offered in the letter. On appeal, the Court of Appeal sent the matter back for a retrial on the issue of damages. The new verdict at the second trial again awarded the plaintiff damages at a higher amount than that referred to in the offer of compromise. The judge at the second trial refused to make an order for indemnity costs. Mr Ettingshausen appealed that decision to the Court of Appeal. The judgment in Ettingshausen was in relation to the costs of the second trial.
In determining whether the plaintiff was entitled to indemnity costs in Ettingshausen, the Court of Appeal held that an offer of compromise does not cease to have effect once the claim has been the subject of a complete trial. The offer is made not in respect of the trial, but in respect of the claim. As the Court of Appeal observed, a claim may not be finally heard and determined until after there have been a number of appeals, and perhaps, a number of trials, and an offer of compromise will continue to have costs consequences for any appeal or subsequent retrial of the claim. The Court of Appeal concluded at 410 that there was no justification for concluding that once a claim has been the subject of a complete trial, an offer for compromise made before the trial has no further significance for any appeal or subsequent re-trial.
In its decision, the Court of Appeal held that all costs before the Court that related to Mr Ettingshausen's defamation claim were to be paid on an indemnity basis. However, on appeal of the first instance judgment on costs (i.e. not relating to the defamation claim, but to an interlocutory costs dispute), costs were awarded on an ordinary basis.
[5]
Mr Helwani's submissions
Mr Helwani submitted that this offer represented a concession of $9,000.00 from the amount claimed on the further amended statement of claim (being $87,077.50) and a complete capitulation on costs, which by that stage were substantial and included multiple affidavits of Mr Helwani, disputation of notices to admit put on by the Roudes and multiple sets of pleadings. The offer stipulated that it was open for a period of 14 days. Counsel's fees as at 11 May 2018 were approximately $7,770.00, and solicitor's fees as at 5 July 2018 were approximately $15,400.00. The Roudes did not respond to the offer.
Mr Helwani submitted that the appeal in his proceedings only relate to his claim for damages. On the issues that this Court decided, Mr Helwani was entirely successful.
Mr Helwani further submitted that the usual rules applying to a party that exceeds its offer should be followed in this manner. This is because the point of offers of compromise and Calderbank offers is that if an offer to settle a claim is accepted, then no more litigation costs follow on the claim. In this appeal, if the offer had been accepted by the Roudes, Mr Helani would not have had to expend money on the appeal. Because Mr Helwani's offer was rejected, Mr Helwani has had to pay to run a trial and an appeal, and has twice been successful in receiving the full amount of his claim, which exceeded his 5 July 2018 offer. As such, Mr Helwani submitted that he is entitled to indemnity costs.
[6]
The Roudes' submissions
The Roudes submitted that Mr Helwani has only cited one authority for the proposition that costs of an appeal are covered by an offer made during the matter at first instance.
I accept that it is correct that the Court of Appeal determined that the offer of compromise made during the matter at first instance pursuant to the rules of the Court also applied to the outcome of the second trial. However, the Roudes submitted that this case is different, as the appeal did not go to the assessment of damages, but to entitlement to damages. As such, the appeal is a discrete event. The Roudes noted that in Ettingshausen, the costs of the appeal were paid on an ordinary basis.
The Roudes submitted that Kirby J's dissent in Ettingshausen is more in line with modern standards. If the respondent wished to obtain an order for indemnity costs, it ought to have made an offer in relation to the appeal. Then the plaintiffs would have been aware of Mr Helwani's position and why he was taking that position.
Finally, the Roudes submitted that Mr Helwani is not entitled to an order for indemnity costs, since on appeal he fixated upon the unarguable notice of contention concerning an account stated.
[7]
Conclusion
Both parties focused their submissions on Ettingshausen, which concerns an offer of compromise. While the law on offers of compromise is similar, Cat Media Pty Ltd v Allianz Australia Insurance Ltd [2006] NSWSC 790 ("Cat Media") relates to Calderbank offers, which was the type of offer made in these proceedings.
In Cat Media, Bergin J (at [9]) stated that the costs consequences of a Calderbank offer are in the court's discretion, having regard to all of the relevant circumstances of the case. Bergin J stated the relevant principles as follows. Firstly, there is no prima facie presumption in favour of an award for indemnity costs if the Calderbank offer is not accepted. Secondly, a Calderbank offer that does not offer a genuine compromise, but is designed merely to trigger costs sanctions, will not be treated as genuine. Thirdly, there is no rule that an optimistic offer is not a genuine offer. Whether or not it was reasonable to reject an offer is a relevant consideration, but will not affect the genuineness of the offer. Finally, the onus rests on the applicant for an order for indemnity costs to show that the rejection of the Calderbank offer was unreasonable.
It does not matter whether the appeal involves an assessment of damages or an entitlement to damages. The Roudes' argument that Mr Helwani is not entitled to an order for indemnity costs "as the appeal was fixated on a notice of contention concerning accounts stated" misses the point. The notice of contention would have come into play only if the appeal was upheld, which it was not.
I accept that there is no prima facie presumption of an award for indemnity costs. The Calderbank offer in this case was for $78,000, which is just over $8,000 less than the amount awarded to Mr Helwani in the judgment but with no order as to costs. In the Local Court, Mr Helwani was willing to forego being awarded the costs he incurred in preparing affidavits and disputing notices to admit, which at the time of the letter amounted to approximately $7,770.00 for his counsel and $15,400.00 for his solicitors.
The Roudes had legal representation and it is likely that they were advised of their chances of success of the appeal. I am of the view that Mr Helwani's offer of compromise was a genuine compromise. It was unreasonable for the Roudes to turn down this offer. Mr Helwani has discharged his onus of proof and shown that the rejection of the Calderbank offer was unreasonable. For this reason, I make an order that the Roudes are to pay Mr Helwani's costs on an indemnity basis in relation to this appeal.
[8]
The Court orders that:
1. The order that the plaintiffs pay the defendant's costs on an ordinary basis is set aside.
2. The plaintiffs are to pay the defendant's costs on an indemnity basis in relation to this appeal.
[9]
Amendments
26 March 2020 - The word "ordinary" in order 2 on the cover sheet changed to "indemnity"
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Decision last updated: 26 March 2020