Williams, William v Williams, William

Evidence

1. Mr Salter's evidence and the court file establish: 1. On 13 July 2020 the plaintiff's solicitors, Clayton Utz, wrote to the defendant demanding recovery of the sum of $213,000 within 28 days. The apparent basis for the claim was a contract between the parties as at the date of the mediation. It may be noted that that was not the juridical basis of the claim ultimately advanced by the plaintiff at trial, which was the common law count of monies had and received to the use of the plaintiff. The letter demanded payment of the full amount within 28 days, being 10 August 2020. 2. The defendant then obtained legal representation. On 29 July 2020 his then lawyers, GTC Lawyers, responded on his behalf, alleging that the monies were gifted to the defendant and that the plaintiff had received legal advice that he would henceforth have no interest in the monies. These allegations were not made out at trial. 3. On 8 October 2020 Clayton Utz sent two letters to GTC Lawyers. An open letter disputed the allegations made by GTC Lawyers on 29 July 2020 and referred to corroborative statements made by the plaintiff's then solicitor at the mediation. It did not refer to the juridical basis of the claim that the plaintiff ultimately advanced and on which he succeeded. 4. The second letter was a Calderbank letter. In that letter, the plaintiff offered to accept $200,000 in full settlement with no order as to costs. The letter foreshadowed an application for indemnity costs if not accepted on the basis that such a failure to accept would be unreasonable. The offer was open for 14 days. 5. The offer was not accepted, or indeed, responded to, and there is no evidence of any further communications at around that time. 6. The plaintiff filed his Statement of Claim on 26 March 2021, but was unable to effect service on the defendant. That Statement of Claim appears to be the first occasion on which the common money count was notified to the defendant as the basis for the plaintiff's claim. 7. GTC Lawyers did not have instructions to accept service and the plaintiff was unable to effect personal service. On 1 November 2021 orders for substituted service were made and the defendant was served in accordance with them. 8. On 10 December 2021 Armstrong Legal, a member of the same legal group as GTC Lawyers, entered an appearance for the defendant. 9. Armstrong Legal filed a defence on 10 December 2021. That defence pleaded that the monies had been gifted to the defendant, and alleged that some $70,000 in payments had been made by the defendant to the plaintiff. Those allegations, to the extent that they were pressed, were unsuccessful. 10. On 6 May 2022 Armstrong Legal ceased to act for the defendant. The plaintiff's affidavit evidence in chief was filed and served in June 2022. The defendant, now unrepresented, filed "responses" to the plaintiff's evidence on 9 September 2022 and the plaintiff served his evidence in reply in October 2022, comprising an affidavit in reply of the plaintiff sworn 7 October 2022 and an affidavit in reply from Mr McEnaney sworn 11 October 2022. 11. On 11 October 2022 Clayton Utz served an Offer of Compromise under UCPR r 20.26, erroneously described as being served under r 20.6. That offer provided that the plaintiff offered to compromise the whole of his claim on the basis of: 1. judgment for the plaintiff; 2. the defendant to pay $200,000 within 28 days of written acceptance of the offer; and 3. each party to pay his own costs. 1. The following features of the offer of compromise are relevant: 1. The offer required payment of the whole sum within 28 days. If the defendant were unable to assemble that sum within that time, he would be in breach of any judgment that the plaintiff would have had the right to enter. There was no evidence as to the defendant's financial position, although correspondence from the defendant on 21 October 2022 (see below) suggested that he did not have such funds available to him at the time. 2. The offer was open for 17 days and expired on 28 October 2022, some 5 days before the matter was listed for hearing. 1. The offer was served under cover of a letter which indicated that if the offer were found not to be a valid offer under the Rules, the plaintiff would, nevertheless, rely on it as a Calderbank offer. In this respect, Clayton Utz again referred to the evidence of Mr McEnaney, which they stated was consistent with the plaintiff's evidence and refuted the substance of the defendant's allegations. 2. The offer was not accepted. On 21 October 2022 the defendant responded by email in which he nominated a settlement figure of $180,000 and suggested he could make weekly instalments of $200 per week. There was no upfront payment and no provision for interest referred to in his email. On 25 October 2022 the plaintiff rejected the offer and the matter proceeded to trial on 2 and 3 November 2022.
2. The process by which Clayton Utz came to act for the plaintiff is set out in my principal judgment in this matter. Clayton Utz took on the plaintiff's claim as a pro bono matter in April 2020. Its work included advising the plaintiff on any legal or equitable interest he may have had in property owned by the defendant. The relevant terms of its retainer are: 1. The plaintiff would not be required to pay anything out of his own pocket for professional costs. 2. An invoice for professional costs would only be rendered, relevantly, if the Court ordered another party (i.e. the defendant) to pay the plaintiff's costs. 3. Clayton Utz undertook to pay up to $200 in disbursements on behalf of the plaintiff and later sought and obtained authorisation from him to incur a further $500 in disbursements.
3. Mr Slater further deposes that Christian McDowell, the senior associate at Clayton Utz with carriage of this matter, obtained the plaintiff's verbal agreement to incur further disbursements. Clayton Utz ultimately incurred $2,433.48 in disbursements, not including counsel's fees, which have yet to be rendered. Taking account of the $200 Clayton Utz undertook to bear, that leaves a potential liability for disbursements of $2,223.48 to date. A further $1,499.00 will fall due to the Court by way of hearing fees. The plaintiff does not qualify for a waiver of those fees.
4. On 21 February 2021 Ms Hulmes provided her own costs agreement to Clayton Utz, which relevantly provided that she would have the right to invoice for her services if the plaintiff obtained an order for costs.

