DKL v LYK (No 2) - [2019] SASC 160

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
DKL v LYK (No 2)
[2019] SASC 160
Judgment of The Honourable Justice Doyle
10 September 2019
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - GENERAL RULE: COSTS FOLLOW EVENT - GENERAL PRINCIPLES AND EXERCISE OF DISCRETION
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - RECOVERY OF COSTS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - INDEMNITY COSTS - POWER TO ORDER
Application for costs of the action.
The plaintiff contends that she was the successful party and should be entitled to recover the entirety of her costs of the action from the defendant. She further contends that those costs should be ordered on an indemnity basis, firstly, on the basis that the defendant’s case was hopeless and untenable, and secondly, on the basis that the plaintiff ultimately obtained judgment in terms no less favourable than filed and Calderbank offers she made shortly before trial.
The defendant rejects the contention that the plaintiff was the successful party, or at least that the degree of success enjoyed by the plaintiff should entitle her to any net costs entitlement in her favour. The defendant also contests both bases put forward for any costs order in favour of the plaintiff being on an indemnity basis.
Held (per Doyle J):
1. The defendant is to pay the plaintiff 75 per cent of her costs of the action (including both the claim and counterclaim) on a party and party basis.
Family Law Act 1975 (Cth) ; Domestic Partners Property Act 1996 (SA) ; Law of Property Act 1936 (SA); Supreme Court Civil Rules 2006 (SA) r 187(2), r 187(6)(c), r 188(1), r 188F, referred to.
DKL v LYK [2019] SASC 100; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225; Morris v McEwen (2005) 92 SASR 281; BHP Billiton Ltd v Parker (2012) 113 SASR 206, considered.

DKL v LYK (No 2)
[2019] SASC 160
Civil

DOYLE J: On 17 June 2019 I delivered my reasons for judgment in this matter: DKL v LYK[1] (my primary reasons). It remains for me to deal with the issue of costs.
[1] DKL v LYK [2019] SASC 100.
The plaintiff contends that she was the successful party and hence that she should be entitled to recover the entirety of her costs of the action from the defendant. She further contends that those costs should be ordered on an indemnity basis for two reasons. First, on the basis that the defendant’s case was hopeless and untenable. And secondly, on the basis that the plaintiff ultimately obtained judgment in terms no less favourable than the filed and Calderbank offers she made shortly before trial, which offers she contends were imprudently refused by the defendant.
The defendant takes a very different view of the appropriate approach to costs. He rejects the contention that the plaintiff was the successful party, or at least that the degree of success enjoyed by the plaintiff should entitle her to any net costs entitlement in her favour. The defendant also contests both bases put forward for any costs order in favour of the plaintiff being on an indemnity basis rather than the ordinary party and party scale.
It is convenient to commence by considering the plaintiff’s claimed entitlement to a costs order in her favour on account of her being the successful party, before then considering the scale upon which any such costs should be payable.
The plaintiff’s entitlement to an order for costs
There is no dispute about the principles governing the exercise of my discretion as to costs. Both parties accept that I should be guided by the general principle that costs follow the event, but that it is also within my discretion to have regard to the extent of both parties’ success on the various issues in the proceedings in arriving at an appropriate order. They also accept that it would be within my discretion to make a single overall or global order in respect of the costs of the action that reflects the parties’ overall success, rather than making orders that address separately the costs of the plaintiff’s claim, the defendant’s counterclaim, or indeed any of the individual issues raised within those claims.
In considering the parties’ relative success in the proceedings, I do not intend to set out in any great detail the issues raised in the proceedings. They are canvassed at length in my primary reasons, and these costs reasons should be read in light of those earlier reasons.
However, I do consider it useful to bear in mind my summary of the matters in issue at the start of my primary reasons. I introduced those reasons by stating:[2]
These proceedings involve competing claims by the parties arising out of the breakdown of the personal relationship between them. The dispute between them is primarily as to their respective interests in various properties acquired during the course of that relationship.
[2] DKL v LYK [2019] SASC 100 at [1].
