Eastland Technology Australia Pty Ltd v Whisson
[2002] WASC 150 (S)
EASTLAND TECHNOLOGY AUSTRALIA PTY LTD & ORS -v- WHISSON & ORS [2002] WASC 150 (S)
| Link to Appeal : | [2005] WASCA 144 [2005] WASCA 144(S) |
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2002] WASC 150 (S) | |
| Case No: | COR:347/1999 | 2-15 APRIL, 22 AUGUST 2002 | |
| Coram: | TEMPLEMAN J | 14/06/02 | |
| 30/08/02 | |||
| 18 | Judgment Part: | 1 of 1 | |
| Result: | Indemnity costs awarded | ||
| B | |||
| PDF Version |
| Parties: | EASTLAND TECHNOLOGY AUSTRALIA PTY LTD (ACN 059 479 391) FEEZONE PTY LTD (ACN 057 705 129) INTERCONTINENTAL CORPORATION PTY LTD MAXWELL EDMUND WHISSON DEAN BRIAN PRESTIDGE SILVERFERN NOMINEES PTY LTD (ACN 070 887 722) as Trustee for the PRESTIDGE FAMILY TRUST |
Catchwords: | Practice and procedure Costs Calderbank offer Whether the offeree acted unreasonably in not accepting the offer Whether costs should be awarded on an indemnity basis |
Legislation: | Nil |
Case References: | Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner for Taxation [2001] HCA 26 Eastland Technology Australia Pty Ltd & Ors v Whisson & Ors [2002] WASC 150 Murcia Holdings Pty Ltd & Ors v City of Nedlands & Ors [1999] WASC 270 Optus Networks Pty Ltd v Leighton Contractors Pty Ltd [2002] NSWSC 450 Trade Practices Commission v Nicholas Enterprises Pty Ltd (1979) 28 ALR 201 Alpine Hard (Aust) Pty Ltd v Hardys Pty Ltd (No 2) [2002] FCA 224 Australian Federation of Consumer Organisations Inc v Tobacco Institute of Australia Ltd (1991) 100 ALR 568 Bass Coast Shire Council v King & Ors, unreported, SCt of Vic; 18 October 1996 Black v Lipovac [1998] FCA 4 Co-operative Bulk Handling Ltd v Antonino Ballato & Ors, unreported; SCt of WA; 25 October 1991 Colgate Palmolive v Cussons Pty Ltd (1993) 46 FCR 225 Coshott v Learoyd [1999] FCA 276 Davids Holdings Pty Ltd v Coles Myer Ltd [1995] ATPR 40, 297 Donnelly v Edelstein (1994) 49 FCR 384 Eastland Technology Australia Pty Ltd & Ors v Whisson & Ors [2000] WASC 285 Eastland Technology Australia Pty Ltd v Whisson [2000] WASC 134 Flemington Properties Pty Ltd v Raine & Horne Commercial Pty Ltd [1998] FCA 53 Hughes v Western Australian Cricket Association Inc (1986) 19 FCR 10 John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201 Love v Williams & Ors, unreported, Fed C of A; 16 December 1994 MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd & Anor (No 2) (1996) 70 FCR 236 Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77 Nobrega v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (No 2) [1999] NSWCA 133 Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569 Re Wilcox; ex parte Venture Industries Pty Ltd (No 2) (1996) 141 ALR 727 Regata Developments Pty Ltd v Westpac Banking Corp, unreported; Fed C of A; 5 February 1993 SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 Spencer v Dowling [1997] 2 VR 127 Stobbart v Mocnaj & Ors [1999] WASC 252 Unioil International Pty Ltd v Deloitte Touche Tohmatsu (1997) 18 WAR 190 Wenzel v Australian Stock Exchange Ltd [2002] FCA 353 Yunghanns & Ors v Elfic Ltd (formerly known as Elders Finance Investment Co Ltd) & Ors, unreported; SCt of Vic; 16 July 1998 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
DECISION : 30 AUGUST 2002 FILE NO/S : COR 347 of 1999 BETWEEN : EASTLAND TECHNOLOGY AUSTRALIA PTY LTD (ACN 059 479 391)
- First Applicant
FEEZONE PTY LTD (ACN 057 705 129)
Second Applicant
INTERCONTINENTAL CORPORATION PTY LTD
Third Applicant
AND
MAXWELL EDMUND WHISSON
First Respondent
DEAN BRIAN PRESTIDGE