Issues

1. Two issues arise: 1. whether the plaintiff is entitled to an order for costs at all; and 2. whether the plaintiff is entitled to an order for indemnity costs for the whole or part of the proceedings.

Entitlement to costs

1. Costs ordinarily follow the event and the plaintiff has succeeded in recovering the full amount of his claim, subject to some adjustment for interest. He is, as I indicated in my principal judgment, prima facie entitled to his costs.
2. Ms Hulmes addressed the question of whether the conditional nature of the plaintiff's liability for costs affected his entitlement, specifically whether recovery on the basis of a conditional costs liability offended the indemnity principle. In the course of her submissions, she directed me to the Victorian decision of Mainier v Cirillo (2014) 47 VR 127; [2014] VSCA 227 at [43] and the Federal Court decision of Royal v El Ali (No 3) [2016] FCA 1573 at [37]-[52].
3. In Royal, the plaintiffs' cost agreement with their solicitors only required payment of their fees if the litigation resulted in a recovery sufficient to ensure their payment. Disbursements were, however, chargeable. It was argued by the respondent that the contingent nature of the liability offended the indemnity principle. Davies J found that the principle was not offended. In his judgment he stated: In issue is whether the applicants are legally obliged to pay any legal costs to their solicitors. If not, a costs order in their favour against the respondents would offend the indemnity principle as there are no costs for them to recover from the respondents: Mainieri & Anor v Cirillo [2014] VSCA 227; (2014) 47 VR 127 ("Mainieri v Cirillo") at [43]. The indemnity principle does not require that the costs have been paid, but it does require that there be a legal liability to pay costs: Wentworth v Rogers [2006] NSWCA 145; (2006) 66 NSWLR 474 ("Wentworth v Rogers") at [126]. … In Wentworth v Rogers … Santow JA considered that the indemnity principle would not be contravened in such a case. His Honour reasoned at [51] and [54] that: the [Legal Profession] Act now recognises conditional costs agreements of the kind where payment of the barrister's or solicitor's costs "is contingent on the successful outcome of the matter"; s186. No distinction is drawn between such a contingency expressed as a condition precedent or subsequent. I am inclined to the view that the application of the indemnity principle should not depend on that distinction either, though that is not necessary to decide. The costs agreement, to comply with the Act, must "set out the circumstances constituting the successful outcome of the matter". I consider that the indemnity principle must at least accommodate the kind of conditional costs agreement recognised by s186. Otherwise, it will operate as a powerful disincentive from using the now statutorily recognised conditional costs agreement, facilitating access to justice, if the lawyer concerned will not recover costs from the other party where successful against that other party. … The general law governing the indemnity principle with its emphasis on flexibility is, in my opinion, quite capable of accommodating conditional fee agreements of this kind. It should do so recognising the importance of such agreements in promoting access to justice which may otherwise be unaffordable. The residual undertaking to pay, though qualified, strengthens the case for conformance with the indemnity principle…
4. I accept that the indemnity principle is not transgressed in the present matter. The contingent nature of the Clayton Utz costs agreement and Counsel's costs agreement do not derogate from this finding. Adopting the analysis of Davies J in Royal and the Victorian Court of Appeal in Mainier, I accept that the plaintiff will be liable on my making an order for costs, and that this will satisfy the requirement that an order for costs be compensatory in nature.
5. Any order I make to that effect will be sufficient to trigger liability under the costs agreements. I will order the defendant to pay the costs of the plaintiff.

