Vakiloroaya v Norri (No 2)

Category: Costs

Parties: Vahid Vakiloroaya (Plaintiff)
Leila Norri (Defendant)

Representation: Counsel:
A Kaufmann (Plaintiff)
M E Parker (Defendant)
Solicitors:
Stanford Lawyers (Plaintiff)
David Leamey Solicitor & Barrister (Defendant)

File Number(s): 2024/00255498

Publication restriction: Nil

JUDGMENT

1. This is a judgment on costs. It follows my judgment on 26 June 2025, dismissing the appeal against the decision of Magistrate Brender dated 11 July 2024. As Norri indicated she was seeking a costs order based on a Calderbank offer, I vacated the costs order that I made when I handed down my judgment.

2. For convenience, and without intending any disrespect, I will refer to the parties by name as I did in my judgment dated 26 June 2025. Both parties have filed and relied upon their written submissions.

3. Norri seeks that the Court order Vakiloroaya to pay her costs on an indemnity basis and as a gross sum of $29,700.00. She relies on the affidavit of David Leamey (Mr Leamey), her solicitor, sworn 2 July 2025.

4. Vakiloroaya opposes Norri’s proposal seeking costs on an indemnity basis and in a gross sum on the basis that he did not accept Norri’s offer to ‘walk away with each party bearing their own costs’. Vakiloroaya submitted that Norri has not established a legal basis for the Court to depart from the general rule, and that Norri’s costs should be as agreed or assessed on an ordinary basis.

The law

5. The starting point in relation to costs is s 98 of the Civil Procedure Act 2005 (NSW) (CPA), which relevantly reads:

98 Courts powers as to costs

(1) Subject to rules of court and to this or any other Act:

(a) costs are in the discretion of the court, and

(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.

(2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court.

(3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings.

(4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:

(a) costs up to, or from, a specified stage of the proceedings, or

(b) a specified proportion of the assessed costs, or

(c) a specified gross sum instead of assessed costs, or

(d) such proportion of the assessed costs as does not exceed a specified amount.

[My emphasis added.]

6. Uniform Civil Procedure Rules 2005 (NSW) (UCPR) rr 42.1 and 42.15A relevantly state:

42.1 General rule that costs follow the event

Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.

[Vakiloroaya agrees that this order should be made.]

…

42.15A Where offer not accepted and judgment no less favourable to defendant

(1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim no less favourable to the defendant than the terms of the offer.

(2) Unless the court orders otherwise—

(a) the defendant is entitled to an order against the plaintiff for the defendant’s costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and

(b) the defendant is entitled to an order against the plaintiff for the defendant’s costs in respect of the claim, assessed on an indemnity basis—

(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and

(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.

Offer of compromise

7. Norri’s offer was not expressed to be an offer of compromise pursuant to r 42.15A UCPR. But does it constitute a Calderbank offer (Calderbank v Calderbank [1975] All ER 331 (Calderbank))?

8. Norri’s solicitor forwarded a “Calderbank” letter to Vakiloroaya’s solicitor dated 10 February 2025, in the following terms:

I am writing in relation to the appeal filed against the Local Court judgment in the matter of Vahid Vakiloroaya v Leila Norri at Parramatta.

In the interest of resolving this matter efficiently and avoiding further legal costs, we propose the following compromise:

1. Each party agrees to walk away from the Appeal and bear their own costs of the Appeal.

2. The respondent acknowledges that they have incurred costs to date in the Appeal but will abandon any claim to recover those costs.

3. This offer is open for acceptance for a period of 21 days from the date of this letter.

We believe this proposal is fair and reasonable, given the circumstances, and will allow both parties to move forward without the burden of additional legal expenses.

Please confirm your acceptance of this offer in writing by 3 March 2025.

9. The offer does not state “without prejudice save as to costs”, nor is it expressed to be an offer made pursuant to Calderbank v Calderbank [1975] All ER 333.

10. This offer was not accepted.

Indemnity costs

11. An offer of compromise can be a genuine compromise in the circumstances, because the plaintiff would not have to bear the costs already incurred by the defendant and it could not be doubted, given the procedural history of the proceedings and its complexity up and to that date, that those would be considerable: see Melchior v Sydney Adventist Hospital Ltd (No 2) [2009] NSWSC 65 at [17] per Hoeben J.

