Ying v Song

JUDGMENT 1HER HONOUR : On 22 December 2010, I handed down my reasons for judgment in these proceedings. I found in favour of the defendants and dismissed the plaintiff's claim. I indicated that I would hear submissions as to costs at a time convenient to Counsel. As it transpired, orders in relation to the costs of the proceedings as between the parties were not the subject of submissions until 10 June 2011. The delay arose because, following the judgment, the defendants indicated that they wished to make a particular application in relation to the costs of the proceedings. To that end, after some delay, they filed a Notice of Motion dated 1 April 2011 seeking indemnity costs orders not only against the plaintiff (Ming Ying) but also against the solicitor and barrister who appeared for Mr Ying in the proceedings before me, Mr Chan and Ms Winfield. Those lawyers are the second and third respondents and are separately represented on the motion. 2At a directions hearing prior to the hearing of the motion on 10 June 2011, Counsel appearing for the second and third respondents (respectively, Mr Downing and Mr Elliott) submitted that the hearing of the application for personal (indemnity) costs orders against their clients should be deferred until after the hearing of an appeal that I am told has been filed in respect of the judgment I handed down on the substantive disputes between Mr Ying and the defendants. It was said that this was appropriate since the legal representatives might wish, on the hearing of the costs applications against them, to put in evidence matters the subject of legal professional privilege (that privilege reposing in their client Mr Ying), the disclosure of which would be possible only if there was a waiver of privilege (which might be unlikely prior to the hearing of the appeal) and thus the legal representatives might be hindered in their ability to conduct their defence to the current costs application. I considered there to be some force in that submission. (It was also suggested by Mr Downing that a successful appeal would obviate the need for the present costs application. I make no comment on that submission.) 3Counsel for the defendants (Mr Lawson) indicated that in the interests of having orders made as to costs prior to the hearing of the appeal (which it seemed to me would be desirable in order to avoid a multiplicity of proceedings, in the event that the plaintiff were also to appeal whatever costs orders might now be made), the application for indemnity costs would be pressed at this stage only on the basis of the various settlement offers that had been made in relation to the proceedings. That said, Mr Lawson not unreasonably wished to reserve to the defendants the potential to make a further application for costs, on the same basis as will be the subject of their costs applications against the legal representatives, should the defendants' cost position not otherwise be adequately met by the costs order that is made at the conclusion of this application. Mr Lawson indicated that any such application would not be pressed until after the determination of the appeal. It could then be heard together with the costs applications against the legal representatives. It seemed to me that this was the course most consistent with the statutory objectives of s 56 of the Civil Procedure Act 2005 (NSW) and I proceeded accordingly. 4In those circumstances, on 10 June 2011 I heard the application for costs only as against Mr Ying and the only orders then sought by the defendants were orders 1, 4 and 5 as set out in their Notice of Motion (those broadly being as to the indemnity costs claimed against Mr Ying and an order for the payment of interest on moneys already disbursed by way of the costs of the proceedings) with the balance of the motion being stood over for hearing at a later date. 5The two issues now for determination, therefore, are whether Mr Ying should pay the defendants' costs of the proceedings on an indemnity basis (it not being contended that there should not at least be a costs order on a party/party basis in accordance with the general rule that costs should follow the event) and whether Mr Ying should pay interest (and if so on what basis) on the costs paid by the defendants in the course of the proceedings. Background 6The background to this matter is set out in my reasons for judgment published on 22 December last year and I do not repeat that here, save to note that the proceedings involved a dispute between former family members over shares in the second defendant, Budget Scaffold Supplies Pty Ltd ("BSS") and in respect of amounts recorded at one stage in the financial records of BSS as a shareholder loan from Mr Ying to the company. 