Indemnity costs application

1. That leaves the second component of the plaintiff's application, which is his claim for indemnity costs. That claim itself has two, alternative, components: indemnity costs for the whole of the proceedings, arising from the failure by the defendant to accept the Calderbank letter of 8 October 2020, and indemnity costs for the period from 11 October 2022, arising from the failure by the defendant to accept the Offer of Compromise of that date.
2. It might be noted that whether this application succeeds or not will not affect the plaintiff. He will only be liable to his solicitors for the amount ordered, so whether I order indemnity costs or not, he will be unaffected. Similarly, disbursements (including counsel's fees) are generally allowed at cost whether assessed on the ordinary or an indemnity basis, although this is not to preclude the proper assessment of such disbursements in due course.

Calderbank offer

1. The plaintiff relies on the principles in Calderbank v Calderbank [1975] 3 All ER 333, as summarised by the Court of Appeal in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [38] to [46] and, more recently, in Re Earth Civil Australia v Bluemine (No 2) [2021] NSWSC 1161 at [93]-[99] per Ward CJ in Eq (as her Honour then was).
2. The Court's power as to costs derives from s 98 of the Civil Procedure Act 2005 ("CPA") and Pt 42 of the UCPR. Costs generally follow the event and are assessed on the ordinary basis. However, the Court retains a discretion not only as to whether costs should follow the event but also as to the basis on which they are assessed: UCPR rr 42.1 and 42.2.
3. Calderbank letters can form the basis of a special costs order because they facilitate the public policy objective of providing an incentive for disputants to end their litigation as soon as possible. They also give effect to the related public policy of discouraging wasteful behaviour by litigants.
4. The failure of a party to accept a Calderbank offer does not necessarily sound in an award of indemnity costs in favour of the offeror. Merely because the offeror does better in the litigation than he or she would have had the offer been accepted is not, of itself, a sufficient reason. Nevertheless, a general rule has emerged in the cases that, in order to justify an award of indemnity costs, the offer must be a genuine offer of compromise that was unreasonable for the offeree not to accept.
5. This is a matter of discretion, which must be exercised with reference to all of the relevant circumstances in the case. The rejection of a reasonable offer is not per se unreasonable. The ultimate outcome of the litigation is a weighty consideration as it is against that amount that the reasonableness of the offer and response should be, to a significant degree, measured: Alves v Patel [2005] NSWSC 841 at [57] per Adams J. However, it is necessary to consider the facts as they were known at the time of the rejection: Fried v National Australia Bank [2001] FCA 1280 at [17] per Gray J. What could and could not have reasonably been foreseen by the offeree informs this assessment: G Dal Pont, The Law of Costs (3rd ed, 2013, Lexis Nexis Australia) at [13.76]. The strength of the offeror's case or defence also has a significant impact on the Court's assessment of the reasonableness of an offer or its rejection: Commonwealth of Australia v Gretton, supra. Other factors include the stage at which the offer was made and for how long the offer remained open: Dal Pont at [13.76], [13.79]-[13.82].