After setting out an overview of the facts, I then elaborated upon the nature of the parties’ claims as follows:[3]
In very general terms, the plaintiff claims that she had a half interest in the Bowen Road property, that she and her business partner owned the Pottinger Street property (through her company, DG Company), and that she alone owns the Willunga Property. She claims that the monies provided to her by the defendant were gifts from him, and hence were neither loans that needed to be repaid, nor contributions to some joint endeavour that resulted in the creation or enlargement of any interest by the defendant in any of the properties in dispute. The plaintiff also claims a half interest in the Medindie property.
The plaintiff seeks a determination of her claimed interests as a matter of general law, but also seeks a division of assets under the Family Law Act 1975 (Cth) (the FLA) or the Domestic Partners Property Act 1996 (SA) (the DPPA). She also seeks orders for the sale of the Medindie property under the Law of Property Act 1936 (SA) (the LPA).
The defendant, on the other hand, by way of both defence and counterclaim, contends for a greater equitable interest on his part in each of the relevant properties. He contends that the plaintiff’s case ignores the additional contributions that he made over time, and mischaracterises his provision of funds as gifts. He contends that the plaintiff holds the relevant properties on either resulting or constructive trust for him. He denies that their relationship was of a nature sufficient to qualify for any division of assets under either the FLA or the DPPA. He also denies that any basis has been established for an order for the sale of the Medindie property under the LPA.
In order to determine the parties’ claims in these proceedings, it is necessary to consider not only the nature of their relationship at various times between 2003 and 2016, but also the circumstances surrounding the acquisition and sale of their various property interests and the provision of money to the plaintiff by the defendant.
While both parties adduced a good deal of evidence in relation to these matters, there was significant agreement between them as to most of the primary facts. With some significant exceptions that will become apparent, their evidence differed mainly as to the characterisation of their relationship, and of their financial dealings and property interests, rather than the primary facts and circumstances. …
[3] DKL v LYK [2019] SASC 100 at [10]-[14].
I then ended my primary reasons with the following summary of the conclusions I had reached in relation to the various matters in issue:[4]
For the reasons set out above, I have rejected the defendant’s claims that the plaintiff held or holds her interest in any of the disputed assets or properties (the Bowen Road property, the Pottinger Street property, the Port Willunga property, the Medindie property or the DM Company assets) on a resulting or constructive trust in favour of the defendant. Nor has the defendant established an entitlement to recover any of the financial contributions that he made on the basis that they were loans. I have also rejected the plaintiff’s claim to any adjustment of the parties’ property rights under the FLA or the DPPA.
It follows that the parties’ interests in the disputed properties are as reflected in the legal ownership of those properties. As a consequence, I have concluded that the plaintiff has a one-half share in the Medindie property and, subject only to consideration of whether the defendant wishes to purchase the plaintiff’s interest in the Medindie property, is entitled to an order for the sale of that property under s 70 of the LPA.
[4] DKL v LYK [2019] SASC 100 at [541]-[542].
In approaching the issue of costs, I consider it appropriate to make a single overall or global costs order. Given the significant overlap between the issues arising within each of the claim and counterclaim, I do not think it would be appropriate to attempt to fashion separate costs orders in relation to the claim and counterclaim, or costs orders which address particular issues arising within those claims. To do so would unnecessarily complicate any attempt to agree or adjudicate the quantum of the costs ultimately ordered.
Further, in determining the appropriate order to be made in respect of the overall costs of these proceedings, I consider that the starting point is that the plaintiff was the successful party in the litigation. I have reached this conclusion because, as is reflected in the paragraphs from my primary reasons extracted above, the substance of these proceedings involved the parties’ competing claims as to their respective interests in various properties (and the status of the monies provided to the plaintiff by the defendant); and the plaintiff was ultimately successful in her contentions as to each of these matters.
While it follows, in my view, that the plaintiff should be entitled to an order for costs in her favour, it does not necessarily follow that she should be entitled to all of those costs (even on the party and party scale). In circumstances where the plaintiff was not entirely successful, and in particular in circumstances where I am intending to make a global costs order dealing with both the claim and counterclaim, it is necessary to consider whether a percentage reduction is appropriate.
In this respect, the defendant emphasises both the form in which the plaintiff’s claim was pleaded, and the extent to which the plaintiff failed on matters raised in her case.
