BHCP Pty Ltd (ATF BHCP Trust) v Reliable Constructions (Australia) Pty Limited ACN 137 300 219 and Ors (2)

[2020] NSWDC 508

District Court

New South Wales

Medium Neutral Citation:

BHCP Pty LTD (ATF BHCP Trust) v Reliable Constructions (Australia) Pty Limited ACN 137 300 219 & Ors (2) [2020] NSWDC 508

Hearing dates:

9 – 11 June 2020; 6 July 2020 (Trial)
6 August 2020 (Primary Judgment)

Date of orders:

8 September 2020

Decision date:

08 September 2020

Jurisdiction:

Civil

Before:

Weber SC DCJ

Decision:

(1) The cross-claimants pay the third to sixth cross-defendants’ costs, other than in relation to the third to sixth cross-defendants’ applications in regards to costs.

(2) The third to sixth cross-defendants pay the cross-claimants’ costs in relation to their applications in relation to costs.

Catchwords:

COSTS – Indemnity Costs – Calderbank offers – whether it was reasonable for the cross-claimants to reject the Calderbank offers made by the cross-defendants – whether awarding a lump sum assessment of costs is appropriate

Legislation Cited:

Uniform Civil Procedure Act 2005 (NSW)

Cases Cited:

Calderbank v Calderbank [1975] 3 All ER 333

Beach Petroleum NL & Claremont Petroleum NL v Johnson (No 2) (1995) 57 FCR 119

Hamod v New South Wales [2011] NSWCA 375

Harrison v Schipp (2002) 54 NSWLR 213

Penson v Titan National Pty Ltd (No 3) [2015] NSWA 121

Wentworth v Wentworth (NSWCA, Priestley, Clarke JJA and Grove AJA, 21 February 1996, unreported)

Category:

Costs

Parties:

Reliable Constructions (Australia) Pty Ltd (1st Cross-Claimant)
Mr R. Coxon (2nd Cross-Claimant)
Mrs A. Coxon (3rd Cross-Claimant)

Mr D. Pannowitz (3rd Cross-Defendant)
Mr P. Quinn (4th Cross-Defendant)
Mr P. Tonkin (5th Cross-Defendant)
Mr L. Pawlak (6th Cross-Defendant)

Representation:

Self-represented:
Cross-Claimants

Counsel:
Mr M. Karam (3rd-6th Cross-Defendants)

Solicitors:
GC Legal (3rd-6th Cross-Defendants)

File Number(s):

2017/371107

Publication restriction:

None

Judgment

1. On 6 August 2020, I delivered judgment in the proceedings, dismissing the cross-claimants' claims against the third to sixth cross-defendants (“the Solicitors”). At the time of delivery of judgment, I was informed that the Solicitors wished to be heard on costs.

2. Upon being so informed, I made directions for the filing and serving of evidence and submissions in relation to the issue of costs. I indicated that I would deal with the matter on the papers. The Solicitors filed and served such documents.

3. On 25 August 2020, my associate was informed by way of email that the cross-claimants had withdrawn the instructions of the firm of solicitors who conducted the cross-claim on their behalf. Whether this is the reason for the failure of the cross-claimants to put on any written submissions is not a matter upon which it is necessary to speculate. The fact is that no such submissions have been filed, and I shall move to consider the third to sixth cross-defendants’ submissions accordingly.

4. The Solicitors seek the following orders in relation to costs:

1. An order pursuant to section 98(1)(c) of the Civil Procedure Act 2005 (NSW) (“CPA”) that the Cross-Claimants pay their costs of the proceedings on an ordinary basis up to and including 17 August 2018, and on an indemnity basis thereafter;

2. Alternatively, the Solicitors seek the same orders as from 17 April 2020; and

3. An order that, pursuant to section 98(4)(c) of the CPA, their costs be paid in a specified gross sum.

5. The basis for seeking orders (a) and (b) above is the making of two offers of settlement pursuant to the principles of Calderbank v Calderbank [1975] 3 All ER 333, which were not accepted by the cross-claimants.

