Carter v The Dennis Family Corporation (No. 2)
[2010] VSC 431
•24 SEPTEMBER 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2004 9785
| ROBERT CARTER | Plaintiff |
| Defendant by Counterclaim | |
| v | |
| THE DENNIS FAMILY CORPORATION (ACN 089 081 667) | Defendant Plaintiff by Counterclaim |
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JUDGE: | HABERSBERGER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 17 SEPTEMBER 2010 | |
DATE OF JUDGMENT: | 24 SEPTEMBER 2010 | |
CASE MAY BE CITED AS: | CARTER v THE DENNIS FAMILY CORPORATION (NO. 2) | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 431 | |
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Practice and Procedure – Costs – Notice to Admit – Costs of proving disputed facts – Plaintiff’s offer of compromise – Indemnity costs – Whether there should be order otherwise even though judgment no less favourable than terms of offer – Plaintiff’s offer to settle before proceedings commenced for a figure less than half the judgment – Alleged litigation misconduct – Whether plaintiff entitled to indemnity costs for the whole of the proceeding for one or other of these reasons – Supreme Court (General Civil Procedure) Rules 2005, rr.26.03, 26.08, 35.03, 35.06, 63.02, 63.18, 63.31.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff/Defendant by Counterclaim | Mr C Gunst QC with Mr M Champion | Holding Redlich |
| For the Defendant/Plaintiff by Counterclaim | Mr T North SC with Mr J Forbes | Freehills |
HIS HONOUR:
On 9 September 2010, I published my reasons for judgment in this proceeding (“the liability judgment”).[1] I found that the plaintiff was entitled to judgment in the sum of $916,774 and that the counterclaim should be dismissed. The questions of interest and costs were adjourned for further hearing, which took place on 17 September 2010.
[1][2010] VSC 406.
The parties very sensibly reached agreement on the amount of interest allowable under s.58 of the Supreme Court Act 1986. As at the date of the second hearing, it was agreed to be $576,205, with interest continuing to accrue at the rate of $251 per day.
This meant that the only remaining issue was that of costs. Whilst costs are in the discretion of the Court,[2] the general rule is that costs follow the event.[3] Normally the costs awarded to the successful party, in this case the plaintiff, are ordered to be taxed on a party and party basis. As often happens, however, the resolution of the costs question is not that simple. In this case, there are three separate issues that require determination.
[2]Supreme Court Act 1986, s.24; Supreme Court (General Civil Procedure) Rules 2005, r.63.02.
[3]Rule 63.31. See also Kenyon v Akeroyd (No. 2) [2009] VSCA 168, [3] (Maxwell P, Redlich J and Forrest AJA).
The Factual Background Relevant to Costs
In order to understand the competing arguments about costs it is helpful to first set out the factual background relevant to costs. Counsel for the defendant submitted that this commenced with the letter from the plaintiff’s solicitors dated 15 October 2004 which accompanied Mr Carter’s answers to the 28 questions. The content of that letter was discussed in some detail in paragraphs [492] to [500] of the liability judgment. I am not persuaded that it is relevant to the question of costs. After all, Mr Carter’s employment was not terminated until 26 October 2004.
However that may be, I do agree with the defendant’s submission that the “without prejudice save as to costs” letter of 14 December 2004 from the plaintiff’s solicitors is relevant. Enclosed with that letter was a draft statement of claim. The plaintiff’s solicitors wrote that they had been instructed by Mr Carter, before issuing the statement of claim, to offer the defendant “an opportunity to settle this matter without resorting to litigation”. The offer of settlement, which was “open until close of business on 17 December 2004”, was as follows:
1 The company make the following to our client:
· $134,015 being his entitlement to the 2003-2004 short term incentive payment;
· A lump sum payment of $700,000 taxed as an eligible termination payment;
· Reimbursement of reasonable legal costs;
2The parties would execute a deed providing for mutual releases, confidentiality in relation to the contents of the Deed, the circumstances of the termination and matters arising within the employment. The Deed would also set out an agreed public position in relation to the circumstances of our client’s departure from the company.
