White v Baycorp Advantage Business Information Services

Supreme Court of NSW|2006-09-13|Before: Campbell J

CITATION : White v Baycorp Advantage Business Information Services [2006] NSWSC 910

DECISION : Indemnity costs refused. Third defendant to pay 75% of plaintiffs' costs of litigation.

CATCHWORDS : PROCEDURE - costs - Calderbank letter - whether appropriate to offer to settle both the claim made, and costs, on a particular basis - circumstances when failure to accept a Calderbank offer justifies indemnity costs - plaintiffs slow in articulating basis on which they eventually succeed, and raising numerous issues on which they lose - appropriate approach to costs order

AMFM Constructions Pty Ltd v Boreal Holdings Pty Ltd [2001] NSWSC 1091 Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Limited (formerly GIO Insurance Limited) & Ors [2006] NSWSC 583 CASES CITED : Dr Martens Australia Pty Ltd (No 2) v Figgins Holdings Pty Ltd [2000] FCA 602 Humble v Hunter (1848) 12 QB 310; 116 ER 885 Smallacombe & Others v Lockyer Investment Co Pty Ltd (1993) 114 ALR 568 White v Baycorp Advantage Business Information Services Ltd [2006] NSWSC 441

John Anthony White - First Plaintiff PARTIES : The White Holdings Group Pty Ltd - Second Plaintiff Capital Finance Australia Ltd - Third Defendant

COUNSEL : P E King - Plaintiffs M Ashhurst - Third Defendant

SOLICITORS : Segal & Associates - Plaintiffs Kemp Strang - Third Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

