Sharjade Pty Ltd v RAAF

Sharjade Pty Ltd v RAAF - [2008] NSWSC 1347 - NSWSC 2008 case summary — Zoe

[15]

Costs of the Second Defendant 15 The plaintiff failed in both its claims against the second defendant. The second defendant seeks an order that the plaintiff pay its costs on a party/party basis up to 21 July 2008 and thereafter on an indemnity basis. The claim for indemnity costs is a little complex because there is a question whether the Calderbank offer was made during a "mediation session" within the meaning of that term in s 30 of the Civil Procedure Act 2005. 16 The plaintiff seeks an order that there be no order as to costs as between it and the second defendant because of the second defendant's wrongful termination of the Option Agreement. It was held that the second defendant was not entitled to demand the provision of a bank guarantee or the payment of interest from the first defendant without having entered into a Contract for the Sale of Land or at least proffered the contract to the first defendant for execution: par [112] of the Judgment. 17 The plaintiff claimed that the second defendant was an essential party to the proceedings by reason of the claim the plaintiff made that the second defendant was not entitled to make those demands on the first defendant and/or terminate the Option Agreement. It would have been possible for the plaintiff simply to sue the first defendant for breach of contract without joining the second defendant as a party. The question of whether the second defendant was entitled to make the demands it did was a question of construction of the Option Agreement and the facts in respect of whether a contract had been proffered by the second defendant to the first defendant. The witnesses that the first defendant would have relied upon in this regard would no doubt have been some of the officers of the second defendant but I am not satisfied that it was an essential party to proceedings for the claim of breach of contract against the first defendant. 18 It is necessary then to turn to the question of whether the second defendant should have its costs following the event of its success in defeating the plaintiff's claims of inducement of breach of contract and conspiracy. It was submitted that the second defendant's conduct triggered the first defendant's conduct in terminating the Heads of Agreement between the plaintiff and the first defendant. However the real question is whether there are circumstances which would persuade me to depart from the usual order of costs following the event. Although it was held that the second defendant's demands on the first defendant were not justified, I am not satisfied that this was conduct that disentitles the second defendant from recovering its costs of successfully defending the plaintiff's claims against it. I am not satisfied that there are any circumstances which would justify a departure from the usual order of costs following the event. The next question is whether I should award indemnity costs from 21 July 2008.

[17]

20.7 Notification of conclusion of mediation Within 7 days after the conclusion of the mediation, the mediator must advise the court of the fact that the mediation has been concluded. 20 It is apparent from an analysis of matters at least in the Commercial List and Technology and Construction List that, in the main, mediators outside the court annexed mediation system have not been complying with this Rule. In the vast majority of cases this has been of no practical consequence. However, this case exemplifies the difficulties that can occur in the absence of such compliance. 21 There are good policy reasons for Rule 20.7. It is necessary to have certainty of the timeframe in which the "mediation session" occurred whilst keeping confidential the communications between the parties and the mediator. Unfortunately compliance with the Rule may not achieve that certainty if it is not otherwise clear when the "mediation session" commenced. The policy of having the mediator advise the Court of the time of the conclusion of the "mediation" was also to accommodate confidentiality agreements in respect of the mediation and s 30(4) of the Civil Procedure Act 2005 which renders inadmissible anything said at a mediation and/or documents prepared for the purposes of, in the course of, or as a result of a mediation session. 22 When parties attend unsuccessful mediations whilst the trial of a matter is proceeding and then continue with the trial, the inference (irresistible perhaps) is that the mediation has been concluded. Even so, it is important that mediators still comply with the Rule so that there is evidence of that fact. The issues that have been highlighted by this application lead me to the conclusion that it may be prudent to amend Rule 20.7 to require the mediator to notify the Court of the time and date on which the "mediation session" commenced and concluded. 23 In this case the second defendant claims that it provided a Calderbank offer by email (the email) to the plaintiff at 6.37 pm on 18 July 2008, one hour and 37 minutes after the parties left the meeting with the mediator. The question of the admissibility of the email and evidence surrounding the way in which that email was prepared and provided to the plaintiff was heard on the voir dire and I reserved my judgment as to whether to admit the evidence on the application for costs. 24 Mr Speakman submitted that his client was entitled to proffer the email as a stand alone offer, quite separate from the mediation process, without having to prove that the offer was made outside the timeframe of the mediation. Andrew Keith Carter, a partner of the firm Blake Dawson, solicitors for the second defendant, made an affirmation dated 14 November 2008 in which he gave evidence that "after the conclusion of the mediation" the second defendant made an offer to settle the proceedings which was communicated to the plaintiff by the email. Mr Newlinds tendered a Mediation Agreement and a Confidentiality Agreement. Although both are undated it is common ground that they were executed on 18 July 2008. The Mediation Agreement included the following:

[21]

(7) In the application of Chapter 3 to a hearing to determine a preliminary question, the facts in issue are taken to include the facts to which the hearing relates. 30 Mr Speakman submitted that Mr Newlinds was precluded from calling evidence from Mr Akbarian by reason of s 131 of the Civil Procedure Act which provides relevantly: 131 Exclusion of evidence of settlement negotiations (1) Evidence is not to be adduced of: (a) a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute; or (b) a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute. 31 However s 131(2)(h) excludes the operation of s 131(1) in relation to a communication or document that is relevant to determining liability for costs. It seems to me that s 30 of the Civil Procedure Act is a complete prohibition in clear and unambiguous terms. I am of the view that s 131(1) is not applicable in this instance and s 131(2)(h) does not apply to attempts to settle a dispute in a mediation session: Azzi v Volvo Car Australia Pty Ltd (Costs) [2007] NSWSC 375. 32 Section 30 of the Civil Procedure Act appears under the heading "Privilege". The communications referred to in similar provisions to s 30 of the Civil Procedure Act (that is, in s 15(1) of the Farm Debt Mediation Act 1994) have been described as having the status of "without prejudice" communications: Commonwealth Bank of Australia v McConnell (Rolfe J, Supreme Court of New South Wales, 24 July 1997, unreported, BC9705442 at 27). When the second defendant asserted that the email containing the Calderbank offer was created after the conclusion of and independently of the mediation session it opened up the questions of: (1) whether the mediation session had concluded at the time the document was provided to the plaintiff; and (2) whether the document was independent from the mediation session and was not "as a result of" the mediation session. 33 Although the Court of Appeal was considering a question of legal professional privilege (prior to the introduction of the Evidence Act 1995) in Benecke v National Australia Bank (1993) 35 NSWLR 110 the observations made by Gleeson CJ at 111 seem to me to be analogous to the present situation:

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