7When the proceedings were initially commenced, in July 2006, the sole defendant was the first defendant (Lida Song), who is Mr Ying's former brother-in-law, and the sole relief claimed related to the transfer of the BSS shares into Mr Song's name. A declaration was sought that Mr Song held those shares on trust for Mr Ying. (The nature of the trust was not identified.) Mr Ying also sought an order that Mr Song account to him for all benefits received from BSS in Mr Song's capacity as holder of the 25 shares and that he do all things necessary to transfer the shares back to Mr Ying. 8Subsequently, in September 2007, the summons was amended to join BSS as the second defendant and additional relief was sought both against the company and against Mr Song (as summarised at [30], [36]-[38] of my principal reasons). Relevantly, in the context of one of the submissions made in the present application, this amendment was made (and BSS joined as a party to the proceedings) at a time after the making in August 2006 of the first of the Calderbank offers to which I was taken on the present application. 9In the proceedings, as they were constituted by the time of the hearing before me, Mr Ying sought declaratory relief in relation to 25 shares in BSS (those being shares that had been transferred to Mr Ying by Mr Song and later, at Mr Song's instigation and without Mr Ying's consent, transferred back to Mr Song) and in relation to certain sums that Mr Ying said he had paid to the company ($106,000 allegedly paid to the company in connection with the acquisition of the BSS shares and another amount of some $30,775 said to have been advanced as a loan to the company). Mr Ying contended that Mr Song held the 25 BSS shares on trust for him and, further, that BSS held the sum of $116,800 on constructive trust for him. Mr Ying also sought an order for the taking of accounts and an enquiry as to the dealings and transactions by or in relation to BSS. 10According to Mr Song, whose evidence I accepted in relation to the transactions in question as more credible than that of Mr Ying, the BSS shares were only transferred to Mr Ying (and the company's records only recorded the particular sums in question as shareholder loans by Mr Ying) as part of an attempt to present a false impression of Mr Ying's assets in Australia to the Department of Immigration so as to assist in Mr Ying's attempt to obtain permanent residency in Australia. (I indicated at the time I handed down my reasons last year that I wished to hear submissions as to why I should not refer the matter so disclosed on the evidence before me to the immigration authorities. Mr Song has, however, since then disclosed these matters of his own volition and in evidence before me on this occasion was correspondence from the Department of Immigration confirming that Mr Song has made such disclosure and advising that it does not propose to take any action at this stage. Therefore it is not necessary or appropriate for me to take any further steps in that regard.) 11As noted in my principal reasons for judgment, a difficulty throughout the hearing was the imprecision as to the basis on which it was alleged that Mr Ying was entitled to some of the relief sought in these proceedings. It was only in the course of closing submissions, for example, that it was asserted that Mr Song owed fiduciary obligations to his former brother-in-law (as a 'self-appointed' fiduciary) and that the circumstances in which the BSS shares came to be registered in Mr Song's name gave rise to a constructive (or resulting) trust by analogy with cases such as Black v S Freedman & Company [1910] HCA 58; (1910) 12 CLR 105. It was then also submitted that a Quistclose trust had arisen. 12In effect, what Mr Ying seemed ultimately to be asserting was an entitlement both to the shares and to recover the $106,000 that he says he paid (but that his Counsel said that he did by way of a loan to BSS) to acquire those shares. 13At [53] of my principal reasons I expressed the view that the explanation given by Mr Ying in the witness box was suggestive of the case, as ultimately put, being one fashioned to meet the relief sought rather than by reference to the underlying facts of the case. In other words, the suggestion that there was a loan to the company seemed to be put on the basis of an assumption that it should be treated as a loan if Mr Ying did not receive back what he says he paid to acquire the shares. 