Border Lifting and Safety Pty Ltd and Russell and Russell (Costs)
[2023] VCC 569
•18 April 2023
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-21-00195
| Border Lifting and Safety Pty Ltd (ACN 057 485 542) trading as Border Lifting and Safety | Plaintiff |
| and | |
| James Russell | First defendant |
| and | |
| Second defendant | |
| Tania Russell |
---
JUDGE: | Her Honour Judge Burchell | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers, written submissions dated 21 March 2023 and 11 April 2023 | |
DATE OF RULING: | 18 April 2023 | |
CASE MAY BE CITED AS: | Border Lifting and Safety Pty Ltd and Russell and Russell (Costs) | |
MEDIUM NEUTRAL CITATION: | [2023] VCC 569 | |
RULING
---
Subject:COSTS
Catchwords: Whether costs should be paid on a standard or indemnity basis – Whether rejection of Calderbank Offer reasonable.
Legislation Cited: County Court Civil Procedure Rules 2018 (Vic) O63A and rr 30 and 31.
Cases Cited:Colgate-Palmolive Co & Anor v Cussons Pty Ltd (1993) 46 FCR 225; BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Industriewerke GmbH (No 3) [2012] VSC 414; Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; Protec Pacific Pty Ltd v Steuler Services GmbH & Co KG [No 2] [2015] VSCA 123; Hannover Life Re of Australasia v Colella [2014] VSCA 205; Calderbank v Calderbank [1975] 3 All ER 333; Aljade and MKIC v OCBC [2004] VSC 351; Oshlack v Richmond River Council (1998) 193 CLR 72; Australian Competition and Consumer Commission v Australian Safeway Stores Pty Limited (No 3) [2002] FCA 1294; Hobartville Stud Pty Ltd v Union Insurance Co Ltd [2004] FCA 1600.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr L Faust | Morgan Couzens Legal |
| For the Defendants | Mr A Crocker | James G Sloan Lawyers |
HER HONOUR:
Introduction
1On 28 February 2023, I gave judgment in favour of the defendants in this matter, Mr and Mrs Russell (“the Russells”). I dismissed the proceeding brought against them by the plaintiff (“Border Lifting”) for alleged breaches of their respective employment contracts in which Border Lifting claimed the Russells deprived it through payments of its funds comprising unentitled bonuses and wages, a misuse of the work credit card and unauthorised spending on meal and accommodation allowances as well as costs in respect of expert reports prepared by RSM Australia Pty Ltd (“RSM”).
2I ordered that the plaintiff pay the defendants’ costs of and incidental to the proceeding on a standard basis to be taxed in default of agreement, unless either party had a basis for seeking a different order as to costs and invited the parties to prepare draft orders to give effect to my reasons. The parties were unable to reach agreement on the issue of costs and prepared written submissions on the question of whether the cost of the proceeding should be paid on a standard (that is, partially in accordance with the County Court Scale) or indemnity basis (that is, in their entirety).
3The Russells seek orders that Border Lifting pay the Russells’ costs of and incidental to the proceeding (including reserved costs) to be taxed in default of agreement on the standard basis in respect of costs incurred up to and including:
(a) 2 July 2021, and thereafter on an indemnity basis or, in the alternative;
(b) 10 August 2022, and thereafter on an indemnity basis.
4Border Lifting opposes the orders that it pay the Russells’ costs on an indemnity basis from the expiry of the First Offer being 2 July 2021 to the date of the expiry of the Second Offer being 10 August 2022. Border Lifting does not oppose orders that it pay the Russell’s costs from the date of the expiry of the Second Offer being 10 August 2022.
5For the reasons set out below, Border Lifting ought to pay the Russells’ costs of and incidental to the proceeding (including reserved costs) to be taxed in default of agreement on the standard basis in respect of costs incurred up to and including 10 August 2022, and, thereafter, on an indemnity basis.
Relevant Background
6In my judgment dated 28 February 2023, I found that Border Lifting had not discharged the onus of proof in relation to claims F.1A, F.2, F.3, F.3A, F.7 and F.10. In respect of claim F4, Border Lifting had no contractual right to recover additional overpayments given the appropriate recovery for overpayment is restitution for unjust enrichment, which had not been pleaded.