6. The principles of Calderbank v Calderbank provide that:

1. where a party has made a complying settlement offer;

2. it was a genuine offer of compromise;

3. the offeree did not accept the offer;

4. it was unreasonable for the offeree not to accept the offer; and

5. on judgment, the offeror beats or equals the offer; then

6. the offeror can seek for the Court to exercise its discretion to award costs on an indemnity basis from the date of rejection or expiry of the offer onwards.

7. On 3 August 2018, following a mediation of the proceedings which occurred on 4 June 2018, and the service of the cross-claimants’ lay evidence in chief, the third to sixth cross-defendants made a Calderbank offer to settle the cross-claim against them for the sum of $50,000 inclusive of costs and interest (“First Calderbank Offer”). This offer set out in detail a number of deficiencies in the cross-claimants’ case, most of which were upheld in my judgment of 6 August 2020. The offer was stated to be open for acceptance until 17 August 2018.

8. The cross-claimants did not accept the First Calderbank Offer, and thus it expired on 17 August 2018.

9. As is usually the case in such matters, the principal issue is whether it was unreasonable for the cross-claimants to reject this offer. The solicitors contended that the cross-claimants’ refusal was unreasonable. They submitted that the First Calderbank Offer represented a genuine compromise. They did so as:

1. They were prepared to:

1. Pay the cross-claimants the sum of $50,000 inclusive of costs;

2. Forgo their costs incurred up to and including, if necessary, 17 August 2018, which, excluding costs associated with preparing for and attending mediation, were $25,137.5 exclusive of GST; and

3. Forgo the likelihood that they would obtain a costs order in their favour if the proceedings progressed to a contested hearing;

2. They held a reasonable and genuine belief that they had a strong defence to liability, which is apparent from the detailed critique of the issues the cross-claimants’ faced in establishing their claim as set out in the First Calderbank Offer;

3. The offer was made at an early stage when maximum costs might still be saved by the cross-claimants’ acceptance of First Calderbank Offer; and

4. Even without the benefit of the judgment, in which the cross-claimants’ case failed on all counts, the case put forward against the Solicitors was a very difficult case having regard to the implausibility of the allegations made by the cross-claimants together with the fact that they would have had great difficulty in establishing the alleged loss.

10. The Solicitors further submitted that it was unreasonable for the cross-claimants not to accept that the First Calderbank Offer as, relevantly:

1. the cross-claimants were in a position to assess the First Calderbank Offer as:

1. They had access to the Solicitors’ defence;

2. The First Calderbank Offer letter set out in detail the difficulties the cross-claimants would face in establishing their claim, the majority of which were reflected in the judgment;

3. They had access to the affidavit of Brian Randall, which contained numerous contemporaneous emails and other records which tended to contradict the cross-claimants’ own case;

4. As the moving party, they were aware of all the matters they would need to prove against the Solicitors, and of the limitations of their own lay evidence.

2. The time period of 14 days for acceptance was reasonable as the cross-claimants were in a position to assess the First Calderbank Offer within the time period and the cross-claimants did not request an extension of time for acceptance;

3. The First Calderbank Offer represented a genuine compromise;

4. The terms of the First Calderbank Offer were expressed with clarity;

5. The First Calderbank Offer expressly stated that it if was not accepted, the third to sixth cross-defendants reserved their rights to refer to it and to seek an award of indemnity costs;

6. The cross-claimants were at all relevant times represented by experienced solicitors and counsel.

Consideration

11. The cross-claimants claim was quantified at $520,000, which, as I explained in the judgment, was the sum which they agreed to pay the developer in respect of his claims against them in the Supreme Court.

12. The First Calderbank Offer was in the sum of $50,000 inclusive of costs. As the offer was made on a “inclusive of costs basis” it is difficult for me to assess its real value, as there is no evidence before me as to what the cross-claimants costs would have been at the time when consideration of the offer was required. That said, the costs of litigation being what they are, it is not unreasonable to assume that the cross-claimants costs incurred to that date would have constituted a very significant proportion, if not all, of the $50,000 offered by the Solicitors. In that regard, I note that by the time of the offer the cross-claimant’s lay evidence in chief had been filed and served, and mediation had been conducted.

