Caruso v Newington Road Developments Pty Ltd (No 2)
[2024] ACTSC 108
•12 April 2024
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Caruso v Newington Road Developments Pty Ltd (No 2) |
Citation: | [2024] ACTSC 108 |
Hearing Date: | Decided on the papers |
Decision Date: | 12 April 2024 |
Before: | Taylor J |
Decision: | (1) The plaintiff is to pay the defendant’s costs on a party and party basis up to 15 March 2023, and thereafter on a solicitor and client basis. |
Catchwords: | CIVIL LAW – PRACTICE AND PROCEDURE – Costs – Calderbank offer – whether offer was a genuine offer – whether it was unreasonable to reject the offer – where plaintiff rejected offer to settle |
Legislation Cited: | Court Procedures Rules 2006 (ACT), rr 1751, 1752 |
Cases Cited: | Calderbank v Calderbank [1975] 3 All ER 333 Caruso v Newington Road Developments Pty Ltd [2024] ACTSC 22 Financial Integrity Group Pty Ltd v Farmer (No 5) [2014] ACTSC 194 Financial Integrity Pty Ltd v Farmer (No 4) [2014] ACTSC 145 Leichhardt Municipal Council v Green [2004] NSWCA 341 Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 Pires v DibbsBarker Canberra Pty Limited [2014] ACTSC 283 Ross v Gordon (No 2) [2023] ACTCA 40 Southwell v Staite (No 2) [2019] ACTSC 83 Subasic v Hewlett-Packard Pty Ltd (No 2) [2020] ACTSC 195 |
Parties: | Frank Caruso ( Plaintiff) Newington Road Developments Pty Ltd (ACN 646 345 002) ( Defendant) |
Representation: | Counsel R Montagnino ( Plaintiff) J A Larkings ( Defendant) |
| Solicitors United Legal ( Plaintiff) Lexmerca ( Defendant) | |
File Number: | SC 361 of 2022 |
TAYLOR J:
Introduction
1․The defendant applies to vary a costs order arising from a judgment delivered entirely in his favour on 8 February 2024: Caruso v Newington Road Developments Pty Ltd [2024] ACTSC 22 (Caruso). Order (3) required the plaintiff to pay the costs of the defendant. The parties were given the opportunity to seek a variation of the costs order.
2․The defendant subsequently applied to the Court for such a variation. The defendant seeks a more favourable costs order requiring the plaintiff to pay its costs, assessed on a party and party basis up to 15 March 2023, and thereafter on a solicitor and client basis. The plaintiff opposes the variation to the costs order.
3․For the reasons that follow, the varied order as sought by the defendant should be made.
Background
4․The background to the proceedings is set out in my judgment in Caruso at [15]. In summary, the plaintiff claimed damages for breach of contract. The contract said to have been formed between the parties was a “collateral contract”. The plaintiff relied on an email sent to him in November 2021 by the defendant’s real estate agent accepting an offer he had made on a lot of land (Lot 10) the defendant company was to develop. The email was said to be the “collateral contract”. Lot 10 was later sold to another buyer. The plaintiff sought the difference between the price he offered to pay for Lot 10 and the price paid by the successful purchaser. The email required the plaintiff to provide a $2,000 holding deposit and to provide details to the real estate agent, including his name, address and bank or broker that he intended to use to purchase Lot 10. The plaintiff paid the holding deposit but did not ever respond to the request for personal particulars. Lot 10 was sold some months after the email was sent, in July 2022. As part of the evidence before the Court, it was revealed that the plaintiff had not received approval from any financial institution to finance the purchase of Lot 10: Caruso at [21].
5․Costs awarded are ordinarily assessed on a party and party basis: Hulanicki v Walton (No 2) [2015] ACTCA 45 (Hulanicki) at [11]. This position is reflected in r 1751 of the Court Procedures Rules 2006 (ACT). Rule 1752 provides the Court with the power to vary the usual position as to costs.
6․The defendant seeks a more favourable costs order based on an offer to settle the proceedings made on 15 February 2023.