Second Respondent
SILVERFERN NOMINEES PTY LTD (ACN 070 887 722) as Trustee for the PRESTIDGE FAMILY TRUST
Third Respondent
(Page 2)
Catchwords:
Practice and procedure - Costs - Calderbank offer - Whether the offeree acted unreasonably in not accepting the offer - Whether costs should be awarded on an indemnity basis
Legislation:
Nil
Result:
Indemnity costs awarded
Category: B
Representation:
Counsel:
First Applicant : Mr D J Garnsworthy & Mr E J Picton-Warlow
Second Applicant : Mr D J Garnsworthy & Mr E J Picton-Warlow
Third Applicant : Mr D J Garnsworthy & Mr E J Picton-Warlow
First Respondent : Mr C G Colvin SC & Mr B W Ashdown
Second Respondent : Mr C G Colvin SC & Mr B W Ashdown
Third Respondent : Mr C G Colvin SC & Mr B W Ashdown
Solicitors:
First Applicant : John Picton-Warlow
Second Applicant : John Picton-Warlow
Third Applicant : John Picton-Warlow
First Respondent : Williams & Co
Second Respondent : Williams & Co
Third Respondent : Williams & Co
Case(s) referred to in judgment(s):
Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner for Taxation [2001] HCA 26
(Page 3)
Eastland Technology Australia Pty Ltd & Ors v Whisson & Ors [2002] WASC 150
Murcia Holdings Pty Ltd & Ors v City of Nedlands & Ors [1999] WASC 270
Optus Networks Pty Ltd v Leighton Contractors Pty Ltd [2002] NSWSC 450
Trade Practices Commission v Nicholas Enterprises Pty Ltd (1979) 28 ALR 201
Case(s) also cited:
Alpine Hard (Aust) Pty Ltd v Hardys Pty Ltd (No 2) [2002] FCA 224
Australian Federation of Consumer Organisations Inc v Tobacco Institute of Australia Ltd (1991) 100 ALR 568
Bass Coast Shire Council v King & Ors, unreported, SCt of Vic; 18 October 1996
Black v Lipovac [1998] FCA 4
Co-operative Bulk Handling Ltd v Antonino Ballato & Ors, unreported; SCt of WA; 25 October 1991
Colgate Palmolive v Cussons Pty Ltd (1993) 46 FCR 225
Coshott v Learoyd [1999] FCA 276
Davids Holdings Pty Ltd v Coles Myer Ltd [1995] ATPR 40, 297
Donnelly v Edelstein (1994) 49 FCR 384
Eastland Technology Australia Pty Ltd & Ors v Whisson & Ors [2000] WASC 285
Eastland Technology Australia Pty Ltd v Whisson [2000] WASC 134
Flemington Properties Pty Ltd v Raine & Horne Commercial Pty Ltd [1998] FCA 53
Hughes v Western Australian Cricket Association Inc (1986) 19 FCR 10
John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201
Love v Williams & Ors, unreported, Fed C of A; 16 December 1994
MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd & Anor (No 2) (1996) 70 FCR 236
Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425
NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77
Nobrega v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (No 2) [1999] NSWCA 133
Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569
Re Wilcox; ex parte Venture Industries Pty Ltd (No 2) (1996) 141 ALR 727
Regata Developments Pty Ltd v Westpac Banking Corp, unreported; Fed C of A; 5 February 1993
(Page 4)
SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323
Spencer v Dowling [1997] 2 VR 127
Stobbart v Mocnaj & Ors [1999] WASC 252
Unioil International Pty Ltd v Deloitte Touche Tohmatsu (1997) 18 WAR 190
Wenzel v Australian Stock Exchange Ltd [2002] FCA 353
Yunghanns & Ors v Elfic Ltd (formerly known as Elders Finance Investment Co Ltd) & Ors, unreported; SCt of Vic; 16 July 1998
(Page 5)
1 TEMPLEMAN J:On 14 June 2002, I delivered my reasons for dismissing the application and giving judgment to the respondents on their counterclaim: see Eastland Technology Australia Pty Ltd & Ors v Whisson & Ors [2002] WASC 150.
