Swan Hill Chemicals v M & J Tripodi [2016] VSCA 316

1 On 14 November 2016, the Court dismissed the applicant's application for leave to appeal against orders of Judge Cosgrave in the County Court on 10 August 2016 allowing the respondent's application to amend its statement of claim. The respondent seeks an order that the applicant should pay the respondent's costs of the application on an indemnity basis.

2 The background facts to the application are set out in the reasons delivered on 14 November 2016.[1] The additional facts, which are relevant on this appeal, are as follows:

(a) On 6 September 2016, the applicant filed and served its application for leave to appeal together with its written case.

(b) On 28 September 2016, Judicial Registrar Irving made procedural orders for the conduct of the application.

(c) On 4 October 2016, the respondent filed and served its written case.

(d) On 7 October 2016, the respondent served its letter offering to settle the application ('the Calderbank offer') stating as follows:

We refer to the above appeal and note that outlines of argument of both the Appellant and Respondent have now been filed and served.

The Applicant appeals against the granting of the Plaintiff's interlocutory application to amend the Statement of Claim by the trial judge during the course of the trial. As such it is appealing against an interlocutory, discretionary decision made in respect of practice and procedure.

The authorities are clear and unequivocal. The Applicant must show that there has been a clear error in the exercise of the discretion and that it also has suffered real prejudice.

As stated in Adam P Brown Male Fashions Pty Ltd v Phillip Morris lnc the Court will rarely grant leave to appeal in matters of practice and procedure.

The High Court in that case went on to approve the dicta of Sir Frederick Jordan in re the will of F. B. Gilbert (dec):

I am of the opinion that ... there is a material difference between an exercise of discretion on the point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case if a tight rein were not kept upon interference with the orders of judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a judge in chambers to a court of appeal.

These sentiments were most recently echoed in Mulligan v Westpac on 30 September 2016.

It is clear that no error has been made by the trial judge. He carefully considered the principles on amendments to pleadings in Aon Risk Services and decided against the contentions of the Applicant. Furthermore and most importantly, no prejudice has been suffered by the Applicant in the granting of the amendment or any injustice shown.

From all of the above, it is clear that the appeal has no prospects of success.

Our client has already incurred substantial costs in preparation of this appeal and would, on the dismissal of the appeal, be entitled to its costs of the appeal including those costs incurred up to this date. We estimate that the costs incurred by the Respondent to date to be approximately $25,000.

However, in an effort to settle this appeal, our client is prepared to forego these considerable costs already incurred so as to bring an end to an appeal that is doomed to fail.

In an effort to resolve the appeal, our client hereby offers to resolve it on the following basis:

1. The Applicant have leave to discontinue the appeal;

2. Each party bear their own costs of the appeal.

In light of the above, this offer represents a genuine attempt to resolve this appeal. This offer is open for acceptance for 14 days, until 21 October 2016.

The offer is put forward on the basis of the principles set out in Calderbank v Calderbank. If the offer is not accepted by the Applicant and the appeal is dismissed, our client will rely upon this letter in seeking indemnity costs against the Applicant in the appeal.

(e) On 11 October 2016, the agreed summary and application book index were filed.

(f) On 14 October 2016, the respondent served an offer of compromise pursuant to r 26.12 of the Supreme Court (General Civil Procedure) Rules 2015, which relevantly provided as follows:

The Respondent offers to compromise this appeal proceeding on the following terms:

1. This appeal proceeding be dismissed.

2. There be no costs of and incidental to this appeal proceeding.

This Offer of Compromise is:

A. Served pursuant to Order 26 of the Rules; and

B. Open for acceptance by no later than 21 October 2016.

(g) On 28 October 2016, the application was heard by this Court.

3 The relevant question in deciding whether the applicant should pay the respondent's costs of the application on an indemnity basis is whether its failure to accept the Calderbank offer and the offer of compromise was unreasonable in the circumstances.[2] It was accepted by the parties that this principle is also applicable both to the refusal of the Calderbank offer and the refusal of the offer of compromise on an appeal.[3]

4 The applicant submitted that it should only be required to pay costs on a standard basis for the following reasons:

(a) The respondent's offer of bearing its own costs were effectively no compromise at all. The respondent relied upon the decision of this Court in Sandri v O'Driscoll.[4]

(b) The offer of compromise, which was served on 14 October 2016, was only open for acceptance until 21 October 2016, which gave the applicant insufficient time to consider it.

(c) Although the Court's dismissal of the application for leave to appeal demonstrated that at that time the application did not have a real prospect of success, that does not mean the application did not have a real prospect of success judged at the time of the offers.

(a) The applicant had adequate time to consider the offers being 14 days from the Calderbank offer and 7 days from the offer of compromise to accept the proposed compromise.

(b) The decision of this Court in Sandri v O'Driscoll[5] was predicated on the fact that the offer for parties to bear their own costs was insubstantial because it was made at an early time in the appeal and 'none of the substantive work of preparing the appeal had yet been undertaken, costs incurred at that point would have been very modest'.[6] By the time the Calderbank offer was made, arguments of both the applicant and the respondent had been served and costs estimated at $25,000 had been incurred.

(c) The application for leave to appeal was against the interlocutory and discretionary decision made by Judge Cosgrave in respect of practice and procedure.

6 We accept the submissions made on behalf of the respondent, in particular, for the following reasons:

(a) The application for leave to appeal related to an order of Judge Cosgrave which was discretionary, interlocutory in character and a matter of practice and procedure. The courts must keep 'a tight rein' on attempts to interfere with such orders.[7]

(b) The order of Judge Cosgrave was supported by reasons which dealt in detail with the considerations assessed by him in 68 paragraphs over 20 pages. The applicant had the benefit of these written reasons prior to filing the application.

(c) Although a Calderbank letter served shortly after the institution of an application for leave to appeal offering only to bear one's own costs will not usually of itself be sufficient, the Calderbank letter and the offer of compromise in this case gave the applicant an opportunity to consider not proceeding with the appeal without paying the substantial costs which had been incurred by the respondent after it had the benefit of the respondent's submissions and a list of authorities.

7 Accordingly, the order of the Court will be that the applicant pay the respondent's costs of the application on a standard basis up to and including 7 October 2016 and, thereafter, on an indemnity basis.

[1] Swan Hill Chemicals Pty Ltd v M & J Tripodi Pty Ltd [2016] VSCA 264 [3]-[20].

[2] Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435, 441 [23].

[3] Settlement Group Pty Ltd v Purcell Partners (a firm) (No 2) [2014] VSCA 68 [9].

[4] [2014] VSCA 109 [5] (Maxwell ACJ, Neave JA and McMillan AJA).

[5] [2014] VSCA 109.

[7] Re Will of Gilbert [1946] NSWStRp 24; (1946) 46 SR (NSW) 318, 323 (Sir Frederick Jordan) referred to in the principal reasons at [20](c) and the Calderbank letter.