Staunton v Cavallaro

Local Court of NSW|2013-02-07|Before: Mr J

Judgment 1On 14 December 2012 in the Local Court at Port Macquarie my principal judgment in this matter was handed down by his Honour Magistrate Hodgson. 2That decision provided in essence that judgment be entered for the plaintiffs in the sum of $62,080.30 plus interest and costs. At the time, Magistrate Hodgson granted liberty to the parties to apply to me for further orders in respect of the precise terms of the costs order I had made. 3On 17 December 2012, and at a time when I was on leave, the plaintiffs' solicitors wrote to me seeking that I make costs orders in the following terms: (1)That the defendants pay the plaintiffs' costs on a party-party basis up to and including 22 September 2011. (2)That the defendants pay the plaintiffs' costs on an indemnity basis from 23 September 2011. 4I take the first order sought by the plaintiffs to in fact be an application that costs be paid by the defendants on an ordinary basis between the dates specified. In support of the application for indemnity costs the plaintiffs rely upon an offer made by them on 22 September 2011 to settle the proceedings for an amount of $70,000 inclusive of costs, and the principles established in Calderbank v Calderbank [1975] 3 All ER 333. 5On 10 January 2013 and while I remained on leave the plaintiffs' solicitors again wrote to me repeating their earlier submission in respect of costs and indicating that the total effect of the orders made by me on 14 December 2012 was that the plaintiffs had obtained a judgment in the sum of $78,574.00 (including interest) plus costs. 6On 21 January 2013 (by which time I had returned from leave) I received from the defendants' solicitors their written submissions on the question of costs and the terms of any order to be made. 7On the 22 January 2013 the plaintiffs' solicitors replied to the defendants' solicitor's submissions of the previous day. Further correspondence was received from each party later on that same day. All of the material that I have received has been carefully considered. It has been agreed that this issue is to be dealt with by me on the basis of the written submissions and without the need for me to hear orally from the parties' solicitors. 8To consider the various submissions I have set out what I understand to be the relevant chronology on the question of costs:

The Submissions 9The thrust of the plaintiffs' submissions as I comprehend them are that I should make the orders sought because they have obtained an outcome in the proceedings that exceeds the offer of settlement made by them on 22 September 2011 being at a time early in the litigation and indeed prior to a defence being filed. They rely on their offer as being expressed to be a Calderbank offer. In the alternative they rely on the Offers of Compromise made pursuant to the Uniform Civil Procedure Rules dated 30 May and 18 July 2012 respectively as grounds for the award of indemnity costs, albeit for a different period of time to that relating to the Calderbank offer. 10The defendants submit that: (i)The plaintiffs' offer of 22 September 2011 being inclusive of costs is contrary to the Uniform Civil Procedure Rules. (ii)The fact that the offer was made inclusive of costs means that indemnity costs will only be awarded if I was satisfied that it was unreasonable for the defendants not to have accepted it, and that in the circumstances of this case I could not be so satisfied. (iii)Inclusive of interest the final judgment amount only marginally exceeds the unaccepted inclusive of costs offer. (iv)I should disregard the offer of the 22 September 2011 in the exercise of my discretion given the inherent difficulties associated with offers made inclusive of costs. (v)I should instead of making the costs orders sought by the plaintiff make orders in accordance with their offer dated 7 November 2012, which offer is incorrectly asserted in their submissions as being made on 7 November 2011. 11In response to the defendants the plaintiffs submit that: (i)It is clear on any view that the plaintiffs have achieved a result in excess of their offer of $70,000 inclusive of costs. (ii)Having regard to interest as calculated in accordance with my orders dated 14 December, 2012, the value of the plaintiffs' judgment as at the date of the offer was in excess of $71,000 plus costs. My own calculations indicate that the value of the plaintiffs' judgment was in fact in excess of $72,000 as at the date of the offer. I will return to this issue later in this judgment. (iii)The offer by the defendants dated 7 November 2012 is not one capable of being assessed by me as more favourable to the plaintiffs than that ordered, and further that it would not have been reasonable to expect the plaintiffs to give the defendants access to their property for the purpose of rectification given the history of the litigation. I accept this submission by the plaintiffs and reject the submission that I should make orders for costs in the terms proposed by the defendants. Such an order would also be at odds with the terms of the costs order made by me on 14 December 2012.