7Border Lifting conceded, in its closing submissions, that it could not meet the requisite standard of proof in relation to some of the items in the F.7 claim and the entirety of the F.8 claim. I, therefore, did not need to deal with the F.8 claim.
8In the parties’ statement of key issues dated 18 October 2022, Border Lifting did not pursue the claims in relation to misuse of company vehicle and unauthorised fuel expenses, being claim F.9.[1] Further, Border Lifting did not pursue the claims in relation to the failure to return the car roof ladder rack, forming part of claim F.12.[2] The balance of the F.12 claim, in relation to an angle grinder in the sum of $698.00, was withdrawn on day 3 of the trial. The roof rack was given to the Victoria Police on 5 February 2021. I, therefore, did not need to deal with these claims.
[1] See plaintiff’s Further Amended Statement of Claim dated 22 April 2022 at paragraphs 48 and 49.
[2] Ibid at paragraph 57(b).
9On the above basis, and in accordance with the reasons outlined in my judgment dated 28 February 2023, I ordered that the proceeding brought by Border Lifting be dismissed.
10The present proceeding involves two Calderbank[3] offers being a letter, marked “without prejudice except as to costs”, setting out the terms of a proposed settlement.
[3] Calderbank v Calderbank [1975] 3 All ER 333
11On 24 June 2021, the Russells made a Calderbank offer to settle the proceeding by paying Border Lifting $60,000.00, inclusive of costs, within 30 days after acceptance of the offer. The offer was open for acceptance until 2 July 2021, after which time it lapsed (having not been accepted by Border Lifting) (“the First Offer”).
12On 27 July 2022, the Russells made a Calderbank offer to settle the proceeding by paying Border Lifting $100,000.00, inclusive of costs and interest, within 14 days after acceptance of the offer. The offer was open for acceptance until 10 August 2022 (“the Second Offer”)
Legal framework
13It is common ground, that as a general rule, the Court will order costs to be taxed on the standard basis.[4] The discretion to make a special costs order is an unlimited one though it must be exercised judicially and not unreasonably, and the circumstances should be “special”.[5] The usual order as to costs is that costs follow the event, and the successful party is entitled to an award of costs in its favour.[6]
[4] O63A r31 of the County Court Civil Procedure Rules 2018 (“Rules”) (see r 30 regarding the meaning of “standard basis”)
[5] Aljade and MKIC v OCBC [2004] VSC 351 [10]
[6] Oshlack v Richmond River Council (1998) 193 CLR 72 at [97]
14In BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Industriewerke gmbH (No 3)[7] Justice Habersberger set out the matters to be considered in circumstances involving the rejection of letters of offer as follows:
[7] [2012] VSC 414 at [59]-[67] (with reference to Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCoverAuthority (No 2) (2005) 13 VR 435)
(a) the fact that a less favourable result is achieved does not give rise to a presumption of a special costs order. The making of an offer and its rejection are only two factors which the Court will have regard in the exercise of its costs discretion.
(b) the competing policy objectives of promoting settlement and reducing litigation costs as against discouraging potential litigants from bringing their dispute to the courts.
(c) the critical question is whether the rejection of the offer was unreasonable in the circumstances.
(d) in considering whether the rejection of the letter of offer was unreasonable, the Court should have regard to the following matters:
(i)the stage of the proceeding at which the offer was received;
(ii)the time allowed for the offeree to consider the offer;
(iii)the extent of the compromise offered;
(iv)the offeree’s prospects of success, assessed as at the date of the offer;
(v)the clarity with which the terms of the offer were expressed; and
(vi)whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.
(e) whether it was unreasonable for the offeree to have rejected the offer is made “as at the time, or within a reasonably short time after, the offer” was made.[8]
(f) the Court should not too readily embrace submissions that it was inevitable that the proceedings would fail.
(g) the onus lies on the offeror to demonstrate the unreasonableness of the offeree’s rejection of the offer. This means that it is necessary to analyse what was proposed.