7․On 15 February 2023, the defendant’s solicitor sent a letter with an offer of settlement to the plaintiff’s solicitor (the Offer). The letter was marked “without prejudice save as to costs” and was expressly stated to be in accordance with the principles contained in Calderbank v Calderbank [1975] 3 All ER 333 (Calderbank). If accepted, the Offer would have required the defendant to pay the plaintiff $20,000 and bear all its own legal costs.
8․The Offer remained open for 28 days, expiring on 15 March 2023. On 3 March 2023, during the period when the Offer remained open, the plaintiff filed a Further Amended Originating Application.
Submissions
The defendant’s submissions
9․The defendant submits that the Offer was a genuine offer of compromise that met the criteria of a Calderbank offer, in that it involved a significant element of compromise, had clear and unambiguous terms, was open for a reasonable period and foreshadowed that it would be relied upon to seek costs on a solicitor and client basis should a future costs dispute arise.
10․The defendant submits that it was unreasonable for the plaintiff to not accept the Offer. Most of the evidence had been served at the time the Offer was made and the defendant submits that the Offer provided the plaintiff notice as to the deficiencies in his case.
The plaintiff’s submissions
11․In opposing the order sought by the defendant, the plaintiff submits that, despite the Court’s determination that the email did not create a legally enforceable obligation on the defendant, the defendant nonetheless received a substantial gain to the plaintiff’s detriment (being the difference between the price he offered to pay for Lot 10 and the price for which it was later sold). The plaintiff submits that the email and holding deposit paid by the plaintiff “gave rise to certain expectations” and that the defendant’s action does not pass “the pub test”.
12․Further, the plaintiff submits that at the time the defendant made the Offer “all evidence was not yet in”, and accordingly it was not unreasonable to reject the Offer as there was potential for the outcome to be impacted by further evidence.
13․Finally, the plaintiff contends that the Offer was not a genuine offer of compromise because it was significantly lower than the costs incurred by the plaintiff at the time the Offer was made as well as the amount he claimed.
The defendant’s submissions-in-reply
14․Quite properly, the defendant rejects the applicability of “the pub test” (however that might be defined) to the question of costs. The defendant identifies that by the time the Offer was made there were only two outstanding affidavits, namely a second affidavit of the defendant’s real estate agent, Mr Dixon, which annexed the bidding record of the auction of Lot 10, and the affidavit of Mr Dixon’s executive assistant, Ms Deschanel, that produced the acceptance email sent to the plaintiff and confirmed the return of the plaintiff’s holding deposit. Both the email and the fact of the return of the holding deposit were matters already within the plaintiff’s knowledge. Indeed, both were central to his own case.
Principles
15․The discretion to award costs is “very wide, although it must be exercised judicially, in accordance with established principle and the statutory context”: Ross v Gordon (No 2) [2023] ACTCA 40 at [61] citing Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at 86 [35] and 96 [65]. When a Calderbank offer has been made, the issue is whether it was unreasonable to reject the offer, considering all the circumstances of the case, including the apparent strength of each party’s case at the time that the offer was made.
16․The principles applicable to Calderbank offers were set out in Hulanicki at [13]-[16]: see also Southwell v Staite(No 2) [2019] ACTSC 83 (Southwell) at [7]-[17]. As McWilliam AsJ (as her Honour then was) explained in Subasic v Hewlett-Packard Australia Pty Ltd (No 2) [2020] ACTSC 195 (Subasic) at [8]:
The Court considers whether the offer was a genuine offer to compromise, and if so, whether it was unreasonable in the circumstances for the opposing party to reject the offer. It is not enough that an offer is made in terms which are either equal to, or more favourable to the recipient of the offer that the judgment obtained. Indemnity costs are not justified unless the Court is satisfied that the rejection of an offer that was not bettered at trial was unreasonable: Jones v Bradley (No 2) [2003] NSWCA 258.
17․In Hulanicki at [14], the Court of Appeal endorsed the following factors as relevant to an evaluation of the reasonableness of a rejection of a Calderbank offer:
(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 indemnity costs in the event of the offeree’s rejecting it.