2 The respondents now seek an order for the payment of their costs by the applicants on an indemnity basis:
"… by reason of the terms of a Calderbank offer made by the respondents, the attitude of the applicants to settlement and the manner in which the proceedings have been conducted by the applicants."
3 Before referring to the terms of the offer, it is important to note that it was made about two weeks after the hearing before Wheeler J of the applicants' application for an interim injunction to restrain the respondents from dealing with their intellectual property.
4 In the course of her extempore judgment, Wheeler J referred to Mr Sims' explanation of the circumstances in which he entered into the deeds of settlement of the previous proceedings (I use the same terminology in these reasons as I have done previously).
5 Wheeler J referred to Mr Sims' belief that the Di-Med inventions were novel and had nothing to do with the Eastland Technology. Wheeler J referred also to Mr Sims' statement that the execution of the deeds of settlement had been founded on representations made by Dr Whisson and Mr Prestidge: and that the actions would not have been settled, had the representations not been made and had he not believed them.
6 Wheeler J went on to say:
"It is not appropriate to form a concluded view about matters of disputed fact at this stage. I therefore do not reject the assertions made by Mr Sims in his affidavit, but it is my view that they are so inherently implausible that they are unlikely to be made out at trial. On Sims' own other affidavit evidence, he and the other directors had plainly long suspected that the later inventions were related to the Eastland inventions despite Whisson's repeated denials. They have seen drawings, albeit briefly, and had formed their own view.
(Page 6)
- It appears to me that a further bald denial totally unsupported by any particulars, such as that found in the affidavits of Whisson and Prestidge to which Mr Sims refers, would be most unlikely to alter anything.
In any event, I note that by 8 July Mr Sims had the report of Mr Harwood and then for some months the applicant, by its conduct, appears to me to have represented that it would proceed on the basis of the deed of settlement, not making the application which it did to me until December.
As a matter of law, I accept that the s 241 of the CorporationsLaw argument to which I have referred in my other reasons is open and that there is a serious question to be tried with respect to it. Indeed, I have to comment that after hearing it set out in a more refined way yesterday, it appears to me to be well-arguable.
Also open, although in my view rather weakly on the facts, is the allegation that the deed of settlement was procured by a fraud or a false representation on the part of Dr Whisson and Mr Prestidge, …"
7 The Calderbank offer was contained in a letter dated 10 July 2000 written to Mr Jooste QC by Mr Scott Crabb of Clayton Utz, the respondents' former solicitors . The letter was headed "Without prejudice save as to costs".
8 The letter contained two offers. The first was set out in a document entitled "Proposed Settlement Terms" annexed to the letter. That offer involved the respondents providing an option agreement to the applicants' solicitors. It was proposed that the option agreement would be in terms to be finalised, but would include terms whereby Eastland would acquire an exclusive option to acquire from the respondents the whole of their right, title and interest in the Di-Med inventions in return for a non-refundable option fee of $380,000.
9 The option period would be for 12 calendar months and would be exercisable on payment of a price of $1,400,000.
10 That part of the offer was explained in the accompanying letter, in the following terms:
(Page 7)
- "You will observe that the settlement terms have been prepared on the assumption that [the applicants] will wish to gain control of the intellectual property which is the subject of the Di-Med inventions and that (as has been suggested) [the applicants] are contemplating publicly floating a company into which the technology has been transferred. The suggested mechanism is an option agreement with an option fee calculated, in part to cover, [the respondents'] legal costs incurred to date.
The overall figure for acquisition has been calculated by reference to the sum of money (tens of millions of dollars) which I seem to recall that [the applicants] have claimed in open court will be realised upon exploitation of the intellectual property. It also represents a very modest portion of the funds which we understand are expected to be raised on any float."