Application to the present facts

1. In the present case, I consider the following matters to be relevant to the exercise of my discretion: 1. The offer was a genuine compromise. A discount of $13,000, out of a claim for $213,000, is about 6%. Given that the plaintiff offered that each party pay their own costs, this was proportionally significant. 2. The terms were clear, as was the foreshadowing of the intention to seek indemnity costs. 3. The defendant was legally represented at the time. 4. The offer was made prior to commencement of proceedings (which is permissible). On the one hand, this makes it more reasonable to have accepted it because costs could have been avoided; on the other, the offer predated the articulation of the plaintiff's claim in a Statement of Claim, or the provision of any evidence for assessment by the offeree. 5. The offer did not articulate the juridical basis of the claim ultimately advanced. It was predicated on an apparent contract claim to the extent a cause of action was identified at all. On the other hand, the factual basis of the claim did not change. Taking both of these factors into account, I consider it was not of itself unreasonable for the defendant to take a "wait and see" approach at that early stage. 6. The offer was only open for 14 days. While the defendant had legal representation at the time, I am not satisfied that this was a sufficient period in the circumstances. The defendant, by his correspondence and by the Court's own observation of him as a witness and an individual representing himself in court as best he could, is not a sophisticated litigant. In circumstances where, notwithstanding the availability to him of legal advice, he was compelled to consider and accept the offer in a comparatively short period, involving a substantial sum of money, I do not regard his failure to respond within the 14 days allowed to have been unreasonable.
2. In the circumstances and weighing the above factors, therefore, I am not satisfied that it was unreasonable for the defendant not to have accepted the Calderbank offer made on 8 October 2020 in accordance with its terms. I therefore decline to award indemnity costs for the whole of the proceedings.

Offer of compromise

1. Offers of Compromise, in terms of the impact they have on applications for indemnity costs, have a number of features that are similar to Calderbank offers. The regime under the UCPR provides that where an offer is made by a plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment no less favourable to him than the terms of the offer, the plaintiff is entitled to indemnity costs from the day after the offer was made, unless the court otherwise orders.
2. The question before the Court is whether there is a basis to order otherwise.
3. UCPR r 20.26 relevantly provides as follows: 20.26 Making of offer (cf SCR Part 22, rules 1A, 2, 3 and 4; DCR Part 19A, rules 1, 2, 2A, 3 and 4; LCR Part 17A, rules 2 and 5) (1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms. (2) An offer under this rule - (a) must identify - (i) the claim or part of the claim to which it relates, and (ii) the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment, and … (f) must specify the period of time within which the offer is open for acceptance. … (5) The closing date for acceptance of an offer - (a) in the case of an offer made two months or more before the date set down for commencement of the trial - is to be no less than 28 days after the date on which the offer is made, and (b) in any other case - is to be such date as is reasonable in the circumstances. (6), (7) (Repealed) (8) Unless the notice of offer otherwise provides, an offer providing for the payment of money, or the doing of any other act, is taken to provide for the payment of that money, or the doing of that act, within 28 days after acceptance of the offer. ….
4. UCPR r 42.14 is the source of a plaintiff's conditional entitlement to indemnity costs. The terms of the rule are: 42.14 Where offer not accepted and judgment no less favourable to plaintiff (cf SCR Part 52A, rule 22; DCR Part 39A, rule 25) (1) This rule applies if the offer is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim no less favourable to the plaintiff than the terms of the offer. (2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim - (a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and (b) 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.
5. The exercise of the court's discretion to "order otherwise" depends upon satisfaction that the particular circumstances are sufficient to justify a departure from the rule: Morgan v Johnson (1998) 44 NSWLR 579 at [581]-[582]. If the offeree's rejection of the offer was reasonable, this would, nevertheless, not be a sufficient basis to displace the rule. It is a relevant, but not determinative, consideration: 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]). See also Leach v Nominal (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [48] per McColl JA.
6. The onus is on the defendant to demonstrate a basis for the Court to order otherwise than to order indemnity costs in accordance with r 42.14.

