Ryding v Miles & Ors

Judgment 1I delivered judgment in these proceedings on 10 February 2012. I noted that the proper order was that the proceedings be dismissed and that, in the ordinary course, costs should follow the event. I indicated that I would hear the parties as to costs and this was effected by each party lodging written submissions as to costs. 2In the ordinary course, the Defendants would be entitled to the costs of the proceedings under Uniform Civil Procedure Rules 2005 (NSW) r 42.1, having been successful in their defence of the proceedings, on the basis that costs follow the event. The Defendants contend that the Plaintiff should pay their costs of the proceedings on an indemnity basis; or, alternatively, the Plaintiff should pay their costs of the proceedings on an ordinary basis prior to 10 July 2009 and on an indemnity basis from that date; and, in either case, the Plaintiff should be ordered to pay interest on those costs. The Plaintiff accepts that an order should be made that he pay the Defendants' costs of the proceedings on a party/party basis but opposes the order for indemnity costs in respect of any part of the proceedings and the order sought by the Defendants that he should pay interest on the Defendants' costs. Claim for indemnity costs 3The Defendants contend that they should be entitled to indemnity costs, on the basis that the Plaintiff maintained proceedings seeking damages for an opportunity that the Plaintiff must have known was already lost for reasons unrelated to any alleged breach by the Defendants; continued the claim for damages in circumstances where he knew he had suffered no loss; pursued litigation although he was aware that he had consent from the Defendants to lodge the relevant Development Application by February 2007 and conducted the litigation in a dilatory manner. 4The principles on which an order for indemnity costs can be made were summarised by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233-4, applied in Lahoud v Lahoud [2006] NSWSC 126 at [11] and in Ng v Chong [2010] NSWSC 127 at [18]. Such an order may be made when the justice of the case requires, and the categories in which the discretion to make that order might be exercised are not closed. For example, such orders have been made where false or irrelevant allegations of fraud have been made; where particular misconduct causes loss of time to the Court and to other parties, or, relevantly, where proceedings were commenced in "wilful disregard of known facts or clearly established law". The defendants also point out that indemnity costs may be awarded where the proceedings are conducted in such a way as to cause unreasonable expense or delay: Wentworth v Rogers [1999] NSWCA 403 at [85]. In Lahoud v Lahoud at [11], Campbell J quoted Sheppard J in Colgate-Palmolive, where his Honour said: "The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis." 5Although I have found against the Plaintiff in respect of a number of aspects of his claim, I do not consider that it has been established that he must have known that the claim was manifestly without prospects of success. In my earlier judgment, I found that various factors suggested that the Plaintiff was not committed to seeking an increase in the extraction rate of the quarry in the relevant period, irrespective of the position in respect of the Development Application. These factors included his decision not to pursue an increase in extraction rates of the quarry when he first raised that possibility with Council in early 2002, for reasons including the adverse reaction of residents and economic reasons; his concession in cross-examination that he had abandoned his intention to expand the quarry by late 2003 when he failed to obtain government funding for that expansion; and his difficulties in securing government assistance in 2006. These matters meant that the Plaintiff's damages claim could not succeed, since he did not seek to quantify any loss arising from an inability to progress the Development Application as distinct from the inability to increase the expansion rate at the quarry which he contended was consequential. 6However, I would not go so far as to find that the Plaintiff knowingly pursued the proceedings while recognising that his damages claim could not succeed. It seemed to me that his concession in cross-examination that he had abandoned his intention to expand the quarry by late 2003 reflected matters which he may not have fully appreciated at an earlier point and, as I noted in my earlier judgment, that concession also had to be qualified to recognise that he was unsuccessfully attempting to secure government assistance which may have changed the position as late as 2006. 7The Defendants also rely upon the evidence which emerged in the course of the Plaintiff's cross-examination that the costs of operating the quarry with an increased expansion rate would significantly exceed the Plaintiff's estimate of the revenue from the quarry. Again, although this evidence also significantly damaged the Plaintiff's case, I would not find that he consciously knew and disregarded it prior to the commencement of the proceedings. Rather, the Plaintiff may well not have previously assembled in his own mind the information which was extracted by a detailed cross-examination by the Defendants' Counsel to support that conclusion. While the Plaintiff may well have been overly optimistic in respect of the proceedings and not have had an adequate appreciation of the evidentiary difficulties facing his claim, I would not draw the conclusion that he had deliberately disregarded the facts which were known to him in commencing the proceedings. 8The Defendants also contend that indemnity costs are justified by reason that the Plaintiff commenced the proceedings although they had consented to the lodgement of the Development Application by February 2007. I reviewed the relevant correspondence in paragraphs [28]ff of my earlier judgment. I do not consider that it has been established that the Plaintiff deliberately disregarded the fact (which I have found) that the Defendants had consented to the lodgement of the Development Application by February 2007. 