11 I have accepted evidence given by Dr Whisson at trial, that when the Di-Med invention was first disclosed to Mr Capes of Becton Dickinson, Mr Capes immediately expressed the view that the invention might be worth $20 million. Later, when Eastland was negotiating with Becton Dickinson, it emerged that the figure was $US20 million. That was the amount to which Mr Sharland referred in his letter dated 10 May 1999 in which he complained to Clayton Utz about their letter to Becton Dickinson. That letter was said to have resulted in Becton Dickinson breaking off negotiations with Eastland: see par [328] of my reasons.
12 Against the background of the value of the Di-Med technology and Wheeler J's comments about the lack of merit in the applicants' case, the first offer contained in the Calderbank letter was, in my view, extremely generous. It is not surprising therefore, that in the opening part of the Calderbank letter, Mr Crabb set out in some detail what he perceived to be the obstacles which the applicants would need to overcome if they were to succeed in the litigation. As Mr Crabb said, that was not done "out of a desire to debate the relative merits of our clients' respective legal positions". Rather, it was done "in order to dispel any belief that might linger in [the applicants'] minds that any settlement should be a reflection of what they hitherto regarded as an overwhelming strong position". The letter also stated:
"For [the respondents] part, they have always had a strong desire to resolve this litigation. It has been time consuming, extremely costly and highly destructive in nature. It was never [the respondents'] desire to involve themselves in litigation.
(Page 8)
- Indeed, it was a matter of great concern to [the respondents] that, after having settled the matter once, they were met with further proceedings in relation to the same (or essentially the same) subject matter.
As was the case when they settled the earlier proceedings, [the respondents'] wish to settle is not based upon any inherent belief in the weakness of their position but is reflective of a desire to get on with their lives. In the case of Dr Whisson, there is also a strong desire to see this technology being used for the benefit of both medical staff and patients."
13 The second limb of the Calderbank letter proposed alternative terms if the principal offer was unacceptable. The alternative, was an offer to settle the proceedings forthwith on the basis that the action was dismissed and each party would bear his or its own costs. That offer was to remain open for 14 days.
14 It is common ground between the parties that the mere fact that a Calderbank offeror is worse off at the end of the proceedings than he would have been had the offer been accepted, does not lead necessarily to the result that an indemnity costs order will be made. The critical question is whether the offeree acted unreasonably in not accepting the offer. In determining this, the Court looks to all the circumstances of the case: Optus Networks Pty Ltd v Leighton Contractors Pty Ltd [2002] NSWSC 450 at par [94].
15 In the present case, the Calderbank offer was rejected almost immediately. As I have said, the letter was written on 10 July 2000 - a Monday. It is not clear when the letter was received by Mr Jooste. However, Mr Sims replied to it on Wednesday, 12 July 2000.
16 Mr Sims replied on the letterhead of Bead Cheata Nom Pty Ltd. That is explained by the fact that the proposed settlement terms which formed part of the Calderbank offer, included a provision whereby companies such as Bead Cheata, with which Mr Sims was connected, would release the respondents from claims made against them by such companies. Although written on Bead Cheata letterhead, the letter was referenced:
"Matter: Eastland Technology Australia Pty Ltd"
- Mr Sims wrote as follows:
"Dear Mr Crabbe (sic),
(Page 9)
- We are in receipt of an 8-page letter to Mr Peter Jooste dated 10 July 2000. Within this letter there are several false allegations, accusations and misconceived assumptions.
Within this garble you have made reference to my Family Trust, Bead Cheata Nom Pty Ltd.
Now Take Notice
Bead Cheata Nom Pty Ltd have no part or role in the matters you have attempted to join them in namely the dispute between E.T.A. Vs Whisson and Others.
The actions being taken by Bead Cheata Nom Pty Ltd are of a total separate issue and the Sims Family Trust is NOT represented by either Mr Picton Warlow or Mr Jooste. Furthermore you have previously been advised of this.
