Sihaphone & Anor v Baccam & Anor - [2021] NSWDC 593 - NSWDC 2021 case summary — Zoe

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Sihaphone & Anor v Baccam & Anor

[2021] NSWDC 593

District Court of NSW|2021-11-02

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At a glance

Source facts

Court

District Court of NSW

Decision date

2021-11-02

Source

Original judgment source is linked above.

Judgment (15 paragraphs)

[1]

Solicitors: Farrar Lawyers for the first and second plaintiffs Maradock Lawyers for the first defendant Andrew Lee Lawyers for the second defendant File Number(s): 2021/00028716

[2]

Background

On 18 October 2021 I ordered a monetary judgment in the plaintiffs' favour against the first defendant for the sum of $153,162.16 and ordered that the first defendant pay the plaintiffs' costs (the 'first costs order'). I also determined that the second defendant have judgment against the plaintiffs, with an order for the plaintiffs to pay his costs (the 'second costs order'). The reasons were set out in Sihaphone & Anor v Baccam & Anor [2021] NSWDC 558, and this judgment assumes the reader's familiarity with those reasons. As indicated in those reasons, the monetary judgment comprised the combined principal on the two money claims in issue ($64,700) and combined interest on the respective money claims ($88,462.16).
The orders made on 18 October 2021 contemplated that the parties might seek a variation of the costs orders and directions for the exchange of submissions were made to cover that event.
By a notice of motion filed on 25 October 2021, the plaintiffs apply for variations of those costs orders.
By that motion, the plaintiffs seek orders that: 1. the first costs order be varied so that the first defendant is to pay the plaintiffs' costs on an indemnity basis from 23 September 2021. This was based on the rejection (by both defendants, including the second defendant who succeeded) of a Calderbank offer made on 22 September 2021; 2. the second costs order be varied so that the second defendant is to bear his own costs of the proceeding, or, alternatively, a Sanderson order [1] whereby the first defendant pay the second defendant's costs of the proceeding; 3. the first defendant pay the plaintiffs' costs of this motion.

[9]

Application that second defendant should be deprived of costs

The plaintiff relied upon the following matters which suggested that he should be deprived of his costs: 1. up to 17 September 2021, the second defendant adopted an identical defence as the first defendant; making similar admissions; 2. the second defendant acted unreasonably by joining in an application (on 20 August 2021) to withdraw admissions he (and the first defendant) had made in their Defences (24 February 2021) about entry into both contested loan agreements and henceforth advanced a position that he was not a party to the two agreements; 3. following that successful application, the second defendant's changed position made all the difference in that, without the change, the second defendant would have been liable.
The plaintiff submitted that the second defendant is not entitled to any costs as a result of these circumstances.
The second defendant submits that the plaintiffs failed in their claim against him and the ordinary rule that costs should follow the event should apply (Uniform Civil Procedure Rules 2005 (NSW) ('UCPR') r 42.1).
The second defendant disputes that it was only via a late amendment application that the plaintiffs were put on notice that he denied being a contracting party to both loan agreements. He says that this was evident since at least the time when he served his affidavit. This was a reference to his affidavit affirmed on 6 August 2021 read by him in the proceeding, in which he asserted, relevantly: "2. I have never entered into any arrangement to borrow or receive money from … (the First Plaintiff) or ….(the Second Plaintiff) …… 4. I was not present at, and did not witness, any of the conversations between my wife … referred to in (the First Plaintiff's) affidavit ….. 8. I do not know or understand why I have been made a party to these proceedings."
This affidavit was served on 9 August 2021.
The circumstances in which the second defendant sought to withdraw the admission of entry into agreements and amend his defence were set out in the affidavit of Dara Vith on 23 September 2021 (especially paragraphs 32- 37). The second defendant referred to the circumstance that the List Judge, when granting the application to amend, had already made costs orders, in effect, to compensate the plaintiffs for any prejudice flowing from the 'late' amendments. There was no justification, it was said, for any further reduction in the second defendant's costs.
In reply to the second defendant's evidence and submissions, the plaintiffs argued that prior to the date when leave was granted to the second defendant to amend, it was unnecessary for the plaintiffs to prove that the second defendant was a party to both loan agreements. The plaintiffs also took issue with the second defendant apparently arrogating to himself the right to apply for a costs order when he had not brought a motion to do so, as that did not comply with court directions. The plaintiffs also noted that the separate representation of both defendants only arose shortly before the hearing with a view to manufacturing a claim for costs for the second defendant.

