Coyne v Calabro (No. 7)

[2010] NSWSC 846

CITATION:	Coyne v Calabro (No. 7) [2010] NSWSC 846
HEARING DATE(S):	21 and 22 July 2010
JUDGMENT DATE :	22 July 2010
JURISDICTION:	Equity
JUDGMENT OF:	White J
EX TEMPORE JUDGMENT DATE:	22 July 2010
DECISION:	Refer to para 28 of judgment.
CATCHWORDS:	COSTS – where multiple defendants unsuccessful in proceedings and liable to pay damages to plaintiffs – whether defendants to be jointly and severally for plaintiffs’ costs of entire proceedings – whether more just that second defendant or plaintiff should bear risk of first defendant’s insolvency - COSTS – where defendants did not accept Calderbank offer made by plaintiffs – whether plaintiffs entitled to indemnity costs - COSTS – whether plaintiffs entitled to order in the nature of Bullock order in respect of costs of cross-defendant payable by plaintiffs – whether defendants’ conduct make it fair to impose liability on them for costs of cross-defendant
LEGISLATION CITED:	Cheques Act 1986 (Cth) Civil Procedure Act 2005 (NSW) Trade Practices Act 1974 (Cth)
CATEGORY:	Consequential orders
CASES CITED:	Coyne v Calabro (No. 5) [2010] NSWSC 694 Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 28 ALR 201; 42 FLR 213 Mike Gaffikin Marine Pty Ltd v Princes Street Marina Pty Ltd (Supreme Court of New South Wales, Young J, 15 July 1996, unreported) Probiotec Ltd v University of Melbourne [2008] FCAFC 5; (2008) 166 FCR 30 Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 Gould v Vaggelas (1985) 157 CLR 215
PARTIES:	1st Plaintiff: Terrence Michael Coyne 2nd Plaintiff: Anne Patricia Coyne 1st Defendant: Grazia Rita Calabro 2nd Defendant: Frank Calabro Pty Ltd
FILE NUMBER(S):	SC 2008/278742
COUNSEL:	Plaintiffs: N Barham Defendants: J M Ireland QC
SOLICITORS:	Plaintiffs: Garland Hawthorn Brahe Solicitors Defendants: Pikes Lawyers

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Thursday, 22 July 2010

2008/278742 Terrence Michael Coyne & Anor v Grazia Rita Calabro & Anor (No. 7)

JUDGMENT

1 HIS HONOUR: A number of issues arise in relation to the final orders to be made to give effect to my reasons. The questions that have been debated are, first, the proper calculation of interest. Secondly, whether the second defendant as well as the first defendant, Mrs Calabro, should pay the plaintiffs' costs of the whole proceedings, or whether the second defendant should pay only the costs of the claim brought under s 76 of the Cheques Act 1986 (Cth) against it. Thirdly, whether the defendant should pay costs on the indemnity basis after 20 October 2008. That was the date on which the plaintiffs made Calderbank offers of compromise. Fourthly, whether the defendants should indemnify the plaintiffs against the costs payable by the plaintiffs to Malouf Real Estate Pty Limited (“Malouf Real Estate”). There is a final issue concerning the costs of the hearing on 21 July.

2 So far as questions of interest are concerned, the parties are now agreed upon the proper calculation of interest in respect of the damages to be awarded against the first defendant. I have been provided with a calculation up to 20 July 2010 in the sum of $86,772.64, which I understand is agreed. As the orders will be made today, it is necessary to update that figure to today's date. The sum to be awarded by way of interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) on the damages payable by the first defendant is $87,202.34. I will in due course so order. Notwithstanding para [120] of my reasons for judgment (Coyne v Calabro (No. 5) [2010] NSWSC 694), the plaintiffs have not sought an order for interest under s 100 of the Civil Procedure Act on the liquidated damages payable by the second defendant.

3 In relation to the second issue, namely whether the second defendant as well as the first defendant should pay the plaintiffs' costs of the entire proceedings, I expressed the prima facie view in para [143] of my reasons, subject to hearing from the parties, that the plaintiffs were entitled to their costs of their claim against Mrs Calabro from her and were entitled to the costs of their claim against the second defendant from it. Counsel for the plaintiffs has argued that both defendants should be jointly and severally liable for the whole of the costs of the proceedings.