14For the reasons I outlined in my principal judgment, I held that Mr Song did not hold his 25 BSS shares on trust for Mr Ying (constructive or otherwise); that BSS did not hold any moneys on constructive trust for Mr Ying; and that the evidence did not establish that there was a loan to BSS in relation to the $106,000 cheque that had been provided to it. I further noted (at [290]) my view that the claim against BSS (for a trust over funds said to have been repayable by it as a loan or to account for the use or benefit of what was said to have been a loan to it) was misconceived from the outset. (This is relevant when considering the reasonableness of the rejection of settlement offers made by BSS.) 15With that background in mind, I turn to the issues now before me for determination. At the outset, I note that generally there is said to be a broad discretion as to the making of costs orders, as recognised in Oshlack v Richmond River Council (1998) 193 CLR 72. (i) Basis on which costs should be ordered 16As noted above, the claim for an indemnity costs order is made (at this stage) in reliance on a series of settlement offers, only one of which purported to be an offer of compromise under the Rules. Offers of Compromise 17Under the Uniform Civil Procedure Rul es (Rule 42.15) if a valid offer of compromise is made by a defendant (and not accepted), then (unless the Court otherwise orders) if the final judgment is not less favourable to the plaintiff, the defendant is entitled to a costs order on an indemnity basis from the day following the day on which the offer was made (in this case that would be 11 August 2006). This may involve a balancing, as well as an arithmetical, exercise depending on the terms of the offer of compromise. 18In Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at [725], the Court of Appeal said that the special costs rules were expected to apply "in the ordinary case". In Morgan v Johnson (1998) 44 NSWLR 578 (at [581] -[582]), it was said that the Rules confer a "prima facie" entitlement to special costs orders in those circumstances. Other cases say that "compelling" or "exceptional" circumstances would be required to justify a departure from the special costs rules ( Hillier v Sheather (1995) 36 NSWLR 414 (at 422B-E) per Kirby P; South Eastern Area Health Service v King [2006] NSWCA 2 at [83] per Hunt AJA; and Caine v Lumley General Insurance Ltd (No 2) [2008] NSWCA 109 at [35]-[37] per Basten JA and see discussion in Ritchie's Commentary at [20.27.15]). In Rosebanner Pty Ltd v Ausgrid [2011] NSWCA 150, the Court of Appeal recently confirmed that the rationale of the rules in relation to offers of compromise, as described in Morgan v Johnson , has significant force. 19There are particular requirements with which an offer of compromise must comply in order to bring the matter within the operation of the special costs rules. Relevantly, for present purposes, Rule 20.26(2) provides that an offer must be exclusive of costs "except where it states that it is a verdict for the defendant and that the parties are to bear their own costs". The relevance of this in the present case is that, although the offer of compromise on which the defendants now rely was not expressed to be "inclusive" of costs, it was an offer that required the plaintiff to agree to entry of a verdict in the defendants' favour but not on the basis that the parties bear their own costs (instead, on a less favourable basis to the plaintiff, namely that he pay a percentage of the defendants' costs). 20In Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194, Ipp JA emphasised that an offer that did not comply with the then equivalent provisions in the Supreme Court Rules (because it was expressed to be inclusive of the costs of the proceedings) was not invalid, "it merely has no effect under the Uniform Civil Procedure Rules" [24], applying the reasoning in Associated Confectionery (Aust) Ltd v Mineral and Chemical Traders Pty Ltd (1991) 25 NSWLR 349. His Honour went on to note that an offer of compromise to which effect could not be given for the reason that it was expressed to be inclusive of costs might nevertheless take effect as a Calderbank offer. 21At [27] his Honour said: Calderbank offers are simply offers that do not comply with the relevant rules of court relating to the making of offers of compromise: Jones v Bradley (No 2) (at [5]). Whether an offer, intended to be an offer under the Uniform Civil Procedure Rules but which is ineffective because it does not comply with those Rules, operates as a Calderbank offer, depends upon the intention of the offeror as revealed by the terms of the offer. The offer may disclose an intention that it should take effect only if it complies with the Uniform Civil Procedure Rules. On the other hand, it may disclose a general intent to make an offer, irrespective of whether it takes effect under the Uniform Civil Procedure Rules or not. (my emphasis) 22In the Salvation Army case, the offer of compromise expressly provided that if it was ineffective under the Uniform Civil Procedure Rules (there contemplated because of the possibility that different Rules might be said to apply in probate proceedings) then the offer was to be treated as a Calderbank offer. His Honour considered that the offer reflected an overriding intent that, irrespective of its application under the relevant Rules that might apply to it, it should take effect as a Calderbank offer and said "In my opinion, the offer of compromise was capable of being accepted by the appellant on the basis that it was an informal Calderbank offer and should be regarded as such an offer". 