Chint Australasia Pty Ltd v Cosmoluce Pty Ltd

[2008] NSWSC 768

CITATION:	Chint Australasia Pty Limited v Cosmoluce Pty Limited [2008] NSWSC 768
HEARING DATE(S):	16/05/08 - 20/05/08
JUDGMENT DATE :	28 July 2008
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	The orders of the court as follows: 1 Order that defendant pay the plaintiffs costs of the proceedings on the ordinary party party basis; 2 Order that the plaintiff pay the defendants costs of the plaintiffs indemnity costs application.
CATCHWORDS:	Calderbank letter does not automatically result in an order for costs - Claimant bears the onus of proving it was unreasonable not to accept the offer - First offer made before the service of material evidence - Second offer open for merely one week - Calderbank letters expressed to be inclusive of costs
LEGISLATION CITED:	Uniform Civil Procedure Rules 1995 (NSW)
CATEGORY:	Consequential orders
CASES CITED:	Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (formerly GIO Insurance Limited) & Ors [2006] NSWSC 583 Brittain v Commonwealth of Australia [2003] NSWSC 270 Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 Hanave Pty Ltd v LFOT Pty Ltd (formerly Jagar Pty Ltd) [1998] FCA 1429 Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 Jones v Bradley (No 2) [2003] NSWCA 258 Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 Naomi Marble & Granite Pty Ltd v FAI General Insurance Co Ltd (No 2) [1999] 1 Qd R 518 Rosser v Maritime Services Board of New South Wales (No 3) (Supreme Court of New South Wales, Young J, 25 November 1997, unreported) Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97 SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323
PARTIES:	Chint Australasia Pty Limited (Plaintiff) Cosmoluce Pty Limited (Defendant)
FILE NUMBER(S):	SC 50065/07
COUNSEL:	Mr MJ Leeming SC, Mr MJ O'Meara (Plaintiff) Mr R Stitt QC, Mr S Balafoutis (Defendant)
SOLICITORS:	Corrs Chambers Westgarth (Plaintiff) Dibbs Abbott Stillman (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Monday 28 July 2008

50065/07 Chint Australasia Pty Ltd v Cosmoluce Pty Ltd

JUDGMENT

Costs

1 The parties have each addressed submissions in relation to the appropriate costs orders to be made following the delivery of the reserved judgment [2008] NSWSC 635.

The principles

2 The starting point is r 42.2 of UCPR which provides:

Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis.

3 A Calderbank offer does not automatically result in the court making an order for indemnity costs: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323. Rather, the question that the court has to determine in deciding whether to award indemnity costs is:

“… whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs. . . that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure …” per Giles JA at [37].

4 SMEC was upheld by the Court of Appeal in Jones v Bradley (No 2) [2003] NSWCA 258 at [8]-[9].

5 SMEC and Jones v Bradley displaced an earlier line of authority to the effect that, prima facie, a successful Calderbank offer should result in an order for costs on an indemnity basis in favour of the offeror. Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 at 451 held there was a:

“prima facie presumption of indemnity” in the event of a Calderbank offer not being accepted and the recipient of the offer not receiving a more favourable result than the offer (followed in Naomi Marble & Granite Pty Ltd v FAI General Insurance Co Ltd (No 2) [1999] 1 Qd R 518, and Brittain v Commonwealth of Australia [2003] NSWSC 270).

6 An award for indemnity costs will not be made unless it was unreasonable for the offeree not to accept the offer: Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 at [4].

7 In Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 per Giles, Ipp and Tobias JJA at [26] the Court stated that there was an onus on the claimant to establish it was unreasonable for the offeree not to accept the offer.

The plaintiff’s alternative claims for orders by way of indemnity costs

8 In support of its application for indemnity costs Chint relies upon two letters dated 14 December 2007 and 6 June 2008:

i. The first letter contained an offer by Chint to settle the proceedings on the basis that Cosmoluce pay Chint $3.8 million inclusive of costs.

ii. The second letter contained an offer by Chint to settle the proceedings on the basis that Cosmoluce pay Chint $4.4 million inclusive of costs.

9 At the time that the first costs offer was made, Cosmoluce did not have all the necessary evidence at its disposal to assess the costs offer. In particular, Cosmoluce did not have any of Chint’s affidavit evidence relating to the misrepresentation case. This material was not served until April 2008. I accept that this material was critical to assess the prospects of success of Cosmoluce’s case. Its absence deprived Cosmoluce of the opportunity to consider the reasonableness of the offer.

10 It was reasonable for Cosmoluce to wait until it had seen Chint’s evidence before agreeing to compromise the case. This is all the more so when many critical issues related to conversations. Basten JA’s comments in Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [147] are apposite:

“Greater sympathy may be accorded a defendant who receives an offer early in proceedings where there has been no reasonable opportunity for it to assess its questions of liability or its likely exposure in damages.”

11 In those circumstances there are is no substance in the proposition that the first costs offer should result in an order for indemnity costs.

12 Nor has it been shown that the later costs offer made on 6 June 2008 merits an order for indemnity costs. That letter contained an offer by Chint to settle the proceedings on the basis that Cosmoluce pay Chint $4.4 million inclusive of costs. That offer was open for merely one week.

13 Chint has not given any explanation for the short period of time allowed for this offer to be accepted. Chint could have made this offer much earlier. In these circumstances, Chint has not discharged its onus to prove that Cosmoluce acted unreasonably by refusing the offer.

14 In Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (formerly GIO Insurance Limited) & Ors [2006] NSWSC 583 at [73] I rejected an application for indemnity costs on a number of bases including that the Calderbank letter relied upon was only served 5 days before the hearing and was expressed to be inclusive of costs.

15 A further factor against making an order for indemnity costs is the form of the costs offers. In Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (formerly GIO Insurance Limited) & Ors [2006] NSWSC 583 at [40] the following observations were made:

It has been held that a Calderbank letter which is expressed to be “inclusive of costs”, is insufficiently precise to qualify as a Calderbank offer, for the reason that the offeree is placed in a position of not being able to determine the appropriate amount to attribute to the substantive claim and the costs incurred in advancing it: Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97 at 102; Hanave Pty Ltd v LFOT Pty Ltd (formerly Jagar Pty Ltd) [1998] FCA 1429, BC9805973 ( Smallacombe Pty Ltd v Lockyer Investments Co Pty Ltd was referred to by Young J in Rosser v Maritime Services Board of New South Wales (No 3) (Supreme Court of New South Wales, Young J, 25 November 1997, unreported, BC9706221).”

Orders

16 The orders of the court as follows:

1 Order that defendant pay the plaintiffs costs of the proceedings on the ordinary party party basis;

2 Order that the plaintiff pay the defendants costs of the plaintiff’s indemnity costs application.