The defendant is quite right that, on the face of the plaintiff’s pleading, her primary claim was for a property adjustment under either the FLA or the DPPA, and that her claim for the partition and sale of the Medindie property under the LPA based upon her general law property rights was couched as an alternative claim. Further, the defendant is also right to observe that the plaintiff failed in her FLA and DPPA claims. While she satisfied various of the more formal jurisdictional requirements of these claims, those claims failed on the facts and as a matter of substance. They failed because I was not satisfied that the parties’ relationship during the relevant period (October 2014 to September 2016) was either a de facto relationship for the purposes of the FLA or a close personal relationship for the purposes of the DPPA.
I also accept that virtually all of the documentary and oral evidence at trial was relevant to the FLA and DPPA claims. While the focus of these claims was upon a characterisation of the parties’ relationship in 2014 to 2016, that task could only be undertaken in the context of at least some understanding of the parties’ relationship prior to this.
However, I do not accept that this has the consequence contended for by the defendant. I do not think it should result in a substantial reduction in the plaintiff’s entitlement to costs, let alone drive some positive costs entitlement in favour of the defendant.
The reason for this is that the defendant’s contentions on costs overlook, or at least understate, the significance of the success the plaintiff did achieve. Despite failing in her FLA and DPPA claims, the plaintiff did succeed in establishing the general law rights she claimed in respect of each of the disputed properties and payments. Not only did this result in her defeating all of the defendant’s claims (in both his defence and counterclaim) by way of resulting trusts, constructive trusts and loans, but it also resulted in the plaintiff obtaining substantially the relief that she sought in her claim. It is true that she ultimately obtained this relief through her LPA claim, and that this was framed in her statement of claim as an alternative claim, but that does not change the fact that she succeeded in obtaining most of what she sought in her statement of claim.
It is of some significance that at least by the start of the trial, the plaintiff had elevated her LPA claim to her primary claim, or at least acknowledged or contended that her general law entitlements should, as a matter of logic and law, be determined first before considering the merits of her FLA and DPPA claims. Indeed, she ultimately put a submission that, having determined the plaintiff’s general law rights, the Court may not consider it necessary or appropriate to go beyond consideration of the formal jurisdictional requirements of the FLA and DPPA claims. The defendant contested this last proposition, and I ultimately followed the course suggested by the defendant in this respect.
But the important point is that the plaintiff was ultimately successful in obtaining substantially the outcome she sought, and that this success necessarily entailed rejection of all of the defendant’s assertions of trusts and loans. Further, my consideration of those asserted trusts and loans necessitated my consideration of the dealings and relationship between the parties at various points during their relationship. In this respect, I accept the plaintiff’s contention that virtually all of the evidence at trial was relevant to these issues. Put another way, I accept that the overlap between the general law issues, and the issues arising under the FLA and DPPA claims was very significant. The plaintiff’s (unsuccessful) pursuit of the latter led to little increase in the work necessary to prepare for, and conduct, the trial.
I acknowledge that the emphasis of the general law claims and the FLA and DPPA claims was different, and that the overlap was not complete. The former focused upon the character of the dealings between (and contributions by) the parties, and the latter upon the characterisation of their relationship. The claims also each had a different temporal focus. The differing focuses of the claims did affect the way the parties approached some of the evidential issues that arose in the proceedings. It also, of course, resulted in differing issues arising by way of legal submissions at the end of the trial.
Nevertheless, at the end of the day, I am not satisfied that the issues on which the plaintiff was unsuccessful added significantly to the work necessitated by these proceedings. I consider it appropriate that there be some reduction in the plaintiff’s overall costs entitlement to reflect the matters emphasised by the defendant in his costs submissions, but not a reduction of the order he contended for.
In arriving at an appropriate figure, it is not a matter that permits of any arithmetical or analytical assessment. It is appropriate that it be addressed at a more impressionistic level, albeit informed by my involvement in the conduct of the trial, and the conclusions I reached in my primary reasons. Wielding the broad axe that it is appropriate that I wield, I would order that the defendant pay 75 per cent of the plaintiff’s costs of the proceedings (including both her claim and the defendant’s counterclaim).
Indemnity costs
The plaintiff contends that she ought to be entitled to her costs on an indemnity basis. Indeed, she contends that she should be entitled to recover all of her costs on that basis and not merely whatever percentage I might otherwise have been inclined to order in her favour.