Mr Bert Dennis responded to this letter by writing directly to Mr Carter “without prejudice save as to costs”. He rejected the offer. His letter dated 17 December 2004 continued:
Both the Board and I have sought to deal with these issues directly with you, without involvement of lawyers. I am writing to you now so that you and Stacey fully understand where the Company stands. The Board and I remain willing to attempt to resolve the issues between us directly.
It was a unanimous decision of the Board to terminate your employment for serious misconduct, including dishonesty, misleading the Board, and gross negligence. This was evidenced by your responses to our questions which were checked but disputed and not corroborated in many instances. Further evidence provided by various people since then have added weight to the view the Company took.
It is entirely a matter for you whether or not you want the issues relating to your employment aired in a Court. The Board has considered the 14 December 2004 letter and resolved that if a writ is issued the Company will not negotiate with you and the matter will go to a trial. We both know that this inevitably is a long, arduous and costly process. Also if you go down that path, you should be aware we will engage Freehills (John Cooper) to represent the Company and they will be instructed to vigorously defend the action and pursue such counterclaims as are available and to evaluate whether or not your conduct whilst at the Company breached the Corporations Law.
It is with some regret that the Company reached this position as we held out great hopes that you would have a successful career with our Company. In any event, that is the position the Board reached and having considered your offer, that remains its position.
Notwithstanding this position, we see the benefit in trying to resolve this so we can all make a fresh start in 2005 and put this behind us.
In an effort to resolve the issues without the need for litigation, and without any admission of liability, we are prepared to make a “without prejudice” counter-offer on the following terms:
· A termination payment of $100,000; and
·A statement from the Dennis Family Corporation Pty Ltd regarding your employment.
The above offer is subject to the signing of the attached Deed of Release. We also attach a copy of a statement from the Dennis Family Corporation Pty Ltd regarding your employment.
This offer is made to assist your transition into the future and to enable us all to put these events behind us. This offer is open for acceptance until close of business, 22 December 2004.
Please do not hesitate to call me to discuss these matters.
The following draft of the proposed statement by the defendant was enclosed:
Robert Carter was engaged as Managing Director of the Dennis Family Corporation Pty Ltd on 5 May 2003 based on his past track record in building teams and implementing strategies. Unfortunately, due to irreconcilable differences with the Board regarding the future direction of the Dennis Family Corporation Pty Ltd, Robert Carter ceased employment with the Dennis Family Corporation Pty Ltd effective from 26 October 2004.
Mr Carter replied by a “without prejudice save as to costs” letter on 20 December 2004. It read:
I refer to your letter of 17 December 2004. I have given it serious thought.
Firstly, I am absolutely confident that I have not engaged in the kind of behaviours referred to in your letter, not that you have ever been specific on that matter, nor met requests to discuss the Board’s reaction to the answers to the questions put to me. I am sure that such a process would have cleared up misunderstandings and led to much greater clarity regarding the intent of your questions.
As to going to trial, I can assure you that I would also be very well represented. For your family and Board and many staff in DFC this would indeed be a long, arduous process and a very taxing and stressful experience. If we cannot resolve matters amicably, I would have no qualms about seeing that through and fully exploring all the issues in court.
However, I totally agree with you that it would be best to try and resolve this so that DFC and Stacey and I can all make a fresh start in 2005 and put this behind us. I have always wished for the best outcomes for DFC and I continue to do so, whatever our differences.
On the other hand, these events have had highly adverse effects on my career prospects and my health and Stacey’s.
Nonetheless, in an effort to resolve the issues without the need for litigation I am prepared, on a “without prejudice” basis to amend my offer to settle to 12 months base salary ($420,000). As a further sign of my genuine intent in this matter, I am willing to agree to a two stage payment, with 60% payable immediately on signing of a deed of release and 40% automatically payable on 1 July 2005 unless DFC can evidence breaches of the Deed of Release by myself.
