Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2)
[2011] VSCA 398
•1 December 2011
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2010 0146
| COMMISSIONER OF STATE REVENUE | |
| Appellant | |
| v | |
| CHALLENGER LISTED INVESTMENTS LTD (ACN 055 293 644) (AS TRUSTEE FOR CHALLENGER DIVERSIFIED PROPERTY TRUST 1) (NO 2) | Respondent |
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JUDGES: | BUCHANAN and TATE JJA and SIFRIS AJA | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | Written submissions filed by appellant on 28 September 2011 and by respondent on 21 and 30 September 2011 | |
DATE OF JUDGMENT: | 1 December 2011 | |
MEDIUM NEUTRAL CITATION: | [2011] VSCA 398 | |
| JUDGMENT APPEALED FROM: | [2010] VSC 464 (Pagone J) | |
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COSTS – APPEAL – Appeal unsuccessful – Calderbank offer from respondent to unsuccessful appellant – Offer not accepted – Whether indemnity costs should be awarded – Whether non-acceptance of offer was unreasonable – Where appeal sought to establish recent decision of the Court was plainly wrong – Appeal was not hopeless or conducted in bad faith – Offer effectively an offer to capitulate – Failure to accept offer not unreasonable.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr P J Hanks QC with Mr P D Nicholas | Solicitor for the Commissioner of State Revenue |
| For the Respondent | Mr J W de Wijn QC with Mr M Richmond SC and Ms E A Bennett | Mallesons Stephen Jaques |
BUCHANAN JA
TATE JA
SIFRIS AJA:
On 14 September 2011, the Court dismissed the appeal brought by the Commissioner of State Revenue (‘the Commissioner’) from a decision of a judge of the Trial Division.[1]
[1]Commissioner of State Revenue v Challenger Listed Investments Ltd (ACN 055 293 644) (as Trustee for Challenger Diversified Property Trust 1) [2011] VSCA 272.
The Commissioner contended that the decision of this Court in Commissioner of State Revenue v Landrow Properties Pty Ltd[2], which dealt with the same issue as raised in this case,[3] was plainly wrong and should not be followed. The Court did not agree that the decision was plainly wrong and dismissed the appeal.
[2][2010] VSCA 197 (‘Landrow’).
[3]The critical issue was whether a trustee held a beneficial interest in a landholder within the meaning of s 76(1) of the Duties Act 2000 (Vic). The Court held that it did not.
By letter dated 18 March 2011, the respondent (‘Challenger’) made a Calderbank offer to the Commissioner. Challenger offered to compromise the appeal on the basis that:
(a)the appellant pay the costs of the trial before Pagone J in accordance with the costs order of Pagone J, less the amount of $5,000; and
(b) each party pay its own costs of the appellant’s appeal.
The offer was expressed to remain open until 25 March 2011. There is no evidence of any response by the Commissioner and it is obvious that the offer was rejected.
Challenger seeks an order for party and party costs to 18 March 2011 and indemnity costs from 18 March 2011. The application is based primarily on the offer, however Challenger also contends that it should not be out of pocket in circumstances where a public authority, in effect, ran a test case.
The Commissioner has not submitted that Challenger is not entitled to the usual order for costs as a result of the dismissal of the appeal. However, the Commissioner opposes an order to the effect that Challenger be awarded costs on an indemnity basis from 18 March 2011.
In Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2)[4] this Court held that the unreasonable refusal of a Calderbank offer may be regarded as a special circumstance that may warrant an award of indemnity costs. The Court of Appeal expressed the relevant test as follows:
The critical question is whether the rejection of the offer was unreasonable in the circumstances. We see no justification for a more stringent test such as ‘manifestly’ or ‘plainly’ unreasonable.[5]
[4](2005) 13 VR 435 (‘Hazeldene’s Chicken Farm’).
[5]Hazeldene’s Chicken Farm [23] (citations omitted).
The Court of Appeal in Hazeldene’s Chicken Farm[6] outlined a number of matters relevant to the question of whether refusal of an offer is reasonable. It said:
[6]At [25].