There are further actions against your client by other companies that my company's (sic) hold an interest that are also separate to the E.T.A. vs Whisson & Others issue. This company is also represented by separate lawyers as they are joined with TNI Verlag Publishing who have claims against your clients.
You have NO defence against any of the actions upon your client or clients being taken by any of the companies in which I have an interest.
You also make comment to allegations made by me, and obviously others, against your company and representatives of your company. I can only assume you are referring to the files that have been opened by Australian Securities Commission and Legal Practitioners Board and we believe soon, the Police Fraud Squad.
The allegations I think you are referring too are not without substance and evidence, mark my word.
If you are under the misconceived assumption or the misguided information that for some reason you are of the belief that any of the actions to gain justice in these matters is placing undue financial pressure on any of our companies you have made a grave mistake. Whether the dispute goes for one or five years and costs a further $100,000 or $5ml there is no financial strain
(Page 10)
- on us. We are totally underwritten in all matters as the breaches and crimes pre-date your obstructive action IN ALL CASES.
All of these matters could have been settled a long time ago if your company had not taken the approach of "feed the monkey, obstruct and delay for as long as possible" (as stated in a letter to your client of March 1999 held by TNI Verlag). The hope that financial hardship would win the day has unfortunately for you, and your client, failed dismally.
The present situation is that as time progresses you will be joined in all of our actions unless all of these disputes are settled to our satisfaction and in this progression you may well find you have forfeited your insurance cover.
As previously requested, please advise if you are receiving service of documents for Whisson.
Yours sincerely
(signed)
Doug Sims
Director
12-07-2000"
17 It was submitted by Mr Garnsworthy who argued the costs application on behalf of the applicants, that as this letter was signed by Mr Sims in his capacity as a director of Bead Cheata, it should not be regarded as a response by, or on behalf of Eastland. I do not accept that submission. I think the letter was written on behalf of Eastland, not only because of the heading, but also because it contained the statement that:
"You have NO defence against any of the actions upon your client or clients being taken by any of the companies in which I have an interest." [my emphasis]
- In that statement, Mr Sims was obviously expressing a view about the merits of Eastland's claim against the respondents.
18 Furthermore, in asserting that Clayton Utz would be making a grave mistake if they believed that the actions were placing undue financial pressure "on any of our companies", Mr Sims clearly included Eastland.
(Page 11)
19 Although Mr Sims did not say expressly that the Calderbank offer was rejected, that was clearly the message which his letter conveyed. Equally clearly, the reasons for that rejection were that:
• The respondents had no defence to any of the actions brought against them.
• The applicants would suffer no financial strain if the dispute continued for a further five years and cost a further $5m.
• The applicants were prepared to proceed with the actions (joining Clayton Utz as a party) unless the disputes were settled to the applicants' satisfaction.
20 The second response to the Calderbank letter was from Mr Jooste, who replied on 17 July 2000.
21 It is not necessary to refer in detail to Mr Jooste's letter. That is because it was not written on behalf of his clients but was a personal response by way of a complaint that Mr Crabb had "seen fit to attempt to side step the 'without prejudice' quarantine that we both clearly agreed and acknowledged on 28 June in a lengthy telephone conversation".
22 The essence of Mr Jooste's complaint, was that Clayton Utz ought not to have avoided that quarantine by adding the condition "save as to costs" to the without prejudice nature of the letter of 10 July 2000.
23 Mr Garnsworthy submitted that Mr Jooste's letter was irrelevant, and therefore inadmissible. I do not think Mr Jooste's letter is irrelevant because even though it contained a complaint, it contained also an invitation to Mr Crabb to "immediately in writing restore the completely without prejudice position".
24 Although the matter has not been argued out before me, I think it appropriate to express my view that there was nothing improper in Clayton Utz making a Calderbank offer, even if this was done in the course of without prejudice negotiations between the parties.
25 If Mr Jooste's request to Mr Crabb to restore the completely without prejudice position was intended as an invitation to engage in further negotiation, that invitation was not accepted. Mr Crabb replied on 19 July 2000 to Mr Jooste's letter in an open letter in which he explained the basis on which he had written the Calderbank letter. And there the matter rested.