(h) there is no general rule that the Calderbank offer must set out with specificity the basis for the offeror’s contention that the offeree should accept the compromise.
(i) it is not necessary for the applicant for an indemnity costs order to establish matters which might be relevant to other, well-recognised, grounds for indemnity costs. Such conduct is not a pre-requisite for a finding that the rejection of the Calderbank offer was unreasonable.
(j) an “all in” offer is permitted in a Calderbank offer.
[8] Australian Competition and Consumer Commission v Australian Safeway Stores Pty Limited (No 3) [2002] FCA 1294 per Goldberg J at [21]
15Justice Habersberger’s decision was upheld on appeal to the Court of Appeal: Protec Pacific Pty Ltd v Steuler Services GmbH & Co KG [No 2].[9]
[9] [2015] VSCA 123 at [55]
16The above “principles established by Habersberger J” were referred to by the Court of Appeal in Hannover Life Re of Australasia v Colella[10] without any criticism.
[10][2014] VSCA 205 at [91]
Issues
17Given Border Lifting’s position that it does not oppose the special costs order from the date of the expiry of the Second Offer, the issues for determination are as follows:
(a) was Border Lifting’s rejection of the First Offer unreasonable;
(b) if yes, should Border Lifting pay the Russell’s costs of the proceeding on a standard basis up to:
(i)2 July 2021 and, thereafter, on an indemnity basis; alternatively,
(ii)10 August 2022, and, thereafter, on an indemnity basis.
(c) if no, should Border Lifting pay the Russell’s costs of the proceeding to be taxed on a standard basis in default of agreement.
Submissions
First Offer
18The Russells submit that Border Lifting’s rejection of the First Offer was unreasonable having regard to the following factors:
(a) the proceeding was (as at the stage the First Offer was made) in the Commercial Division Expedited Cases List and listed for trial on 23 August 2021. The proceeding was well advanced, pleadings were closed and the date by which discovery was to be completed had passed;
(b) the period of seven days after service for consideration of the offer was reasonable. The allegations made in the proceeding were not conceptually complex, were (or ought to have been) well understood by Border Lifting and Border Lifting was able to assess its position in an informed and considered manner;
(c) the offer of $60,000.00 including the cost of the proceeding, was significant and represented a genuine and fair compromise. As at the date of the offer, Border Lifting’s claim totalled $116,336.90, plus $54,371.01, being the cost of the two RSM reports. The Russells offer represented more than 50% of the outer limit of the damages claimed;
(d) Border Lifting’s prospects of success, assessed as at the date of the offer, were limited. The principal claim was that Mr Russell had received overtime payments (totalling $50,018.38) to which he was not entitled. The Russells alleged that it was a term of Mr Russell’s employment contract that he was entitled to overtime, which he manually recorded and reported to Border Lifting weekly. Mr Russell’s emails reporting overtime worked were critical to the Russells defence. As at the date of the offer, Border Lifting had discovered only 11 such emails and maintained that there was a “puddle of such documents, not an ocean”. It subsequently discovered over 100 such emails, and substantially amended its claim in relation to the overtime claim. At trial Mr Robinson agreed that he knew there were significantly more emails when he affirmed his affidavit, “but we couldn’t find them”. It should have been apparent to Border Lifting, as at the date of the offer, that the most substantial part of its claim faced significant difficulties;
(e) the terms of the offer were clear; and
(f) the offer foreshadowed an application for indemnity costs.
