Eccles v Koolan Iron Ore Pty Ltd
[2013] WASC 418 (S)
•18 JUNE 2014
ECCLES -v- KOOLAN IRON ORE PTY LTD [No 3] [2013] WASC 418 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 418 (S) | |
| Case No: | CIV:2868/2009 | 27 MAY 2014 | |
| Coram: | LE MIERE J | 18/06/14 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Application for indemnity costs dismissed Plaintiffs pay the defendants costs of the action | ||
| B | |||
| PDF Version |
| Parties: | REBECCA AMY ECCLES LEE MARCUS STERGIOU KOOLAN IRON ORE PTY LTD MT GIBSON IRON LTD |
Catchwords: | Costs Application for indemnity costs Plaintiffs did not accept Calderbank offers Rejection of Calderbank offers was not unreasonable |
Legislation: | Nil |
Case References: | Dobb v Hacket (1993) 10 WAR 532 Eccles v Koolan Iron Ore Pty Ltd [No 3] [2013] WASC 418 Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115; (2009) 41 WAR 1 Overseas-Chinese Banking Corporation Ltd v Malaysian Kuwaiti Investment Co SDN BHD [2004] VSC 351 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- LEE MARCUS STERGIOU
Plaintiffs
AND
KOOLAN IRON ORE PTY LTD
First Defendant
MT GIBSON IRON LTD
Second Defendant
Catchwords:
Costs - Application for indemnity costs - Plaintiffs did not accept Calderbank offers - Rejection of Calderbank offers was not unreasonable
Legislation:
Nil
Result:
Application for indemnity costs dismissed
Plaintiffs pay the defendants costs of the action
Category: B
Representation:
Counsel:
Plaintiffs : Mr M J McPhee
First Defendant : Mr P D C Robinson
Second Defendant : Mr P D C Robinson
Solicitors:
Plaintiffs : M J McPhee Barrister & Solicitors
First Defendant : Williams & Hughes
Second Defendant : Williams & Hughes
Case(s) referred to in judgment(s):
Dobb v Hacket (1993) 10 WAR 532
Eccles v Koolan Iron Ore Pty Ltd [No 3] [2013] WASC 418
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115; (2009) 41 WAR 1
Overseas-Chinese Banking Corporation Ltd v Malaysian Kuwaiti Investment Co SDN BHD [2004] VSC 351
1 LE MIERE J: The plaintiffs claimed damages against the defendants for breach of a contract under which the plaintiffs provided health and fitness services to the defendants. I found that the plaintiffs had failed to established that there was an agreement on the terms they alleged and dismissed the plaintiffs' claim: Eccles v Koolan Iron Ore Pty Ltd [No 3] [2013] WASC 418. The defendants now seek an order that the plaintiffs pay the defendants' costs from commencement of the action until 21 September 2010 on a party/party basis and from 22 September 2010 until the conclusion of the trial on an indemnity basis. Alternatively, the defendants seek an order for indemnity costs from 28 March 2013 or further alternatively from 19 April 2013. The defendants' application is based upon informal offers of settlement, or Calderbank letters, of 22 September 2010, 28 March 2013 and 19 April 2013.
The plaintiffs' claim
2 The plaintiffs claimed that there was a contract between them and the first defendant, Koolan Iron Ore Pty Ltd (Koolan) or the second defendant, Mount Gibson Iron Ltd, on the terms of the Cross Fit contract which was executed by the plaintiffs but not the defendants. Clause 10 of the Cross Fit contract provides that if Koolan terminates the contract by notice then 'the contract rate is reverted back pro rata to month to month pricing as shown below'. The plaintiffs claimed that Koolan terminated the contract by notice before 12 months had expired and the increased monthly rate became payable from the beginning of the contract to the date of termination. The plaintiffs claimed to be entitled to a sum of $124,419.20 on that basis.
3 The plaintiffs also claimed damages for 'loss of opportunity to achieve a renewal of the contract and successive renewals thereof'. That claim was based on an assertion that Koolan breached a clause of the contract by failing to give the plaintiffs a real and commercial opportunity to 'revise the contract for renewal'. The plaintiffs said that there was a strong chance that the contract would have been renewed for 12 months and if they had been given the opportunity required and if the contract had been renewed they would have made a profit of approximately $188,000.