(Page 12)
26 I make that observation, despite a statement in Mr Sims' affidavit of 13 August 2002 in which he referred to the assertion by Mr Prestidge that the Calderbank offer received no response from Eastland. Mr Sims said:
"This is not true. I am told by Mr Jooste and I believe that Mr Jooste acting for [Eastland] did respond to the solicitor's [sic] for the First and Second Respondent rejecting the offer on the basis of their refusal to honour previous agreements and making a counter offer.
After this conversation between Mr Jooste and Mr Crabb no further attempt was made by the respondents to pursue a settlement."
27 I do not accept Mr Sims' evidence. Had Mr Jooste attempted to negotiate with the respondents' solicitors in the way suggested by Mr Sims, it would have been open to him to swear an affidavit to that effect. Although that might well have disqualified Mr Jooste from appearing to argue the costs point, as I have noted, he did not appear in any event. The matter was argued for the applicants by Mr Garnsworthy.
28 Furthermore, Mr Jooste had an opportunity to inform me of any such conversation with Mr Crabb. The respondents' application for indemnity costs, supported by Mr Prestidge's affidavit of 29 July 2002 exhibiting the Calderbank offer and the responses to it, was listed before me on 31 July 2002. Mr Jooste then sought an adjournment so that his instructing solicitors could look into the question whether there had been any response beyond his and Mr Sims' letters. Had Mr Jooste engaged in any negotiation with Mr Crabb, I have no doubt he would have informed me on that occasion.
29 Even if I were to accept Mr Sims' evidence, I would regard as wholly unreasonable the rejection of the Calderbank offer on the basis that the respondents had refused to honour previous agreements. As made plain in my previous reasons, earlier attempts to settle the dispute did not founder because of the conduct of the respondents. The position was quite the reverse.
30 In my view, the applicants behaved quite unreasonably in response to the principal offer contained in the Calderbank letter. They rejected out of hand an offer which was extremely generous in all the circumstances and which was made by parties who were most anxious not to litigate. I say that despite the reference in Mr Sims' letter of 12 July 2000 to the "feed the monkey, obstruct and delay for as long as possible approach"
(Page 13)
- apparently recommended by Clayton Utz. I note that although Mr Sims seems to have been referring to privileged correspondence, the respondents rely on his letter. If that was the advice given by Clayton Utz, it is clear from the fact that the Calderbank offer and its terms, that the advice was not accepted.
31 Mr Garnsworthy submitted that the applicants did not act unreasonably in rejecting the offer because, even if it had been accepted, it would not have resolved every issue in dispute between the parties. I accept that may have been the case. However, the offer was not intended to include all the appropriate terms: it was expressed to be "in terms to be finalised". Furthermore, the offer contained an invitation to negotiate albeit "within the narrow confines" of the principles it contains. If the applicants had been genuinely concerned about the detail of the offer, I have little doubt that the matter could have been resolved by further negotiation.
32 As I have noted above, the respondents claim indemnity costs not only because of the attitude of the applicants to settlement, but also the manner in which the applicants conducted the proceedings. There is an issue between the parties about the extent to which it is legitimate to refer to the history of the dispute in judging the applicants' response to the offer of settlement.
33 I accept that the applicants' cavalier rejection of the Calderbank offer is entirely consistent with their attitude to the respondents throughout the history of the dispute. This emerges from my earlier reasons which it is not necessary to repeat here.
34 However, the crucial question, in my view, is not how a Calderbank offeree conducted himself before the offer was made. It is how he conducted himself afterwards. In the present case, the position is clear from my previous reasons: the applicants conducted themselves unreasonably by pursuing a claim based on fraudulent misrepresentations when the relevant statements were true and the applicants did not rely on them in any event. Furthermore, the applicants were given a clear indication by Wheeler J, that insofar as the action was based on fraud, it was unlikely to succeed.
35 I accept that Wheeler J regarded as arguable the claim brought pursuant to s 241 of the Corporations Law. However, if that had been the only claim to be pursued by the applicants, it could have been resolved in
(Page 14)
- probably less than a day in court and on the basis of limited factual material which, in all probability, would have been non-contentious.