23The offer must involve "a real and genuine element of compromise" ( Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375; Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120; Leichhardt Municipal Council v Green [2004] NSWCA 341). 24In the present case, this gives rise to the question whether the offer of compromise (requiring, as it does, a capitulation to the defendants' position, by way of a verdict in their favour, and the payment of a substantial portion of their costs) involves a real and genuine element of compromise. Where an offer is in substance a demand for payment of the full amount claimed, or a formal offer "designed simply to trigger the entitlement to indemnity costs", or requires dismissal of the claim, then the necessary element of compromise may be said to be lacking (see Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353 at [355]; Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 at [368]; Shorten v David Hurst Constructions Pty Ltd [2008] NSWSC 609 at [6]). 25To the extent that Rule 20.26(2) expressly contemplates that a defendant may issue an offer of compromise providing for a verdict in its favour on a 'walkaway' basis (i.e., on the basis that each party bear its own costs), then this would seem to involve a recognition that such an offer involves an acceptable level of compromise. What is less clear is that an offer of compromise that provides for a verdict in other (less favourable) circumstances will do so. Calderbank offers 26The position in relation to offers expressed to be without prejudice except as to costs (and relied upon as being in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586) differs in that the party seeking to rely on the offer must establish both that it represents a genuine compromise of the dispute and that it was unreasonable for the offeree to reject it. It is recognised that the making of a Calderbank offer is one of the circumstances in which the court may exercise its discretion under Rule 42.1 to make some order other than that costs should follow the event but that it does not automatically follow that simply because the offer was more favourable than the judgment then an indemnity costs order will be made. 27In Commonwealth of Australia v Gretton [2008] NSWCA 117, Beazley JA noted the public policy considerations that underpin the making of favourable costs orders where a Calderbank offer has been made, (at [41]) those being the encouragement of settlement of disputes as soon as possible and the discouragement of wasteful and unreasonable behaviour by litigants. Her Honour noted that the making of a Calderbank offer does not automatically result in a favourable costs order, notwithstanding that the judgment is more favourable to the party making the offer than the terms of the offer, referring to what was said by Giles JA in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37], to the effect that the question is whether in all the circumstances the failure to accept the offer "warrants departure from the ordinary rule as to costs". The onus is on the party making a Calderbank offer to satisfy the court that it should exercise the costs discretion in its favour ( Evans Shire Council v Richardson (No 2) [2006] NSWCA 61). 28In Cat Media Pty Ltd v Allianz Australia Insurance Ltd [2006] NSWSC 790, Bergin J (as her Honour then was), summarising the relevant principles to be gleaned from the Court of Appeal decision i n Leichhardt noted that the discretion as to the cost consequences attendant under the general law upon an offer of compromise made in a Calderbank letter is to be exercised having regard to all of the relevant circumstances of the case. Her Honour observed not only that there is not a prima facie presumption in favour of an award for indemnity costs if the Calderbank offer is not accepted and is not bettered but also that "there is no rule that an optimistic offer is not a genuine offer". 29Relevantly, in Cat Media , her Honour accepted that the offer there made by the defendant was a genuine offer of compromise (although describing it as a 'borderline' case), where the offer represented a payment that would have covered only a portion of the plaintiff's costs incurred up to that time. Her Honour noted that, in submissions, the plaintiff had argued that the offer was, in reality, no more than an invitation to capitulate and had relied upon what was said by Bryson JA in Leichhardt at [59]: The respondent's case did not succeed but it was not a case which could not reasonably be argued ... The only element of compromise in the offer was as to costs: otherwise it was a call on the respondent to capitulate and give up: the element of compromise was slight and the respondent's ultimate lack of success does not to my mind demonstrate that the reasonable course for the respondent was to capitulate, nor does anything show that the respondent was delinquent with going on with the trial or in resisting the appeal. 