4 The proceedings were commenced on 16 May 2008 by summons. At that time only Mrs Calabro was joined as a defendant. The summons sought an order for specific performance against her and an order that she pay the deposit of $645,500 due under the contract. The second defendant was joined by a statement of claim filed on 11 August 2008. The order then sought against the second defendant was that it pay $645,500 plus interest. The plaintiffs pleaded the dishonour of the cheques drawn by the second defendant on 6 and 9 May 2008. The second defendant provided a further cheque for the deposit on 15 August 2008 which was honoured on 20 August 2008. By their amended statement of claim filed on 17 October 2008 the plaintiffs claimed against the second defendant that it was liable to pay as damages interest in relation to the deposit cheque up to 20 August 2008. Thus the plaintiffs' claim against the second defendant was for liquidated damages of $14,454. The claim against Mrs Calabro was for unliquidated damages of almost $1 million.

5 As recorded at para [58] in my reasons, on 28 August 2008 Mr Hewett, the solicitor for the defendants, at that time affirmed the contract and advised that he held $15,000 in trust for interest which would have accrued if the first deposit cheque had been met on presentation. On behalf of the defendants he offered to pay the interest and bank charges. However, that position was not maintained by the defendants following Mr Calabro's learning of Mr Field’s valuation of the property in the sum of $5 million, and his learning from documents produced on subpoena of the special conditions in the Mulham contract. Mrs Calabro did not complete the purchase, but purported to rescind. The second defendant did not consent to judgment for interest. Rather it defended the claim against it on the grounds that Mrs Calabro had validly rescinded the contract ab initio and that the plaintiffs were therefore not entitled to the deposit or interest on it. One defence was filed by both defendants. In it the second defendant made the same allegations of misleading and deceptive conduct as did Mrs Calabro.

6 In Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 28 ALR 201; 42 FLR 213, the plaintiff was successful against multiple defendants. Fisher J refused to make an order that each defendant be severally liable for a specified portion of the plaintiff's costs and not be jointly liable to the plaintiff for the whole of the costs. His Honour said at 210 that:

“ The plaintiff as the successful party is prima facie entitled by way of indemnity to its costs of the action, and if one of the unsuccessful defendants is unable or unwilling to meet its share of the obligation, the misfortune should be that of its ‘partner in crime’ and not of the plaintiff ."

7 In Mike Gaffikin Marine Pty Ltd v Princes Street Marina Pty Ltd (Supreme Court of New South Wales, Young J, 15 July 1996, unreported), Young J (as his Honour then was) said that where some special circumstances are shown, the Court may make an order for costs against multiple defendants so that they are not jointly and severally liable for the whole costs of the action. His Honour said that where the defendants can, in a practical sense, be considered "partners in crime" (or in that case, partners in unconscionability) it is more just that the other defendant pay costs which would otherwise be recoverable from an insolvent defendant, than that the loss fall on the successful party.

8 In Probiotec Ltd v University of Melbourne [2008] FCAFC 5; (2008) 166 FCR 30, the Full Court of the Federal Court applied a different approach in a patent infringement claim. The respondents were separately represented. The Probiotec parties filed a defence formally putting the validity of the patents in issue but did not seek to prove substantively that the patents were invalid. They took no active part in the hearing but submitted to the outcome of the litigation between the applicants and the other respondents. The Full Court of the Federal Court held that the primary judge erred in making an order that all respondents be jointly and severally liable for the whole costs of the proceedings. Instead the Full Court exercised the discretion under s 43 of the Federal Court Act (equivalent to s 98 of the Civil Procedure Act) by ordering those respondents to pay ten per cent of the costs, being the equivalent of a one day uncontested trial.