I would also request that the Statement be amended to be more in line with the public stance you have already taken, in the Financial Review of November 25 … ie a return to family management.
The Deed of Release has not been checked by my lawyers, but I am hopeful that this will not present any insuperable obstacle.
It is clear that we are both keen to put these events behind us and I make this heavily amended offer in that spirit. It remains open until close of business 22nd December.
Please do not hesitate to contact me if you wish to discuss the matter.
By a letter dated 21 December 2004, Mr Dennis wrote again to Mr Carter “without prejudice save as to costs”. He said:
I refer to your letter of December 20, 2004.
The offer contained in that letter is rejected by the Company. However we have amended the statement to reflect the fact that the business has returned to family management (see below).
I have discussed the contents of your letter of the 20th with the Board of Directors. They are not prepared to make any change to the offer contained in our letter dated December 17, 2004.
That offer has not been rejected by you and remains open until close of business December 22, 2004.
Mr Carter issued this proceeding on 22 December 2004. The statement of claim pleaded certain misleading and deceptive representations and implied terms of the employment contract for breach of which the plaintiff claimed damages. Included in the damages were loss of remuneration for the balance of the three year term under the employment contract, loss of expectation of renewal of the employment contract and continuing employment and “prejudicial impact on the plaintiff’s reputation and career prospects”. An alternative claim was for payment of the plaintiff’s entitlements under the employment contract, which was calculated to be the sum of $862,188. As a result of an increase due to a change by the plaintiff in the calculation of the short term incentive payment and decreases due to changes by the plaintiff in the calculation of the superannuation contribution and the car allowance, the figure of $862,188 became the judgment sum of $916,774.
On 2 August 2006, the plaintiff’s solicitors served an offer of compromise, “in accordance with Part 2 of Order 26” of Chapter 1 of the Supreme Court (General Civil Procedure) Rules 2005 (“the Rules”). By that offer, the plaintiff said that he would accept the sum of $650,000 by way of compromise of his claim against the defendant and the defendant’s counterclaim against him. The offer of compromise was stated to be “open to be accepted for a period of 14 days after the day the offer is served”. It was not accepted.
On the following day, the plaintiff’s solicitors wrote to the defendant’s solicitors advising that the offer should, if necessary, be treated as a Calderbank[4] offer.
[4]Calderbank v Calderbank [1976] Fam 93.
In February 2007 the defendant obtained an order striking out those parts of the statement of claim relating to the allegations of breach of the Trade Practices Act 1974 (Cth) and of the alleged implied terms. The plaintiff did not appeal the strike out order and did not take up the opportunity, provided for under the strike out order, of repleading those causes of action.
Two further offers of compromise were made by the plaintiff. The second, on 22 December 2008, was in the sum of $800,000. The third, on 11 February 2009, was in the sum of $900,000. The 30 day hearing commenced on 13 May 2009.
The Competing Submissions
Counsel for the plaintiff’s primary submission on costs was that there should be an order for indemnity costs from the date of its first offer of compromise, 2 August 2006. Counsel for the plaintiff further or alternatively submitted that there should be an order for indemnity costs for the whole of the proceeding because of Mr Carter’s offer to settle his claim for $420,000 two days before the proceeding was issued, alternatively because of the defendant’s conduct generally in the proceeding. Counsel acknowledged that the submissions were structured in this way because, it was submitted, there really was no argument against an order for indemnity costs from 3 August 2006, whereas the claim for indemnity costs from the commencement of the proceeding was more debatable.
Subject to the matter of the Notice to Admit, in respect of which it was submitted that the plaintiff should pay the defendant’s costs of proving the disputed facts, counsel for the defendant did not oppose an order for costs in favour of the plaintiff, given the findings in the liability judgment. Indeed, counsel for the defendant very fairly indicated that they could not say anything in opposition to an order for indemnity costs from the date of the second offer of compromise, 22 December 2008. But the defendant strongly opposed an order for indemnity costs from 2 August 2006, or from the commencement of the proceeding.