30Her Honour (in considering that submission, and the defendant's submission in response that Santow JA in the same case had recognised that a 'walkaway' offer could, in a particular case, be a genuine offer, as could an offer which allowed only a small discount from 100% success be genuine and realistic depending on the circumstances of the case) noted (at [15]) that: An offer to pay only a portion of the plaintiff's costs at such a late stage of the proceedings may well present as equivalent to a requirement that the plaintiff capitulate. I am of the view that it is a borderline case but on balance, the fact that the defendant was willing at that time to give up - or compromise - what it saw as its strong position and pay $100,000 to the plaintiff persuades me that the offer was a genuine offer of compromise. 31In Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322, it was suggested that unless a Calderbank or informal offer of compromise involved some direct inconsistency with the formal "offer of compromise" rules, the content and terms of such an offer would be of relevance to the exercise of the costs discretion (at [133]-[135]). 32There is a question as to the consequences which should flow from the making of an "inclusive of costs" Calderbank letter, in circumstances where the offer of compromise rules provide for offers to be made on an exclusive of costs basis. 33In Elite , McColl JA noted the line of authority, commencing with Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97, to the effect that a Calderbank letter expressed to be inclusive of costs will not warrant departure from the usual basis upon which a successful party's costs are calculated. 34In Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (Formerly GIO Insurance Ltd) and Ors [2006] NSWSC 583, Einstein J, in a passage noted by her Honour in Elite , said at [40]-[41]: It has been held that a Calderbank letter which is expressed to be 'inclusive of costs', is insufficiently precise to qualify as a Calderbank offer, for the reason that the offeree is placed in a position of not being able to determine the appropriate amount to attribute to the substantive claim and the costs incurred in advancing it: Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97 at 102; Hanave Pty Ltd v LFOT Pty Ltd (formerly Jagar Pty Ltd) [1998] 1429 FCA 11, BC9805993 (Smallacombe Pty Ltd v Lockyer Investments Co Pty Ltd was referred to by Young J in Rosser v Maritime Services Board of New South Wales (No 3) (unreported, Supreme Court of New South Wales, 25 November 1997, Young J, BC9706221). These authorities recognise the importance of isolating the costs component in such a way which is clear and capable of proper assessment independently of the principal claim, as part of a Calderbank letter. 35McColl JA noted (at [101]) that Campbell J (as his Honour then was) had made the same point in White v Baycorp Advantage Business Information Services Ltd [2006] NSWSC 910 (in a case where the Calderbank offer had encompassed an amount both for damages and costs). Her Honour then considered Victorian authority where it had been held that a Calderbank letter could be expressed to be on an all-inclusive basis ( M T Associates Pty Ltd v Aqua-Max Pty Ltd & Anor [2000] VSC 163 per Gillard J, observing that many cases were settled on an "all in" basis and "[t]here is little difficulty in making an assessment of the likely amount of the claim and costs"). 36Her Honour noted (at [103]) that in an ex tempore judgment in DSE (Holdings) Pty Ltd v InterTAN Inc [2004] FCA 1251; (2004) 51 ACSR 555 (at [12]-[13]), Allsop J (as his Honour then was) had referred to Smallacombe, Hanave Pty Ltd v LFOT Pty Ltd (formerly Jagar Pty Ltd) [1998] FCA 1429 (Unreported Judgment of the Federal Court of Australia, Moore J, 11 November 1998) and Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602, and did not regard Smallacombe as having articulated "a definitive rule that in an application for costs, an offer that was an all inclusive sum could not, in any circumstances, be taken into account by a Court in considering whether thereafter indemnity costs should be awarded". 