12. Vakiloroaya has not addressed the issue that unless the Court otherwise orders, Norri is entitled to an order that Vakiloroaya pay her costs on an indemnity basis. There is a prima facie entitlement to the successful defendant to a special order for costs and it is a matter for the unsuccessful plaintiff to displace that entitlement: Hollier v Sutcliffe (No 2) [2010] NSWSC 433 at [6] per R A Hulme J (‘Hollier’). Norri further submitted that it is a matter for the unsuccessful party to show there are exceptional circumstances warranting an exercise of the discretion not to order costs on an indemnity basis: Hollier at [6].

13. In relation to the effect of the words ‘order otherwise’, in Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [46]-[48] McColl JA (with whom Gleeson JA and Sackville AJA agreed), stated:

“[46] There is a conflict in decisions of this court as to whether exceptional circumstances are required before the court may exercise the discretion to ‘order otherwise’ in relation to an unaccepted offer of compromise or whether that discretion has to be exercised having regard to all the circumstances of the case: Commissioner of Taxation v Moodie [2014] NSWCA 59; (2014) 282 FLR 453 (at [64]) per McColl JA.

[47] An ‘exceptional circumstances’ test could be seen as a gloss on the language of the relevant rules their text does not admit. That suggestion was discounted by Hely J in relation to the like power to ‘otherwise order[s]’ in O 23, r 11(4) of the Federal Court Rules 1979 (Cth) (as then in force): Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) [2004] FCA 1437; (2004) 212 ALR 281 (at [17]). Rather, his Honour was of the view that such language merely ‘convey[s] that the prima facie position should only be departed from for proper reasons which, in general, only arise in an exceptional case’. In my view his Honour's observation sufficiently encapsulates the approach to be adopted in the present case.

[48] It is impossible exhaustively to state the circumstances in which the court's discretion to ‘order otherwise’ might be exercised: New South Wales Insurance Ministerial Corporation v Reeve (at 102). The mere fact that it was reasonable for the litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule: Morgan v Johnson (at 582). However that does not mean that reasonableness of the rejection is an irrelevant consideration: see Seven Network Ltd v News Ltd (at [64] - [67]); Uniting Church in Australia Property Trust (NSW) t/as Northaven Retirement Village v Takacs (No 2) [2008] NSWCA 172 (at [15]) per Hodgson JA (McColl JA agreeing); cf Basten JA (at [32] - [33]).”

Norri’s submissions – indemnity costs

14. Norri submitted that the application for indemnity costs is justified because Vakiloroaya did not accept the Calderbank offer to walk away on the basis that each party bears their own costs. The matter proceeded to hearing and Norri successfully defended the appeal.

15. The court has discretion to award indemnity costs where a Calderbank offer was unreasonably rejected (Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 (‘Miwa’)). Some relevant factors include the timing and clarity of the offer; whether it involved a genuine compromise, the offeree’s prospects at the time, and whether the offer foreshadowed an indemnity costs application (Miwa).

16. Finally, Norri submitted that the offer was made early in the proceedings and represented a clearly articulated, genuine compromise; and that Vakiloroaya unreasonably rejected the offer, in circumstances where his appeal was ultimately unsuccessful. She should not be penalised by being deprived of being awarded the full costs incurred due to Vakiloroaya’s failure to accept a reasonable offer. If the offer was accepted only minimal costs were incurred and those costs would be allowed in full on an ordinary basis in any event.

Vakiloroaya’s submissions – indemnity costs

17. Vakiloroaya submitted that because Norri seeks to punish him, the Court should not depart from the general rule regarding the awarding of indemnity costs. Vakiloroaya submitted that the court’s discretion to award indemnity costs must be exercised judicially (Mead v Watson as Liquidator for Hypec Electronics (2005) 23 ACLC 718; [2005] NSWCA 133 at [8]), and with caution (Leichhardt Municipal Council v Green [2004] NSWCA 341 at [47] (‘Leichhardt’)). It is further submitted that indemnity costs are compensatory, not punitive; and that if the court considers departing from this usual rule, regard should be had to the purpose, rationale and principles of fairness (Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121] (‘Gretton’)).

18. For a court to justify the ordering of indemnity costs, Vakiloroaya submitted that it must find a claim to be “without substance”, “groundless”, “fanciful or hopeless”, so weak as to be futile; or that there is some special or unusual feature like unreasonable delay or wasting of time: Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (No 2) [2009] NSWCA 12 at [4] (‘Baulderstone’).

19. Notwithstanding that the Court dismissed Vakiloroaya’s appeal, none of the above features were present in his appeal nor did Norri suggest that any such features were present to justify the awarding of indemnity costs in this case.