In support of such an uplift in her costs, the plaintiff relies upon two matters. The first is what she contends is the hopeless or untenable nature of the defence case. The second is the plaintiff’s achievement of an outcome no less favourable than the filed and Calderbank offers she filed before the trial, and what she contends was the defendant’s imprudent or unreasonable failure to accept these offers. The plaintiff proffers these as either independently sufficient, or alternatively cumulatively sufficient, bases for the contended uplift in her costs.
Merits of the defendant’s case
The plaintiff commenced this limb of her submissions with reference to two often–cited authorities in relation to the circumstances in which a successful party might be entitled to recover ‘solicitor and client’ or ‘indemnity’ costs.
In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd,[5] Woodward J said:
I believe that it is appropriate to consider awarding “solicitor and client” or “indemnity” costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.
[5] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401.
In relying on this passage, the plaintiff emphasised his Honour’s reference to “properly advised”, and what she contends is thus an objective assessment of the merits.
The plaintiff also referred to the reasons of Sheppard J in Colgate–Palmolive Company v Cussons Pty Ltd.[6] After referring to the ordinary position that costs are payable on a party and party basis, and that the circumstances of the case must be such as to warrant the court departing from this usual course, his Honour said:[7]
Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud … evidence of particular misconduct that causes loss of time to the Court and to other parties … the fact that the proceedings were commenced or continued for some ulterior motive … or in wilful disregard of known facts or clearly established law … the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions … an imprudent refusal of an offer to compromise … and an award of costs on an indemnity basis against a contemnor … Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
[6] Colgate – Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 232-234.
[7] Colgate – Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233-234 (omitting citations).

Relying upon these authorities, the plaintiff contends that the defendant’s case in these proceedings was dependent upon evidence and assertions that the defendant knew or ought to have known were wrong or unsustainable and that, properly advised, he should have known that his defence had no chance of success.
In my view, this submission overstates the significance of the inadequacies in the defendant’s case, and my reasons for rejecting it.
It is true that I expressed significant concerns about the evidence of the defendant.[8] I said that I considered that his evidence was affected by his anger and resentment towards the plaintiff, and in some respects involved a reconstructed or reconsidered view of his actions, thoughts and motivations in light of his present feelings for the plaintiff, rather than an accurate reflection of his contemporaneous actions, thoughts and motivations. These concerns contributed to my not accepting the defendant’s evidence on various matters of fact relevant to the disposition of the proceedings.
[8] DKL v LYK [2019] SASC 100 at [19]-[20].
However, I did not intend, through my expression of concerns about the defendant’s evidence, to suggest any general or widespread attempt by the defendant to give deliberately or consciously false evidence. There were some limited respects in which I was concerned that the defendant may have adjusted or tailored his evidence to address a perceived difficulty in his case. But the focus of my more general concerns about the defendant’s evidence was the unreliability of that evidence rather than deliberate dishonesty on his part.
As such, I do not think my findings in relation to the defendant’s credibility and reliability as a witness of themselves provide a basis for an indemnity costs order. Nor in my view, does a consideration of the merits of the defendant’s case more generally. I rejected all of the trusts and loans contended for by the defendant. And while in some cases I ultimately reached quite firm conclusions on these matters, I do not think that the defendant’s case in respect of these matters were untenable or hopeless in the relevant sense. To the contrary, as the length and content of my primary reasons demonstrate, the defendant’s case raised several quite nuanced and finely balanced issues of fact and law.
For these reasons, I do not consider that the merit of the defence case provides any basis for an uplift in the plaintiff’s costs.
The plaintiff’s offers to settle
The trial of these proceedings commenced on 21 November 2018. On 7 November 2018, and so 14 days prior to the commencement of trial, the plaintiff made a filed offer and also sent the defendant a letter offering to settle (the Calderbank offer). The two offers were in similar terms. In summary, the plaintiff offered to settle the entire action on terms which may be summarised as follows:
1.   The defendant will pay the plaintiff, within 28 days of acceptance of the offer, $2 million on account of her interest in the Medindie property.
2.   That it is a condition of acceptance of the offer that the defendant agree to return forthwith to the plaintiff in good and proper condition all of the items listed in a schedule which had been attached to an affidavit of the plaintiff filed earlier in the proceedings.
3.   That the defendant will pay the plaintiff her costs of and incidental to the action on a party and party basis up to the time of acceptance of the offer.
4.   That the defendant must within 7 days of acceptance of the offer, execute and deliver to the plaintiff a withdrawal of the caveat he had lodged over the Port Willunga property.
The offers also included some additional detail, and matters relating to the mechanics of any settlement, which are not presently relevant.
The Calderbank offer stated that the offer was open and capable of acceptance until 5.00 pm on 14 November 2018 (being a period of seven days from the date of the letter).
The filed offer did not contain any express limitation upon the period for which it remained open and capable of acceptance. That said, the filed offer included a specification that it was “a ‘Contract Offer’ for the purposes of Rule 187(2) of the Supreme Court Civil Rules 2006.” Under r 187(6)(c), such an offer “may be expressed to lapse after the expiration of a stipulated time, being not less than 14 days after service of the offer, but if silent will be taken to remain open until it lapses or is withdrawn in accordance with rule 188”. And under r 188(1), if no time for acceptance is stipulated and the offer has not been withdrawn, it “cannot be accepted after 7 clear calendar days before the commencement of the trial of the claim to which it relates.” It follows that, in the circumstances of this case, the filed offer was open for a period of seven days (from 7 November 2018 to 14 November 2018).
By letter dated 20 November 2018, the defendant (through his solicitor) responded with a Calderbank offer of his own. The terms of that offer were essentially:
1.   That the defendant remove the caveat over the Port Willunga property and make no further claim over that property.
2.   That the plaintiff, within 28 days, effect a transfer of her interest in the Medindie property, to the defendant so that he becomes the sole registered proprietor of that property.
3.   The chattels in the schedule be split, with certain identified items returned to the plaintiff.
4.   Each party is to bear their own costs.
Further, on 21 November 2018, the defendant filed a response to the plaintiff’s filed offer. The response was in the following terms:
1. The offer is not accepted.
2. The offer is not a “complying offer” within the meaning of Rule 188F, in that it was not filed at least 21 clear calendar days before the commencement of the trial of the claim to which it relates, pursuant to Rule 188F(1)(e).
The potential consequences of the failure to accept a filed offer (referred to under the Rules as a ‘formal offer’) are governed by r 188F. That rule relevantly provides:
188F—Costs where complying offer not accepted
(1)In this Part
complying offer means a formal offer that—
(a)     complies with rule 187;
(b)     involves a genuine compromise;
(c)     contains a term either that the defendant on the relevant claim is to pay the costs of the plaintiff on the relevant claim on a party and party basis or that the parties will submit to any order the Court may make in the exercise of its discretion;
(d)     if a contract offer—
(i)     is a monetary offer; and
(ii) if made by the party who is to pay the money, the money is payable under the terms of the offer within not more than 28 days after acceptance of the offer and the party is ready, willing and able to pay the money in accordance with the terms of the offer; and
(e) was filed at least 21 clear calendar days before the commencement of the trial of the claim to which it relates or such later date as may be specified by the Court on application for an extension of time made before the formal offer is made.
Note—
If the trial is vacated or adjourned without being part heard, the original trial date the subject of the vacation or adjournment order is to be ignored for the purpose of paragraph (e).
monetary offer means a formal offer under which the principal consideration payable by one party to the other (disregarding costs) is the payment of money.
(2)     The provisions of this rule are subject to the overriding discretion of the Court.
(3) When a complying offer is made by a plaintiff and not accepted by a defendant and the plaintiff obtains judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer—
(a)     the costs incurred in respect of the claim up to 14 days after service of the formal offer are unaffected by the making of the formal offer;
(b)     the plaintiff is entitled to an order against the defendant for the plaintiff's costs of action in respect of the claim to which the complying offer relates thereafter on an indemnity basis.
…
Relevantly summarised, if the filed offer is a complying offer (which requires that the offer comply with r 187, involve a “genuine compromise”, and be filed at least 21 days before the commencement of trial), is not accepted by the defendant, and the plaintiff obtains a judgment “no less favourable” to the plaintiff than the terms of the offer, then the plaintiff is entitled to an order that its costs from 14 days after service of the offer be paid on an indemnity basis. Under r 188F(2), this position is subject to the overriding discretion of the Court.
Here, as the defendant contends and the plaintiff accepts, the plaintiff’s filed offer was not a “complying offer” under r 188F(1) by reason that it was not filed at least 21 days ahead of trial. It was filed on 7 November 2018, being 14 days ahead of trial.
However, the plaintiff contends that despite this, the Court nevertheless retains a discretion to make an order for indemnity costs by reason either of the discretion reserved to the Court in r 188F(2) or the continued operation of the Court’s general discretion in relation to costs. The plaintiff further contends that the Full Court’s decision in Morris v McEwen,[9] at least as subsequently construed by the Court in BHP Billiton Ltd v Parker,[10] is no obstacle to this submission.
[9] Morris v McEwen (2005) 92 SASR 281.
[10] BHP Billiton Ltd v Parker (2012) 113 SASR 206.
In BHP Billiton Ltd v Parker, Doyle CJ and White J explained the effect of the earlier decision in Morris v McEwen, and the principles governing the relevance of informal offers to the Court’s discretion to order costs on an indemnity basis, in the following terms:[11]
In Morris v McEwen this Court held that in exercising the discretion as to costs, a court can have regard to a Calderbank letter, even though the party making the offer could have filed, but did not file, a formal offer of settlement: Debelle J at [1], Besanko J (dissenting) at [34], White J at [62] and [73]. The court followed the reasoning of a earlier Full Court in Pirrotta v Citibank Ltd (1998) 72 SASR 259, in particular the reasons of Debelle J. White J went on to say, referring to the reasons of Debelle J in Pirrotta:
… The second matter suggests that there are some limitations on the circumstances in which it will be appropriate to attach any weight to a Calderbank letter. It suggests that in order for effect to be given to a Calderbank letter, it should be framed in terms which are consistent with the spirit and intent of r 40. In particular, for effect to be given to a Calderbank letter where an offer in accordance with the Rules of Court could have been lodged, the Calderbank letter should not impose more onerous obligations on the recipient than would an offer filed in accordance with the rules. The procedure specified in the rules for the lodgment of an offer is to be understood as an expression of what the court regards as a reasonable approach. To the extent that a defendant departs from that regime, it runs the risk that the court will regard the manner or content of its offer as being unreasonable and, therefore, as not warranting any alteration of the usual position as to costs.
In considering whether to give a Calderbank letter the same effect as an offer lodged pursuant to r 40, a number of matters will be relevant. These will include: whether or not an offer could have been lodged pursuant to r 40; any difficulties associated with the framing of an appropriate offer; any difficulties occurring because of the involvement of other parties in the litigation; the proximity of the trial at the time when the offer was made and the time available to the plaintiff in which to consider the offer; the commitments to which the plaintiff may be subject at that time; and the extent to which, if at all, the circumstances of the offer, or its terms and conditions, differ from the circumstances, or terms and conditions, of an offer lodged in accordance with r 40. This is not intended to be an exhaustive list of the matters which may be relevant.
Debelle J agreed at [1], as did Besanko J at [36].
We make the following comments. The expression “Calderbank letter” seems to be used as a term of art, as if such a letter is always of a particular kind, with the same consequences, and has some special status. As we understand it, the expression is used to refer to a letter making an offer in settlement, usually with a time limit for acceptance, and usually with an indication that the letter will be relied upon in relation to costs should that be considered appropriate. Bearing in mind that in cases of the kind now under consideration the court is exercising a broad discretion, it is better, we think, and avoids misconceptions, to refer simply to an informal offer of settlement made by letter. The court can have regard to any such informal offer: r 263(3) of the District Court Civil Rules and Morris v McEwen.
It is also important to bear in mind that the question is not simply whether, having regard to a Calderbank letter, a court should order the defendant to pay costs on a basis other than as between party and party. The court will be exercising a broad discretion, and the making of an informal offer of settlement is merely one of a number of matters relevant to the exercise of that discretion: Colgate-Palmolive Co v Cussons Pty Ltd. And a Calderbank letter is but one instance of how a party might make an offer which has been “imprudently refused”: Pirrotta at 263, Debelle J. Imprudent refusal of an offer of settlement is often raised as the basis for an application for an order for costs on a basis other than as between party and party, but once again it has to be borne in mind that while “imprudent refusal” conveniently encapsulates an approach to the exercise of the discretion, in the end the issue is whether the discretion should be exercised to depart from the usual basis of an order for costs.
[11] BHP Billiton Ltd v Parker (2012) 113 SASR 206 at [263]-[265].