37There is, of course, a distinction between a finding that an inclusive offer in a particular case does not enable a determination as to whether proceedings are more or less favourable than the offer (as was the difficulty in Associated Confectionery ) on the one hand, and a conclusion that a costs inclusive offer can never be treated as giving rise to a special costs order on the other hand. 38After considering the divergent lines of authority, McColl JA came to the following conclusion (from [111]): The Smallacombe line of authority has been developed by experienced trial judges whose views, in my opinion, should be accorded great weight. The underlying premise of such cases rests in the proposition that an offeree cannot be said to have acted unreasonably in not accepting an offer expressed to be inclusive of costs, because the offeree does not have an adequate opportunity to consider the offer and because of the difficulties posed when a court comes to consider the reasonableness of the offeree's conduct in rejecting/not accepting it. In other words such an offer presents practical difficulties. (my emphasis) First, the recipient of such an offer would not know the likely party and party costs to date on taxation or assessment: see Smallacombe (at 102); Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2). Secondly, in considering the reasonableness of the offer at the time the question of its costs consequences arose, it would be necessary to indulge in a taxation, or assessment, of costs: Associated Confectionery (at 351). The Court should not be required to postpone the decision as to the basis upon which costs should be awarded while awaiting the outcome of that exercise. Nor should it be required either to speculate as to what the outcome of an assessment might be, nor arbitrate on a dispute between the parties on this topic. In Smallacombe (at 102) Spender J opined that "all-in" offers "would not promote the finality of litigation, but fragment it", a proposition implicitly recognised by Cole J (as his Honour then was) in W Jeffreys Holdings Pty Ltd v Appleyard and Associates (1990) 10 BCL 298 when he said "[g]reat difficulty is encountered if offers are framed in Calderbank letters on an inclusive of costs basis. It leads to ex post facto and unsubstantiated estimates of what costs may have been at a given date". 39McColl JA expressed concurrence with the view expressed by Allsop J, as his Honour then was in DSE Holdings , (at [115]) that: ... I agree with Allsop J that Smallacombe does not lay down a "definitive rule" that an "all-in" Calderbank offer can never be considered on the question of indemnity costs. The Court cannot fetter the s 98 discretion by legal rules: Oshlack (at [35]). Smallacombe does, however, afford guidance as to the exercise of the s 98(1) discretion. It informs the question of the reasonableness of an offeree's refusal to accept an "all-in" offer. In my view it has a sound practical basis. While I accept each case should be considered on its facts, Smallacombe provides sound reasons to discourage offerors from drafting Calderbank letters on an "all-in" basis. 40I note that her Honour said that, even had the offer not been inclusive of costs, her prima facie view would have been that it did not, in the circumstances in which it was made, attract an indemnity costs order because it was open for acceptance for only one week at a time when there was no imminent trial and the respondent's solicitors forwarded under cover of the same letter a quantity of economic loss material which it would have been necessary for the appellant's solicitors to assess. In noting the longer time period within which equivalent offers of compromise were required to be open, her Honour said (at [117]) "Prima facie, I see no reason why litigants who choose not to avail themselves of the rules as to Offers of Compromise should be in a better position than those who do, if they radically foreshorten the period in which an offer is open for consideration". 41Insofar as the reasonableness of a party's rejection of an inclusive of costs Calderbank offer is referable to the difficulty the recipient has in determining the likely costs at the relevant time, the time at which such an offer has been made seems to me to be relevant. It was said, for example, in Elite at [143] - [144] per Basten JA that: If a party in receipt of an offer wishes to know how far the sum offered will go in meeting its costs up to that time, all it has to do is ask its lawyers. In an age where lawyers are required to provide advance estimates of their fees and in circumstances where commercial services are billed on a monthly basis, it is unrealistic to suggest that the recipient of an inclusive offer will be confused or otherwise unable to assess the financial risk of proceeding with litigation. In any event, the offeree is likely to be liable for legal fees exceeding the costs recoverable from the other party. Most litigants, in considering offers, will want to know from their own lawyers, how much they will receive in the hand. Of course, if the offer is not left open for a reasonable time, that might itself make non-acceptance a reasonable course. However, an offeree which is genuinely seeking to assess its position, might be advised to seek more time, if it thinks that is reasonably required. The suggestion that a Calderbank letter which is expressed to be inclusive of costs is "insufficiently precise to qualify as a Calderbank offer" requires to be addressed in particular circumstances. A defendant who fears that even if successful it will be unable to recover costs awarded against the plaintiff, may wish to make an offer in full and final settlement, without further disputation over costs. It may wish to place pressure on the plaintiff to consider the offer favourably by reserving an entitlement to use the offer in relation to costs if the matter proceeds to trial. There is no reason based on policy or principle which would preclude a defendant relying on such an offer only when it is said to be exclusive of costs. Such an inclusive offer will not cause the plaintiff embarrassment: its value will be that amount remaining to him or her after deducting costs already incurred, which the plaintiff's lawyer should be readily able to quantify. The disadvantage of an inclusive offer lies with the defendant if the matter proceeds to judgment. Where the judgment is equal to or above the inclusive figure, the defendant will have failed to better its own offer. However, if the judgment is below the offer there may be uncertainty because the offer included an unquantified element for costs incurred up to the time when it lapsed or was rejected. No doubt the figure for costs incurred to that time by the plaintiff could be resolved by some form of assessment, but if the calculation of the damages component is not clearly seen to provide a figure above the judgment, then the interests of justice will usually not be served by incurring further expense in assessing the costs element of an offer and the plaintiff would be entitled to his or her costs: see Smallacombe above at [140]. (my emphasis) 42At [146] his Honour further held that: ... the fact that a defendant's offer is made early in the proceedings should not by itself be given significant weight in assessing the reasonableness of the plaintiff in rejecting it. Nor should significant weight usually be given to what the plaintiff did or did not know at that stage. Were it otherwise, the more complex the litigation the less likely that the rejection of an early offer which proves to have been fair and reasonable, will have costs consequences. That tendency would diminish rather than enhance the purpose to be discerned from Calderbank offers and court rules. and at [149]: In the present case, the fact that the offer was said to be open for only seven days may well be a factor suggesting that a failure to accept the offer was not unreasonable. However, it is but one circumstances to be considered and should not by itself lead to any prima facie conclusion. The absence of any request for an extension of time would be relevant in assessing reasonableness , as would the fact that the offer was made in response to an offer by the defendants which itself required acceptance within seven days. (my emphasis) 43Ritchie's Commentary (at [42.13.25]), noting the differing views as to inclusive of costs Calderbank offers, expresses the opinion that the first rationale for disregarding such offers (the difficulty for the courts in determining whether a judgment amount is no less favourable than an unaccepted offer) has no persuasive force where the final judgment substantially exceeds the offer (or equally, it might be said, where the final judgment establishes that the claim had no foundation and is dismissed altogether, as is the present case) and that the second reason (namely the difficulty for an offeree in assessing the real value of the offer) has little force in the case of a defendant's offer because the plaintiff should be well able to make a reasonable estimate of the costs they have incurred (referring to what was said by Basten JA in Elite at [144]-[145]). 44With the above in mind, I turn to the particular offers made in the present case. Each must be considered in the light of the context and time at which it was made. 10 August 2006 Calderbank letter 45The first offer on which reliance is placed was that contained in a letter dated 10 August 2006 (only a month after the proceedings commenced by way of summons in July 2006 and at a time when the sole defendant was Mr Song). 46In that letter, which was headed "Without Prejudice except as to Costs", Mr Song's lawyers conveyed an offer by Mr Song to pay the sum of $10,000 inclusive of costs, interest and GST (if payable) in full and final settlement of the proceedings, within 14 days. The letter noted that if the offer was accepted then "an appropriate Deed of Settlement and Release will need to be entered into between the parties" and that the defendant's lawyers could draft a suitable deed. 47The letter made clear that the offer was being put forward as a "Calderbank" settlement offer and that the intention was that it would be tendered on any later application as to costs. 