The Law 12The power to award costs is discretionary although Rule 42 of the Uniform Civil Procedure Rules create a presumption that costs will follow the event. Clearly, and in the exercise of my discretion, I have already determined in the orders made 14 December 2012, that the defendants are to pay the plaintiffs' costs. 13The only issue that remains for my determination is whether the order for costs already made in the plaintiffs' favour is to be on an indemnity basis and if so, the period over which such an order should be made. 14A review of the law relating to the award of indemnity costs as set out in paragraph [8-0090] of the Civil Trials Bench Book published by the Judicial Commission of New South Wales indicates the following matters of general principle: (i)The courts power to award costs on an indemnity basis derives from section 98(1)(c) of the Civil Procedure Act 2005. (ii)Caution should be exercised by court in making an order for indemnity costs- Leichhardt Municipal Council v Green [2004] NSWCA 341. (iii)While there appears no fixed rule or rationale as to when the discretion to award indemnity costs might be exercised it requires a sufficient or unusual feature to justify it- Harrison v Schipp [2001] NSWCA 13; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225. (iv)Indemnity costs are compensatory and not punitive- Hamod v State of New South Wales (2002) 188 ALR 659. (v)A formal warning of an intention to claim it indemnity costs will make the awarding of them are more likely- Huntsman Chemical Co Australia Ltd v International Pools Australia Pty Ltd (1995) 36 NSWLR 242. (vi)An order for indemnity costs should remain exceptional. (vii)The discretion to award costs on an indemnity basis is most often exercised where offers of compromise pursuant to the Uniform Civil Procedure Rules, or Calderbank v Calderbank have been made. (viii)The failure to accept an offer of compromise made in accordance with the Uniform Civil Procedure Rules better than the result ultimately obtained creates a prima facie entitlement to indemnity costs, as to which the offered must establish a basis for some other order - Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109. (ix)The presumption may be displaced by demonstrating that rejection of the offer was reasonable in the circumstances of the particular case, having regard to the strength of it at the time that the offer was made. (x)Another factor relevant to the reasonableness of rejection is where the full parameters of the dispute were still uncertain at the time of the offer, or the offeror's case changes after the offer is made. Accordingly where all relevant evidence is not served prior to the offer, the discretion to award indemnity costs might be refused. (xi)An offer of compromise must be genuine, that is, it must contain a real element of compromise. The question to be asked is whether it formed part of a genuine attempt to reach a negotiated settlement. An offer designed merely to trigger costs sanctions will not be regarded as a genuine offer of compromise. (xii)An offer of compromise should be left open for a reasonable period of time and, if made pursuant to the Uniform Civil Procedure Rules, must be exclusive of costs. (xiii)The effect of the non-acceptance of a Calderbank offer is similar to an offer of compromise save that the making of a Calderbank offer better than the result ultimately obtained does not automatically translate into an indemnity costs order. The court's discretion to make an order for indemnity costs is enlivened by the rejection of the Calderbank offer where the final result is less favourable to the offeree. It does not create a prima facie entitlement- Chief Commissioner of State Revenue v Platinum Investments Management Ltd (No 2) [2011] NSWCA 197. (xiv)In cases dealing with Calderbank offers it is the offeror who bears the onus of persuading the court to exercise the discretion in its favour- Ofria v Cameron (No 2) [2008] NSWCA 242. 15In a paper delivered to the Australian Lawyers Alliance, Hunter Valley Conference, 14-15 March 2008 titled 'Calderbank Offers', her Honour Justice M J Beazley AO observed that there are a number of fundamental principles governing Calderbank offers and the exercise of discretion to order indemnity costs based thereon. Firstly the offer must be a genuine offer of compromise, and secondly the offeree must be given an appropriate opportunity to consider and deal with the offer. Her Honour said at paragraph 20 of her paper, "The concept that derives from these two principles is that an award for indemnity costs will not be made unless it was unreasonable for the offeree not to accept the offer". 16Justice Beazley's paper identifies the following further matters of relevance to the consideration of the Calderbank offer made in these proceedings: (i)A relatively small disproportion between the offer and the award (such as is the case here) may nevertheless still represent a genuine offer of compromise. (ii)In deciding whether the offer of compromise is a real one, it is legitimate to take into account the means of the offeror, in this case the plaintiffs. It is be noted in this regard that the plaintiffs are not persons of wealth, and the fact is that they had not been in a position, as at the date of the hearing, to carry out the necessary rectification work at the premises. (iii)Factors relevant to determining if the rejection of an offer is reasonable include: (a)Whether there was sufficient time to consider the offer (b)Whether the offeree (in this case the defendants) had adequate information to consider the offer, and (c)Whether any conditions are attached to the offer, and if so whether they are reasonable. (d)In this instance, the period for which the Calderbank offer was left open was 28 days, being a period of time for which such offers are typically left open. In my assessment, 28 days was sufficient time for the defendants to consider the offer, in circumstances where the parties were well aware of the nature and context of the dispute existing between them. Further, there were no conditions attaching to the offer, and its terms made clear that the plaintiffs intended in the event of their obtaining "a result in excess of this offer" to seek indemnity costs. (e)The fact that an offer is made inclusive of costs (as is the case here) does not preclude it being considered as a Calderbank offer: see Elite Protective Personnel v Salmon Pty Ltd [2007] NSWCA 322. Difficulties may however arise in the court determining whether it was unreasonable for the offeree not to have accepted it, and for the court to assess whether the offer was equal or better than the result achieved. 17What is clear in this case is that I entered judgment for the plaintiffs in the sum of $62,080.30 plus interest. Calculated to the date of the Calderbank offer, the value of the plaintiffs' judgment, being the sum of both principal and interest was on my calculations, in an amount of $72,414.30. It goes without saying that costs had been incurred up to and including the date of the offer for which the plaintiffs would be liable. That being so, it is the case that the value of the judgment up to and including 22 September 2011 is for an amount that exceeds the Calderbank offer made on that day in the sum of $70,000 inclusive of costs. Had their offer been accepted the plaintiffs would have received after the payment of costs an amount less than $70,000. As a consequence of the orders made by me they are to receive an amount in excess of that sum of $70,000. 18In my view it is appropriate for the defendants to pay indemnity costs from 22 September 2011. I am mindful in reaching this conclusion, that such an order is exceptional and that my discretion to make it should be exercised cautiously. In addition to the matters to which I have referred in paragraph 16 hereof, I have also borne in mind: (i)That the defendants were warned at the time of the Calderbank offer that indemnity costs would be sought if the offer were not accepted. (ii)That the offer was in terms, a genuine offer of compromise particularly having regard to the plaintiffs' circumstances, and (iii)That in my assessment the defendants had sufficient time to consider the offer and their failure to accept it was unreasonable.

ORDERS The orders of the court will be as follows: (1)Further to order v) made 14 December 2012, it is ordered: (i)That the defendants are to pay the plaintiffs' costs on the ordinary basis up to and including 22 September 2011. (ii)That the defendants are to pay the plaintiffs' costs on an indemnity basis from 23 September 2011. Magistrate Christopher O'Brien 7 February 2013

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 September 2013

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