Bamco v Contek (No 2)
[2019] VCC 400
•3 April 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-17-00268
| BAMCO GROVE PTY LTD | First Plaintiff |
| and | |
| B22 PTY LTD | Second Plaintiff |
| v | |
| CONTEK CONSTRUCTIONS PTY LTD | First Defendant |
| and | |
| YARRA RANGES SHIRE COUNCIL | Second Defendant |
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JUDGE: | HER HONOUR JUDGE MARKS | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers | |
DATE OF RULING: | 3 April 2019 | |
CASE MAY BE CITED AS: | Bamco v Contek (No 2) | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 400 | |
REASONS FOR RULING
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PRACTICE AND PROCEDURE – COSTS – OFFER OF COMPROMISE BY DEFENDANT – Rule 26.08(4) County Court Civil Procedure Rules 2008 – Defendant obtained judgment on the claim ‘no less favourable than the offer of compromise’ – Whether it was unreasonable for the plaintiffs to reject the offer of compromise – Whether defendant entitled to indemnity costs as a result
PRACTICE AND PROCEDURE – COSTS – CALDERBANK OFFERS – Whether plaintiffs unreasonably rejected offers – Whether defendant entitled to indemnity costs as a result
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APPEARANCES: | Counsel | Solicitors |
| For the first and second plaintiffs | Ms K Foley | Lander & Rogers |
| For the first defendant | Mr PJ Hayes QC, with Dr M Barrett | Terrill & Holmes Pty Ltd |
CONTENTS
Introduction
Orders
Indemnity costs
Calderbank offers
Offers of compromise
Analysis
Trial prolongation
Senior counsel
HER HONOUR:
Introduction
On 22 March 2019 I delivered reasons for judgment in relation to the trial of this matter: Bamco v Contek [2019] VCC 327 (March reasons). This decision as to costs follows on from those reasons, and I refer to the parties by the same names as used in those reasons.
I said that I would dismiss the plaintiffs’ claim. I directed the parties to consider the orders that should be made. Written submissions were then filed by the plaintiffs (drafted by Ms Foley, counsel for the plaintiffs), and by Contek (drafted by Dr Barrett, junior counsel for Contek). The parties did not seek a hearing.
The costs issues requiring determination are:
·Should the plaintiffs be ordered to pay indemnity costs?
·Should Contek bear some costs for unnecessary prolongation of the trial?
·Should the Court certify for the use of senior counsel by Contek?
Orders
For the reasons which follow, I will make the following orders:
1. The plaintiffs’ claim is dismissed.
2. The first defendant pay the plaintiffs 70 per cent of their costs associated with the subpoena directed to Lander & Rogers and filed on 13 November 2018, to be assessed by the Costs Court in default of agreement.
3. The plaintiffs pay the first defendant’s costs of the proceeding on the standard basis, to be assessed by the Costs Court in default of agreement.
4. Certify senior counsel’s fees at $6,600 and junior counsel’s fees at $4,400.
Indemnity costs
The power to award costs is discretionary, although the discretion must be exercised judicially. The ordinary rule is that costs follow the event and are awarded on a standard basis.
I will not make an order for indemnity costs as I am not satisfied that there is a reason to depart from the usual order as to costs on a standard basis.
Contek made three offers to the plaintiffs over a two year period, none of which were accepted:
(a)A Calderbank offer made on 3 November 2016, before proceedings were issued. Contek offered to bear its own costs.
(b)An offer of compromise under the County Court Civil Procedure Rules2008 (Vic) (the Rules) made on 20 September 2018. Contek offered to pay $100,000, inclusive of costs.
(c)A Calderbank offer made on 20 November 2018, during the trial. Contek offered to pay $225,000, inclusive of costs.
The plaintiffs would have done better in this case had any of those offers been accepted. Contek seeks indemnity costs because it says it was unreasonable of the plaintiffs not to accept its offers.
Calderbank offers
The party relying on a Calderbank offer bears the onus of establishing that the Court should exercise its discretion as to costs in its favour: Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [26].
In Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] 13 VR 435, the Victorian Court of Appeal set out the principles to be considered in the use of Calderbank offers. It said that orders for special costs should only be made in special circumstances.
The Court noted (at [21] and [22]) the competing policy considerations of providing an incentive to settle but not discouraging litigants from bringing their disputes to the Court.
The Court found (at [23]) that the competing considerations:
can be sufficiently accommodated by applying a test of (un)reasonableness. The critical question is whether the rejection of the offer was unreasonable in the circumstances. [citation omitted]
As made clear in Hazeldene, determining whether an offer was unreasonably rejected involves matters of judgment and impression. Matters I need to consider in the exercise of my discretion include the stage of the proceeding at which the offer was received, the time allowed to consider the offer, the extent of the compromise offered, the plaintiffs’ prospects of success (assessed as at the date of the offer), the clarity of the terms of the offer, and whether the offer foreshadowed an application for indemnity costs in the event of it being rejected. There is no exhaustive list of factors the Court should consider when assessing whether an offeree unreasonably rejected an offer, although some relevant matters are identified in Hazeldene at [25].
Offers of compromise
Where an offer of compromise under the Rules is made by a defendant, and the plaintiff’s claim is dismissed, costs consequences follow only if the plaintiff ‘unreasonably fails to accept’ the offer. Rule 26.08(4) provides:
(4) Where an offer of compromise is made by a defendant and the plaintiff unreasonably fails to accept the offer and the claim to which the offer relates is dismissed or judgment on the claim is entered in favour of the defendant, then unless the Court otherwise orders—
(a) the defendant shall be entitled to an order against the plaintiff for the defendant's costs in respect of the claim until 11.00 a.m. on the second business day after the offer was made, taxed on the ordinarily applicable basis; and
(b)the defendant shall be entitled to an order against the plaintiff in respect of the defendant's costs after the time referred to in paragraph (a) taxed on an indemnity basis.
Analysis
I am not satisfied that it was unreasonable for the plaintiffs to fail to accept either of the Calderbank offers or the offer of compromise.
The first Calderbank offer (of 3 November 2016) was made before the proceeding commenced. This was well before the plaintiffs had the opportunity to consider Contek’s evidence or its legal arguments in any detail. It was simply an offer to ‘walk away’ and bear its own costs. The offer was not an offer to compromise, but an offer to capitulate. It was not unreasonable to reject it.
Contek submits that:
The 3 November 2016 offer, although made very early, highlighted to the plaintiffs that there were significant issues with causation. And causation was ultimately a primary basis upon which the plaintiff’s claim failed. By the date of the offer, the plaintiffs’ lawyers also had already made inquiries of the Council Arborist (Tree Dimensions) about the works and whether there was damage to the tree. The plaintiffs lawyers had received the letter dated 7 September 2015 from Tree Dimensions, stating that they had inspected the works and that “no damage to trees was observed.” Irrespective of what occurred thereafter, that should have given the plaintiffs significant cause for concern about their prospects of succeeding against Contek. In those circumstances it was unreasonable for the plaintiffs not to accept the offer on 3 November 2016.
Having cause for concern as to prospects of success does not amount to it being unreasonable to reject a walk away offer. Nor does there being ‘significant issues’ as to a crucial aspect of the case.
The offer of compromise (of 20 September 2018) was made nearly two months before trial. It was for $100,000 inclusive of costs. There is no evidence before me of what those costs were by this time. This was a relatively low offer, compared to the plaintiffs’ claim, which exceeded $1million.
The second Calderbank offer (of 20 November 2018) was made in the course of the trial, on day six. It was for $225,000 inclusive of costs. It notes that the first defendant’s costs were in the vicinity of $350,000 at that time.
It sets out reasons Contek considered that the plaintiffs’ claim would not succeed. It predicted, correctly as matters transpired, that causation would not be established.
However I am not satisfied that it was unreasonable for the plaintiffs to consider, at the times of the offers, that there was a real prospect that they might successfully establish causation. The Court’s determination of causation needed to be decided on an assessment of all relevant evidence, including taking into account the evidence of both competing experts, both of whom were well-qualified and experienced.