2219/06 JOHN ANTHONY WHITE & ANOR v BAYCORP ADVANTAGE BUSINESS INFORMATION SERVICES LIMITED & ORS JUDGMENT 1 HIS HONOUR: I gave judgment on 18 May 2006 in White v Baycorp Advantage Business Information Services Ltd [2006] NSWSC 441. In making orders, I made an order that the third defendant pay the costs of the plaintiffs of the proceedings. That order was made without there having been argument by counsel, and on the assumption that the only relevant factors were that costs would follow the event. 2 Both the plaintiffs, and the third defendant, submit that that order should be varied. The plaintiffs seek an order for indemnity costs. The third defendant puts forward three alternative orders as to costs, each of which results in the third defendant paying less than all of the costs. The Plaintiffs' Application for Indemnity Costs 3 Before the present action was begun, the plaintiffs requested the third defendant to remove the entries on the Baycorp database, and advanced some reasons why the third defendant should do so. Those reasons did not include any of the particular deficiencies that led, in the judgment I delivered, to orders for removal of the database entries. 4 The present proceedings began on 4 April 2006. 5 On 1 May 2006 the solicitors for the plaintiff sent a Calderbank letter to the solicitors for the third defendant. The proposal it put forward was in the following terms: "1, Your client gives an undertaking to the Court that it will, with Capital Corporate Finance Pty Ltd, direct the First Defendant to remove from its database and from such other records of its credit listing the material specified in the schedule to the originating process, including the entry for the First Plaintiff that has been amended, but not removed. 2. Your client gives an undertaking to the Court that it will make all reasonable endeavours to ensure the staff of the Third Defendant do not vilify or otherwise adversely comment upon the credit worthiness of the Plaintiffs, to be satisfied by the issue of a written notice to that effect to be posted on staff notice boards and forwarded to all internal staff by email. 3. The parties will and subject to any order not disclose the terms of the settlement to any other entity. 4. Otherwise the proceedings to be dismissed. 5. That your client pays the costs of the Plaintiffs assessed at $30,000.00 inclusive of costs and damages." 6 That offer was rejected, on 3 May 2006, without any counteroffer being made. 7 The judgment of the Court gave to the plaintiffs relief no less extensive than had been sought in the first paragraph of the Calderbank letter. 8 The judgment of the Court did not give relief as extensive as that sought by the second paragraph of the Calderbank letter. Instead, the Court ordered that: "… if the third defendant by itself its servants or agents is contacted by any person concerning either of the said entries, it inform the enquirer that the entries were made in error, and that no debt was owed by either plaintiff to any company in the Capital Group." 9 The third paragraph of the Calderbank letter bore no relation to any order which the Court eventually made. Indeed, given the practice of publication of reasons for judgment, it was hardly to be expected that any eventual court proceedings would produce any sort of an analogue to the third paragraph of the Calderbank letter. 10 The plaintiffs recovered nothing by way of damages in the proceedings. On 13 September 2006, after judgment on this application had been reserved, the plaintiffs, struck by l'esprit d'escalier, had this matter restored, and sought to file an affidavit which stated (probably inadmissibly, but I received the affidavit so that this application could be dealt with on its merits), that the party-party costs which would have been payable by the plaintiffs, up to 1 May 2006, exceeded $30,000. That affidavit provided, for the first time, an evidentiary basis for concluding that, if the plaintiff were to be granted, in this present application, an order for the payment of all its costs, that order would result in the third defendant being worse off, so far as the topic with which paragraph 5 of the Calderbank letter is concerned, than it would have been if it had accepted the offer made by the Calderbank letter. However, as will hereafter appear, I do not propose to make an order that the plaintiffs receive all their costs. Thus, even with the extra evidence, the plaintiffs have still not shown that the result of the proceedings, so far a the topic with which paragraph 5 of the Calderbank letter is concerned, leaves the third defendant worse off than it would have been if it had accepted the offer made by the Calderbank letter. 11 Thus, taking the Calderbank letter as a whole (as one must), the plaintiffs have not demonstrated that the third defendant has fared worse as a consequence of running the litigation than it would have fared if it had accepted the Calderbank offer. In other words, the plaintiffs have not demonstrated the fundamental matter which sometimes justifies an award of indemnity costs if a Calderbank offer is rejected. 12 Further, there is a line of authority whereby, when a plaintiff makes a claim for an order involving payment of money, it is not appropriate for that plaintiff to serve a Calderbank letter offering to settle its claim for a particular sum of money inclusive of costs: Smallacombe & Others v Lockyer Investment Co Pty Ltd (1993) 114 ALR 568 at 573; Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 at [22]-[24] Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Limited (formerly GIO Insurance Limited) & Ors [2006] NSWSC 583 at [40]-[41]. I agree with Einstein J, in the last-mentioned case, that the reason why in those circumstances the Calderbank offer is inappropriate is that, "… the offeree is placed in a position of not being able to determine the appropriate amount to attribute to the substantive claim", as opposed to the costs incurred in advancing it. In my view that principle is applicable in the present case, as damages was one of the elements of the claim which the plaintiffs made, and paragraph 5 of the Calderbank offer rolls together an amount offered to be paid for both damages and costs. 13 This provides a separate reason why the award of indemnity costs is not called for in the present case. 14 Mr King referred, in paragraph 3 of some written submissions he made, which I will leave with the papers, to some other matters which he said amounted to a "special or unusual feature" of the case. Much of the evidence of Mr Malafouris which he refers to was not admitted into evidence in the case. None of the reasons advanced provides, in my view, a justification for an order for indemnity costs. 15 In all these circumstances, I decline to make an order for indemnity costs in favour of the plaintiffs. The Third Defendant's Application for a Limitation on the Costs Ordered 16 The third defendant presented extensive evidence about the course which the proceedings took, and the arguments which were advanced by the plaintiffs at different times in the course of the proceedings. 17 The proceedings were begun on 4 April 2006, when Nicholas J, as Duty Judge, abridged the time for service of an Originating Process and Interlocutory Process. 18 On 10 April 2006, the matter was before Austin J, as the Corporations List Judge. Mr King, for the plaintiffs, urged Austin J to proceed with the case that day. By that time the plaintiffs knew, from previous correspondence between solicitors, that the third defendant was asserting that Konica had entered the relevant agreements as an agent, for Capital Corporate as an undisclosed principal. Mr King submitted that the deed establishing that agency (the relevant parts of which I set out at para [46] of my judgment of 18 May 2006) was not admissible consistently with the decision in Humble v Hunter (1848) 12 QB 310; 116 ER 885. He submitted to Austin J that the real question in the case "is the simple construction of commercial documents", and hence that, if the case could not be decided that day, it could be decided very soon. Austin J stood the matter over before the Duty Judge on Wednesday, 12 April 2006. 19 On Wednesday, 12 April 2006 the matter came before Barrett J as Duty Judge. Mr Ashhurst told his Honour that Mr King had told Austin J that the case was about whether Capital Corporate's claim to be an undisclosed principal was unmaintainable because of the principle in Humble v Hunter (1848) 12 QB 310; 116 ER 885, in consequence of which the case involved just a construction of the lease agreement. The following exchange occurred: "HIS HONOUR" Is that what it is about, Mr King? KING: It is about that. HIS HONOUR: That and only that? KING: Well, the rule in Humble v Hunter is a rule of exclusion and we submit, as I submitted to the learned judge on Monday, that it would obviate a need for the court to examine or rely upon any defence which the defendant had put forward in some correspondence to us, prior to the proceeding commencing and on that basis the answer is yes." 20 As the hearing progressed, it became apparent that the plaintiffs' case involved more than that single point. His Honour broke off the hearing, saying: "We are ducking and weaving and going uphill and down dale on what this case is really about. Unless there is proper definition of that, we are not going to get anywhere."

