Down to Earth Spring Water v Mitrofanis Demetrius Nikolaidis and Leon Nikolaidis trading as MD Mikolaidis and Co [No. 2]

[2002] NSWSC 551

CITATION:	Down to Earth Spring Water & Ors v Mitrofanis Demetrius Nikolaidis & Leon Nikolaidis trading as MD Mikolaidis & Co [No. 2] [2002] NSWSC 551
FILE NUMBER(S):	SC 20928/97
HEARING DATE(S):	19/6/02
JUDGMENT DATE:	26 June 2002
PARTIES :	Down to Earth Spring Water (1st Plaintiff) Nilbrook Pty Limited (2nd Plainitff) Four MJ Pty Limited (3rd Plaintiff) Mitrofanis Demetrius Nikolaidis & Leon Nikolaidis Trading as MD Nikolaidis & Co (Defendant)
JUDGMENT OF:	Bell J at 1

COUNSEL :	Mr T. A. Alexis / Ms E. Champion (1st, 2nd, 3rd Plaintiffs) Mr P. M. Wood (Defendant)
SOLICITORS:	Hazan Hollander (1st, 2nd, 3rd Plaintiffs) Henry Davis York (Defendant)
CATCHWORDS:	Costs judgment
LEGISLATION CITED:	Supreme Court Rules 1970
CASES CITED:	Charlie Brown Pty Ltd v Green (SCNSW), McLelland CJ in Eq, 3 July 1995, unreported Donnelly v Edelsten (1994) 121 ALR 333 Dr Martens Australia Ltd v Figgins Holdings Pty Ltd (No. 2) [2000] FCA [17] Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 Prebble v Australian Broadcasting Corporation, 11 July 1997 NSWSC, unreported, BC9703240
DECISION:	The defendant pay the plaintiffs' costs of the proceedings to date, such costs to be paid on an indemnity basis from 16 November 2001, with leave to have those costs assessed and paid forthwith

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

BELL J

20928/97 Down to Earth Spring Water & Ors v Mitrofanis Demetrius NIKOLAIDIS & Leon NIKOLAIDIS trading as MD Nikolaidis & Co [No. 2]

JUDGMENT

1 BELL J: On 3 May 2002 I delivered reasons determining certain questions the subject of a separate trial pursuant to Pt 31 r 2 of the Supreme Court Rules 1970 (“the SCR”). The issues were (i) was the defendant retained by the plaintiffs and, if “yes”, (ii) did the defendant breach that retainer and (iii) was the defendant in breach of the common law duty of care owed to the plaintiffs. I answered each of those questions “yes”.

2 The matter was listed before me on 19 June 2002. On that occasion the parties were agreed upon a timetable for the future conduct of the proceedings and I made directions accordingly. The only issue between them was as to the costs of the separate trial.

3 The plaintiffs seek an order that the defendant pay their costs of the proceedings to date, on an indemnity basis from 16 November 2001, and that such costs be assessed and paid forthwith pursuant to Pt 52A r 9(1).

4 In support of the application, Mr Alexis relies on a letter sent on behalf of the plaintiffs to the defendant’s solicitor and dated 16 November 2001 (“the offer”). The offer is in these terms:

“We refer to the call-up of these proceedings and note that these proceedings have been specially fixed for hearing for ten days commencing 28 January 2002. The plaintiff’s legal costs to date would well exceed $50,000. However, in an endeavour to resolve this part of the proceedings, the plaintiffs are prepared to accept the following:
1. An order for judgment in the plaintiff’s favour with damages to be assessed before the Master;
2. Each party pay their own costs of the proceedings to the date of this offer.
The plaintiffs consider this to be a generous offer because:
1. The written memorandum dated 8 June 1992 does not give rise to an instruction for the defendants to discontinue the plaintiffs’ case against the State Bank of NSW on 9 June 1992. Indeed, the memorandum contains an express written instruction by the plaintiffs for the defendants to proceed with the hearing.
2. The affidavit evidence filed on behalf of the defendants does not refer to any verbal instruction given by any of the plaintiffs for their case against the State Bank of NSW to be discontinued on 9 June 1992.
3. The particulars provided by you are that the instruction to discontinue the case against the State Bank of NSW on 9 June 1992 is somehow to be inferred from the conduct of the parties.

In circumstances where express written instructions were sought as to the conduct of the proceedings it is inconceivable, that the defendants could proceed to discontinue the case based on implied instructions.

We commend this offer as a sensible way of avoiding the expensive costs of a ten day trial on the issue of liability. No doubt, the respective positions of the parties, on the assessment of damages can be protected by an exchange of offers of compromise in respect of damages so that it will not necessarily follow that the plaintiffs will recover the costs of the damages hearing if this offer is accepted.

This offer remains open for a period of 28 days. At the expiration of 28 days from the date of this letter, this offer lapses. A copy of this letter may be tendered for an application for indemnity costs, in the event that the offer is not accepted and the plaintiffs are successful at the liability hearing.”

5 In support of his submission that any order for costs be made payable forthwith, Mr Alexis referred me to the commentary to Pt 52A r 9 in Ritchie’s Supreme Court Procedure NSW. Reference is made therein to Charlie Brown Pty Ltd v Green 3 July 1995, (unreported) NSWSC BC9505032. In that case McLelland CJ in Eq observed:

“I also consider that orders should be made in each matter under Pt 52A r 9 of the Supreme Court Rules that the costs shall be payable forthwith. The matters dealt with in the determination of the separate questions were matters fundamental to the relationship of the parties, and raised issues which are quite discrete from any other relief claimed in the proceedings. It was appropriate that those matters should be dealt with separately and, it is in my view also appropriate that now they have been dealt with, the costs relating to them should be assessable and payable forthwith.”

6 In Prebble v Australian Broadcasting Corporation 11 July 1997 (unreported) NSWSC BC9703240 Levine J referred to a number of cases dealing with Pt 52A r 9 of the SCR (and its equivalent under the Federal Court Rules). His Honour considered the circumstance that the interlocutory proceeding determined in the applicant’s favour was a discrete one, in the sense that it would play no further part in the continuing litigation, favoured the making of an order that costs be paid forthwith.

7 I am persuaded that this is an appropriate case in which to order that the costs payable to the plaintiffs be assessable and payable forthwith. The determination of the three questions the subject of the separate trial involved discrete issues. The outcome of the balance of the proceedings will have no bearing on the plaintiffs’ entitlement to recover the costs of the separate trial.

8 In support of the claim for the payment of costs on an indemnity basis Mr Alexis relies upon Pt 52A r 22(4) of the SCR:

“Where an offer is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer, then, unless the court otherwise orders, the plaintiff shall, subject to rule 33, be entitled to an order against the defendant for the plaintiff’s costs in respect of the claim from the day on which the offer was made, assessed on an indemnity basis in addition to his costs incurred before and on that day, assessed on a party and party basis.”

9 Mr Wood took me to the terms of the offer observing that the determination of the questions on the separate trial in the plaintiffs’ favour fell short of judgment on their behalf. In his submission there remains a live issue as to whether the defendant’s breach of the retainer and of the common law duty of care caused damage to the plaintiffs.

10 Mr Alexis noted that the defendant had made no response to the offer. The offer was said to be designed to “resolve this part of the proceedings”. This was a reference to the separate trial. Any concern that it was posited on the entry of judgment (and not the determination of each of the questions fixed for separate trial in the plaintiffs’ favour) might have been addressed had that matter been raised. I consider there is substance to that submission in the circumstances of this case. An order was made in October 1999 for the separate trial of the issues of retainer and of breach (on 2 November 2001 I granted the plaintiffs leave to file an amended statement of claim pleading their claim also in negligence - the order pursuant to Pt 31 r 2 was amended so as to include the determination of the question of whether the defendant acted in breach of the common law duty of care owed to the plaintiffs). While the claim in negligence requires proof of damage caused by the breach in order to succeed, the claim in contract on the issue of liability has been determined in the plaintiffs’ favour by the separate trial. True it is that the assessment of damages raises nice questions however the penultimate paragraph of the offer realistically addressed this consideration.

11 Mr Alexis referred me to the judgment of Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 at 451:

“In my opinion the proper approach to take to an offer of compromise, whether made under the Rules or pursuant to a Calderbank letter, is that there should be a prima facie presumption in the event of the offer not being accepted and in the event of the recipient of the offer not receiving a result more favourable than the offer, that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of the making of the offer. I proceed on the basis that the unreasonableness was the failure by the offeree to accept the offer, which unreasonableness is demonstrated, prima facie, by the ultimate result. This approach is consistent with the decisions to which I have referred, the policy evidenced by the Act and the Rules and the widely accepted philosophy that settlements should be encouraged.”

12 The result of the proceedings has been better for the plaintiffs than would have been the case had the defendant accepted the offer. The preparation for the trial of the separate issues had been substantially undertaken as at 16 November 2001 and, in the circumstances, the plaintiffs’ willingness to forgo their costs to that date amounted to a real concession on their part. I accept Mr Alexis’ submission that the timing of the offer, a little over two months prior to the date fixed for hearing, provided the defendant with an opportunity to consider and deal with it in the context of the affidavit evidence. In this respect I note Goldberg J’s remarks in Dr Martens Australia Ltd v Figgins Holdings Pty Ltd (No. 2) [2000] FCA, BC200002244 at [17]:

“Thus, whenever a Calderbank offer is made, and is enlivened by a result more favourable to the offeror and less favourable to the offeree, it is necessary to look at all the surrounding circumstances and not simply the fact that an offer was made and rejected and the offeree has achieved a less favourable result than the offer. It is necessary to look at the genuineness of the offer, whether it was realistic, at the point of time at which it was made and that whether, in all the circumstances, it was such a reasonable offer required the offeree to give careful consideration to it. If, in all the circumstances, it was unreasonable for the offeree to reject the offer and not accept it then there are strong grounds for the court ordering indemnity costs on the basis that the offeror has made a fair and reasonable attempt to resolve the proceeding and has given the offeree the opportunity at a relevant point of time in the proceeding to consider the reasonableness of the offer. The full Court (Neaves, Ryan and Lee JJ) underscored this approach in Donnelly v Edelsten (1994) 121 ALR 333 where it said at 345:
“The foundation for the order is the need for the costs order to do equity where a party who has succeeded in the proceeding has made a reasonable attempt to terminate the proceeding by an offer of compromise shown to have been a fair offer in all the circumstances and to have provided appropriate opportunity for the offeree to consider and deal with the offer.”

13 The written instructions of 8 June 1992 signed by the directors contained no instruction to discontinue the plaintiffs’ damages claim against the Bank. Neither Mr Nikolaidis, Mr Grieve nor Mr Svehla asserted that instructions, in terms, had been given by the directors to discontinue the plaintiffs’ damages claim. I consider the offer to have been a fair and reasonable one made in a timely way. The appropriate exercise of my discretion favours the making of an order in the terms that the plaintiffs’ seek.

The defendant is to pay the plaintiffs’ costs of the proceedings to date, such costs to be paid on an indemnity basis from 16 November 2001, with leave to have those costs assessed and paid forthwith.

*******

Last Modified: 06/28/2002