13. In the circumstances, it seems to me that the offer lacked a sufficient element of compromise to enliven the principles enunciated in the cases which followed Calderbank v Calderbank. As such, I do not believe that it was unreasonable for the cross-claimants to have rejected it.

14. A second Calderbank offer was served on 11 April 2020 (“Second Calderbank Offer”). This was an offer to settle the cross-claim on the basis of a payment of $108,000 including costs and interest. This offer was rejected by the cross-claimants on 17 April 2020.

15. The matter was called on for hearing before me on 9 June 2020. Thus, at the time of the Second Calderbank Offer, the proceedings were in an advanced state of preparation, with only final preparation for hearing required. It is to my mind inconceivable that the cross-claimants’ costs by this time would not have comfortably exceeded the quantum of the Second Calderbank Offer. As such, the Second Calderbank Offer made no meaningful compromise in relation to the claim against the solicitors, but merely proposed a sum of money which would, to a limited extent, offset some of the costs incurred to date.

16. As such, I do not consider that it was unreasonable for the cross-claimants to reject this offer.

Payment of Costs in a Gross Sum

17. The Solicitors also seek an order pursuant to section 98(4)(c) of the CPA for payment of a gross sum instead of assessed costs.

18. As was observed by Giles JA in Harrison v Schipp (2002) 54 NSWLR 738; NSWCA 213 (at [21]-[22]), the power pursuant to what is now section 98(4)(c) of the CPA confers a wide discretion on the court, whose exercise is not confined to lengthy and complex matters, but may be exercised whenever the circumstances warrant. This principle was confirmed by Beazley JA in Hamod v New South Wales [2011] NSWCA 375 (at [813]). As acknowledged in these and other authorities, the power may be exercised only when the Court considers it can do so fairly between the parties.

19. The considerations material to the exercise of the discretion principally include the following (see Hamod v New South Wales [2011] NSWCA 375 at [813]–[820] and Penson v Titan National Pty Ltd (No 3) [2015] NSWA 121):

1. The complexity of the proceedings in relation to their cost;

2. Whether the assessment of costs would be “protracted and expensive”,

3. Whether there is a risk the unsuccessful party would not be able to meet a liability of the order likely to result from the assessment; and

4. The relative responsibility of the parties for the costs incurred, especially where the costs incurred are disproportionate to the result of the proceedings.

20. The Solicitors made submissions reliant on the fact that affidavit evidence filed by one of the cross-claimants, Mr Coxon, indicated that they have had to sell their home, and that their financial position was strained.

21. The Solicitors submitted that there was a real risk that the cross-claimants would not be able to meet any liability for costs following an assessment of their costs. This may well be the case, but what has not been demonstrated is that their position would be any better if a lump sum costs order was ordered forthwith.

22. As I have indicated, the power to award a gross sum should only be exercised when the Court considers that it can do so fairly between the parties, which consideration includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available (Wentworth v Wentworth (NSWCA, Priestley, Clarke JJA and Grove AJA, 21 February 1996, unreported)). The approach taken to estimate costs must be logical, fair, and reasonable (Beach Petroleum NL & Claremont Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 123).

23. True it is that, as the Solicitors contended, two authorities demonstrated that in appropriate cases the Court can adopt a “broad brush” approach to the assessment of costs. In the present circumstances, I do not believe that this is appropriate, and I do not believe that, on the evidence before me, I can do justice as between the parties in arriving at a lump-sum assessment of the solicitors’ costs, and accordingly I will not do so.

Conclusion

24. The Solicitors’ various applications in relation to costs are dismissed.

Orders

1. The Cross-Claimants pay the Third to Sixth Cross-Defendants’ costs, other than in relation to the Third to Sixth Cross-Defendants’ applications in relation to costs.

2. The Third to Sixth Cross-Defendants pay the Cross-Claimants’ costs in relation to their applications in relation to costs.

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Decision last updated: 08 September 2020