The Notice to Admit
Counsel for the defendant submitted that the plaintiff should pay the costs associated with proof of certain matters the subject of its Notice to Admit dated 28 July 2008, served pursuant to the provisions of Order 35 of the Rules. By a Notice of Dispute dated 8 August 2008, the plaintiff admitted the fact specified in paragraph 1 of the Notice to Admit and disputed the facts specified in paragraphs 2 to 7.
Rule 35.06 relevantly provides that where a party serves a notice under r.35.03(2) disputing a fact and afterwards that fact is proved in the proceeding, liability for costs shall be determined in accordance with r.63.18. That rule relevantly provides that in those circumstances the party disputing the fact which is subsequently proven “shall pay the costs of proof, unless the Court otherwise orders”.
The six disputed facts in respect of which the defendant sought admissions were as follows:
2.On 26 February 2003 the board of NRMA resolved to terminate the Plaintiff’s employment as chief executive offer.
3.The Plaintiff left the employment of NRMA because his employment was terminated by NRMA.
4.Prior to leaving his employment with NRMA the Plaintiff had not been a party to any conversation with the Defendant’s chairman, Mr Albert Dennis, regarding employment of the Plaintiff by the Defendant.
5.Prior to leaving his employment with NRMA the Plaintiff had not been provided with the briefing paper referred to on page one of the letter from Holding Redlich to Mr Albert Dennis dated 15 October 2004 (the Holding Redlich letter).
6.On or before 15 October 2004 the Plaintiff instructed his solicitors Holding Redlich that prior to entering into the contract of employment with the Defendant, a number of representations were made to him by the Defendant, which he relied on in leaving his former employment with National Roads and Motorists Association (NRMA).
7.The “Representations made prior to entering into the contract of employment” referred to in the Holding Redlich letter were not relied upon by the Plaintiff in leaving his employment with NRMA.
I dealt with this issue in paragraphs [489] to [518] of the liability judgment. As I attempted to explain there I consider that the resolution of the Board of the NRMA on 26 February 2003 did not terminate Mr Carter’s employment in the sense of dismissing or sacking him. Rather, the resolution was that his employment should be terminated in the sense of being brought to an end by mutual agreement after negotiations between the parties over the terms of his departure.
Thus, I consider that the plaintiff was justified in disputing the facts alleged in paragraphs 2 and 3 of the Notice to Admit. Given the confusion over the wording of the resolution of the Board of the NRMA, I am not even persuaded that these two facts were subsequently proven, at least in the sense maintained by the defendant. However, out of an abundance of caution, I am prepared to “otherwise order” with respect to the proof of the facts surrounding Mr Carter’s departure from the NRMA. This would include the costs of the defendant calling Mr Evans as a witness and the cross-examination of Mr Carter relevant to these two facts. I note in passing that my criticism of the cross-examination of Mr Carter, which was mentioned in the written outline of submissions by the defendant’s counsel, was limited to the “inordinate amount of time” spent on cross-examining him “about his performance as the CEO of the NRMA”. No criticism was made about the cross-examination concerning the circumstances of Mr Carter’s departure from the NRMA.
I consider next the fact alleged in paragraph 7 of the Notice to Admit. As discussed in the liability judgment, I found that Mr Carter relied to some extent on the representation about corporate governance made in the letter from Cordiner King dated 10 February 2003 because he was “very, very confident” that he would get the job at DFC, and that he could not have relied on the other representations referred to in the Holding Redlich letter because they were made, if at all, after Mr Carter left the NRMA. I also found that the letter, rather than alleging representations prior to Mr Carter entering into the employment contract with DFC, mistakenly alleged representations prior to Mr Carter leaving his then employment and entering into the contract with DFC.
Thus, the disputed facts alleged in paragraph 7 of the Notice to Admit were subsequently partly proven and partly not. In the circumstances, it seems to me that the plaintiff was justified in disputing the fact alleged in paragraph 7 of the Notice to Admit and that I should “otherwise order” with respect to the proof of the facts surrounding the representations referred to in the Holding Redlich letter.