The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations.[7] 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.[8]
[7]See House v R (1936) 55 CLR 499 at 505.
[8]Hazeldene’s Chicken Farm [25].
In our opinion, the only items that require consideration in the present case are items (c) and (d). It is clear that the offer was made at a reasonable stage in the proceeding and that the time allowed for consideration and acceptance of the offer was reasonable. Further, the offer was expressed with sufficient clarity and foreshadowed an application for indemnity costs in the event that it was rejected.
The remaining matters concern the extent of the compromise offered and the offeree’s prospects of success, assessed as at the date of the offer.
Challenger submits that the extent of the compromise offered was significant. First, it was giving up a claim to $5,000 for costs, to which it was entitled. Second, it was giving up costs in relation to the appeal to the date of the offer, which according to an affidavit sworn by Michael John Vallis Mathieson on 21 September 2011, were in the sum of $36,277.50. It is further submitted by Challenger that acceptance of the offer would have prevented the expenditure of significant sums by both parties.
The Commissioner submits that an offer to forego costs in relation to a claim exceeding $11,000,000 does not represent a sufficient compromise.
There is authority to the effect that where the offer does not involve a genuine compromise, but is in fact either an invitation to capitulate or a derisory or nominal offer, it would not be unreasonable for the losing party to have rejected it.
In Berrigan Shire Council v Ballerini & Anor (No 2)[9] Callaway JA observed that the treatment of Calderbank offers comes down to the question of whether the rejection was unreasonable in the circumstances. In that case, the offer was an offer to walk away. Callaway JA characterised it as a demand to capitulate that could reasonably be rejected.[10]
[9][2006] VSCA 65.
[10]Chernov JA and Nettle JA in effect agreed with the observations made by Callaway JA.
In the case of Truenergy Pty Ltd v Dispute Resolution Panel (No 2)[11] Cavanough J considered that in order for a Calderbank offer to be taken into account by the court, it should be attractive in all the circumstances and not merely comprise, in effect, a demand to capitulate.
[11][2009] VSC 612.
In the recent case of Pepe v Platypus Asset Management Pty Ltd (No 2)[12] Almond J held that offers of $65,000 and $90,000 (inclusive of costs) were properly rejected in circumstances where the claim was in excess of one million dollars.[13]
[12][2011] VSC 21.
[13]See also Ipex ITG Pty Ltd (in liquidation) v State of Victoria (No 2) [2011] VSC 39 (Sifris J).
In our opinion and in the circumstances of this case, it was not unreasonable for the Commissioner to reject the offer made on 18 March 2011. The offer, in effect an offer to walk away, in our opinion amounts to a demand to capitulate. A reduction of $5000 from a costs order may realistically be regarded as de minimis in the circumstances. The offer does not represent (in financial terms) a serious endeavour to resolve the proceeding. It was, given the amount involved in the case, no more than a token offer.
In relation to the prospects of success, Challenger submits that the Commissioner’s prospects were very low in light of the recent and considered decision of this Court in Landrow. It was contended that it would be very difficult to convince this Court that Landrow was plainly wrong.
The Commissioner contends that it was entitled to run the argument, that submissions were made that were not made in Landrow and that an alternative construction was presented.
We agree. Although the Commissioner faced substantial obstacles, it cannot be contended that the appeal was hopeless or conducted in bad faith.
In all of the circumstances, we do not consider that an order for indemnity costs based on the Calderbank offer is warranted.
So far as the Commissioner’s use of the matter as a test case and the consequent disadvantage or prejudice to Challenger as a private litigant is concerned, we regard it as of significance that the Commissioner was desirous of running another case as a test case, but Challenger sought to argue the issue first. Although Challenger was entitled to have its case disposed of, it does not follow that it is, in the circumstances, entitled to indemnity costs.
In all of the circumstances and in the exercise of our discretion, costs (including reserved costs) should follow the event on the usual party and party scale.
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