20. Mr Leamey’s letter dated 10 February 2025, was not a Calderbank offer. It does not contain the necessary indicia to make it a Calderbank letter, for example, it is not marked “without prejudice except as to costs”, it does not indicate that it will be relied upon in support of a claim for costs, nor does it comment on the grounds of appeal and provide any reason why the appeal would fail and Vakiloroaya should accept the offer in the letter.

21. Vakiloroaya referred to Gretton at [43] and said that the making of a Calderbank offer that is better than the result ultimately obtained does not automatically lead to the making of an indemnity costs order. He stated that unlike a formal offer of compromise, a Calderba**nk letter does not have the equivalent presumptive effect but rather is a relevant consideration in the exercise of the court’s discretion. One reason for this is that a party seeking to take advantage of such an offer for the purposes of costs should be expected to comply with the rules of the court.

22. The purpose of an offer of settlement or compromise is to encourage the recipient to seriously consider the risks involved in proceeding with the matter. Mr Leamey’s letter did not articulate any such risks and encourage Vakiloroaya to give serious consideration to continuing nor did it give any reason why he should accept the offer. The offer was derisory because it is an invitation to surrender rather than an offer to commercially compromise the appeal (Regency Media P**ty L**td v AAV Australia P**ty L**td [2009] NSWCA 368 at 30] (‘Regency Media’)). Such an offer, without more, will not trigger the indemnity costs mechanism (Regency Media at [31]). The offer must contain some real benefit, more than total capitulation, to Vakiloroaya. An offer that merely seeks to trigger any costs sanctions will not be considered an offer of compromise (Leichhardt at [23]).

23. The offer must involve a genuine attempt to reach a negotiated settlement (Baulderstone at [19]).

24. Determining whether rejection of an offer was unreasonable requires consideration of the facts and circumstances specific to the case (see Baulderstone at [22]). Vakiloroaya then referred to East W**est Airlines Ltd v Turner (No 2) [2010] NSWCA 159, where the Court concluded that it was not unreasonable for the appellant to refuse a settlement offer on the basis that the appeal be withdrawn with each party bearing their own costs.

Resolution

25. Norri’s offer in terms of a “walk away offer” constitutes a genuine offer of compromise: Byrne v Turner Freeman Lawyers (No 2) [2025] NSWCA 158 at [13] (citing Schepis v Commonwealth of Australia [2013] NSWCA 354 at [33] and Taheri v Vitek (No 2) [2014] NSWCA 354 at [8]). Is it critical that the letter did specifically set out that it was a Calderbank offer save as to costs? In the exercise of my discretion, I do not think it is fatal. Vakiloroaya’s case was, at best, weak and any offer should have been taken seriously by him and his legal advisors. In the circumstances, it is my view that I should otherwise order. Therefore, Vakiloroaya is to Norri’s costs on an indemnity basis.

Gross sum costs order

26. The next issue is whether Vakiloroaya should be rto pay Norri’s costs as a gross sum.

27. Below, I reproduce [7]-[14] of my judgment in Quach v Horvath (No 2) [2022] NSWSC 55, where I summarised the legal principles applicable.

“[7] An order for a gross costs sum is particularly appropriate where costs have been incurred as it is desirable to avoid the expense, delay and aggravation or futility likely to be involved in a contested or extensive costs assessment. That desirability may arise from the likelihood that the additional costs of formal assessment would disadvantage the successful party because of the potential inability of the unsuccessful party to pay the costs in any event: Harrison v Schipp (2002) 54 NSWLR 738 at 743-4 (‘Harrison’).

[8] The assessment of any lump sum to be awarded must represent a review of the successful party’s costs by reference to the pleadings and complexity of the issues raised on the pleadings, the interlocutory processes, the preparation for final hearing and the final hearing: Smoothpool v Pickering [2001] SASC 131 at [12].

[9] The power to award a gross sum should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available: Wentworth v Wentworth [1996] NSWCA 552; BC9600215 at 35-6 (‘Wentworth’).

[10] The approach taken to estimate costs must be logical, fair and reasonable. Reasonable assessment of the costs incurred and properly recoverable may involve an impressionistic discount of the costs actually incurred or estimated, to take into account the contingencies that would be relevant in any formal costs assessment.

[11] The costs ordered should be based on an informed assessment of the actual costs having regard to the information before the Court (for example, by relying on costs estimates or bills). It may be necessary, and it is at least desirable, for the costs claimed to involve a degree of particularity about the way in which the total costs have been calculated. This may involve evidence of the nature and amount of the rates involved.

[12] However the exercise of its discretion the Court is not required to undertake a detailed examination of the kind that would be appropriate to taxation or to a formal costs assessment: see Harrison at 743. Indeed descending into the level of detail required on taxation or formal costs assessment defeats the purpose of a gross sum order.

