Bofinger v Kingsway Group Pty Ltd (No. 2)

[2009] NSWCA 172

NEW SOUTH WALES COURT OF APPEAL

CITATION:
BOFINGER &  Anor v KINGSWAY GROUP PTY LTD & Ors (No. 2) [2009] NSWCA 172

FILE NUMBER(S):
40782/07
40909/07

HEARING DATE(S):
On written submissions.

JUDGMENT DATE:
2 July 2009

PARTIES:
Ronald John BOFINGER (1st Appellant)
Sandra Anne BOFINGER (2nd Appellant)
KINGSWAY GROUP PTY LTD (1st Respondent)
RECKLEY PTY LTD (2nd Respondent)
John Edward SKEHAN (3rd Respondent)
David John LEVI & John Maxwell MORGAN (Joint Liquidators B & B Holdings Pty Ltd) (4th Respondents)
Ron TOSOLINI (5th Respondent)
Adrian MATTIUSSI (6th Respondent)
Lou POLITO (7th Respondent)
Peter HATHELIER (8th Respondent)

JUDGMENT OF:
Giles JA Handley AJA Sackville AJA   

LOWER COURT JURISDICTION:
Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S):
SC 2451/06

LOWER COURT JUDICIAL OFFICER:
Young CJ in Eq.

LOWER COURT DATE OF DECISION:
 15 October 2007

LOWER COURT MEDIUM NEUTRAL CITATION:
[2007] NSWSC 1138

COUNSEL:
G McVay (1st & 2nd Appellants)
R Darke SC (5th, 6th & 7th Respondents)

SOLICITORS:
Warren McKeon Dickson (Appellants)
Middletons (5th, 6th & 7th Respondents)

CATCHWORDS:
COSTS - indemnity costs - Calderbank offer - no question of principle.

LEGISLATION CITED:

CASES CITED:
Barnes v Addy (1874) LR 9 Ch App 244;
Jones v Bradley (No 2) [2003] NSWCA 258;
Leichhardt Municipal Council v Green [2004] NSWCA 341;
SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323.

TEXTS CITED:

DECISION:
Costs payable by the guarantors to the fifth to seventh respondents on an indemnity basis from 7 December 2007.  The guarantors pay the fifth to seventh respondents' costs of the application for indemnity costs.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40782/07
CA 40909/07

GILES JA
HANDLEY AJA
SACKVILLE AJA

Thursday, 2 July 2009

BOFINGER & ANOR v KINGSWAY GROUP PTY LTD & ORS (NO. 2)

Judgment

1. THE COURT:  On 3 December 2008 this Court dismissed, with costs, an appeal from the decision of Young CJ in Eq of 17 October 2007.  The Chief Judge had held that puisne mortgagees, which had the benefit of guarantees from the appellants, were entitled to the surplus proceeds from the realisation by the first mortgagee of its securities and the remaining unrealised securities, in priority to the guarantors. 

2. The guarantors’ claim was based on their payments to the first mortgagee in reduction of its debt which they had also guaranteed, and they asserted that these entitled them to be subrogated to the surplus proceeds and unrealised securities in priority to the puisne mortgagees.

3. The Court reserved its judgment and three separate judgments were given with different reasons, although the result was unanimous.

4. The guarantors had joined as defendants in the Equity Division the first, second and third mortgagees, the liquidator of the principal debtor, and the solicitors (the fifth to seventh respondents) who had acted for the first and second mortgagees in the realisation of their securities.  The solicitors were sued under the rules in Barnes v Addy (1874) LR 9 Ch App 244.

5. When the Court's reasons for judgment were published and its oral orders pronounced the solicitor for the fifth to seventh respondents applied for an order for indemnity costs. 

6. Directions were given for the delivery of written submissions and for the matter to be dealt with on the papers.

7. The application was based on a Calderbank offer made on 13 and 30 November 2007.  The offer was that the fifth to seventh respondents would pay their own costs to date if the guarantors abandoned their case against them.

8. The solicitors for the guarantors indicated a willingness to recommend a settlement on these lines but subject to conditions relating to retention of the money at stake in a particular bank account and restriction of the remaining issues in the appeal.  These conditions were outside the control of the fifth to seventh respondents.  For this reason the solicitors for the fifth to seventh respondents declined to pursue the issues of the retention of money and the guarantors did not accept offers.

9. On 14 December Young CJ in Eq, in the course of dealing with consequential matters following the publication of his reasons for judgment, said:

   "pragmatically it would be good for saving costs for everybody if the dispute continued only between the plaintiff and the first and fourth defendants because they are the people who are most affected …"

10. Those respondents were the first and second mortgagees.

11. The Calderbank offer was renewed on 31 March but again rejected.

12. The Calderbank offers involved a substantial element of compromise because the fifth to seventh respondents were willing to give up the order for costs in their favour made by Young CJ in Eq. 

13. The guarantors submitted that the only letter expressed to be a Calderbank offer, that of 31 March, was marked “Without prejudice” and so was not admissible.  They submitted that the other letters did not “attract any principle relating to costs”, it seems because they were not expressed to be Calderbank offers.  There is nothing in this.  The letter of 31 March was marked “Without prejudice”, but the body of the letter stated (with reference to Calderbank v Calderbank (1975) 3 WLR 586) that it would be relied on in an application for indemnity costs. The first of the earlier letters was marked “Without prejudice save as to costs”, and would clearly have been understood as a Calderbank offer; the second of the earlier letters was confirmatory of the first.

14. The guarantors then submitted that the fifth to seventh respondents had not shown “some special or unusual circumstances”.  They did not have to.  The question was, in short, whether in the circumstances the guarantors unreasonably failed to accept the offer:  SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323; Jones v Bradley (No 2) [2003] NSWCA 258; Leichhardt Municipal Council v Green [2004] NSWCA 341.

15. In the letter stating the conditions abovementioned the guarantors’ solicitors correctly said that, if the proceedings against the fifth to seventh respondents were “discontinued”, the remaining issues as against the first, second and third respondents would be whether there was a right of subrogation and whether it was waived.  It appears that the money at stake was in a “controlled moneys account” and represented the surplus proceeds of sale.  Acceptance of the Calderbank offer would inevitably have meant that the money in the controlled moneys account would be disposed of according to the result as between the guarantors in the appeal and the first to third respondents.  There were no other issues in the appeal with which the fifth to seventh respondents were concerned. 

16. It should be inferred that the guarantors could readily have obtained agreement that, so far as the fifth to seventh respondents were signatories to the bank account, they would join in its disposal according to the result in the appeal or as agreed by the remaining parties.  The guarantors acted unreasonably when they failed to seek the agreement of the fifth to seventh respondents and to accept their offer.  There was no evident purpose in retaining the fifth to seventh respondents as parties, and none was suggested in the guarantors’ submissions whereby the fifth to seventh respondents would no longer have been involved in the appeal.

17. The costs payable by the guarantors to the fifth to seventh respondents should be on an indemnity basis from 7 December 2007.  The guarantors should pay the fifth to seventh respondents’ costs of the application for indemnity costs.

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LAST UPDATED:
2 July 2009