[11]

The first costs order

Unlike a rules offer made under r 20.26 of the UCPR, [2] , there is no presumptive entitlement in an offeror to indemnity costs arising from the rejection of a Calderbank letter even if the offeror obtains a better outcome from the judgment than the terms of what were offered. The onus remains upon the offeror to establish the entitlement.
I accept, on balance, that the term of the offer represented a genuine offer. It represented a significant reduction in the interest component (from the first advance) should the plaintiffs succeed on their money claim on the first advance. The potential reduction on the interest component offered was not so derisory as to invite the inference that the plaintiffs were merely bent upon making an offer that might trigger an entitlement to indemnity costs.
However, it remains necessary for the plaintiffs to prove that it was unreasonable for the first defendant to reject the offer.
It is notable that the monetary judgment exceeded the settlement sum identified in the Calderbank offer only because of the interest component (from the first advance). The first defendant was in a position to calculate for herself her potential exposure, because of interest (on the first advance), should she fail in her defence of both money claims and, at the time, was therefore capable of assessing that if she lost, she was likely to be exposed to a sum greater than that which had been offered in the Calderbank offer.
By itself, however, actual or constructive appreciation of the risk of rejection of the offer does not mean that it was unreasonable for the first defendant to reject it.
In positing the contention that her rejection of the offer was unreasonable, the plaintiffs emphasised the circumstance that the Court rejected the first defendant's defences. But the agitation of arguments later rejected by a Court is not synonymous with unreasonable conduct of the nature usually warranting an order for indemnity costs. It is pertinent, in this context, that there is no evidence on this application to indicate that the plaintiffs sought to persuade the first defendant that her defences were likely to fail.
As a related but superficially separate point, the plaintiffs pointed to an admission, later withdrawn, by the first defendant that she had entered into the second loan agreement and the Court subsequently found that she had entered into that agreement. But as previously indicated, the first defendant's pleaded position had always been to deny the receipt of the monies advanced under that agreement. So the plaintiffs' argument comes down, again, to the contention that because the first defendant failed in that argument, this partly justified the making of an order for indemnity costs.
I am not persuaded that a partial indemnity costs order, based upon rejection of the Calderbank offer, is warranted.
It is unnecessary to consider other grounds raised by the first defendant in opposition to this application including the lack of distinction drawn in the offer between the position of both defendants, or the sufficiency of time for consideration of the offer.

[13]

Whether a Sanderson order should be made

Given the second defendant's earlier admission, albeit one that was later withdrawn, that he was a contracting party to both agreements, it was reasonable for the plaintiffs to join the second defendant in his claims for breach of their terms. Whether or not he was actually a party to the agreements, there was a real factual question as to whether he benefitted, indirectly or directly, from the advances even if they were made to the first defendant.
The real question is whether it is fair to impose liability upon the first defendant.
In this regard, the plaintiffs rely upon the first defendant's passivity. The insinuation is that she should have done something to correct the plaintiffs' belief, reinforced by the later admissions, that the second defendant was truly a contracting party.
But the principle for Sanderson (and Bullock) orders depends upon an element akin to estoppel; that there has been conduct by the unsuccessful defendant (the first defendant) that makes it reasonable for the plaintiff to join the successful defendant. That is similar to the concept of a 'holding out' relevant to questions of ostensible agency. This was touched upon in the reasons for judgment.
The plaintiffs' citation of the circumstance that the second defendant later withdrew his admission that he was a contracting party has already been factored into the result that the plaintiffs' costs exposure, to the second defendant, has been substantially reduced by that event. So that circumstance may be put aside.
As explained at greater length in the reasons for judgment ([104]-[113]), nothing was done by the first defendant, prior to the advances, which led the plaintiffs to think that the second defendant was a joint contractor to the two agreements. Further, there is no evidence on this application which would indicate other conduct by the first defendant, subsequent to the advances being made, but before the institution of the proceeding, which might reasonably have led the plaintiffs to think that it was appropriate to join the second defendant.
That being so, the conditions for a Sanderson (or Bullock) order are not made out.
It follows from this that it is unnecessary to determine the second defendant's apparently contingent application that the plaintiffs partially pay his costs on an indemnity basis as a result of the plaintiffs' continued pursuit of him following their rejection of Mr Lee's Calderbank offer of 24 September 2021. But leaving aside the formal complaint raised by the plaintiffs about an absence of a notice of motion, I would add that if it was necessary to consider that offer, there would be real doubts about whether the offer represented a genuine offer of compromise (there being no indication of which costs were incurred by him which were not collectively incurred by both defendants) and the extremely limited time (noting the time of service for the offer) available for acceptance of the offer.

Sihaphone & Anor v Baccam & Anor

At a glance

Court

Decision date

Source

Judgment (15 paragraphs)

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Legislation Cited (2)

Cases Cited (2)