Contek was challenging the evidence of the plaintiffs’ expert, Dr Nicolle, and by the time of the second Calderbank offer, it was apparent that there was some basis for doing so. However, I accept the plaintiffs’ submission:
[12] …unless Dr Nicolle’s evidence was completely excluded (which did not occur), the Court was still required to assess his evidence and demeanour and weigh it against the evidence and demeanour of Contek's expert, Mr Hartley, and take into account other evidence relevant to causation. In other words, it cannot be said that the fact an issue had arisen regarding Dr Nicolle’s independence meant the Plaintiffs' causation case must fail. The issue of his independence was a real difficulty for the Plaintiffs' case, but the Plaintiffs were not unreasonable in rejecting the relatively low offers made by Contek, in circumstances where significant costs had been expended already (i.e. the offers were made close to and during the trial) and where there was still a prospect they would succeed on causation (even if the prospect had diminished in the course of the trial).
So far as the quantum of the offers is concerned, Contek further submits:
[9] As for the amount of the offers, they represent offers that, if accepted, would have seen the plaintiffs in a significantly better financial position than they now find themselves. It is also not appropriate to compare the offers with the total of the claim being in excess of $1million. The Yarra Ranges Shire Council was a party but settled with the plaintiffs some time prior to trial. There was no evidence as to the terms upon which the plaintiffs settled with the Council. There was no evidence as to what monetary payment was made which could have been taken into account in preventing any double recovery had the plaintiff succeeded against Contek.
Contek is correct in identifying that there is no evidence as to the terms of settlement between the second defendant (the council) and the plaintiffs. I cannot take into account, in assessing if it was unreasonable to refuse the offers, whether any monies were paid pursuant to those terms.
Trial prolongation
The plaintiffs seek to have the first defendant bear its own costs of the first two and a half days of trial. They argue:
[14] The Plaintiffs submit that the costs order made by the Court should take into account the fact that the trial was lengthened by two and a half days by reason of Contek’s decision to serve a notice to produce to Landers at 4:38pm on the day before trial, followed by subpoenas directed to Landers and a third party (Mr Glen Kile). The issuing of the notice to produce and the subpoenas caused delay in the commencement of the trial – opening address by the Plaintiffs’ counsel was not able to start until day 3 of the hearing at about 12:00pm. In considering the delay, the Plaintiffs submit the Court should take into account that the notice to produce directed to Landers was not effective (notices to produce can only be issued to parties), and the subpoena issued to Mr Glen Kile was unnecessary and bore no relevance to the issues in the proceeding. In relation to the subpoena issued to Landers, the Plaintiffs do not contend that Contek should not have taken this step, but it should have been taken prior to the eve of the trial. Correspondence from Contek’s solicitor seeking correspondence to and from Dr Nicolle for a specific period was received in 2017, but was much narrower than the subpoena ultimately issued and not pursued until the eve of trial. The subpoena was overly broad and led to privilege disputes that took up further time at trial (leading to a costs order in favour of the Plaintiffs).
[15] In the Plaintiffs’ submission, although Contek was ultimately successful in the proceeding, the Plaintiffs should not have to pay Contek’s costs for the two and a half days of the trial that were effectively wasted by a notice to produce that should not have been issued, a subpoena that should not have been issued, and a subpoena that was permissibly issued but was overly broad and issued too late.
On the first day of trial, Contek had issued a subpoena to the plaintiffs’ solicitors, Lander & Rogers seeking:
All correspondence, emails, notes of discussions with Mr Dean Nicolle including but not limited to an email dated 22 March 2016 from Lander & Rogers to Dean Nicolle.
The plaintiffs then produced many documents – including some which the plaintiffs did not concede it was necessary for them to produce. There remained five diary notes in issue.
Following written and oral submissions, on the afternoon of the third day of trial, I ruled that one of the diary notes should be produced (the diary note of 6 April 2016).