The facts alleged in paragraphs 4 to 6 of the Notice to Admit were subsequently proven. They should not have been disputed. With the first two it was simply a matter of looking at the dates and recognising that the events in question occurred after Mr Carter left the NRMA. With the third of these disputed facts, it should have been admitted that Mr Carter gave the instructions in question. He readily accepted in cross-examination that the letter of 15 October 2004 from his solicitors was based on his instructions.
Nevertheless, the time and effort involved in proving these three disputed facts was minimal. Even if they had been admitted, these events would surely have been referred to in cross-examination. Thus, I am disposed to also “otherwise order” with respect to the proof of these facts, although I do so with some reluctance because parties should take Notices to Admit seriously and make appropriate admissions in order to narrow the issues in dispute.
The result of the above discussion is that I will make an order that the defendant is not entitled to the costs of proving any of the facts specified in paragraphs 2 to 7 of the defendant’s Notice to Admit dated 28 July 2008.
The Offer of Compromise made on 2 August 2006
Pursuant to r.26.08(2)(b) of the Rules, as the plaintiff has obtained a judgment on the claim and counterclaim “no less favourable to the plaintiff than the terms of the offer” made on 2 August 2006, the plaintiff is entitled to an order for party and party costs up to and including the day the offer was served and thereafter for costs to be taxed on an indemnity basis, “unless the Court otherwise orders”.
The offer of compromise made on 2 August 2006 was clear and certain and “capable of acceptance and enforcement”.[5] Indeed, no argument was advanced to the contrary. What was submitted by counsel for the defendant was that the defendant should not be penalised for rejecting the 2 August 2006 offer of compromise when, at the time the offer was made, the plaintiff was unreasonably maintaining embarrassing, unsustainable and legally flawed causes of action. Reference was made to the parts of the statement of claim, as it was then pleaded, which as referred to above were subsequently struck out and not repleaded. Thus, as counsel expressed it in their written submissions:
It cannot be unreasonable to reject an offer to settle an untenable and flawed case.
[5]MT Associates Pty Ltd v Aqua-Max Pty Ltd (No. 3) [2000] VSC 163, [56] (Gillard J).
I do not agree with this submission. Whilst parts of the statement of claim were struck out after the making of the first offer of compromise, nothing was added to the existing pleading after that date, apart from an adjustment to the figures. That is, the claim which eventually succeeded was set out in the pleading as an alternative claim at the time the first offer of compromise was made. Even though the defendant was correctly critical of the way in which other claims were pleaded by the plaintiff, it should, and I believe would, have understood that it still faced the simple contractual claim. It knew how that claim was put. Therefore, the defendant needed to assess the offer of compromise in the light of those facts. Obviously, it decided that it would be successful in defeating the contractual claims on the basis of being able to demonstrate gross negligence or serious misconduct on the part of the plaintiff and could therefore ignore the offer of compromise. That decision has proven to be incorrect. None of that analysis is altered by the retention of the other “flawed” claims in the statement of claim at the time the first offer of compromise was made.
As Ashley J (as his Honour then was) said in Simonovski v Bendigo Bank Ltd (No. 2)[6] with respect to a party obtaining a judgment not more favourable than the terms of an offer of compromise:
It is clear that an order otherwise should not be lightly made; that the position prima facie established by the Rule is a strong one, not easily displaced. Nonetheless, there is a discretion …[7]
[6][2003] VSC 139.
[7][2003] VSC 139, [17].
I do not propose to exercise that discretion to “otherwise order”. No criticism can be made of the reasonableness of an offer to settle for $650,000 a claim then said to total $862,188 plus 18 months’ interest which, at the time, could have been calculated to be at least about another $130,000. It was a genuine offer to compromise which, as events have turned out, should have been accepted by the defendant.
The result of the above discussion is that the plaintiff is entitled to an order for his costs to be taxed on an indemnity basis from and including 3 August 2006.
