Expectation Pty Ltd v PRD Realty Pty Ltd - [2003] FCA 1086

FEDERAL COURT OF AUSTRALIA
Expectation Pty Ltd v PRD Realty Pty Ltd [2003] FCA 1086
COSTS – Discretion – whether there is some special feature to justify departure from principle that costs be awarded on a party and party basis – whether appropriate to order successful respondents not have costs on an issue on which they were unsuccessful – whether applicant should have its costs on that issue – whether Sanderson or Bullock order should be made against first and second respondents in favour of third respondent – whether such an order should be on an indemnity basis
Trade Practices Act 1974 (Cth) s 52
Federal Court Act 1976 (Cth) s 43
Federal Court Rules O 6 r 8, O 23 r 11(5), O 62
Nella v Kingia Pty Ltd (1989) 11 ATPR 50,402 referred to
Alpine Hardwood (Aust) Pty Ltd v Hardys Pty Ltd (No 2) (2002) 190 ALR 121 referred to
Calderbank v Calderbank (1975) 3 All ER 333 cited
Black v Lipovac BHNF Maria Lipovac [1998] FCA 699 cited
Coshott v Learoyd [1999] FCA 276 referred to
McHattan v Saramoa Charters Pty Ltd [1996] FCA 891 referred to
Hughes v Western Australian Cricket Association (Inc) [1986] 8 ATPR 48, 134 referred to
Cretazzo v Lombardi (1975) 13 SASR 4 considered
Mobile Innovations Ltd v Vodaphone Pacific Ltd (2003) NSWSC 423 mentioned
Oshlack v Richmond River Council (1998) 193 CLR 72 cited
Re: Wilcox: Ex parte Venture Industries (1996) 92 FCR 151 followed
EXPECTATION PTY LTD (ACN 009 030 102) v PRD REALTY PTY LTD
(ACN 009 954 956) and OTHERS
No WG 181 of 1996
SPENDER J
BRISBANE
9 OCTOBER 2003

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

WG 181 OF 1996

BETWEEN:

EXPECTATION PTY LTD (ACN 009 030 102)
APPLICANT

AND:

PRD REALTY PTY LTD (ACN 009 954 956)
FIRST RESPONDENT

GORDON DOUGLAS
SECOND RESPONDENT

JOHN HAMMOND
THIRD RESPONDENT

JUDGE:

SPENDER J

DATE OF ORDER:

9 OCTOBER 2003

WHERE MADE:

BRISBANE

THE COURT ORDERS THAT:
1.The proceeding against the first, second and third respondents be dismissed.
2.The applicant pay the first and second respondents’ costs of and incidental to the proceeding, including reserved costs, save and except the costs of the first and second respondents in relation to the issue of an agreement of compromise. The costs of the first and second respondents are to be taxed on a party and party basis up until 19 September 1999. The applicant pay the costs of the first and second respondents subsequent to that date, on the basis that such costs are to include all costs except insofar as they are of an unreasonable amount or were unreasonably incurred so that, subject to such exceptions, the first and second respondents will be completely indemnified by the applicant for their costs.
3.The first and second respondents pay the third respondent’s costs of and incidental to the proceeding, including reserved costs if any, to be paid on a party and party basis.

Note: Settlement and entry…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2003] FCA 1086
Decision Date: 9 OCTOBER 2003

CaseChat Overview and Summary

In the case of Expectation Pty Ltd v PRD Realty Pty Ltd, the applicant sought a determination on certain legal matters related to an offer of compromise under the Uniform Civil Procedure Rules 1999 (NSW). The primary focus of the case was whether the applicant was entitled to costs following the rejection of an offer of compromise made by the respondents, given that the applicant was ultimately unsuccessful in the proceedings. Weinberg J was tasked with determining the appropriate legal framework and costs order in light of the unsuccessful application and the rejected offer.

The key legal issue before the court was whether the applicant, having rejected an offer of compromise made by the respondents, was entitled to any costs when it failed to secure a judgment more favourable than the terms of the offer. The court had to navigate the interplay between the provisions of O 23 r 11(5) of the Uniform Civil Procedure Rules 1999 (NSW) and the common law principles concerning Calderbank offers. The court considered the principles established in Calderbank v Calderbank and the relevant commentary on the absence of a comprehensive rule addressing the situation where an applicant rejects an offer and subsequently fails to establish liability.

Weinberg J concluded that the correct approach was to rely on the observations made by Wilcox J in Coshott v Learoyd, which emphasized the distinction between O 23 offers and Calderbank offers. The court determined that the rejection of a respondent’s offer and the applicant's subsequent failure to secure a more favourable judgment warranted a specific costs order. The court found that the respondents were entitled to costs on an indemnity basis from the date of the rejected offer, with certain exceptions for unreasonable costs or those incurred unreasonably.

