Clintway Pty Ltd v Humich

[2011] WADC 84 (S)

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION	: PERTH
CITATION	:  CLINTWAY PTY LTD -v- HUMICH [2011] WADC 84 (S)
CORAM	: BOWDEN DCJ
HEARD	:  6, 7 & 8 APRIL 2011
DELIVERED	:  3 JUNE 2011
SUPPLEMENTARY
DECISION	:  22 AUGUST 2011
FILE NO/S	:  CIV 3406 of 2009
BETWEEN	: CLINTWAY PTY LTD

Plaintiff

AND

IVAN HUMICH
HUMICH NOMINEES PTY LTD
ANILIA PTY LTD

Defendants

Catchwords:

Costs - Calderbank offer - Offer rejected - Whether rejection unreasonable

Legislation:

Nil

[2011] WADC 84 (S)

Result:

Costs ordered on a party/party basis

Representation:

Counsel:

Plaintiff	:	Mr C Biris
Defendants	:	Mr P Read

Solicitors:

Plaintiff	:	Chris Biris
Defendants	:	Ilberys

Case(s) referred to in judgment(s):

Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115
Miller v Evans [2010] WASC 127
Miller v Evans [2010] WASC 127 (S)

BOWDEN DCJ [2011] WADC 84 (S)

1. BOWDEN DCJ: On 3 June 2011 I found that the claim by the plaintiff could not be pursued because the settlement agreement entered into by the parties settled all matters between them including matters the plaintiff claimed indemnification for.

2. In those circumstances, it is appropriate that action be dismissed.

3              The defendants seek an order that the plaintiff pay their costs on a

party/party basis up to 3 February 2011 and on an indemnity basis
thereafter.

1. They seek indemnity costs from 3 February 2011 because they made a Calderbank offer, open until 11 February 2011, on that date.

2. The plaintiff made no request for an extension of time within which to consider that offer nor did they make a counteroffer.

3. The plaintiff claims that the defendants' rejection of the offer was so unreasonable as to justify an order for indemnity costs.

The principles applicable to Calderbank offers

1. Calderbank offers were considered by the Court of Appeal in Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115. Buss JA cited all the relevant principles and cases supporting them and the following propositions can be extracted from his Honour's reasons.

2. A Calderbank offer will not justify an award of indemnity costs unless its rejection was unreasonable [16].

9              All of the relevant facts and circumstances must be considered in

determining whether a party's rejection of a Calderbank offer was
unreasonable [17].

10            The mere fact that the recipient of a Calderbank offer is ultimately worse off than he would have been had the offer been accepted does not mean that its rejection was unreasonable [18].

11            Whether the conduct in rejecting the offer is reasonable or

unreasonable involves matters of judgment and imprecision and, although not exhaustive, ordinarily regard should be had to at least the following factors:

(a) the stage at the proceedings in which the offer was received;

BOWDEN DCJ [2011] WADC 84 (S)

(b)	the time allowed to consider the offer;
(c)	the extent of the compromised offer;
(d)	the offeree's prospects of success assessed as at the date of the offer;
(e)	the clarity in which the terms of the offer was expressed; and
(f)	whether the offer foreshadowed an application for indemnity costs in the event of its rejection [19].

12            The onus of satisfying the court that it should make an award of

indemnity costs in there favour is on the party who made the rejected
offer: [21].

13            It does not follow that a party who receives a Calderbank offer in an amount which is approximately 50% of the claim will necessarily be acting unreasonable if it rejects the offer. The amount of the offer is merely one factor to be considered with all other relevant circumstances [90].

Consideration of the application

The stage of the proceedings in which the offer was received

14            The offer was made on 3 February 2011 which was prior to the date

for compliance with orders which required the filing of witness statements
by 23 February 2011.

1. The trial commenced on 6 April 2011.

2. The writ of summons in this matter was filed in November 2009 and was subsequently amended on 18 January 2010.

17            The offer was made some two months prior to the trial. The offer

was not made until some 15 months after the writ was issued. After the offer was made, the defendants amended their defence on 29 March 2011 and the trial of the preliminary issue was agreed as a consequence of that amendment. The amendment of the defence in my opinion has no bearing on the question I am now considering. The general rule is the successful should be awarded costs and there is nothing in the amendment that would lead to the departure from that general rule.

BOWDEN DCJ [2011] WADC 84 (S)

18            Whilst I accept that significant costs were incurred after the date of

the offer, clearly significant costs would have been incurred by both
parties before the offer had been made.

