The Anderson Group Pty Ltd v Tynan Motors Pty Ltd [2006] NSWCA 120 | Case summary

18 May 2006 THE ANDERSON GROUP PTY LTD v TYNAN MOTORS PTY LTD [No. 2] Costs Judgment 1 SANTOW JA: I agree with Basten JA. 2 BASTEN JA: Following delivery of judgment in this matter on 21 February 2006, the Court received an application from the Appellant seeking a variation of the orders to provide for interest and to make the costs payable on an indemnity basis. Directions were given as to the filing of any evidence and the exchange of written submissions. 3 As appeared from the submissions for the Respondent, the only matter in issue was whether costs should be awarded on an indemnity basis, and if so, from what date. The entitlement to interest was conceded. 4 On three occasions the Appellant made formal offers of settlement. Each involved a Calderbank letter, the two later letters being accompanied by a formal offer of compromise pursuant to the relevant Court rules. Although the amount of the offer was in each case greater than the principal component of the claim, in no case did it reach the total amount, including interest from the date on which the vehicle was taken until the date of the offer. The Appellant's claim had sought both principal and interest and, as it submitted in support of its application for a judgment including interest, such an award is almost invariable where a money judgment is obtained: see Falkner v Bourke (1990) 19 NSWLR 574 at 576. Each offer was expressly made on the basis that it included interest. 5 The first offer, made on 3 September 2002, was in an amount of $170,000, the total claim, including interest, at that date being $205,603. There was, accordingly, an element of compromise in the order of 20% of the claim. As the Respondent noted, that offer was silent as to costs, which may have meant that it was inclusive of costs, or may not. However that is not a point on which the Respondent can rely, as it never sought to resolve the ambiguity and if inclusive of costs, the compromise was considerably greater. 6 The second offer, in an amount of $215,000, was made on 25 June 2003. By that stage, the claim, with interest, totalled $217,678. It made clear that the offer was exclusive of costs. The element of compromise was thus less than 2%. 7 The third offer, made on 18 August 2005, was in the amount of $180,000. By that stage, the total claim was $249,769 inclusive of interest. The offer expressly stated that it did not include costs. The offer was thus 72% of the total claim at that time and hence involved a significant level of compromise. 8 It is well established that an offer which does not involve a real and genuine element of compromise, will not be taken into account in relation to costs, either under the general law principles established by Calderbank v Calderbank [1975] 3 WLR 586, or under rules of Court: see, eg, Leichhardt Municipal Council v Green [2004] NSWCA 341; Manly Council v Byrne (No. 2) [2004] NSWCA 227 and Herning v GWS Machinery Pty Ltd (No. 2) [2005] NSWCA 375. 9 While it is true that in personal injury cases, offers by plaintiffs which have been only marginally below the judgment eventually obtained have been treated as involving an element of compromise, it does not follow that a similar approach should be adopted in relation to commercial litigation. In any event, because the first offer involved a significant element of compromise, it is not necessary to resolve the true nature of any subsequent offer in the District Court proceedings. 10 The approach to be adopted by this Court in relation to Calderbank offers was stated by Giles JA in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37] approved and applied in Jones v Bradley (No. 2) [2003] NSWCA 258 at [8]. Accordingly, the entitlement to costs, subject to the Court ordering otherwise, pursuant to rules of Court, is not applicable in relation to Calderbank offers, the discretion of the Court remaining at large and requiring consideration of the relevant circumstances. In the present case, the dispute did not involve any issue as to quantum, and turned largely on questions of law, subject to a factual issue as to the reasonableness of the steps taken by the Respondent to secure the keys of the vehicle. 11 As is usually the case in such matters, the Court is not made aware of the way in which the offer was calculated by the offeror, or the consideration in fact given to it by the offeree. Nor was the Court invited to take into account any particular matters relating to the circumstances of the parties. So far as the proceedings in the District Court are concerned, the Respondent drew attention to the changes in the statement of claim, made on the first day of the trial. However, it was not made clear in what respect the nature of the case was said to have changed, in a manner which might render the earlier offer of less relevance than otherwise: see Rolls Royce Industrial Power (Pacific) Ltd v James Hardie & Coy Pty Ltd (2001) 53 NSWLR 626 at 642. The filing of the amendments did not, apparently, require any adjournment of the hearing, nor do they appear on their face to have materially altered the nature of the claim being made. 12 It should be inferred, no doubt, that the Respondent would have valued its chance of successfully defending the litigation at a higher level than did the Appellant. Nevertheless, the offer involved a genuine element of compromise and the Appellant has obtained a judgment which would have entitled it, at the time of the offer, to an amount $35,000 (or 20% higher) than the offer made. The failure to accept the offer warrants a departure from the ordinary rule as to costs, with the result that the Respondent should pay the Appellant's costs in the District Court on an indemnity basis, from the date on which the offer might reasonably have been accepted, which may be treated as the final date on which the offer remained open, namely 1 October 2002. 13 The Appellant having failed in the District Court, it is appropriate that the costs in this Court be assessed in accordance with the offer of compromise made specifically in relation to these proceedings, on 18 August 2005. That offer was in an amount of $180,000. As noted above, it involved a discount of almost $70,000 on the amount of the claim, as at the date at which it was made. The Appellant's success involved it obtaining a judgment on a basis which would have provided a benefit of almost 40% more than the amount of the offer, as at the date it was made. The offer therefore involved a significant element of compromise. 14 The offer, having been made after the commencement of the Uniform Civil Procedure Rules, should be considered in accordance with Part 20 of those Rules. The offer stated that it was "exclusive of legal costs" and further provided: "Costs of the District Court proceedings and the appeal proceedings to be agreed or assessed." 15 Rule 20.26(2) provides that an offer must be exclusive of costs: this offer clearly was. The further sentence quoted above is not inconsistent with the operation of r 42.14 and does not purport to exclude, modify or restrict the operation of that rule, contrary to r 20.26(12). Although, in its written submissions, the Respondent submitted that a contrary conclusion should be accepted, no reason for that conclusion was put forward and the words of the offer should not be so read. 16 The Respondent also objected that, contrary to r 20.26(7)(a), the offer was open for 21 days, rather than the prescribed 28 day period. In reply, the Appellant noted that the offer had been made within two months of the date of hearing in this Court and accordingly was to be left open for a period that was "reasonable in the circumstances", in accordance with paragraph (b) of the rule. The submission argued that 21 days was a reasonable time having regard to the age of the cause and the proceedings and the imminence of the hearing. That submission should be accepted. 17 In Suresh v Jacon Industries Pty Ltd [No. 2] [2005] NSWCA 270 this Court referred to the authorities establishing that Part 22 of the former Supreme Court Rules operated in this Court. That depended, at least in part, on the express provisions of Part 51, r 3 that other Parts apply in this Court "so far as applicable". Since the commencement of the Uniform Civil Procedure Rules, a reference to other "Parts" should be understood as a reference to other Parts of those rules (Part 51 of the Supreme Court Rules still being in operation). That conclusion follows as a result of the following legislative chain. The Civil Procedure Act 2005 (NSW) provides that the Uniform Civil Procedure Rules would operate in relation to all civil proceedings in the Supreme Court: Civil Procedure Act, s 9(3) and UCPR, r 1.5. The Supreme Court includes the Court of Appeal: Supreme Court Act, s 38. However, Part 51 of the Supreme Court Rules 1970, dealing with this Court, are retained and prevail over the UCPR: r 1.7. For the purposes of Schedule 6, "Savings, transitional and other provisions" of the Civil Procedure Act, the Supreme Court Rules 1970 form part of "the old legislation". Clause 9 of Schedule 6 provides for the construction of references in the old legislation as follows: 9. Subject to this Schedule and the regulations, in any Act or instrument: (a) a reference to a provision of the old legislation for which there is a corresponding provision of this Act extends to the corresponding provision of this Act or the uniform rules, and (b) a reference to any act, matter or thing referred to in a provision of the old legislation for which there is a corresponding provision in this Act or the uniform rules extends to the corresponding act, matter or thing referred to in the corresponding provision of this Act or the uniform rules, as the case requires.