48It could not be suggested that the offer was made so close to the trial that Mr Ying was not able to give sufficient consideration to it (having regard to the practical exigencies of trial preparation, that being a factor considered in Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85). Nor could it sensibly be said that Mr Ying was unable to assess the offer because of a lack of understanding as to what the case was - it was, after all, Mr Ying's claim to the shares that was then being pressed. 49As to the offer being inclusive of costs, it must be noted that the proceedings had only just been instituted. Apart from the fact that one would expect the plaintiff's costs at that stage to be relatively low (being, presumably, the costs of drafting and service of the initiating process), it could not possibly have been difficult (had Mr Ying wished to assess the overall worth of the offer in monetary terms) for Mr Ying to find out from his solicitors what their then costs were. There is no suggestion that he did so (and what is done in response to a Calderbank offer can be taken into account in assessing the reasonableness of its rejection). 50Mr Lawson submits that this was an offer in its terms capable of acceptance and that there was no suggestion (by the reference to the need to enter into a Deed of Settlement and Release) that anything other than a deed reflecting the offer contained in the letter would be required. It is submitted that 14 days was a reasonable time for acceptance in the circumstances (having regard to the fact that the case at that stage was one that turned on factual issues in relation to the BSS shares that should have been well within Mr Ying's own knowledge). 51It is further submitted by Mr Lawson that it was unreasonable for that offer to be refused for the following reasons: first, because Mr Ying did no better on the hearing (something on which little weight can be placed since there is no prima facie presumption that a less favourable outcome warrants a departure from the usual costs order, as explained in the authorities noted earlier); second, because the reason that Mr Ying did no better on the hearing was that on the facts there was no entitlement to the relief sought (which is of some significance in circumstances where the claim to the shares was based on a version of events that Mr Ying must be taken to have known at the time was a sham); and, third, that nothing that subsequently became available to Mr Ying throughout the course of the proceedings had put him in a better position to consider the prospects of success on his claim than what he had when he received the letter of 10 August 2006. 52In particular, it is said that on the facts (as found) Mr Ying must always have known that his case had no basis. In other words, having regard to the finding that the shares were registered in Mr Ying's name as part of a sham arrangement to mislead the Department of Immigration, Mr Ying cannot reasonably have believed that he was entitled to a beneficial interest in the shares as at the time the Calderbank offer was made (and thus a payment to settle his claim to those shares of $10,000 would have represented something in the nature of a windfall gain - and therefore pointing to the unreasonableness of its rejection). 53No evidence was adduced by Mr Ying on the present application as to the reason for his refusal of this offer. However, reliance is placed by Mr Deng, the solicitor appearing for Mr Ying, on the letter responding to this offer as evidencing that reason. 54By letter dated 15 August 2006, William Chan & Co expressed the view (albeit a view formed without, according to the letter, the writer being able to understand the basis of the offer) that the offer was "clearly inadequate". 55The letter noted (as was the case) that the claim was only against Mr Song (and was not a claim against BSS) and stated that "Our client has an independent claim for repayment of the loan, inter alia, against Budget which it will pursue at the appropriate time". Thus, it could not be suggested that there was any misunderstanding on Mr Ying's part as to the ambit of the proceedings (namely that the proceedings he had commenced related only to the 25 BSS shares) and the reasonableness for the rejection of the offer must be tested by reference to that claim (since there was nothing in the offer to suggest that it encompassed any as yet unclaimed entitlement by Mr Ying beyond his assertion of a claim to the 25 BSS shares. 56The basis on which the $10,000 offer in relation to the share claim was rejected (by reference to Mr Chan's letter) seems to have been that it did not reflect, in Mr Ying's opinion, the true value of the shares (representing a 25% interest in the company). The letter indicated a willingness to consider a "realistic offer" for the shares or for the shareholding in BSS to be independently valued.

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