18․With regards to calculating the date from which costs consequences should be imposed, “unless the offer is expressly rejected at some earlier date, the last day to which it remains open is, in principle, the date from which any costs consequences should flow”: per Refshauge J in Financial Integrity Group Pty Ltd v Farmer (No 5) [2014] ACTSC 194 at [7].
19․The plaintiff challenges that the Offer was a genuine offer of compromise. Putting that challenge aside for moment, I am satisfied the Offer satisfies other criteria that would see it properly characterised as a Calderbank offer. Namely, the Offer was marked “without prejudice save as to costs” and therefore able to be tendered at any hearing or application for costs. The offer was clear and unambiguous in its terms and was final in nature. The offer expressly stated that if it was not accepted the defendant would rely on it to seek costs on a solicitor and client or indemnity basis: Southwell at [8] citing Pires v DibbsBarker Canberra Pty Limited [2014] ACTSC 283 at [97] and Financial Integrity Pty Ltd v Farmer (No 4) [2014] ACTSC 145 at [24]-[46].
Determination
Was the Offer a genuine offer of compromise?
20․The plaintiff identified two reasons why the Offer was not a genuine offer of compromise. First, that by the time of the Offer the plaintiff’s costs exceeded the amount offered and second, that the amount offered was significantly less than the amount claimed by the plaintiff.
21․In my view, the Offer was a genuine offer of compromise in that it represented a genuine attempt to reach a negotiated settlement of the proceedings and was not merely an attempt to trigger a costs sanction against the plaintiff: Leichhardt Municipal Councilv Green [2004] NSWCA 341 (Leichhardt) at [39].
22․I consider the following factors relevant to the conclusion I have drawn. The terms of the Offer, had it been accepted, saw the defendant pay a sum of money to the plaintiff and bear its own costs. The Offer saw the defendant forgo entirely the capacity to recover their own costs, the proceedings having reached the point where evidence had been filed, but it was not limited only to costs. The Offer was not a call to the plaintiff to simply capitulate and give up, it involved an aspect of real financial compromise to the detriment of the defendant. While the financial compromise was significantly less than the amount claimed by the plaintiff, the Offer was made in circumstances where the defendant disputed entirely the creation of a legal relationship, though the facts were not significantly in dispute. That the Offer was significantly less than the amount claimed reflected the position the defendant adopted to the claim and does not, in my view, detract from the genuine nature of the Offer.
23․The Offer could properly be described as hopeful, but “there is no rule to the effect that an optimistic offer is not a genuine offer”: Leichhardt at [40]. The Court in Leichhardt observed further, at [40]:
Whether or not it was reasonable to reject an offer is a question that may figure in the discretionary balance, but it is not a question which affects the genuineness or otherwise of the offer.
24․Having established that the Offer was a genuine offer of compromise, I turn to consider whether it was unreasonable for the plaintiff to reject the Offer.
Was it unreasonable for the plaintiff to not accept the Offer?
25․The Offer was detailed and the terms of it were clear. The Offer identified the defendant’s position, including the basis for the denial of the existence of a contractual obligation and any liability for damages.
26․The Offer was made in February 2022, the matter having been on foot since September 2022. The plaintiff highlights that the Offer came before all the evidence had been filed. While this is so, the reality of the evidence that was later filed (a second affidavit from Mr Dixon and an affidavit from Ms Deschanel) is that it did not shift the sands for the position of either party. Indeed, as I have already observed, the affidavit of Ms Deschanel attested to only two matters of real significance to the case and both were matters already included as critical facts in the plaintiff’s own case, and were not ever challenged by the defendant. In my view, by the time the Offer was made the plaintiff was in a position to consider it in light of the prospects of his claim. The plaintiff did not identify any evidence produced after the Offer that materially affected the position of either party.