Application to present facts

1. The plaintiff says that none of the circumstances which might cause the Court to exercise its discretion to otherwise order exist in the present case. Significantly, he says: 1. The Offer was a genuine and material compromise, particularly when interest is factored in. 2. In the plaintiff's financial circumstances, this was a significant compromise.
2. As the defendant was unrepresented, he was able to make little contribution to the argument. I did raise, however, the following matters with counsel for the plaintiff: 1. Whether, in accordance with UCPR r 20.26(5)(b), the Court can be satisfied that the offer, having been made within two months of the commencement of the hearing, was open for a period that was reasonable in the circumstances. In this respect I noted that the defendant was not legally represented at the time. 2. Whether I could take into account the fact that acceptance of the offer required payment within 28 days and whether the evidence established that the defendant did not have sufficient liquid assets to be able to perform such an obligation within that period.
3. Counsel's submissions in this regard can be summarised as follows: 1. The comparative shortness of the period for which the offer was open ought not weigh against the plaintiff. The plaintiff points out that the defendant responded to the offer within 10 days. 2. Further, with respect to the expiry of the offer some five days before the commencement of the hearing instead of, say, the first day of the hearing or the day immediately before its commencement, the plaintiff says that it was necessary, in making final preparations for the hearing, for his legal advisors to know whether the matter would settle. 3. The mere fact that the defendant was unrepresented at this stage of the proceedings does not necessarily translate to an entitlement to greater time to consider the offer. In the circumstances, he did not need more than 10 days to consider and respond to the offer. 4. The financial position of the defendant was not a relevant consideration. The evidence did not establish what that situation was, in any event.
4. Taking into account the above matters, I have concluded that the offer was not open for a period that was reasonable in the circumstances. The prima facie position in New South Wales is that offers should be open for 28 days. In cases where the offer is made within the final two months before the hearing, the question of reasonableness must take into account not only the length of time for which the offer is open, but also the nature of the parties and the complexity or otherwise of the case. Unsophisticated offerees may need longer to consider the merits of any offer: Dal Pont at [13.32].
5. The offer was not served until 11 October 2022, which I infer was because that was the date on which the plaintiff's affidavit evidence in reply was complete. The closure of the offer after 17 days, some 5 days before commencement of the hearing, did not extend to the defendant all of the remaining available time in which to consider the offer prior to the commencement of the hearing.
6. I am not satisfied that the fact that the plaintiff's final preparation had to commence was a sufficient basis for the offer not to remain open until the day before the hearing or even the first day of the hearing itself. That period still would not have been 28 days, but in the circumstances, it would have been more reasonable than the length of time actually afforded to the defendant. The fact of expiry of the offer may have been understood by the plaintiff's solicitors as changing the parties' respective costs exposure in a way which might have impacted on settlement, but it would not have precluded the matter still settling. Settlement immediately prior to, or even during, a hearing is not unknown.
7. I accept the plaintiff's submission that the defendant's financial position, such as is known or may be inferred by the Court, does not derogate from the plaintiff's position in these circumstances, and I do not have regard to it in the exercise of my discretion. I also accept that the defendant's response to the offer within 10 days is a factor in favour of finding the period of 17 days was reasonable. In all the circumstances, however, I do not regard it as a sufficient basis to support such a finding.
8. I, therefore, find that the offer of compromise was not a valid offer under the UCPR because it was not open for a period that was reasonable in the circumstances.