19Border Lifting contends that its rejection of the First Offer was not unreasonable for the following reasons. Referring to the principles set out in the decision of Habersberger J in BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Industriewerke GmbH (No 3)[11] and further responds to the Russells submissions:
(a) it concedes that on 24 June 2021, the Russells made the First Offer which referred to Calderbank and foreshadowed an application for indemnity costs and, further, that the terms of the First Offer were clear;
(b) whilst the proceeding was well advanced, this ought to be considered in the context of the Russells’ ongoing concerns about the adequacy of Border Lifting’s discovery and subsequent filing of a further amended statement of claim dated 22 April 20202, as well as consequent pleadings;
(c) the period of seven days for consideration of the First Offer was not reasonable given the significant dispute that existed between the parties about the existence of further emails;
(d) that it is disingenuous for the Russells to say the allegations made in the proceeding were not conceptually complex given the ongoing dispute about the overtime emails and, as a consequence, Border Lifting was not able to assess its position in an informed and considered manner. But for these circumstances, Border Lifting would have conceded that the seven days was a reasonable period;
(e) the Russells’ first offer of $60,000.00, including the costs of the proceeding, did not represent a genuine and fair compromise. By the time of the First Offer, Border Lifting had spent $54,371.01 on the RSM reports and incurred significant costs to that point. Border Lifting submits that it was entitled to treat the costs of the RSM Reports as a head of damage or, if successful at trial, to claim its cost of the RSM Report on a taxation or assessment of those costs. Whether it would have succeeded would be necessarily affected by the existence of the overtime emails of which there was significant dispute over;
(f) the Russells’ submissions focus on only part of the amended statement of claim being the F1 claim and fail to make any submissions to the balance of Border Lifting’s claims to be assessed as of 24 June 2021. Of the claims made in the amended statement of claim, Border Lifting sought to rely on the RSM reports in relation to the F1, F2, F3, F4, F7, F8, F9 and F10 claims. Whilst Border Lifting is not suggesting that reliance on the RSM reports would have been sufficient to succeed on the claims at trial, and noting its decision to not rely on the RSM reports at trial, it submits that this is not in issue. It argues that the Russells had not discharged the onus in relation to the claims in the amended statement of claim other than attempting to do so in relation to the F1 claim.
(g) at the date of the First Offer, Border Lifting had only discovered 11 emails and it subsequently discovered over 100 emails in relation to the overtime payments and had then amended its claim. It says, by reference to the affidavit of its solicitor Charles Morgan sworn on 11 April 2023, that on 24 June 2021 there was considerable dispute between the parties about the existence of more emails in relation to Mr Russell’s overtime that had been discovered by Border Lifting and only after the First Offer did Border Lifting significantly recast the F1 Claim; and
(h) the Russells submit that at trial Mr Robinson agreed that he knew there were significantly more emails when he affirmed his affidavit and that it should have been apparent at the date of the First Offer that a substantial part of its claim faced difficulty. Border Lifting says that this was not put to Mr Robinson and, further, that only one line of evidence supports the Russells’ proposition which ought to be read in the context of the whole of Mr Robinson’s cross examination. Border Lifting submits that the evidence, available as of 24 June 2021, suggests that Mr Robinson and Mrs Robinson, who were tasked with locating the then alleged emails, believed there to be no others.
[11] [2012] VSC 414 at [59]-[67]
Second Offer
20The Russells’ submit the Second Offer referred to Calderbank v Calderbank,[12] as adopted by the Victorian Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No.2).[13] Further, that the letter stated that if the offer was not accepted, and Border Lifting obtained at trial a result not more favourable to it than the terms of the offer, the letter would be produced to the Court in support of an application for indemnity costs from the date the offer expired.
[12] [1975] 3 All ER 333
[13] (2005) 13 VR 435
21The Russells’ submit that Border Lifting’s rejection of the Second Offer was unreasonable having regard to the following factors:
(a) the proceeding was well advanced at the point of offer, having been on foot for over 18 months. Amended pleadings had been filed and further discovery made. Two mediations had been conducted. The letter stated:
This matter has been on foot since 21 January 2021. The statement of claim has been amended twice. Your client has the benefit of my clients’ defences. The proceeding is at a stage where the parties will incur costs in preparing for trial. Those costs will be substantial relative to the amounts claimed by the plaintiff.