The plaintiffs' offers
4 The action was commenced on 29 October 2009 by writ of summons indorsed with a statement of claim. A defence was filed on 14 December 2009. The statement of claim was amended on 5 February 2010 and an amended defence filed on 23 February 2010 and a reply on 2 March 2010.
5 On 22 September 2010 the defendants' solicitors wrote to the plaintiffs' solicitors a letter which was expressed to be without prejudice save as to costs. The letter stated that in the defendants' view if the matter proceeded to trial the plaintiffs' claim would be dismissed for a number of reasons including that the draft contract that the plaintiffs relied on has no application because, amongst other things, the parties were not ad idem as to the terms. The defendants offered to settle the action on the following terms:
(a) Koolan Iron Ore Pty Ltd (Koolan) pay to Eccles and Stergiou $25,000 (inclusive of costs and interest).
(b) Eccles and Stergiou release Koolan and its subsidiaries from all further claims in relation to this action and matters the subject of the action.
- The offer was expressed to be open for acceptance for 21 days. The plaintiffs did not accept that offer.
6 On 1 June 2011 the plaintiffs' solicitors wrote to the defendants' solicitors. The letter offered to settle the action by payment to the plaintiffs of the sum of $500,000 plus costs to be taxed. The plaintiffs' solicitors said that the plaintiffs' view was that the contract would be established and that if the contract had not been breached it is likely to have been renewed for a number of years. That offer was not accepted by the defendants.
7 On 28 March 2013 the defendants' solicitors made a further offer of settlement. The offer was that Koolan pay to the plaintiffs $100,000 inclusive of costs and interest. The defendants stated their view that the plaintiffs' claim would fail for a number of reasons including the following. The draft contract was not executed by the defendants and a number of terms of the document had not been discussed. The plaintiffs' claim for damages was largely comprised of damages for loss of opportunity. There was no proper expert or factual basis for the plaintiffs' claim. If the plaintiffs succeeded their best case scenario was to recover $124,419.20. The offer was open for acceptance until 21 April 2013. It was not accepted by the plaintiffs.
8 On 19 April 2013 the defendants' solicitors made a further offer of settlement. The offer was to pay $125,000 on the same terms as the letter of 28 March 2013. The offer was sent by email at 4.46 pm on Friday, 19 April 2013 and was open for acceptance until close of business on Monday, 22 April 2013. The defendants' solicitors responded on 23 April 2013 rejecting the offer of 19 April 2013. The trial of the action commenced on 30 April 2013.
Legal principles
9 The relevant principles governing an award of indemnity costs were considered by Buss JA, with whom Wheeler JA agreed, in Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115; (2009) 41 WAR 1. Buss JA put forward the following principles:
(1) a Calderbank offer will not justify an award of indemnity costs unless its rejection was unreasonable;
(2) all of the relevant facts and circumstances must be considered in determining whether a party's rejection of a Calderbank offer was unreasonable;
(3) the mere fact that the recipient of a Calderbank offer is ultimately worse off than he or she would have been had the offer been accepted, does not mean that its rejection was unreasonable;
(4) whether conduct is reasonable or unreasonable always involves matters of judgement and impression;
(5) it is not possible nor desirable to enumerate exhaustively all circumstances which must be taken into account, in a particular case, in deciding whether the rejection of a Calderbank offer was unreasonable, but, ordinarily, regard should be had to, at least, the following:
(a) the stage of the proceeding in 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; and
(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it;
(6) the party who makes a Calderbank offer that is rejected bears the onus of satisfying the court that it should make an award of indemnity costs in his or her favour; and
(7) the standard to be applied in awarding indemnity costs should not be allowed to diminish to the extent that an unsuccessful party will be at risk of an order for costs assessed on an indemnity basis absent some blameworthy conduct on its part - a test of unreasonableness should not be upheld on other than clear grounds.
The first offer
10 The first offer was made on 22 September 2010, 11 months after the action commenced. By that time the plaintiffs had filed a statement of claim, amended their statement of claim, given particulars and filed a reply. The defendants have filed a defence and amended defence. The plaintiffs and the defendants had each given discovery. There had been a number of directions hearings. The defendants offered to compromise the action by paying the plaintiffs $25,000 inclusive of costs. The first named plaintiff, Ms Eccles, says that the defendants' offer was well below the plaintiffs' actual costs at that time. I accept that the amount of the offer was less than the plaintiffs' actual costs at the time and less than the amount of costs allowable under the relevant legal costs determinations allowing for some amount for getting up case for trial.