[13] In Sedgwick v Varzonek (No. 2) [2015] NSWSC 1613, Slattery J relevantly stated at [34]-[36]:

‘[34] The applicable principles in relation to the making of specified gross sum costs orders under [Civil Procedure Act 2005 (NSW) (CPA)], s 98(4)(c) may be shortly stated. Although the CPA s 98(4)(c) power has been described as particularly suited to complex litigation, the rule is expressed in general terms and is not limited to cases of that type: Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006 at [3] (Burchett J). The power to award a CPA s 98(4)(c) specified gross sum instead of assessed costs is exercised whenever the circumstances warrant its exercise; the purpose of the rule is to avoid the expense, delay and aggravation arising out of taxation: Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119 (von Doussa J).

[35] Probable inability to pay a costs order will usually provide a proper basis for the making of a s 98(4)(c) order. If the unsuccessful party ordered to pay costs is unlikely to be able to pay the amount of costs ordered then the successful party is further aggravated by having to fund the additional costs of taxation, those costs also being unrecoverable: Harrison v Schipp [2002] NSWCA 213; 54 NSWLR 738 at [21] (Giles JA) and Hadid v Lenfest Communications Inc [2000] FCA 628 (Lehane J).

[36] But there are many other reasons for making such an order. Here there is a pressing need in the interests of a number of parties interested in these proceedings to bring consequential aspects of the proceedings to a rapid conclusion. Marlene died almost four years ago. Mr Sedgwick is in poor health and has pressing financial needs. Marlene’s mother Anna is an elderly pensioner in Poland. She and her daughter, Marlene’s sister, have immediate financial needs. Rapid disposal of costs issues is desirable.’

[14] In Fan v South Eastern Sydney Local Health District (No 3) [2015] NSWSC 1620, I relevantly stated at [32]-[38]:

‘[32] The defendant referred to Hamod v New South Wales [2011] NSWCA 375, where Beazley JA (with whom Giles and Whealy JJA agreed) stated at [816]:

“[816] The terms of s 98(4), together with the more general considerations reflected in the Civil Procedure Act, ss 56(1), 57(1)(d) and 60, suggest the factors that merit particular consideration include: the relative responsibility of the parties for the costs incurred (for example, Harrison v Schipp); the degree of any disproportion between the issue litigated and the costs claimed; the complexity of proceedings in relation to their cost; and the capacity of the unsuccessful party to satisfy any costs liability: Ritchie’s Uniform Civil Procedure NSW at [s 98.45].”

[33] … in Ghougassian v Fairfax Community Newspapers Pty Ltd [2015] NSWCA 307, Emmett JA stated at [62]:

“[62] Under s 98(4)(c) of the Civil Procedure Act, the court may make a costs order as a specified gross sum, rather than assessed costs. The discretion conferred by that provision may be exercised where the assessment of costs may be protracted and expensive and if it appears that a party obliged to pay the costs may not be able to meet a liability to do so. The power may also be exercised where a party’s conduct contributes unnecessarily to the incurring of costs.”

[34] Further, the defendant submitted that this is a case where the assessment of costs will be protracted and expensive and that such expense will be incurred in circumstances where the plaintiff may not be able to meet a liability of the order likely to result from the assessment: see Hamod and MainteckServices Pty Ltd v Stein Heurtey SA (No 2) [2014] NSWCA 214 at [13].

[35] In Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [22], Giles JA (quoted with approval in Hamod) stated:

“[22] …The power should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available.”

…

[37] In Chaina v Presbyterian Church (NSW) Property Trust (No. 26) [2014] NWSC 1009 at [50(c)] and [51], Davies J stated:

“[50] I have taken into account the following matters in concluding that a specified gross sum for costs should be ordered:

…

(c) The fact that the Plaintiffs are unrepresented, and are likely to remain unrepresented through any costs assessment process. The difficulties that attended the hearing of the substantive proceedings when the Plaintiffs were unrepresented were significant. The position would be magnified in any costs assessment process, not the least reason for which would be that the Plaintiffs are unlikely to be able to engage any form of advisor to assist them through the process;

…

[51] When assessing the costs for the purpose of making a gross sum order a broad brush approach may be taken: Zepinic v Chateau Constructions (Aust) Ltd (No. 2) [2014] NSWCA 99 at [31] and [38]; Hamod v New South Wales (No 13) [2009] NSWSC 756 at [31]; see also Hamod at [819]-[820] and Young v Hones (No. 3) [2014] NSWSC 499 at [28]-[30].”