9. The plaintiff's final alternative argument in favour of an award of indemnity costs was that the offer should, nevertheless, be treated as a Calderbank offer. Courts are generally reluctant to award indemnity costs against unrepresented litigants. In Bhagat v Royal and Sun Alliance Life Assurance Australia Ltd [2000] NSWSC 159 at [13], Hodgson CJ in Eq observed: … I accept that a court does have to make allowances for the position of litigants in person, and to try to ensure that such a litigant does not lose out because of lack of expertise; although there is a limit to what the Court can do in that regard, while still remaining an impartial determinant of a dispute. The Court may in those circumstances refrain from making orders against litigants in person for conduct that might be considered as justifying orders for costs against represented litigants. By the same token, litigants in person can cause great hardship and expense to other parties, through making allegations and claims that lawyers would recognise as allegations and claims that could not reasonably or even properly be made, and through making proceedings much longer and much more expensive than they would otherwise be, by not focusing accurately on the real issues in the case. Conduct of that nature by legally represented parties would often lead to orders for indemnity costs. Litigants in person may escape the consequence of indemnity costs, but I do not think that the circumstance that a party is a litigant in person is a ground for displacing the ordinary result that costs follow the event.
10. That matter concerned the conduct of proceedings by a litigant in person. In my view, similar considerations apply in considering the conduct of the defendant with respect to his non-acceptance of the 11 October 2022 offer. Courts have awarded indemnity costs against litigants in person for failure to accept a Calderbank offer: e.g. Roads Corporation v Love [2010] VSC 581.
11. The October 2022 offer was rejected by way of a counter offer a week prior to its expiry, whereas the October 2020 offer was not responded to at all for the period it remained open. The Calderbank enquiry must therefore focus on the reasonableness of the rejection rather than the reasonableness of the period for which the offer remained open. In my view, the following factors are relevant: 1. The 11 October 2022 offer was made shortly before the hearing, when all of the affidavit evidence had been served. The plaintiff's claim, as it was ultimately presented to the Court, had by then been articulated in the Statement of Claim. The defendant was in as good a position as he ever would be to assess his prospects of success. 2. The offer was sufficiently clear for the defendant not to have been under any doubt that the plaintiff was seeking to compromise his claim for $200,000, which was a real compromise. An application for indemnity costs was clearly foreshadowed. 3. If an offer is unreasonably rejected within the period during which it is open, I am not aware of any principle or authority which in ordinary circumstances invalidates the offer for not having been open beyond the date of its rejection. 4. On the other hand, while the plaintiff ultimately prevailed, there were difficulties with his evidence (as there were with the evidence of the defendant). It would not be possible to say that his prospects of success as at the date of the offer were so poor that it would have been unreasonable for a litigant in person in his position, and with his level of sophistication, to have considered he had sufficient prospects of success to defend the claim. Ultimately, the plaintiff prevailed primarily because his account better accorded with the probabilities and Mr McEnaney partially corroborated his account.
12. Further, in my view, the reasonableness of the defendant's rejection of the offer cannot be assessed against the standard applicable to ordinary, represented litigants. In my view, on balance, the above factors do not establish an unreasonable failure by this litigant in person to accept the offer nor are they indicative of the type of behaviour deprecated by the Courts as described in paragraph 19 above. While he relied on factual allegations that were not accepted, and ultimately failed in his defence, I do not consider, in the exercise of my discretion, that his behaviour in not accepting the offer was, in his circumstances, so unreasonable as to justify an order for indemnity costs.
13. On the basis of the above, I decline to order that any part of the plaintiff costs be paid on an indemnity basis.

Orders

1. The defendant will pay the plaintiffs costs on the ordinary basis, as agreed or assessed.

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: 24 March 2023