9 There are similarities and differences between ProbiotecLtd v University of Melbourne and the present case. In Probiotec Ltd v University of Melbourne, the Probiotec respondents, by their pleading, put the validity of the patents in issue, but left it to the other respondents to pursue the case actively, although no doubt hoping to reap the consequences of a successful defence by the other respondents. Otherwise they did not participate in the hearing. But for the fact that in the present case both defendants had the same representation, the position of the second defendant in this case is similar. No separate substantive case was advanced on the second defendant's behalf. As in Probiotec Ltd v University of Melbourne, the second defendant sought to piggyback on the defence of Mrs Calabro. The potential difference with ProbiotecLtd v University of Melbourne is that in that case, the Probiotec respondents were not partners, even in a loose sense, in the same conduct that led to the litigation.

10 In this case, the second defendant was a participant with Mrs Calabro in the transaction which gave rise to the litigation, but only to the extent of providing the cheques for the deposit. In both Trade Practices Commission v Nicholas Enterprises Pty Ltd and Mike Gaffikin Marine Pty Ltd v Princes Street Marina Pty Ltd, the issue was posed as being whether it was just that the risk of one defendant's insolvency be borne by a successful plaintiff, or by another unsuccessful defendant. In those cases it was found that it was more just that the other defendant bear that risk because the defendants were "partners in crime" or "partners in unconscionability". In other words the findings were that it was the defendants' participation in the transactions giving rise to litigation that made it just that those defendants bear the risk of a co-defendant's insolvency.

11 When the issue is posed that way, as I think it should be, I do not consider that it is just that in this case the second defendant, whose participation was confined to providing a deposit for the cheque, should bear the risk of Mrs Calabro's insolvency arising from her entry into the contract, her subsequently seeking to avoid it, and the litigation that followed. Rather, it seems to me more just that the plaintiffs bear that risk as they assumed the risk of dealing with a potentially insolvent party by contracting with her.

12 It would certainly not be just to make the second defendant liable for costs incurred before its joinder. But having regard to the part played by the second defendant in the proceedings, and the matters referred to earlier in these reasons, I do not think it would be just to make the second defendant liable for the whole costs of the proceedings after its joinder.

13 In my view, the proper costs orders were those formulated by Mr Ireland QC who appeared for the defendants, namely that the first defendant pay the plaintiffs' costs of the proceedings and that the second defendant pay the plaintiffs' costs of the claim against it in respect of interest pursuant to s 76 of the Cheques Act.

14 I turn then to the question as to whether costs should be ordered otherwise than on the ordinary basis by reason of the offer of compromise. The offer was conveyed by a letter from Comino Prassas to Mr Hewett of Pikes Lawyers on 20 October 2008. The letter was in the following terms:

“ We refer to previous correspondence.
Our client is of the view that the belated attempts by your client to rescind the contract and otherwise repudiate its terms on the basis of alleged misrepresentations are transparent and will be seen to be so by the court. Your client made immediate attempts to extricate herself from the contract, and then affirmed the contract by the tendering of a further deposit cheque which after that further deposit cheque ‘bounced’, and in full knowledge of all material facts again affirmed the contract by the tendering of the further deposit cheque which was met on presentation in August. Your client was aware at least from the date of exchange of contracts that there was an offer tabled by a third party in the sum of $6.25 million which is a long way away from the valuation which your client has belatedly obtained. Our client will also have little difficulty in establishing that the property market has moved downwards considerably between exchange of contracts and the date required for completion pursuant to the contract. Exactly how your client can rely upon a valuation obtained months later in a different market and for a different purpose is unclear and, if permitted to be relied upon at all, is unpersuasive.
As your client is aware, our clients purchased the property otherwise than through a marketing campaign. It was a direct approach. The property at the time it was purchased by our clients was not the subject of an application to the Council for any development application, which, of course, the property was at the time that it was marketed by our clients and purchased by yours. Your client has the further difficulty that our clients have not personally made any misrepresentation, even on the allegations made in the cross claim, and with respect, the representations which are alleged in the cross claim, appear to have been true in any event. Even if found not to have been true, they are not material, your client is unlikely to be found to have relied upon them and she was in any event represented by solicitors throughout the process as well as having had the advice of her clearly experienced husband all the way through. Further, she did not suffer any loss. Paragraph 7 of the affidavit of Anthony John Calabro dated 23 July 2008 shows that your client’s ‘agent’ as he is termed in the cross claim, was fully aware that the other party had offered $6.25 million. That was indeed the case. He was aware that the other side would be aware that that figure was to have been disclosed. Mr Calabro indicates he would treat that figure as a ‘de facto reserve’. Nobody was misled.
In so far as your client had any rights of rescission, at all, which she appears not to have had, she waived those rights, alternatively made an election to proceed with the contract. This will be pleaded in the defence to the first cross claim. Your client has on the one hand issued requisitions under the contract and on the other hand purported to rescind under non-existent cooling off rights. Your client has indicated that the matter will settle, has invited submissions in relation to costs and then has refused to settle and purported to rescind (again). The idea that your client was at any time misled is fanciful. In our clients’ opinion, an opinion which we share, the court, no doubt in appropriately scathing terms, will punish your client’s contemptuous conduct in approbating and reprobating on no less than 5 separate occasions in relation to the contract subsequent to exchange (first deposit cheque, second deposit cheque, requisitions, third deposit cheque, advice that the matter would settle and requesting details of costs).
Clearly with the joinder of the agents to the proceedings as parties, costs, which are already significant, are going to escalate. In the interests of settling this regrettable litigation we are instructed that our clients are prepared to settle the litigation on the following bases:
1. An acknowledgement by judgement [sic] or deed that they are entitled to obtain the deposit, which they will retain.
2. By accepting payment of the further sum of $160,000 together with costs as agreed or assessed. The $160,000 is made up of monthly interest payments of $40,000, $20,000 in relation to advertising for the new marketing campaign and $20,000 in relation to moving expenses. So far as any agreement in relation to costs is concerned, we are instructed to advise that our clients would be prepared to accept the sum of $100,000 in relation to their costs.
3. Proceedings otherwise dismissed.
4. Plaintiffs and defendant release the other if settlement is by deed rather than judgment.
5. Deed and/or judgment to be finalised within 7 days of agreement.
Should this offer not be accepted, it is proposed, pursuant to the principles in Calderbank v Calderbank to rely upon this letter on the question of costs, which will be sought on an indemnity basis. It is implicit that if the offer is accepted, and our clients suffer a loss on sale, they will bear that loss themselves. They will assume the risk of a loss on sale or of the property being passed in or not sold. Should the property realise more than the price of the contract the subject of these proceedings that would be to their benefit.
This offer will remain open for a period of 7 days and will not be extended. Would you please obtain your client’s instructions. ”

15 On the application for indemnity costs the question is whether the refusal by either defendant to accept the offer of compromise was unreasonable. The offer could not have been accepted by the second defendant. The offer does not affect the order to be made against it. Even had I found that the second defendant should be liable for the whole of the costs of the proceedings, the letter of 20 October 2008 would not, in my view, warrant an order for indemnity costs against it.

16 However, the position is different in the case of Mrs Calabro. The offer had a very substantial element of compromise. The author of the letter referred to the valuation which Mr and Mrs Calabro had by this time seen. Mrs Calabro, through Mr Calabro, knew of Mr Field's valuation of the property as at August 2008 in the amount of $5 million. Mrs Calabro must have known of the substantial risk of a substantial damages claim exceeding the amount of the deposit. The reasons for accepting the offer were cogently expressed. In my view, the offer of compromise was generous and ought to have been accepted had Mrs Calabro or those advising her made a realistic assessment of her prospects of success. The refusal of the offer was at least imprudent. (See Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233.) In my view the first defendant acted unreasonably in not accepting the offer.

17 It was submitted for the defendants that the offer was unreasonable in that it was expressed to be open only for a period of seven days and that time, it was said, would not be extended. In my view, where the first defendant was legally represented, the period specified was sufficient. Mrs Calabro and her legal advisors ought at that time to have made a realistic assessment of her prospects of success. The position might be different had Mrs Calabro sought to accept the offer after the seven-day period had expired, and had any such purported acceptance been rejected as out of time. But that was not the case, and I do not consider that the costs consequences of not accepting the offer should be affected by the period for which the offer was open.