The Offer to Settle made on 20 December 2004
The first way in which the plaintiff put his submission for an order for indemnity costs for the whole of the proceeding was based on the offer to settle which he made on 20 December 2004. One of the circumstances listed by Sheppard J in the leading case of Colgate Palmolive Co v Cussons Pty Ltd[8] as having been thought to warrant the exercise of the discretion to award indemnity costs was “an imprudent refusal of an offer to compromise”. The offer to settle made by the plaintiff on 20 December 2004 was that he would accept payment of $420,000. The letter conveying that offer was sent “without prejudice save as to costs”. Acceptance of that offer would have meant a more favourable result for the defendant than the judgment.
[8](1993) 46 FCR 225, 233.
In Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No. 2),[9] the Court of Appeal rejected the proposition that a Calderbank offer gave rise to a presumption in favour of indemnity costs where the offeree received a less favourable result. Their Honours held that the critical question was whether the rejection of the offer “was unreasonable in the circumstances”.[10] Their Honours further said:
[9](2005) 13 VR 435 (Warren CJ, Maxwell P and Harper AJA).
[10](2005) 13 VR 435 [23].
The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed;
(f)whether the offer foreshadowed an application for an indemnity costs [sic] in the event of the offeree’s rejecting it.[11]
[11](2005) 13 VR 435, [25].
Having referred to Hazeldene, counsel for the plaintiff submitted that the defendant’s rejection of the offer was unreasonable having regard to the following matters:
(a) the terms of the offer were clearly expressed;
(b) the offer involved a very significant compromise of the plaintiff’s claim;
(c) the offer was for payment of a very modest and reasonable amount;
(d)although the offer was made at an early stage this was not a case in which it was difficult for the defendant to make an informed assessment of the plaintiff’s case and its own defence;
(e)the offer was peremptorily rejected by the defendant before the deadline thus indicating that “the rejection was not supported by any process of reasoning whatsoever”;[12] and
(f)the defendant’s attitude to the plaintiff and his offer was adversarial and entrenched as demonstrated by what Mr Dennis wrote in his letter of 17 December 2004.
[12]Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2005] NSWSC 481, [30] (McDougall J).
Counsel for the defendant submitted that Mr Carter’s letter was not a Calderbank offer because, like the letter from the plaintiff’s solicitors some six days earlier, the stated consequence of not accepting the offer was that a legal proceeding would be issued. There was no suggestion that if the offer was rejected the defendant would be put at risk of paying indemnity costs. In my opinion, the letter of 20 December 2004 was akin to a Calderbank offer because it contained an offer of settlement which was made “without prejudice save as to costs”.[13] In the circumstances, I do not see why the plaintiff cannot seek to rely on that offer on the question of costs.
[13][1976] Fam 93, 106 (Cairns LJ, with whom Scarman LJ and Sir Gordon Willmer agreed).
However, whether or not the defendant’s counsel were correct in their submission that this was not a Calderbank offer, I agree that a critical consideration for present purposes is that there was no foreshadowed application for an indemnity costs order in the event that the offer was rejected and the plaintiff subsequently obtained a more favourable outcome.[14] This consideration is particularly relevant in this case because the correspondence in question was between lay people who may not have understood the subtlies of costs orders in litigation. Given the speed of Mr Dennis’ reply to Mr Carter’s offer and the fact that he had commenced corresponding directly with Mr Carter, he may only have consulted the other Board members and not his legal advisers before rejecting the offer.
[14]Danidale Pty Ltd v Abigroup Contractors Pty Ltd (No.2) [2007] VSC 552, [17] (Habersberger J).
Counsel for the defendant also relied on the fact that the offer was open only for two days. This is an important consideration, in my opinion. There really was no need for the plaintiff to impose such a short deadline at such a busy time of year, particularly when the larger part of his contractual claim was not due to be paid until 26 January 2005. I do not regard the defendant’s quick rejection of the offer as invalidating this criticism of the terms of the offer. The defendant met the deadline imposed by the plaintiff. It responded with a sense of urgency created by the plaintiff’s imposition of an extremely short deadline.