(b) the period of 14 days after service for consideration of the offer was reasonable;
(c) the offer of $100,000.00 including the cost of the proceeding was significant and represented a genuine and more than fair compromise. As at the date of the offer, Border Lifting’s claim totalled $108,910.51, plus $54,371.01, being the cost of the two RSM reports;
(d) Border Lifting’s prospects of success, assessed at the date of the offer, were poor, reasons for which are set out in the letter. The allegations against the Russells were extremely serious (being that over a six-year period, they deprived Border lifting of over $100,000.00 by making unauthorised wage, bonus and credit card payments). The principal claim was that Mr Russell did not work hours for which he was paid. That claim was entirely inferential and predicated on inadmissible lay opinion. Another aspect of Border Lifting’s claim relied upon an allegation that Mrs Russell had “deceptively affixed Mr Robinson’s signature” to her employment contract, which allegation was not particularised in accordance with the Rules nor any supporting evidence ultimately offered at trial;
(e) the terms of the offer were clear; and
(f) the consequence of not accepting the offer was foreshadowed.
22Border Lifting does not oppose orders that it pay indemnity costs from the date of the expiry of the Second Offer being 11 August 2022 and thereafter. It does not address or respond to the Russells’ submissions in respect of the Second Offer.
Analysis
Was Border Lifting’s rejection of the First Offer unreasonable?
23For the reasons set out below, the answer in respect of the First Offer is no.
24The Russells rely on two Calderbank letters dated 24 June 2021 and the other dated 27 July 2022.
25The First Offer offered to settle the proceeding by the Russells paying Border Lifting the sum of $60,000.00, inclusive of costs, within 30 days after acceptance of the offer.
26The First Offer was open for a period of 7 days; referenced the Calderbank decision and subsequent authorities and warned that the letter would be produced to the Court in the event of an application for costs, including on an indemnity basis. The letter, however, did not explain the reasons why the claims then made were misconceived and doomed to fail.
27Border Lifting did not reply to the First Offer within the 7-day period, or at all.
28The Russells contend that Border Lifting’s failure to accept the First Offer was unreasonable for the following reasons:
(a) the proceeding was listed of trial on 23 August 2021 when it was well advanced, and the pleadings were closed, and discovery had been made;
(b) the terms of the offer were clear;
(c) the period of 7 days for consideration was reasonable;
(d) the sum of $60,000.00 represented a genuine and fair offer, including costs, as at the date of the offer Border Lifting’s claim totalled $116,336.90 plus $54,371.01 for the RSM reports and represented more than 50% of the damages claimed;
(e) Border Lifting’s prospects of success were limited where:
(i)the principal claim was that Mr Russell had received overtime payments (totalling $50,018.38) to which he was not entitled;
(ii)the Russells alleged that it was a term of Mr Russell’s employment contract that he was entitled to overtime, which he manually recorded and reported to Border Lifting weekly;
(iii)Mr Russell’s emails reporting overtime worked were critical to the Russells defence;
(iv)as at the date of the offer, Border Lifting had discovered only 11 such emails and maintained that there was a “puddle of such documents, not an ocean”. It subsequently discovered over 100 such emails, and substantially amended its claim in relation to the overtime claim;
(v)at trial Mr Robinson agreed that he knew there were significantly more emails when he affirmed his affidavit, “but we couldn’t find them”; and
(vi)it should have been apparent to Border Lifting, as at the date of the offer, that the most substantial part of its claim faced significant difficulty.
(f) the cost consequences of not accepting the offer were foreshadowed.
29Border Lifting contends that its rejection of the First Offer was not unreasonable for the following reasons:
(a) whilst the proceeding was well advanced this must be considered in the context of ongoing concerns about the adequacy of its discovery and subsequent pleadings amendments;
(b) there was clear ongoing dispute about the overtime emails and Border Lifting was not in a position to consider its position as of 24 June 2021 in an informed or considered manner;
(c) the Russells offer of $60,000.00 was not a genuine or fair compromise considering at that at the time of the First Offer, Border Lifting had spent $54,371.01 on the RSM reports and incurred significant costs to that point;
(d) whether Border Lifting would have succeeded at trial in relation to its overpayment claims was affected by the existence of overtime emails which there was significant dispute over;
(e) the Russells have not discharged the onus in respect of claims in the amended statement of claim beyond the F1 Claim;
(f) there was considerable dispute about the existence of more emails in relation to Mr Russell’s overtime payment than had been discovered by Border Lifting an after the First Offer, Border Lifting significantly recast the F1 Claim; and
(g) only one line of evidence at trial supports the Russell’s submissions that Mr Robinson knew there were significantly more emails and that it should have been apparent, as at the date of the First Offer, that a substantial part of its claims faced difficulty.