The time allowed to the offeree to consider the offer

1. The offer allowed eight days before it lapsed which, in the circumstances, was a reasonable time.

2. I note there was no application to extend the time for the plaintiff to consider the offer. Nor was there any counteroffer by the plaintiff.

3. It is a significant factor but it is only one factor to be considered together with all of the other factors.

The extent of the compromise

1. The amount of the offer was approximately 50% of the amount claimed exclusive of interest and cost.

The offeree's prospects of success assessed as at the date of the offer

1. It is true that in respect of the preliminary issue, the defendants' success would bar the plaintiff's claim.

24            On the other hand, if the plaintiff was successful in relation to the

preliminary issues, they would still have to establish its case against the
defendant, requiring it to prove inter alia:

1.          That costs incurred by the plaintiff were properly and reasonably incurred in relation to the matters contained in cl 20 of the deed of dissolution;

2.          Legal costs were contemplated by cl 20 of the deed of dissolution; and

3.          The legal costs, if covered by cl 20, were reasonable.

25            What must also be born in mind is that the trial of the preliminary

issue necessarily involved the interpretation of a handwritten document prepared at a mediation conference held in the Supreme Court of Western Australia.

1. The plaintiff, notwithstanding that it was ultimately unsuccessful, clearly had a reasonable prospect of success.

BOWDEN DCJ [2011] WADC 84 (S)

27            The outcome of litigation, as Hall J in Miller v Evans [2010] WASC 127 stated, cannot always be predictable. The fact the plaintiff failed, does not mean that it was destined to fail, far less, does it mean that such failures would have been foreseen.

1. It cannot be said that the plaintiff unreasonably resisted a claim that was devoid of any reasonable prospect of success.

29            Litigation is uncertain. In many cases proceeding to trial simply

proves that one of the two lawyers was wrong because no doubt in most

cases both think that they are going to succeed.

1. The plaintiff's case was not doomed to fail.

The clarity with which the terms of the offer were expressed

31            The terms of this offer were clear and unambiguous, the terms being

that on payment of the money, a full and final settlement to all matters in dispute between the parties would be achieved and a deed of settlement and release entered into.

Whether the offer foreshadowed an application for indemnity costs in the event of its rejection

32            The offer did foreshadow that the letter would be produced in

support of an application for costs in the event that the offer was not
accepted.

1. It is quite true that the letter does not contain the oft used phrase 'save as to costs' immediately following the words 'without prejudice'.

34            However, the offer refers to 'an offer to the plaintiff … made

pursuant to the principles in Calderbank v Calderbank (the offer)' and
proceeds to state:

In the event that the offer is rejected we anticipate producing this letter in support of an application for costs in the event the defendants are wholly or partially successful in defending this action.

35            In my opinion this offer carries the necessary implication that if

rejected it would be relied upon in making an application for indemnity costs: Miller v Evans [2010] WASC 127 (S). Although there is no reference to indemnity costs, the reference to Calderbank clearly conveys that implication.

Other relevant matters

36            The defendant also asks me to consider the likely costs of the parties

in pursuing the action compared to the amount of the claim, the plaintiff's

BOWDEN DCJ [2011] WADC 84 (S)

failure to respond to the offer within the time period and failure to make any counteroffer. They point out there were no other consideration which the plaintiff could reasonably take into account in rejecting the offer.

1. Clearly the plaintiff ought to have responded to the offer. It is a matter of concern that they chose not to.

38            Whilst I do not agree that the parties ought to have been aware that

legal costs were likely to exceed the amount claimed, I accept the defendants' proposition that both parties knew the trial would last three days and they ought to have been aware that legal costs were likely to be extremely high.

1. The fact that the plaintiff made a reasonable offer does not establish that its rejection was unreasonable.

2. It was not unreasonable for the plaintiff to pursue its claim.

41            The offer by the defendant was not of such an amount that its

rejection was unreasonable. Indeed by its terms, an offer of one half of the claim is capable of conveying the impression that the offeror thought each party had an equal chance of success.

42            After considering the combined weight of all of the factors it cannot

be said that it was unreasonable for the plaintiff to pursue its claim, particularly as the action was always going to involve issues of credibility of witnesses in establishing the surrounding circumstances of the settlement deed and depend on my construction of clauses within that deed.

43            Neither the rejection of the offer nor any aspect of the manner in

which the plaintiff conducted the case provides any sufficient basis to
order indemnity costs.

44            I reject the defendant's submission that the plaintiff's actions in

rejecting the offer were unreasonable. I reject the plaintiff's submissions that costs should only be paid by them from the date of their amendment of 29 March 2011.

1. I order the defendants' costs be paid by the plaintiff on a party/party basis to be taxed if not agreed.