27․The plaintiff was legally represented at the time of the Offer. I am satisfied that the Offer came at a time when the plaintiff had sufficient material to enable an assessment to be made of the prospects of success of his claim, together with an assessment of the damages that may be awarded: Subasic at [10] citing Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [9].
28․The Offer remained open for 28 days, which I consider to be sufficient time, given the nature and extent of the claim, for the plaintiff to take on advice and determine his response. Indeed, I am affirmed in that view by the fact that on 3 March 2022, while the Offer remained open for acceptance, the plaintiff further amended his originating application.
29․The Offer sought to identify with some precision the deficiencies in the plaintiff’s case to demonstrate the limited prospects he had of success. The plaintiff’s case rose and fell on the characterisation of the email; so much was accepted by the plaintiff’s counsel at the outset of the hearing. I determined that the email did not create any enforceable rights or obligations on the part of the plaintiff or the defendant. This finding is consistent with the position the defendant set out in the Offer.
30․Further, the Offer identified an aspect of the plaintiff’s case that was, on the face it, a real obstacle for him with respect to any assessment of damages. The obstacle being the plaintiff’s inability to demonstrate that he was ready, willing and able to perform the contract that he asserted existed. The Offer states:
…[T]he plaintiff’s affidavit evidence fails to prove that he was ready, willing, and able to perform any contract for the sale of land if it had been provided to him, which is necessary to establish any entitlement for an order for damages. The conditional approval for finance annexed to the plaintiff’s affidavit of 21 September 2022 relates to a different person to the plaintiff and could not relate to the purchase of Lot 10 when it expressly states that “This Conditional Approval is valid for 30 days from 04 December 2019”, being nearly two years before the [Ray White] Email.
31․The plaintiff ultimately argued his claim on the basis that it was a “collateral contract” created by the email and not a contract for the sale of land, but the point remained that the evidence did not establish that he was ever in a position to make good on the offer he made to purchase Lot 10 at any time prior to the sale of it in July 2022. The plaintiff’s position in terms of damages, as described in the above extract from the Offer, did not ever improve. Indeed, he went on to concede during cross-examination that the “conditional approval” referred to in his affidavit not only related to refinancing an unrelated property but had, in any event, expired by the time he made the offer on Lot 10. He conceded that he did not ever have financial approval to purchase Lot 10.
32․I determined this factor to be influential in relation to the environment within which the plaintiff asserted an intention to create legal relations existed and to any assessment of damages. In so far as the effect on damages was concerned, so much was conceded by the plaintiff’s counsel during closing submissions in the hearing.
33․The plaintiff, as at the stage the Offer was made, did not have strong prospects in relation to extent of the damages he claimed, even if he was able to establish the existence of a collateral contract. The factors underpinning those prospects, clearly identified in the Offer, were known to the plaintiff. While the offer of $20,000 was significantly less than the damages claimed, it was not inconsistent with what the plaintiff knew the evidence to support at the time of the Offer. The sum offered was ultimately better than the position judgment left him in.
34․At the time the Offer was made the plaintiff had already incurred costs. He must have known that the litigation of the matter to hearing would involve further, substantial expense. The hearing went for two days and involved written submissions. The plaintiff’s conduct in failing to provide his personal particulars and failing to secure financial approval to make good on the offer were both matters known to him and detrimental to his prospects, at the very least as to damages. These are matters I consider amplified the obligation on the plaintiff to give serious and genuine consideration to the compromise of the claim, notwithstanding the value of the Offer as compared with the scope of the claim. There is no evidence the plaintiff ever responded to the Offer.
35․It is in those circumstances that I consider it to be unreasonable for the plaintiff to have not accepted the Offer. Accordingly, the defendant has established that the Offer was genuine and that it was unreasonable for it not to have been accepted. This warrants a more favourable than usual costs order and the variation to the costs order should be made.
Orders
36․For the above reasons I make the following orders:
(1)The plaintiff is to pay the defendant’s costs on a party and party basis up to 15 March 2023, and thereafter on a solicitor and client basis.
| I certify that the preceding thirty-six [36] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Justice Taylor Associate: Date: 12.04.2024 |
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