[38] In Chaina at [56(b)] Davies J continued “As a broad rule of thumb, a successful party will recover 70% to 80% of costs assessed on the ordinary basis.’”

Norri’s submissions

28. Norri seeks that this Court order Vakiloroaya pay her costs as a specified gross sum in the amount of $29,700.00.

29. The circumstances of this case warrant the exercise of the power in s 98(4)(c) of the CPA. Vakiloroaya’s prosecution of this claim and the history of his dispute with her and her husband, suggests that he is unlikely to approach any cost assessment in a manner that facilitates the just, quick and cheap resolution of the process. Additionally, the costs sought in the appeal approximate Vakiloroaya’s debt claim of $30,000.00. Meanwhile, Norri’s costs in the Court below total $113,866.00 and remain unpaid.

30. By reference to Mr Leamey’s affidavit, which provides evidence of the costs incurred by Norri, the Court can be confident in arriving at the appropriate sum. Mr Leamey attached invoices of his legal fees and counsel’s fees to his affidavit. The solicitor’s fees for acting for Norri are $10,972.50 and counsel’s fees are in the sum of $13,667.50. The invoices record the work performed with respect to those costs. Although the costs are not insignificant, when compared to the usual costs incurred when defending an appeal in the Supreme Court, Norri submitted that the solicitors’ costs are modest, and counsel’s costs are reasonable.

31. Mr Leamey estimated that a cost assessment process would likely result in Vakiloroaya paying 100% of his fees and 100% of disbursements including counsel’s fees. The quantum of $29,700.00 is based on experience and is commensurate with percentages ordered by the courts in gross-sum costs orders like, for example, In the matter of Aquaqueen International Pty Ltd [2015] NSWSC 500 at [30] (‘Aquaqueen’).

Vakiloroaya’s submissions

32. Vakiloroaya submitted that this appeal was straightforward, quick and ordinary. Norri has not articulated anything that would justify the awarding of a gross costs sum, nor has she provided any evidence as to the complexity or cost of the proceeding in an assessment of her costs, such that the Court could be persuaded to exercise its discretion and order a gross sum of costs.

33. Norri’s reference to unrelated and irrelevant proceedings against her and her husband, as well as an unassessed amount of costs in the Local Court, are not factors that can persuade the Court to exercise its discretion and order a gross sum of costs.

34. Vakiloroaya also referred to Harrison v Schipp [2002] NSWCA 213 at [22] (Giles JA citing Clarke JA in Wentworth v Wentworth (Court of Appeal, 21 February 1996, unreported)), and submitted that the court’s power to make a lump sum costs order “should only be exercised when the court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the material available”.

35. Vakiloroaya rejected Mr Leamey’s opinion as to the appropriateness of his own costs and counsel’s fees; and submitted that the Court could not be satisfied of the reasonableness of the amount claimed nor that it is a proper basis for a lump sum costs order. The Court could not confidently order a gross sum in that amount.

36. Vakiloroaya submitted that in assessing the amount of a lump sum cost order, courts apply a discount to the costs claimed, because even on an assessment on an indemnity basis, a successful party invariably recovers less than their actual costs (see Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [13]; Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2014] NSWCA 99 at [38]). He further submitted that the sum ordered would include costs that would not be recovered on assessment, account for the time and costs saved in applying for an assessment (see Aquaqueen at [18]), and the contingencies that would be relevant in any formal cost assessment (Hamod v State of N**ew South W**ales [2011] NSWCA 375 at [820]). As such, if the Court is minded to make a gross sum of costs order, a discount of 50% of Norri’s costs should be applied.

Resolution

37. Vakiloroaya has not provided any evidence that he can pay Norri’s costs. Norri’s costs of the Local Court proceedings are in the sum of $113,866.00. Vakiloroaya was ordered to pay them. They remain unpaid. I have carefully examined the invoices by both Norri’s counsel and solicitor in the appeal. I have formed the view that these costs are reasonable. On this basis, I make an order that Vakiloroaya is to pay Norri’s costs assessed as a gross sum in the sum of $29,700.00.

Result

38. Vakiloroaya is to pay Norri’s costs of the appeal on an indemnity basis and in the gross sum of $29,700.00.

Costs

39. Costs follow the event. Vakiloroaya is to pay Norri’s costs of this costs application on an ordinary basis.

The Court orders that

1. The plaintiff is to pay the defendant’s costs of the appeal on an indemnity basis and in the gross sum of $29,700.00.
2. The plaintiff is to pay the defendant’s costs of this costs application on an ordinary basis.

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