In relation to costs of the subpoena I said:
In this matter the first defendant has in fact argued that five diary notes should be produced. It has been successful in relation to one of them and unsuccessful in relation to the other four. Mr Hayes QC argues that the one that has been successful maybe will turn out to be the real prize and it may take on significant forensic importance.
That may or may not be the case, but I do not accept the submission that was put that that is where all the main attention or the chief attention of the arguments in this matter were directed. Certainly a great deal of time was spent by Mr Hayes QC in detailing what had happened before the first report was actually served, but that was in my view primarily to say why there was a pattern of conduct that affected the diary notes afterwards.
In fact, I am of the view that most of the time in relation to both the preparation of written submissions and the time in Court, was spent dealing with whether or not privilege was waived in relation to the diary notes which occurred between the first and second report, and the diary note after the second report.
I am also concerned that the application, first by notice to produce and then as a subpoena, was made so late in the piece. JR Burchell ordered that any subpoenas be issued by 13 October 2017 initially. Later orders were also made, and on 2 May 2018 the judicial registrar ordered that any subpoenas be issued by 2 October 2018. In any event, asking for the documents and issuing a subpoena the day before the trial and then on the day of the trial is very late. That obviously affects the Court's processes in terms of the timing that the Court has available for the trial and it obviously affects the running of it.
In all those circumstances, I will order that the first defendant pay the plaintiffs 70 per cent of their costs associated with the subpoena.
My order that Contek pay the plaintiffs’ 70 per cent of their costs associated with the subpoena is intended to include those costs associated with dealing with the issues arising under that subpoena in the first two and a half days of trial.
An initial notice to produce was incorrectly addressed by Contek to Lander & Rogers, but this was a technical issue, easily dealt with by reissuing it as the subpoena directed to Lander & Rogers. The subpoena directed to Mr Kile took little time. The costs of these matters are appropriately dealt with as being costs in the cause.
Senior counsel
Contek engaged senior counsel in this matter not long before trial. The plaintiffs do not want to pay the costs associated with that. They submit:
Senior counsel was not required in this proceeding. Contek was represented by very experienced junior counsel in the lead-up to the proceeding and during the proceeding. The Plaintiffs were not represented by senior counsel. Contek was of course entitled to make a decision to brief senior counsel, but the Plaintiffs should not be required to pay the costs associated with that decision.
However, I am satisfied that it was appropriate for Contek to engage senior counsel and for those costs to be borne by the plaintiffs. I will certify for senior counsel.
InOldaker v Currington[1987] VR 712, Murray, McGarvie and Marks JJ said, at 715-6:
The question to be asked is whether the retention of senior counsel was reasonably necessary for the attainment of justice or the enforcement of the plaintiff’s rights. … the question must be looked at from the point of view of the party who has to make the decision before the trial, at the time when it is proper, in the circumstances of the case, that counsel should be briefed. It is necessary to guard against hindsight in deciding the question. …
Considerations of the advancement of the plaintiff's interests and the achievement of a just result in the litigation are relevant in determining whether the retention of senior counsel might reasonably be regarded as necessary for the adequate presentation of the case.
The cases show that a wide variety of circumstances may be treated as warranting the engagement of senior counsel. A common circumstance is the weight of the case which may make a division of labour between counsel desirable. Another is the need for the special skills and experience to be found within the inner bar. [citations omitted]
This was a complex matter involving a claim brought by the plaintiffs against Contek for over $1million. There was detailed, and complicated, expert evidence to be tested and argued about, and other issues including relating to quantum (which ultimately did not need to be decided but were the subject of expert evidence and submission). Final submissions were extensive. I consider it was reasonable for Contek to consider that the skill and experience expected of senior counsel was reasonably necessary for the presentation of its case.
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Certificate
I certify that these 8 pages are a true copy of the reasons for ruling of her Honour Judge Marks, delivered on 3 April 2019, and revised 10 April 2019.
Dated: 10 April 2019
Samantha Marinic
Associate to Her Honour Judge Marks
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