His Honour directed the preparation of a Statement of Claim. 21 When a draft Statement of Claim was produced in Court later in the day, it became apparent that the third defendant would require particulars of that document. 22 The matter was back before Barrett J on 18 April 2006. On that occasion, the transcript makes clear that the basis upon which the plaintiffs put their case was still not clearly articulated. 23 On 21 April 2006, Young CJ in Eq gave directions in the matter, fixing it for hearing before me on 8 May 2006 as a one day case. He granted leave for an Amended Statement of Claim to be filed. 24 The matter came before me for directions on Wednesday, 3 May 2006, when the plaintiffs made application for, and were granted, leave to file a different Amended Statement of Claim to that concerning which Young CJ in Eq had granted leave. 25 The hearing before me occupied 8 and 9 May 2006, with the hearing on 9 May continuing until 6.40 pm. 26 The pleadings made clear that the plaintiffs disputed the claim that Capital Corporate was the undisclosed principal of Konica. The pleadings did not, however, make clear the precise reasons why Capital Corporate was not the undisclosed principal of Konica, concerning the two agreements which were relevant to the case. Mr Ashhurst informs me, and I accept, that it was only in the course of the hearing that he came to appreciate some of the arguments on that topic which the plaintiffs were then relying on. However, the third defendant did not apply for an adjournment. The case is one where the parties have chosen to fight, at the hearing, on some issues which are within the scope of the pleadings, but not themselves clearly articulated in the pleadings. The Tally of Issues Raised 27 It is appropriate here to summarise, in a broad way, the factual circumstances from which the case arose, and its outcome. 28 Metronome Enterprises Pty Ltd rented photocopying equipment from Konica. It did so pursuant to a rental agreement made on 1 September 1999 between Metronome Enterprises Pty Ltd and Konica. White Holdings purchased the business of Metronome, and entered an "Assignment of Rental Agreement" document dated 23 October 2000 with Konica. Mr White gave a guarantee of amounts that White Holdings might come to owe to Konica connected with that agreement. Unknown to Mr White, an agreement was on foot whereby Capital Corporate authorised Konica to enter, in Konica's own name but acting as agent for Capital Corporate as undisclosed principal, hiring agreements concerning leasing proposals that Capital Corporate had approved. Capital Finance on occasions acted as the agent of Capital Corporate, in administering loans owed to Capital Corporate. In September 2004 Capital Finance served notices of default on White Holdings and Mr White, relating to alleged failure to pay amounts falling due under those agreements. When those notices were not complied with, Capital Finance notified the defaults to a credit bureau operated by the first defendant. Mr White and White Holdings sought orders for the removal of those entries from the credit bureau's records, an order like that which Young CJ in Eq contemplated in AMFM Constructions Pty Ltd v Boreal Holdings Pty Ltd [2001] NSWSC 1091, an order restraining Capital Finance from communicating any credit information or personal information regarding either plaintiff to any credit provider, damages, exemplary or aggravated damages, and costs. 29 I found for the plaintiffs, in the judgment of 18 May 2006, on the following bases:

Konica did not have the prior written consent of Capital Corporate to the Assignment Agreement, or to the guarantee given by Mr White, and hence did not enter either of those agreements as agent, with Capital Corporate as its undisclosed principal.

In issuing the notices in September 2004 to White Holdings and Mr White, Capital Finance was not acting as agent for an undisclosed principal Capital Corporate, because Capital Corporate was then deregistered, and (1) the boards of both Capital Corporate and Capital Finance were of the view that Capital Corporate had no business to carry on, and hence as a matter of fact Capital Finance did not at the time have authority to act for Capital Corporate in giving those notices. (2) quite independently of that argument, the subsequent reinstatement of the registration of Capital Corporate was not effective to retrospectively confer on Capital Finance authority to give the notices on behalf of Capital Corporate.