9Although there was a significant amount of delay by the Plaintiff in the conduct of these proceedings, I am also not satisfied that these matters raise to a level where an order for indemnity costs in respect of the proceedings is justified. Indemnity costs in respect of offer of compromise 10The Defendants contend that they should have their costs on an indemnity basis from 10 July 2009, the day after an offer of compromise to pay the Plaintiff the sum of $15,000 was made under UCPR r 20.26. UCPR r 42.15 provides that, if a valid offer of compromise is made by a defendant and not accepted then, unless the Court otherwise orders, if the final judgment is not less favourable to the plaintiff, the defendant is entitled to a costs order on an indemnity basis from the day following the day on which the offer was made. The entitlement which arises from r 42.15 is at least a "prima facie" entitlement and a number of cases suggest that compelling or exceptional circumstances would be required to justify a departure from those rules: see the helpful summary of the case law in Ying v Song [2011] NSWSC 618 per Ward J at [18]. 11An effective offer of compromise must involve a "real and genuine element of compromise": Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120; (2006) 67 NSWLR 706; Ying v Song at [23]. In the present case, the amount offered by the Defendants by way of a compromise of the proceedings was not nugatory, particularly where the Plaintiff would have recovered his costs of the proceedings on accepting the offer of compromise. I accept that it therefore involved a genuine element of compromise. 12The Plaintiff submits that the offer of compromise was not valid under UCPR r 20.26 because the Plaintiff's claim involved a claim for damages and for declaratory relief and the offer made by the Defendants did not address the claim for declaratory relief or the costs of that aspect of the proceedings. The requirements of UCPR r 42.15A are, in my view, satisfied where the Plaintiff has failed to obtain any declaratory relief and the Defendants have obtained an outcome that is more favourable to them than the terms of the offer. 13Alternatively, the Plaintiff contends that "exceptional circumstances" are established so that an order for indemnity costs should not be made in respect of the offer of compromise. I do not consider that the Plaintiff has established exceptional circumstances that would deprive the Defendants of the indemnity costs which would otherwise follow from the offer of compromise. To the contrary, the matters to which I have referred above, although they do not warrant an order for indemnity costs in themselves, reinforce the appropriateness of the result which will follow from the application of UCPR r 42.15A. 14In the alternative, I would have held that the Offer of Compromise took effect as a Calderbank offer and supported an order for indemnity costs on that basis. The Plaintiff contends that the offer could not operate as a Calderbank offer if not valid under UCPR r 20.26: Trustee for the Salvation Army (NSW) Property Trust & Anor v Becker (No 2) [2007] NSWCA 194 at [22]. In this case, by contrast with Salvation Army, the letter from the Defendants' solicitor serving the offer of compromise did not contain an express statement that it should also take effect as a Calderbank offer. However, there is no history of the making of various offers in this case to suggest, as did the history in Ying v Song, that the Defendants would have been expected to expressly state that intention at the time of service of the offer of compromise had they held it. I can see nothing to suggest that the Defendants would not have intended the offer to operate as a Calderbank offer if it were not effective as an offer in accordance with the Rules, and I consider that such an intent was implied in the relevant circumstances. 15In order to be entitled to indemnity costs under a Calderbank offer, the Defendants must establish both that the offer represents a genuine element of compromise of the dispute and that it was unreasonable for the Plaintiff to reject it. The making of a Calderbank offer does not automatically result in a favourable costs order, even if the judgment is more favourable to the party making the offer than the terms of the offer: Commonwealth of Australia v Gretton [2008] NSWCA 117. It seems to me, in the circumstances of the case and having regard to the very substantial difficulties which the Plaintiff faced in proving his case (which ultimately resulted in his failure to do so), the rejection of the offer made by the Defendants, if treated as a Calderbank offer, must be found to be unreasonable so as to support an order for indemnity costs. Interest on costs 16The Defendants also seek an order for interest on costs under s 101 of the Civil Procedure Act 2005. The principles applicable to an award of interest and the proper process for calculation of that interest were comprehensively reviewed by Ward J in Ying v Song at [99]ff. I accept that, particularly where the proceedings have continued over a long period, the Defendants will have been out-of-pocket by the payment of costs to their lawyers, and an order for interest on costs can be made to compensate them for that matter, in the absence of any countervailing discretionary factor: Drummond & Rosen Pty Ltd v Easey (No 2) [2009] NSWCA 331 at 4; Ying v Song at [99]-[103]. 17In Drummond & Rosen Pty Ltd v Easey (No 2) at [49], Handley JA (with whom Tobias JA agreed) observed that the power under s 101(4) should not be exercised without evidence of the amounts paid and the dates of payment. The Plaintiff relied on the fact that, in their submissions in chief as to costs, the Defendants had not provided evidence of the amounts paid and the date of payment. The Defendants now rely on an affidavit of Stephen Miles dated 21 March 2012, which was served with their submissions in reply as to costs. Mr Miles is the solicitor for the Defendants and a partner in the firm which acted for them in the proceedings. Mr Miles gives evidence that he has rendered tax invoices for legal services and disbursements in the course of the proceedings and the Defendants have paid those tax invoices so that there are presently no outstanding unpaid invoices. His affidavit annexes a copy of his firm's accounting ledger for the relevant proceedings which show the date on which tax invoices were rendered, disbursements paid and trust funds received. In my view, this satisfies the requirements in Drummond & Rosen Pty Ltd v Easey (No 2). I do not consider the Plaintiff has suffered any disadvantage as a result of the lateness of that affidavit. 18I would, for the reasons set out by Campbell J in Lahoud, accepted by Bergin J in Cat Media Pty Ltd v Allianz Australia Insurance Ltd [2006] NSWSC 790 and Ward J in Ying v Song, adopt a formula which avoids the complex and expensive task of a costs assessor calculating interest on individual payments. The Plaintiff, although resisting an order for payment of interest, did not submit that the approach adopted in Lahoud, Drummond & Rosen Pty Ltd v Easey (No 2) and Ying v Song was inappropriate if such an order were made. Orders 19Accordingly, I order that: