Dreamfields v Zacutti (costs)
[2020] VCC 1561
•2 October 2020
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | (Not) Restricted |
Case No. CI-17-06121
| Dreamfields Pty Ltd as Trustee for The Culkin Lawrence Family Trust (ACN 086 299 541) | First Plaintiff | |
| and | ||
| Robin John Culkin-Lawrence | Second Plaintiff | |
| v | ||
| Betty Doris Zacutti as Executrix of the Will of John Luxmoore, deceased | Defendant | |
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JUDGE: | HER HONOUR JUDGE MARKS | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | Determined on the papers | |
DATE OF RULING: | 2 October 2020 | |
CASE MAY BE CITED AS: | Dreamfields v Zacutti (costs) | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 1561 | |
REASONS FOR RULING
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PRACTICE AND PROCEDURE – COSTS – application for indemnity costs as a result of a Calderbank offer – offer to pay $1 within 7 days of ‘Terms of Settlement to be agreed’ – uncertain offer – not unreasonable for plaintiffs to refuse the offer
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiffs | Mr B Gillies | SLM Law |
| For the defendant | Mr J Rizzi | Savage & Co |
Contents
Introduction
Uncertainty of the offer
Extent of the compromise offered
Prospects of success at the time the offer was made
The stage of the proceeding the offer was made
Time for consideration of the offer
Conclusion
HER HONOUR:
Introduction
Following a trial, Judicial Registrar Tran made orders dismissing this proceeding on 13 December 2018, giving judgment for the defendant. The plaintiffs filed a notice seeking a review of the judicial registrar’s decision, pursuant to rule 84.03 of the County Court Civil Procedure Rules 2018. The review was conducted before me, as a hearing de novo.
Following that hearing, on 2 September 2020, I confirmed the judicial registrar’s decision: see Dreamfields v Zacutti [2020] VCC 1324 (the principal judgment).
The plaintiffs and defendant then filed written submissions as to costs. An affidavit was filed by the defendant, sworn by Michelle Savage on 15 September 2020. I have dealt with this application on the basis of those documents.
The parties agree that the plaintiffs should pay the defendant’s costs of the review (since the defendant was successful in obtaining an order confirming the judicial registrar’s decision). The issue is whether the costs should be paid on the standard basis, or whether some part should be paid on an indemnity basis, because the plaintiffs did not accept a Calderbank offer the defendant made to them to settle the proceeding.
The plaintiffs oppose an order for indemnity costs. They submit that they should pay the whole of the defendant’s costs of the review on the standard basis because it was not unreasonable for them in the circumstances not to accept the offer.
On 24 April 2020, the defendant’s solicitor sent a letter to the plaintiffs’ solicitor, stating that in her view the proceeding was likely to be dismissed by Judge Marks for the reasons noted by Judicial Registrar Tran. The letter was sent twelve days before the review hearing. It referred in particular to certain paragraphs of the judicial registrar’s decision and said that ‘it appears to us that the decision…was sound and that your proceeding is hopeless and bound to fail’.
The letter continued, ‘our client is prepared to settle the proceeding on the following basis’:
1.our client shall pay your client $1 within 7 days of the execution of Terms of Settlement to be agreed;
2.the review of the decision of Judicial Registrar Tran be dismissed;
3.each party shall bear their own costs of the review of the decision of a [sic] Judicial Registrar Tran.
On 30 April 2020, the plaintiffs rejected the offer.
In seeking indemnity costs, the onus is on the defendant to establish that the plaintiffs unreasonably failed to accept its offer having regard to the applicable circumstances at the time of the offer.
The principles which apply to Calderbank offers were summarised by Nettle JA (as His Honour then was) in Berrigan Shire Council v Ballerini (No 2) [2006] VSCA 65 at [33]:
The rejection of a Calderbank offer not later bettered by judgment does not lead automatically to an indemnity costs order in favour of the offeror. The question in each case is whether the offer was a reasonable offer of compromise, and whether the rejection of the offer was unreasonable, and the answer to that question turns in each case on all the circumstances of the case. The making of an offer and its rejection are but two albeit important circumstances to which the court will have regard in the exercise of its costs discretion. As the court explained in Hazeldene’s Chicken Farm:
“The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. 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 [order] in the event of the offeree’s rejecting it.”
[citations omitted]
Uncertainty of the offer
I consider that it was not unreasonable for the offer to be rejected due to its uncertainty.
The defendant argues that the offer was clear and capable of being understood.
But the offer in the letter was premised on Terms of Settlement ‘to be agreed’. No proposed Terms of Settlement were provided with the offer, and the plaintiffs did not know what further terms (other than those in the letter) might be contemplated by the defendant. If the offer being made was as simple as an offer to have an agreed order dismissing the application for review, with each side bearing their own costs of that review, and the defendant paying the plaintiffs $1 – why then were later Terms of Settlement contemplated, or necessary?
It follows that the offer made was uncertain. It was in the nature of an invitation to negotiate. It was not unreasonable for the plaintiffs to refuse it.
Having decided that, I do not need to make findings as to other issues raised by the parties. However, I will indicate my view.
Extent of the compromise offered
The plaintiffs submit that acceptance of the offer to pay them $1 would have involved them essentially ‘giving up’:
[6]… the offer of settlement is essentially an offer in which it is just asked for the plaintiff to give up.
…
[9] A more attractive offer could have been made. Given the findings of Judicial Registrar Tran the sum involved the value of the property at $90,000 was a reasonable valuation, the defendant could have offered to convey the property to the plaintiff but did not do so.
[10]The defendant could have offered to have sold the property for a sum to the plaintiff but did not do so.
The plaintiffs’ suggestion that the defendant could have offered to have sold the property for a sum to the plaintiffs is beside the point. Parties can settle cases in many ways. The question is the extent of the compromise offered. I consider it was reasonable, in circumstances where the dispute involved an ‘all or nothing’ result – either the plaintiffs would successfully obtain the specific performance they sought and a transfer of the property in question to them, or they would not – for this offer to be made.
I consider that the offer to pay $1 (assuming nothing further of a monetary value was contemplated in the unknown terms of settlement) would have been a reasonable compromise. It was effectively a walk away offer. But it was made at a stage when the defendant had incurred the costs of directions hearings, settling a new court book, filing submissions, and costs of preparation for the hearing de novo. By the offer, the defendant was herself ‘giving up’ the prospect of obtaining some payment of her costs of the review to date if she were successful.
As the defendant submits:
[30]The compromise offered in the Offer was only for the nominal amount of $1.00, however it importantly offered for each party to bear their own costs of the proceeding. At that stage of the proceeding it is likely that each party’s costs would have been significant as most interlocutory steps had already been completed and preparation for the trial was well underway.
[31]The plaintiffs would have been aware of the usual costs order that a successful party in litigation is entitled to an order for costs and the unsuccessful party bears the liability for the costs of the unsuccessful litigation.
[32]Considering that the matter concerned a potential contract to purchase a country property for only $93,000, the costs of the litigation was one of the most important issues in the case.
[33]Betty submits that the plaintiffs must have been aware that if they accepted the Offer, the costs saving to them would have been significant.
Prospects of success at the time the offer was made
The defendant submits:
[35]Betty submits that the plaintiffs’ prospects of success at the date the Offer was sent were poor. The Offer explicitly states:
In our view, your proceeding is likely to be dismissed by Judge Marks in the upcoming hearing for the reasons noted by Judicial Registrar Tran on 13 December 2018. In particular, we refer you to [29] to [36] and [41] and [42] of the decision of Judicial Registrar Tran.
It appears to us that the decision of Judicial Registrar Tran was sound and that your proceeding is hopeless and bound to fail.
[36]This issue was also considered by Croft J in Igo Mischel (as Executor of the Estate of Maria Mischel) v Mischel Holdings Pty Ltd (in liq) (No 2). At [41] and following, His Honour said:
41. Whether the Defendant’s rejection of the offer contained in the Calderbank Letter was reasonable also depends upon the process of reasoning undertaken by the Defendant. This was emphasised by McDougall J in Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd:
“…the failure to accept a Calderbank offer does not create a presumption as to indemnity costs when the offeror receives a more favourable outcome than that offered, then the corollary is that it is necessary to show that there exist sufficient circumstances to displace the general rule as to costs (where the offeror was a defendant and the offeree a plaintiff). In many cases — maybe most — that will be done by demonstrating that rejection of the offer was unreasonable in some way. In this context, I think, “unreasonable” may mean either that the rejection was not supported by any process of reasoning whatsoever or that the reasons for rejection that were advanced, or that may be inferred, were legally or factually (or both) inadequate.” (emphasis added by Crofts J)
42. The quick or prompt rejection of an offer would tend to suggest that the rejection was unreasonable.10 Additionally, although an offeree is not compelled to disclose legal advice (so as to waive privilege over the advice), “a failure to disclose advice means that one circumstance that is possibly relevant to the characterisation of the rejection as reasonable or unreasonable is not available.
[37] The letter from the plaintiffs’ solicitor rejecting the Offer states:
We refer to your letter dated 24 April 2020 and confirm our client's instructions to reject the offer contained therein.
We confirm our client's view that Judicial Registrar Tran wrongly found in favour of your client and it is our belief that Her Honour Judge Marks will award our client specific performance of the Heads of Agreement.
[38]Betty submits that the plaintiffs’ rejection of the Offer was not supported by any process of reasoning and the reasons provided for rejection were legally inadequate. The legal inadequacy of the plaintiffs’ position can be gleaned from the final submissions made by the plaintiffs – they did not accept that the Heads of Agreement was a clear example of the third type of agreement referred to in Master v Cameron.
[citations omitted]
The plaintiffs submit:
[16] It was not so clear that the plaintiff ought to have known that he had no chance of success. There is no evidence to say that he had commenced or continued the proceeding for an ulterior motive or wilful disregard of the known facts or clearly established law. Any suggested ulterior motive of unconscionability was expressly rejected by judicial Registrar Tran and there was no evidence that the price agreed for the property was not the appropriate price. It was not as if the plaintiff was seeking a bargain.
The plaintiffs’ submission on this point is misconceived. Unconscionability was not an issue in the review; neither was whether the price agreed for the property was an appropriate price. Those questions only arose at the first trial before the judicial registrar, and not before me. There was also no suggestion made by the defendant that the plaintiffs commenced or continued the proceeding or the review ‘for an ulterior motive’ or ‘in wilful disregard of the known facts or clearly established law’.
The point made by the defendant was simple: the plaintiffs’ prospects of overturning the judicial registrar’s decision were poor. I agree.
The stage of the proceeding the offer was made
The defendant served its Calderbank letter on 24 April 2020, twelve days before the review hearing was due to begin on 6 May 2020. By this stage, the proceeding had been on foot for approximately two and a half years. The parties had already had the benefit of having run the matter to trial before Judicial Registrar Tran, and had prepared for the review significantly, including filing opening submissions.
The defendant submits:
[23]In short, by that stage the plaintiffs had had every opportunity to carefully consider their case and the defendant’s case. No evidence came out in the running of the rehearing that ought to have surprised the plaintiffs.
[24]The fact that a settlement offer is made at a late stage and close to the trial date is not necessarily a bar to an indemnity costs order being made. Indeed, it has been noted that offers made an early stage of a dispute or a proceeding are more likely to be rejected on the basis that it is difficult for the offeree to make an informed assessment of the offeror’s claim or defence.
[25]At offer made shortly before trial remains potentially significant to the exercise of the costs discretion. In Clarke and Anor v ABC and Anor, Ashley J found that:
…it is plainly the fact that the plaintiffs' offer was late made, and was left open only for a short while. But it was made when the defendants should have been well able, and without much delay, to assess both the probable and possible outcomes of the proceeding; and thus resolve upon a response to the plaintiffs' offer.
[26]The fact that the plaintiffs rejected the Offer on 30 April 2020, prior to its expiry, suggests that the plaintiffs were fully aware of the strengths and weaknesses of their case and able to assess ‘the probable and possible outcomes’ of the case at that stage.
[citations omitted]
The plaintiffs’ submissions repeatedly state that insufficient time was given for them to consider the offer:
[6]Insufficient time was given to the plaintiff to consider the offer and as well, the offer was made at a time when trial was due to commence. It had not been made earlier.
…
[13]The offer was not made in good time before the trial. It was made shortly prior to trial. The time limit was less than 7 days.
…
[17]Further, the first offer made at the stage of the proceedings at which it was made, that is, less than 14 days prior to trial with a timing of acceptance of less than 7 days where all the documentation for trial had been prepared including court books, notice of appeal and submissions was too late. The prospects of success depended upon an evaluation of legal matters.
[18]The fact that the offer was rejected on 20 April 2020 does not mean the plaintiffs had sufficient time to consider it. The plaintiffs were preparing for trial and it was not reasonable to have made an offer at such a late stage.
However, I consider it was reasonable to make the offer at that stage.
In Mischel v Mischel Holdings Pty Ltd (in liq) (No 2) [2012] VSC 421 (Mischel), Croft J considered an offer that was served approximately two to three days before trial and was open for acceptance for just two to three business days. His Honour stated:
[27]In my view, the fact that a settlement offer is made at a late stage and close to the trial date is not necessarily a bar to an indemnity costs order being made. Indeed, offers made an early stage of a dispute or a proceeding are more likely to be rejected on the basis that it is difficult for the offeree to make an informed assessment of the offeror’s claim or defence.
[28]The Court should, however, discourage the making of a Calderbank offer shortly prior to a trial commencing when it is used “as an indiscriminately wielded tactical weapon” or when offeree might be expected to have made up its mind on a number of matters and incurred considerable costs. However, this consideration only appears to carry significant weight where the proceedings are complex and a considerable amount of time has already been invested in them.
[29]Where an offer, though made at the “eleventh hour”, is not used as a tactical weapon, it remains potentially significant to the exercise of the costs discretion. In Clarke and Anor v ABC and Anor, Ashley J found that:
“…it is plainly the fact that the plaintiffs' offer was late made, and was left open only for a short while. But it was made when the defendants should have been well able, and without much delay, to assess both the probable and possible outcomes of the proceeding; and thus resolve upon a response to the plaintiffs' offer.”
[30]In light of these authorities I am of the view that the provision of the Calderbank Letter only a few days prior to the trial date does not render it of no or little significance for the purposes of exercising the discretion with respect to costs. In my opinion, the Calderbank Letter was provided to the Defendant when, in the particular circumstances of these proceedings, it ought to have been fully aware of the strengths and weaknesses of its case and so should have been well able to assess “probable and possible outcomes” and respond without delay. In these circumstances it was, in my view, a reasonable step for the Plaintiff to take at this time for the purpose of resolving the proceedings, or, at least, seeking to protect himself from costs. Consequently it could not be regarded as a tactical weapon in the relevant sense. Neither do I think that the proceedings were so complex or that such significant time had been invested in them to make it inappropriate or undesirable for a Calderbank offer to be permitted when it was made. There is no evidence which would support a finding of a relevantly significant investment of time and, consequently, cost and the proceedings are not complex in the relevant sense. Consequently, the time at which the offer in the Calderbank Letter was made is not a factor that assists the Defendant in contending that its rejection of that offer was reasonable.
..
[34] The more flexible attributes of Calderbank offers mean that regard must be had to the complexity of the proceedings and the extent to which the offeree might reasonably be thought to have fully understood the claims and evidence in a proceeding and been able to assess its position in a fully informed and considered manner. It follows that, as a general proposition, a shorter time limit for acceptance of a Calderbank offer would seem to be justified in a number of instances, “especially if the offer is made at a time sufficiently advanced that the parties are positioned to assess the respective strengths and weakness of the offeror’s position on the issues in dispute at trial.” Nevertheless, it does depend, very much on the particular circumstances.
[35]Returning to this proceeding, I am of the opinion that, although the Plaintiff’s offer was only open for a short period of time, the offer was made at a stage when the Defendant ought to have known the strength of the Plaintiff’s case and the weakness of its case and been able to respond promptly. Whilst the Plaintiff’s offer could have been made earlier and provided the Defendant with further time, I think the period of time was, in all the circumstances, reasonable.
[citations omitted]
Time for consideration of the offer
The offer was open for 5 days. Had it been a clear, and not an uncertain, offer, I would have considered this sufficient in the circumstances.
Conclusion
I will order costs on the standard basis, to be taxed by the Costs Court in default of agreement.
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Certificate
I certify that these 11 pages are a true copy of the reasons for ruling of Her Honour Judge Marks, delivered on 2 October 2020, revised 10 November 2020
.Dated:
2 October10 November 2020
Zeinab Ali
Associate to Her Honour Judge Marks
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