11 The defendants' success at trial did not turn only on the fact that the Cross Fit contract was not executed by the defendants. In my judgment I stated that to determine whether the parties made a contract on the terms of the Cross Fit contract required a careful examination of the communications between, and conduct of, the parties in the circumstances of the case: Eccles v Koolan Iron Ore Pty Ltd [No 3] [2013] WASC 418 [20]. There was a conflict of evidence concerning the communications between the parties. In particular, there was a conflict of evidence concerning a telephone conversation between Ms Eccles and Mr Angel in late June 2008 and a telephone conversation between Ms Eccles and Mr Taylor in August 2008. I did not accept Ms Eccles' evidence concerning those conversations but I accept that Ms Eccles believed the evidence she gave to be true. Ms Eccles' recollection of the conversations was affected by her belief that Koolan and in particular Mr Jordinson and Mr Taylor had agreed to the terms of the Cross Fit contract. At the time the plaintiffs were not in receipt of witness statements from the defendants contradicting Ms Eccles' belief of what had occurred.
12 On the one hand the court should encourage settlement of disputes and 'be careful not to foster the proposition that obstinacy and unreasonableness will not be punished by orders as to costs': Dobb v Hacket (1993) 10 WAR 532, 540 (Murray J). On the other hand 'potential litigants should not be unnecessarily discouraged from seeking to litigate a factual dispute, it seldom been possible to predict with any certainty what findings of fact will be made': Overseas-Chinese Banking Corporation Ltd v Malaysian Kuwaiti Investment Co SDN BHD [2004] VSC 351 [32] (Redlich J). In considering the reasonableness of a party's refusal of an offer of compromise the court must be careful to avoid hindsight bias.
13 I find that the plaintiffs' rejection of the offer was not unreasonable in the circumstances. Their case was based on Ms Eccles' evidence of the communications between herself and the defendants as well as the documents and objective circumstances. I did not accept some critical aspects of Ms Eccles' evidence. I did not find that her evidence was dishonest. She has sworn that 'I fully believed in my case and the factual situation that pertained'. I accept that evidence. Disbelief of a party's witnesses, or rejection of the evidence of a party herself, does not as a matter of principle provide a sufficient basis for the award of indemnity costs. The defendants' offer was to pay an amount less than the costs which the plaintiffs had then incurred. If the plaintiffs had accepted the offer they would have made a net loss from the litigation. At the time it was not unreasonable for the plaintiffs to reject the offer.
28 March 2013 offer
14 The defendants' second offer, to pay $100,000 inclusive of costs, was made on 28 March 2013. By that time the action had been entered for trial, the principal witness statements had been exchanged and the trial date had been set. At that time the plaintiffs had not been charged the full amount of work in progress but had paid their solicitors $139,627.02. That, of course, was in excess of the amount of the offer. Therefore, acceptance of the defendants' offer would have meant that the plaintiffs would have made a substantial loss on the litigation. With hindsight it would have been prudent for them to accept the offer. However, rejection of the offer was not unreasonable in the circumstances of 28 March 2013.
19 April 2013 offer
15 The third and final offer, of $125,000 inclusive of costs, was made on 19 April 2013, which was 11 days before the trial commenced. The offer was $25,000 more than the offer made on 28 March but the costs incurred by the plaintiffs had increased in the meantime. Accepting the offer would have meant that the plaintiffs made a net loss on the litigation. The plaintiffs' rejection of the offer was not unreasonable in the circumstances. An objective analysis would have disclosed that there was a substantial risk that the plaintiffs would fail. However, the documents and the objective circumstances did not render any knockout blow to the plaintiffs. They pressed on to trial in the belief that Ms Eccles' evidence would be accepted and that that would lead to a finding that there was an agreement on the terms of the Cross Fit contract. With hindsight they were wrong. However, I do not find that they were unreasonable in rejecting the offer in the circumstances of 19 April 2013.
Conclusion
16 The defendants claim for indemnity costs is based on the plaintiffs' rejection of the offers to compromise made on 22 September 2010, 28 March 2013 and 19 April 2013. I have found that the plaintiffs' rejection of each of those offers was not unreasonable in the circumstances. The defendants' claim for indemnity costs fails. The appropriate order is that the plaintiffs pay the defendants' costs of the action.
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