Following the court's reasoning, Weinberg J made specific orders concerning the costs to be paid by the parties. The applicant was ordered to pay the costs of the first and second respondents up until a specified date on a party-and-party basis, and thereafter on an indemnity basis, except for any unreasonable costs. Additionally, the first and second respondents were ordered to pay the costs of the third respondent on a party-and-party basis. The court's decision provided a clear framework for the distribution of costs in light of the unsuccessful application and the rejected offer of compromise.

Orders

Orders of the court

1. The proceeding against the first, second and third respondents be dismissed.

2. The applicant pay the first and second respondents’ costs of and incidental to the proceeding, including reserved costs, save and except the costs of the first and second respondents in relation to the issue of an agreement of compromise. The costs of the first and second respondents are to be taxed on a party and party basis up until 19 September 1999. The applicant pay the costs of the first and second respondents subsequent to that date, on the basis that such costs are to include all costs except insofar as they are of an unreasonable amount or were unreasonably incurred so that, subject to such exceptions, the first and second respondents will be completely indemnified by the applicant for their costs.

3. The first and second respondents pay the third respondent’s costs of and incidental to the proceeding, including reserved costs if any, to be paid on a party and party basis.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

SPENDER J

Of particular relevance to this case is the provision of O 23 r 11(5) which provides:‘11(5) [Costs orders where non-acceptance by applicant and applicant obtains particular judgment] If:(a)an offer is made by a respondent and not accepted by the applicant; and (b)the applicant obtains judgment on the claim to which the offer relates not more favourable than the terms of the offer;then, unless the Court otherwise orders:(c)the applicant is entitled to an order against the respondent; and(d)the respondent is entitled to an order against the applicant;for costs in respect of the claim taxed as provided in subrule (6).’ In this particular case the applicant did not “obtain judgment on its claim” at all. That position was the subject of comment by Weinberg J in Alpine Hardwood at par 16: ‘It is peculiar that none of the provisions of O 23 deal with the situation where an applicant has rejected an offer of compromise, and subsequently been entirely unsuccessful in establishing liability. That situation has, of course, arisen on many occasions. It has been dealt with, broadly speaking, in conformity with the principles which underlie O 23.His Honour noted that O 23 does not constitute a code so as to prevent parties from being able to rely upon the principles developed at common law in relation to what is known as “Calderbank letters”: Calderbank v Calderbank (1975) 3 All ER 333. The offers in this case were O 23 offers and were not Calderbank offers. As to Calderbank offers, the Full Court (Miles, Heerey and Madgwick JJ) in Black v Lipovac [1998] FCA 699 discusses a number of cases, to the effect that a mere refusal of a Calderbank offer does not of itself warrant an order for indemnity costs, the offeror needing to show that the conduct of the offeree was unreasonable. In my respectful view, the correct approach is to be found in the observations of Wilcox J in Coshott v Learoyd [1999] FCA 276, where his Honour observed at par 37:‘Order 23 of the Rules covers offers of compromise by any party to any other party: see rule 2. The offer made in this case complied with the formal requirements of rule 3. Rule 11 sets out provisions concerning costs. Where an applicant makes an offer which is not accepted by the respondent and the applicant obtains a judgment not less favourable than the terms of the offer, the applicant is prima facie entitled to have costs on an indemnity basis as from the date of the offer. Where a respondent makes an offer that is not accepted and the applicant obtains a judgment not more favourable than the terms of the offer, the applicant is prima facie entitled to party-party costs until the day after the offer and the respondent to party-party costs thereafter. However, rule 11 does not cover the situation that occurred in this case, where a respondent’s offer is rejected and the applicant is wholly unsuccessful. Apparently the situation is similar under the equivalent rule of the New South Wales Supreme Court. The omission was pointed out, and deprecated, by Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425. Nonetheless, Rolfe J awarded the defendant costs on an indemnity basis as from the date of rejection by the plaintiff of an offer of compromise made by the defendant.’

Ratio Decidendi

Legal Principle Established

Established by: SPENDER J

Full text does not contain this section.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	WG 181 OF 1996

BETWEEN:	EXPECTATION PTY LTD (ACN 009 030 102) APPLICANT
AND:	PRD REALTY PTY LTD (ACN 009 954 956) FIRST RESPONDENT GORDON DOUGLAS SECOND RESPONDENT JOHN HAMMOND THIRD RESPONDENT
JUDGE:	SPENDER J
DATE OF ORDER:	9 OCTOBER 2003
WHERE MADE:	BRISBANE