36 In Murcia Holdings Pty Ltd & Ors v City of Nedlands & Ors [1999] WASC 270 at par [10] Anderson J referred to two matters of policy which are relevant to considerations of indemnity costs:
"In the first place, settlements are to be encouraged. Parties should know that if they act obdurately in the face of realistic compromise offers, they may have to pay indemnity costs. On the other hand, parties should not be placed in terrorem by compromise offers. I respectfully adopt the reasoning of Lehane J in Flemington Properties Pty Ltd v Raine & Horne Commercial Pty Ltd(1998) 83 FCR 411 where he said that the promotion of the policy of encouraging settlements 'does not … require that an applicant who receives any offer and rejects it be at risk of an order for payment of indemnity costs should the applicant ultimately fail to obtain any relief because it fails to make good the cause of action on which it relies. There is, after all, a policy against deterring parties from pursuing claims to which they reasonably believe themselves entitled'."
37 In the present case, I have no doubt that the applicants did act obdurately in response to a very generous compromise offer which warranted careful consideration. In rejecting the offer, they may well have pursued a claim to which they believe themselves entitled. But in my view, their belief was unreasonable, for the reasons I have already given.
38 In these circumstances, I consider this an appropriate case in which to make an award of indemnity costs.
39 There was some issue between the parties as to the precise formulation of the order. Mr Garnsworthy suggested a number of possible alternatives. His principal concern, as I understood it, was that the order should not put scrutiny of the respondents' legal costs beyond the reach of the courts and the taxing officer: see Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner for Taxation [2001] HCA 26 at par [40] per Callahan J. I agree that such a course would be unacceptable. However, the order sought by the respondents does not involve that vice. The order will be:
(Page 15)
- "The first, second and third applicants, jointly and severally, pay the costs of the first, second and third respondents of the application and counterclaim, including any reserved costs.
The costs are to be taxed as in an action, down to and including 12 July 2000.
From 13 July 2000 onwards, the applicants are to pay such costs, except in so far as they are of an unreasonable amount or have been incurred unreasonably so that, subject to the above exceptions, the respondents will be completely indemnified by the applicants for the costs incurred since that date."
40 Having regard to this conclusion, it is not necessary to consider the second limb of the Calderbank offer.
Apportionment of Costs
41 In making the above order, I have not accepted the applicants' submission that the costs should be allocated as to 95 per cent to Eastland and as to 2.5 per cent each to Feezone Pty Ltd and Intercontinental Corporation Pty Ltd.
42 The basis for the apportionment is said to be first, that Feezone and Intercontinental Corporation were joined as parties only for the purpose of prosecuting the claim under s 241 of the Corporations Law, and secondly, that it was relatively inexpensive claim to litigate. I agree with the second proposition. Indeed, the 5 per cent in total which the applicants attribute to the s 241 claim approximates to a half-day in court. That reflects the assessment which I have already made.
43 However, I do not accept that the costs should be apportioned in the way proposed by the applicants. That is because although only Feezone and Intercontinental Corporation could take the s 241 point, had it succeeded, they would have stood in the shoes of Eastland for the purpose of prosecuting the action generally.
44 Feezone and Intercontinental were joined as parties to the proceedings at their request: And Mr Jooste and Mr Picton-Warlow acted for them, together with Eastland throughout the proceedings.
45 In these circumstances, I see no reason to depart from the usual rule by which the respondents, as the successful parties, are entitled to be indemnified by the applicants, jointly and severally. As Fisher J put it in
(Page 16)
- Trade Practices Commission v Nicholas Enterprises Pty Ltd (1979) 28 ALR 201 at 210:
"… 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."
46 I have referred above to Mr Sims' affidavit of 13 August 2002, filed in opposition to the respondents' claim for indemnity costs.
47 Objection was taken to various parts of that affidavit. I now set out my rulings in relation to those objections.
Paragraph 3
48 In this paragraph, Mr Sims sets out his perception of the history of the dispute in a way which very largely ignores the findings of fact which I have made, as set out in my earlier reasons for judgment.