18 In my view the first defendant ought to pay the plaintiffs' costs on the indemnity basis after 20 October 2008. I will therefore order that Mrs Calabro pay the plaintiffs' costs of the proceedings on the ordinary basis up to and including 20 October 2008 and on the indemnity basis thereafter.

19 The next issue is that the plaintiffs seek an order that the first and second defendants indemnify them in respect of the costs payable by them to Malouf Real Estate in respect of the third and fourth cross-claims. The third cross-claim was brought by the plaintiffs against Malouf Real Estate for damages, if the allegations made by Mrs Calabro in her first or second cross-claims were upheld. The fourth cross-claim was brought by Malouf Real Estate against the plaintiffs because they had been joined to the proceedings by Mrs Calabro's second cross-claim and by the plaintiff's third cross-claim. The joinder of Malouf Real Estate and the consequent exposure of the plaintiffs to the costs of Malouf Real Estate only arose because of the allegations made by Mrs Calabro.

20 The order sought is in the nature of a Bullock order. The question is not whether it was reasonable for the plaintiffs to cross-claim against Malouf Real Estate, but whether the costs incurred by the plaintiffs to Malouf Real Estate were reasonable and properly incurred by the plaintiffs as between them and the defendants. To put it another way, the question is whether the conduct of the defendants has been such to make it fair to impose some liability on them for the costs of Malouf Real Estate (Gould v Vaggelas (1985) 157 CLR 215 at 230).

21 Although the second defendant made the same allegations to the defence as did Mrs Calabro, the principal protagonist was Mrs Calabro. Malouf Real Estate was first joined on Mrs Calabro's cross-claim. The plaintiffs' third cross-claim against Malouf Real Estate expressly pleaded that to the extent, which was not admitted, that the allegations in the first and second cross-claims were found to be proved at the hearing, then the plaintiffs’ alleged causes of action against Malouf Real Estate for breach of contract and breach of s 52 of the Trade Practices Act 1974 (Cth). The third cross-claim made no reference to any conduct of the second defendant as giving rise to the claim. I consider it just that Mrs Calabro, but not the second defendant, pay the costs payable by the plaintiffs to Malouf Real Estate on the third cross-claim.

22 The plaintiffs are also liable to Malouf Real Estate for the costs of the fourth cross-claim. That claim arose because of Malouf Real Estate's joinder by the second and third cross-claims. The same reasoning applies to it.

23 However, it is not just that Mrs Calabro be required to indemnify the plaintiffs in respect of their costs liability to Malouf Real Estate. The plaintiffs are liable to Malouf Real Estate to pay costs on the indemnity basis pursuant to a term of the agency agreement between them and Malouf Real Estate. There is no reason that Mrs Calabro should be fixed with the consequences of that contract.

24 The appropriate order is that the first defendant pay to the plaintiffs so much of the costs payable and paid by the plaintiffs to Malouf Real Estate in respect of the third and fourth cross-claims as would be payable if such costs were assessed on the ordinary basis.

25 The only remaining question is as to the costs of the hearings as to the orders that should be made to give effect to my reasons in the principal judgment. The matter was listed on 20 July 2010 for the purpose of bringing in short minutes of order. The matter had to be adjourned to 21 July principally for the reasons that the calculation of interest made by the plaintiffs was defective, as it now appears, on at least three grounds. First, interest under s 100 was then calculated only up to the date of my reasons of 29 June 2010 and then capitalised, which is clearly inappropriate. Secondly, there was a miscalculation as to the date from which interest on the principal component of $909,500 should run. There was also an error in the deduction of the sum of $61,160 in the calculation of interest, when that sum had already been deducted in the calculation of damages.

26 As well, the solicitor appearing for the plaintiffs was not in a position on that day to make submissions on questions of costs. Those questions were argued on 21 July.

27 I think the costs of the appearance on 20 July were largely wasted and in my view the plaintiffs ought to pay the defendants' costs of the hearing on 20 July.

28 For these reasons I make a declaration and orders in the form of the document which I initial and will hand down to the parties.

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