It was inaccurate for the database entries to represent that as at 16 September 2004 either White Holdings, or Mr White, had failed to pay any sum of money which they owed to a company in the Capital Group, because as at that date Capital Corporate (the only entity to which money could possibly have been owed) did not exist.

Mr White did not owe any money, because the guaranteed amount was only payable upon demand, and, when Capital Finance purported to make a demand, it was not acting, and did not have authority to act, on behalf of Capital Corporate. 30 I rejected the following arguments which the plaintiffs had put forward:

The database entries were inaccurate because they represented that the debt concerning which default had been made was one owed to an entity named "Capital Consumer Finance NSW" . (In fact, there never had been an entity named "Capital Consumer Finance NSW" .)

Capital Corporate was not the principal in relation to the original contract of hire, because the approval for that contract of hire was given by Capital Finance, not Capital Corporate.

The hiring agreement was in terms that could not be entered by Konica as agent for an undisclosed principal, consistently with the decision in Humble v Hunter .

The Assignment of Rental Agreement was one that Konica was unable to enter as agent for an undisclosed principal.

Mr White had never been served with a notice from Capital Finance that made demand upon him.

Mr White signed no consents to disclosure of his personal information, and signed no consents enabling Konica to obtain personal information concerning him from other people.

Capital Finance had committed the tort of injurious falsehood.

The plaintiffs have demonstrated that they have suffered damage in consequence of the presence of the entries on the database. 31 I also found it unnecessary to decide various arguments that the Plaintiffs had put forward, including a complex argument that the plaintiffs had rights under the general law, through an application of the law of confidential information, to protect what was said to be private information. 32 The starting point for any decision about costs is that usually costs follow the event. The finding in the present case is that the third defendant has committed a wrong, and that that wrong should be remedied by injunctions. The plaintiffs needed to bring proceedings to have that wrong remedied. In that context, it does not seem to me to be appropriate to adopt one of the approaches which Mr Ashhurst urges, of counting up the issues on which the plaintiffs succeeded, counting the issues on which the defendant succeeded, and dividing the costs accordingly, so that the third defendant pays 50% of the plaintiffs' costs. 33 Another approach which Mr Ashhurst puts forward is that each party pay their own costs up to and including 18 April 2006 (the day of the second hearing before Barrett J) and the third defendant otherwise pay the plaintiffs' costs. A difficulty with that approach is that numerous affidavits had been sworn prior to 18 April 2006, and other pre-trial work was bound to have been done, which was of relevance to the final hearing. 34 Another alternative which Mr Ashhurst puts forward is that the plaintiffs pay the third defendant's costs of, and incidental to, the appearances before Barrett J on 12 April 2006 and 18 April 2006, and the third defendant otherwise pay the plaintiffs' costs. A difficulty with that approach is that, while much that occurred in the course of the hearings before Barrett J on those days was a waste of time, briefer appearances on at least one of those days would still have been necessary if the case had been prepared in a way which led by a more direct route to the points on which the plaintiffs ultimately succeeded, and some of the preparation time for those hearings is likely to have been relevant to the final hearing. 35 Even so, when the plaintiffs have taken as a circuitous route as they did to eventually articulating the points on which they succeeded, and have presented significant evidence and argument on points on which they failed, it simply does not seem to me to be fair to require the third defendant to pay the whole of the costs of the plaintiffs of the proceedings. A shotgun might hit an object in whose direction it is pointed, but it wastes a lot of shot in the process. 36 I see no way of making a costs order other than by reference to a proportion of the plaintiffs' costs of the proceedings. 37 Taking into account all these matters, the proportion I arrive at is 75%. 38 As each side has had a measure of success concerning the third defendant's motion, each side should bear his or its own costs of that Notice of Motion. Orders

Plaintiffs' Notice of Motion filed 18 May 2006 dismissed.

Order the plaintiffs to pay the third defendant's costs of that Notice of Motion.

Order 4 made by me in these proceedings on 18 May 2006 be set aside.

Order third defendant to pay 75% of the costs of the plaintiffs of the proceedings, other than the plaintiffs' Notice of Motion filed 18 May 2006 and the third defendant's Notice of Motion filed 29 June 2006.

Order each party to bear his or its own costs of the Notice of Motion of the third defendant filed 29 June 2006. **********

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At a glance

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Judgment (28 paragraphs)

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Cases Cited (5)

Cited By (6)