49 In so far as par 3 reflects my reasons it is irrelevant. In so far as it seeks to controvert my findings, it is improper.
50 Paragraph 3 should therefore be struck out.
Paragraph 5
51 In this paragraph, Mr Sims states that he has seen correspondence between the respondents and their advisors which indicated that it was the respondents' intention to continually frustrate Eastland and repudiate agreements, to cause Eastland financial stress.
52 This paragraph should be struck out for two reasons. First, it appears to be a reference to privileged correspondence between the respondents and their solicitors which was stolen from Dr Whisson's premises and found its way into the possession of Mr Sims. I ruled at the trial that such evidence was inadmissible. In my view, Mr Sims acted improperly in making reference to the correspondence in his affidavit.
53 If I am wrong in my supposition that Mr Sims is referring to privileged communications, I consider that the paragraph should be struck out on an alternative ground: namely that it is irrelevant.
(Page 17)
54 I take that view, because, as I have found, the respondents did not in fact frustrate Eastland. Nor did they repudiate any agreements. The respondents' conduct must be measured by what they actually did. Relevantly for present purposes, that conduct involved the making of an extremely generous offer of settlement which the applicants rejected out of hand.
Paragraph 9
55 Mr Sims here asserts that Eastland was not disposed to accept the respondents' offer of settlement for various reasons, there set out. In summary, these were:
• The respondents were in default of their obligations under the licence agreement of 25 January 1999.
• Dr Whisson had a conflict of interest in his respective capacities as a Di-Med partner and a director and chairman of Eastland.
• Mr Prestidge was in breach of his duties to Eastland.
• The respondents engaged in improper conduct by handing over incomplete and inaccurate patent applications at settlement on 5 June 1999, handing over corrupt computer records, (in the case of the first respondent) by denying his involvement in developing Eastland's technology and products and in lodging the UK patent application on 24 June 1999.
56 Again, Mr Sims relies on matters about which I have made findings adverse to the applicants. I exclude from that, reference to the lodgement of the UK patent. That was a matter which proved to be irrelevant to the main proceedings.
57 I accept that the reasonableness of the applicants' conduct in rejecting the Calderbank offer must be viewed in the light of the circumstances when the offer was made, and not with the benefit of hindsight. That being so, evidence of the reasons for the rejection of the respondents' offer is, I think, properly admissible. I do not, therefore, strike out par 9. However, I place no weight on the evidence. That is because it relies principally on assertions which are contrary to the findings I made at trial. Furthermore, in the circumstances as I have found them to be, the allegations support, rather than contradict, my conclusion that the applicants acted unreasonably in rejecting the Calderbank offer.
(Page 18)
Paragraphs 7 and 8
58 I have already referred to these paragraphs in the course of my reasons. Although they contain hearsay evidence, they are relevant to Mr Sims' credibility and I will therefore allow them to stand.
Objections to Mr Prestidge's Affidavit
59 Mr Garnsworthy submits that a number of paragraphs of Mr Prestidge's affidavit of 29 July 2002 are objectionable. Mr Garnsworthy did not press the submission but I must nevertheless deal with it.
Paragraphs 11 - 14
60 These paragraphs exhibit the correspondence between Clayton Utz, Mr Sims and Mr Jooste to which I have referred above. In my view, it is relevant to know how the applicants responded to the Calderbank offer. I therefore consider the evidence admissible.
Paragraphs 15, 17 - 28
61 In these paragraphs, Mr Prestidge refers to, and exhibits, various documents contained in the trial bundle. I take the same view in relation to these materials as I did in relation to Mr Sims' evidence of a similar kind.
62 That is to say, in so far as I have made findings in relation to the exhibited materials, Mr Prestidge's affidavit adds nothing to my reasons. In so far as the material has not been the subject of findings, I consider it inappropriate now to rely on it.
63 I will therefore strike out paragraphs 15 and 17 - 28 of Mr Prestidge's affidavit.
0
29
0