This would produce the result that a reference to the "provisions of Parts" in Part 51, r 3 will apply to provisions of Parts of the UCPR. 18 Accordingly, absent some reason to order otherwise, the Respondent should pay the costs of the appeal on an indemnity basis from the end of the period of the offer, namely 8 September 2005. 19 The Respondent resists this conclusion and argues that the Court should otherwise order on the basis that the offer was not a true compromise. However, for the reasons noted above, there was a significant discount on the value of the claim as at the date the offer was made and there is no other reason to suggest that it was not a genuine offer of compromise. The Respondent has also submitted that the argument at the hearing of the appeal "was very much more significant and detailed than the argument at first instance". That may be so, but by the stage the offer was made, written submissions had been prepared and the nature of the argument should have been apparent to the Respondent. 20 The remaining question is whether the Respondent should pay indemnity costs for the whole of the appeal, on the basis of the earlier offers in the District Court. As noted in Suresh [No. 2] such an offer may be a relevant consideration in considering the costs in this Court, but the Court is not bound to act in accordance with the District Court Rules, to the extent that they operate to provide an entitlement to costs on an indemnity basis in that Court. 21 As noted above, the second offer made below, on 25 June 2003, involved a very marginal compromise of the claimed amount, and was not, arguably, a genuine compromise at all. That fact, combined with the passage of time since it was made and the circumstance that the Appellant had received an adverse judgment in the District Court, suggest that the Court should give little weight to either of the offers made in the District Court with respect to the costs of the appeal. Accordingly, the ordinary order with respect to costs in this Court will apply up until the date from which indemnity costs are to be paid pursuant to the offer made in this Court.

The Anderson Group Pty Ltd v Tynan Motors Pty Ltd

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