As noted in the above passage, the ultimate issue remains whether the Court should exercise its discretion to depart from the usual basis of an order for costs. The imprudent refusal of an offer of settlement may provide a basis for so departing. Further, in considering whether the refusal to accept an offer was imprudent or unreasonable, it will be relevant to have regard to the Court’s expression of what it regards as a reasonable approach, as encapsulated within r 188F. As to this last point, it follows that a failure to adopt, or a departure from, the mechanism in the Rules is a relevant, but not necessarily decisive, consideration in the exercise of the Court’s discretion as to costs.
Here, the defendant cited several matters in support of his contention that his refusal to accept the plaintiff’s offers was not imprudent or unreasonable.
The defendant first observed that the offers were not made more than 21 days prior to the start of trial, and were only open to be accepted for seven days rather than the 14 days contemplated by the Rules. While these are departures from the regime contemplated by the Rules, I would not regard them as having much significance, and certainly not decisive significance, in the circumstances of this case. While the defendant did not in fact respond to the offers until close to 14 days after the offers were made, there is no reason for me to think that either the timing of the offer, or the period for which it was open to be accepted, was a matter of significance here.
More significantly, the defendant also contended that the plaintiff did not achieve an outcome at trial that was no less favourable to her than her offers, and that in any event the offer did not involve any genuine compromise on the part of the plaintiff. Rather, the offer was, in effect, no more than the plaintiff offering to accept what she was claiming.
In this respect, the defendant relied on the fact that the plaintiff’s offer required that the defendant pay all of her costs. The defendant contended that if I were to make a costs order less favourable to the plaintiff, then that alone is an obstacle to any conclusion that his refusal to accept was imprudent. As I have concluded that the plaintiff should not recover all of her costs, there is merit in this submission.
Further, and in any event, the defendant contended that an offer to accept an obligation to pay $2 million within 28 days was more onerous to the defendant (or favourable to the plaintiff) than a judgment to the effect that the plaintiff was entitled to 50 per cent of the net proceeds of sale of the Medindie property. This was so because it required the defendant to raise the $2 million rather than merely paying money out of the sale proceeds. He also contended that given the evidence at trial to the effect that the likely sale value was estimated to be $3.9 million,[12] an offer to accept $2 million was an offer to accept greater than 50 per cent of the likely net proceeds (particularly having regard to the costs likely to be associated with sale of the Medindie property).
[12] The effect of the valuation evidence was summarised in my primary reasons at [199]-[202].
The plaintiff sought to counter these contentions in relation to the $2 million payment by referring to the defendant’s own evidence at trial that the Medindie property might realise $4.5 million, and by post-trial evidence from the parties’ jointly appointed sales agents estimating a sale price of $4.45 million.
I do not attach any weight to the sale agents’ post-trial estimate. While the question of imprudence or unreasonableness in refusing an offer involves a degree of hindsight in that it takes account of the outcome at trial, I do not think it involves taking account of post-judgment evidence of this nature.[13] Even if I were wrong about this, I would attach next to no weight to the estimate of $4.45 million given that it was (as the plaintiff’s counsel frankly conceded) an estimate made without any inspection of the property and in circumstances where the evidence reveals that there has been a deterioration in the condition of the property over the last couple of years.
[13] For similar reasons, I do not think it would be appropriate for me to defer determining the issue of costs to await the outcome of the anticipated sale. Apart from the fact that this will likely be some months away, I am not satisfied the actual sale price would be relevant to the exercise of my discretion.
I also do not attach much significance to the plaintiff’s submission that by offering to settle for $2 million in respect of the Medindie property she was giving up any upside in the sale price that might ultimately be realised. While this is true, the obverse is also true, namely that she was avoiding any downside risk.
In the ultimate analysis, I am not persuaded that the plaintiff has achieved an outcome at trial that is no less favourable to her. Alternatively, to the extent that there was any element of compromise in the plaintiff’s offers, it was very limited and not sufficient to involve a genuine compromise in the sense contemplated by the Rules.
For these reasons, I am not satisfied that it was imprudent or unreasonable for the defendant to have refused the plaintiff’s offers, or that there is otherwise a proper basis for an order for indemnity costs.
Conclusion
I order that the defendant pay the plaintiff 75 per cent of her costs of action (including both the claim and counterclaim) on a party and party basis.