30The mere refusal of an offer does not automatically mean that the Court should make an order for costs on an indemnity basis where the ultimate result is less favourable than that contained in the offer.[14]
[14] Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCoverAuthority (No 2) (2005) 13 VR 435 at [18]-[20]
31I accept the Russells submissions that the First Offer was more favourable than the judgment entered. However, the principles are that there must be some unreasonableness in the refusal to accept.[15]
[15] Hobartville Stud Pty Ltd v Union Insurance Co Ltd [2004] FCA 1600 per Crennan J at [6]
32In my view, the First Offer was a genuine offer to compromise, however, it was not unreasonable for Border Lifting to reject the offer in circumstances where the claims were still being amended, Border Lifting was yet to discover over 100 emails in relation to overtime worked by Mr Russell on 23 July 2021, and the Russells had not explained in the letter of offer Border Lifting’s prospects of success on the issues in dispute then existing between the parties.
33On the other hand, the Second Offer was a genuine offer to compromise, and it was not an invitation to capitulate by offering to pay Border Lifting the sum of $100,000.00, inclusive of costs and interest within 14 days after acceptance of the offer. The offer was open for acceptance until 10 August 2022. Border Lifting did not respond to the offer.
34For completeness, in my view, Border Lifting did act unreasonably in rejecting the Second Offer in circumstances where:
(a) the proceeding had been on foot for over 18 months and the amended pleadings had been filed, further discovery had been made and two mediations had been conducted.
(b) the period of 14 days to consider the offer was reasonable.
(c) the offer of $100,000.00 including costs and interest represented a genuine and fair compromise of the proceeding where Border Lifting’s claim at that stage totalled $108,910.51 plus $54,371.01 for the RSM reports;
(d) the Second Offer set out the reasons why Border Lifting’s prospects of success on each ground were poor including as follows:
(i)the allegations against the Russells were extremely serious (being that over a six-year period, they deprived Border lifting of over $100,000.00 by making unauthorised wage, bonus and credit card payments);
(ii)the principal claim was that Mr Russell did not work hours for which he was paid. That claim was entirely inferential and predicated on inadmissible lay opinion;
(iii)another aspect of Border Lifting’s claim relied upon an allegation that Mrs Russell had “deceptively affixed Mr Robinson’s signature” to her employment contract, which allegation was not particularised in accordance with the Rules, nor any supporting evidence ultimately offered at trial.
(e) the terms of the offer were clear; and
(f) the consequences of not accepting the offer were foreshadowed.
Should Border Lifting pay the Russells’ costs of the proceeding on a standard basis up to 2 July 2021 and, thereafter, on an indemnity basis?
35Given my finding that the rejection of the First Offer by Border Lifting was not unreasonable, the answer to this issue is no.
Should Border Lifting pay the Russells’ costs of the proceeding on a standard basis up to 10 August 2022 and, thereafter, on an indemnity basis?
36For the foregoing reasons in relation to the Second Offer, the answer is yes.
Conclusion
37Border Lifting ought to pay the Russells’ costs of and incidental to the proceeding (including reserved costs) to be taxed in default of agreement on a standard basis in respect of costs incurred up to and including 10 August 2022, and, thereafter, on an indemnity basis.
Orders
38For the reasons set out above, the orders are as follows:
(a) There is judgment for the defendants.
(b) The proceeding is dismissed.
(c) The plaintiff pay the defendants’ costs of and incidental to the proceeding (including reserved costs) to be taxed in default of agreement on the standard basis in respect of costs incurred up to and including 10 August 2022, and thereafter on an indemnity basis.
- - -
Certificate
I certify that these 18 pages are a true copy of the judgment of Her Honour Judge Burchell delivered on 18 April 2023.
Dated: 18 April 2023
Nikki Thomson
Associate to Her Honour Judge Burchell
1
10
0