It is also important to look at all of the correspondence between the parties at this time, which is why I quoted it virtually in full. I do not regard the defendant’s attitude towards the possibility of litigating against the plaintiff as being as entrenched as the submission by counsel for the plaintiff suggested. First, an offer of $100,000 had been made by the defendant. Counsel for the plaintiff described this as “derisory”. It was low, but it was an offer. Secondly, the defendant was acting in a conciliatory way with respect to the proposed statement about the plaintiff’s departure. All of this raises the possibility in my mind that if the plaintiff had not insisted on the two day deadline matters may have progressed to a more satisfactory conclusion. I note that if the plaintiff, having made an offer to settle for the sum of $420,000 before the proceeding was issued, had followed the logical course of making an offer of compromise in the same amount shortly after the proceeding had issued, that offer would have had to remain open for not less than 14 days, pursuant to r.26.03(3) of the Rules.
I have concluded, therefore, that the defendant’s rejection of the offer made on 20 December 2004 was not such that it should lead to an order for indemnity costs from the commencement of the proceeding on 22 December 2004.
The Defendant’s Conduct in the Proceeding
The second way in which the plaintiff put his submission for an order for indemnity costs for the whole of the proceeding was based on the defendant’s conduct in the proceeding. The submission referred to a number of matters said to demonstrate litigation misconduct by the defendant. They can be considered under the three different headings I referred to in paragraph [66] of the liability judgment – the discontinuance of virtually all of the counterclaim without explanation, “the failure to comply with discovery obligations” and “the extravagant and inappropriate way” in which the defendant’s case was put.
In my opinion, none of the matters warrants an order for indemnity costs for the whole of the proceeding. I can briefly explain my reasons for reaching this conclusion. First, even if the massive counterclaim was, as the plaintiff submitted, “mounted and maintained only to hold the plaintiff in terrorem to deter him from persisting with his claim”, on 14 November 2008 an order was made by Kings AsJ dealing with the costs of those parts of the counterclaim abandoned three days before witness statements were scheduled to be filed and exchanged. In those circumstances, I do not consider it appropriate to revisit this question.
Secondly, I am not satisfied that the plaintiff has proven that there was a “persistent failure of the defendant to comply with its discovery obligations in the interlocutory stages of the proceeding”, and a “need for repeated discovery applications by the plaintiff”. At the liability hearing, the defendant’s ten affidavits of documents were tendered by the plaintiff as an exhibit.[15] However, I know nothing about the circumstances leading up to the swearing of the further affidavits of documents. The existence of ten affidavits of documents does not necessarily establish that the defendant failed in its discovery obligations. The opposite could be true. A number of other exhibits were relevant documents which had not been discovered. But insofar as this may have indicated default on the part of the defendant, it seems to me that it occurred during a period in respect of which the plaintiff is already receiving indemnity costs[16] and there is no justification for extending that period back to the commencement of the proceeding.
[15]An eleventh affidavit of documents was filed during final submissions.
[16]Also, six of the defendant’s ten affidavits of documents were sworn after 2 August 2006.
Thirdly, I am not persuaded that it is appropriate to order indemnity costs for the whole of the proceeding for the alleged extravagantly wasteful way in which the defendant put its case. Criticisms such as persisting in running all thirteen reasons for summary dismissal when some were groundless and an excessively lengthy cross-examination of the plaintiff, even if made out, relate to matters which occurred at trial. As explained above, the plaintiff is already receiving indemnity costs for this period and there is no justification for extending the period back to the commencement of the proceeding.
The Final Orders
Accordingly, the final orders will be that:
1.There be judgment for the plaintiff in the sum of $1,494,736 including interest pursuant to statute in the sum of $577,962.
2. The counterclaim be dismissed.
3.The defendant is not entitled to the costs of proving any of the facts specified in paragraphs 2 to 7 of its Notice to Admit dated 28 July 2008.
4.The defendant pay the plaintiff’s costs of the claim and the counterclaim, such costs to be assessed on a party and party basis up to and including 2 August 2006 and thereafter on an indemnity basis.
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