Berhero Pty Ltd v Hinds (No 2)

[2023] NSWSC 1214

Supreme Court

New South Wales

Medium Neutral Citation:

Berhero Pty Ltd v Hinds (No 2) [2023] NSWSC 1214

Hearing dates:

On the papers

Date of orders:

12 October 2023

Decision date:

12 October 2023

Jurisdiction:

Equity - Commercial List

Before:

Rees J

Decision:

Dismiss application for special costs order.

Catchwords:

COSTS – Calderbank offer – plaintiff sues for fees – defendant files cross claim for damages – defendant offers to accept $250,000 – parties agree shortly before trial that plaintiff will refund fees if claim fails and cross claim will be dismissed with costs – plaintiff’s claim fails – judgment for fees to be refunded plus interest said to exceed the Calderbank offer – necessary to compare substance of offer with result – offer based on cross claim which was dismissed with costs – no special costs order.

Legislation Cited:

Civil Procedure Act 2005 (NSW) s 98

District Court Act 1973 (NSW) ss 4, 44, 51(2)(a)

Uniform Civil Procedure Rules r 42.34

Category:

Costs

Parties:

Berhero Pty Ltd (Plaintiff)
Paul Hinds (First Defendant)
RV Developments Australia Pty Ltd (Second Defendant)
RV Developments Australia Pty Ltd as Trustee for RV Developments Australia Unit Trust (Third Defendant)

Representation:

Counsel:
Mr B Le Plastrier (Plaintiff)
Mr S Golledge SC/Mr J Douglas (Defendants)

Solicitors:
ClarkeKann Lawyers (Plaintiff)
James Conomos Lawyers (Defendants)

File Number(s):

2019/269928

JUDGMENT

1. HER HONOUR: On 30 August 2023, I gave judgment in this matter in favour of the defendants in the amount of $154,000 and otherwise dismissed the summons with costs: Berhero Pty Ltd v Hinds [2023] NSWSC 1022. The defendants now seek a special costs order under section 98 of the Civil Procedure Act 2005 (NSW) in light of a Calderbank offer.

Facts

2. These proceedings were commenced in August 2019 in the District Court of New South Wales. The jurisdictional limit of the District Court was then $750,000: sections 4 and section 44, District Court Act 1973 (NSW). The plaintiff then sought judgment in the amount of some $480,000, comprising its unpaid fee of $216,000 plus interest. Where the plaintiff was entitled to charge interest on unpaid fees at 2% per month under the terms of the contract, the interest component of the claim eclipsed the unpaid fee when the proceedings were commenced and, by the hearing, stood at some $1 million.

3. The proceedings were waylaid for two years, whilst a complaint lodged by the defendants with the Australian Financial Complaints Authority (AFCA) was considered. AFCA ultimately decided that it was unable to consider the complaint due to jurisdictional limits. In June 2021, the defendants proceeded to file a defence and cross-claim in the District Court. The defendants’ solicitor also advised that their cross-claim was now “within the jurisdiction of the Supreme Court and accordingly, we anticipate applying for a transfer order.” In September 2021, the first defendant, Paul Hinds, swore an affidavit in support of a transfer to this Court, describing the total loss and damages sought by the cross-claim as between some $678,000 and $1.013 million.

4. In November 2021, the proceedings continued in this Court. Lay evidence was served. In September 2022, the matter was fixed for hearing.

The offer

5. Two months’ later, on 14 November 2022, the defendants’ solicitors served a Calderbank letter comprising nine pages and a detailed critique of the plaintiff’s claim. The defendants were said to be “cautiously optimistic that they will succeed in establishing its case on the balance of probabilities.” An offer was put “to settle all aspects of the dispute,” requiring the plaintiff to pay $250,000 to the defendants, following which the proceedings would be discontinued with each party to bear their own costs and all caveats lodged by the plaintiff would be withdrawn. The offer was open for 14 days. The amount sought was said to represent more than a 50% discount on what the plaintiff would otherwise be obliged to pay if the cross-claim succeeded. The offer was not accepted.

6. The trial was to commence on 13 June 2023. The defendants provided an outline of submissions on 8 June 2023, informing the Court that an agreement had been reached between the parties which meant that the Court would not need to determine the cross-claim. However, if the plaintiff failed in its contract claim, the plaintiff would consent to an order that it pay the defendants $176,000 plus interest, being the amount previously paid by way of commission. (The figure of $176,000 was later reduced, by agreement to $154,000. The plaintiff accepted that if it was not successful on its claim, it was liable to repay the defendant’s $154,000). The cross claim was to be dismissed. The plaintiff would be entitled to its costs thrown away. The agreement also extended to limit the evidence upon which the plaintiff would rely to make good its contract claim.

Consideration

7. The starting point for an application for a special costs order is that the offeree ultimately achieves a worse result than that provided for in the Calderbank offer. By the defendants’ calculations, the judgment in their favour, together with interest is some $222,027. The difference between the Calderbank offer of $250,000 and the judgment sum is $27,973. The defendants’ costs incurred at the time that the Calderbank offer was made far exceeded $27,974. As such, it was said that the defendants had achieved a better result than the offer.

8. There are two problems with the defendants’ argument. First, the defendants’ evidence relied upon in support of its application for a special costs order does not delineate between the defendants’ costs of the defence and the costs of the abandoned cross-claim. This makes it difficult to assess whether the defendants achieved a better result than their offer, where the defendants are only entitled (as matters presently stand) to their costs of defending the plaintiff’s claim but not the cross-claim and, indeed, are obliged to pay the plaintiff’s costs thrown away as a consequence of the abandonment of the cross-claim.

9. A more significant problem, however, is that the defendants did not ultimately press the cross-claim on which the Calderbank offer was based. The judgment for $154,000 plus interest arose from the agreement reached between the parties shortly before the commencement of the hearing, to the effect that if the defendants were successful then the broker would repay the portion of its fee which had already been paid plus interest. That is, the judgment entered arose from that agreement, rather than any positive defence or, more importantly, prosecution of the cross-claim. I do not think it is sufficient to simply compare dollars. It is also necessary to compare the substance of the offer with the ultimate result. In these circumstances, I do not think it can be said that the defendants achieved a better outcome than they would have if the offer had been accepted, where their cross-claim was dismissed with costs.

10. For its part, the plaintiff, in its submissions, sought an order under rule 42.34 UCPR that the defendants ought not have their costs of the proceedings, where it was said that the matter should have been determined in the District Court. The directions which I made on 5 September 2023 – being by consent – did not envisage that the plaintiff would make such an application and thus I will not entertain it. In any event, the plaintiff’s submission was mis-guided where the plaintiff’s claim came to exceed the jurisdictional limit of the District Court, given the accrual of interest. There is no evidence that the plaintiff would have capped the amount sought or obtained the defendants’ consent to extend the jurisdiction of the District Court pursuant to section 51(2)(a) of the District Court Act. The plaintiff’s evidence and submissions were largely directed to this submission. The costs of same ought not be recoverable from the defendants.

11. Overall, I consider that an appropriate order in respect of the costs of the defendants’ application for a special costs order is to make no order as to costs.

Orders

12. For these reasons I make the following orders:

1. Dismiss the defendants’ Notice of Motion filed on 11 September 2023.

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Decision last updated: 12 October 2023