Forte Sydney Construction Pty Ltd v N Moit and Sons (NSW) Pty Ltd (No. 2)

[2022] NSWDC 57

District Court

New South Wales

Medium Neutral Citation:

Forte Sydney Construction Pty Ltd v N Moit & Sons (NSW) Pty Ltd (No. 2) [2022] NSWDC 57

Hearing dates:

On the papers

Date of orders:

15 March 2022

Decision date:

15 March 2022

Jurisdiction:

Civil

Before:

Russell SC DCJ

Decision:

(1)   Order that the costs payable by the plaintiff to the defendant are to be assessed on an ordinary basis up to and including 13 September 2021 and on an indemnity basis after that date.

(2)   Order that the costs of this application for indemnity costs be paid by the plaintiff to the defendant on an indemnity basis.

Catchwords:

COSTS – Calderbank offer – principles – failure of the plaintiff to accept the Calderbank offer made by the defendant was unreasonable – time at which indemnity costs commence

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW) r 42.2

Cases Cited:

Forte Sydney Constructions Pty Ltd v N Moit & Sons (NSW) Pty Ltd [2021] NSWDC 673

Leichhardt Municipal Council v Green [2004] NSWCA 341

Category:

Costs

Parties:

Forte Sydney Construction Pty Ltd (Plaintiff)
N Moit & Sons (NSW) Pty Ltd (Defendant)

Representation:

Counsel:
J Cameron (Solicitor) (Plaintiff)
D Hand (Defendant)

Solicitors:
J Cameron Lawyers Pty Ltd (Plaintiff)
Colman Greig (Defendant)

File Number(s):

2019/00145109

Judgment

Introduction

1. On 14 December 2021 I delivered judgment in the primary proceedings: Forte Sydney Constructions Pty Ltd v N Moit & Sons (NSW) Pty Ltd [2021] NSWDC 673. I made the following orders:

1. Judgment for the defendant on the plaintiff’s claim.

2. Judgment for the defendant on the cross-claim for $418,485.04.

3. Order the plaintiff to pay the defendant’s costs of the proceedings.

4. Grant leave to approach my Associate within 7 days to obtain a date for submissions as to any application for a different costs order arising from any settlement offers made.

2. The defendant has made an application for indemnity costs based upon a Calderbank letter. The parties agreed to file written submissions and that the costs issue should be dealt with on the papers.

The Calderbank Offer

3. The defendant relied upon a Calderbank offer dated 13 September 2021, a copy of which was annexed to the affidavit of Mr Rashid-Ring, solicitor, dated 28 January 2022. The affidavit of Mr Rashid-Ring sets out the following chronology:

1. On 20 July 2020 the plaintiff served an affidavit and an exhibit bundle which contained over 1,050 pages of documentation.

2. On 30 November 2020 the parties attended an informal settlement conference. By that time the parties had familiarised themselves with the issues in dispute and the available documentary material.

3. On 25 August 2021 the defendant served its evidence-in-chief, including the bulk of its evidence in support of its cross-claim.

4. On 26 August 2021 the parties attempted mediation, by which time the majority of the evidence-in-chief had been served.

4. The Calderbank letter dated 13 September 2021 offered to settle on the following terms:

“(a)   Our client to pay your client the total sum of $10,000 (all inclusive) (Settlement Sum) in respect of its claim in the Proceedings, within 7 days of the written acceptance of the Offer;

(b)   The parties agree to dismiss the Proceedings with no order as to costs; and

(c)    Each party is to bear their own costs of the Proceedings.”

5. The offer was expressed to be open for acceptance until 9.00am on 29 September 2021. The letter referred to Calderbank principles and indicated that if the offer was not accepted, the letter would be relied upon on the question of costs of the proceedings, which would be sought on an indemnity basis.

6. The letter went on to set out a short summary of the reasons why the offer was reasonable and represented a genuine compromise on behalf of the defendant.

Calderbank Principles

7. The following principles apply to an application for indemnity costs based on a failure to accept a Calderbank offer:

1. The onus is on the party making the Calderbank offer to satisfy the Court that it should exercise the costs discretion in its favour on the basis of the offer made.

2. The threshold requirement for a Calderbank offer to have any possible costs consequences for the offeree is that the offeree did not accept the offer and has ended up worse off under the judgment than if the offer had been accepted.

3. The making of a Calderbank offer is one of the circumstances in which the court may exercise its discretion under r 42.2 of the Uniform Civil Procedure Rules 2005 (NSW) to order that costs be assessed otherwise than on the ordinary basis.

4. It does not automatically follow that the court will make an indemnity costs order simply because the offer represented a genuine offer of compromise and was more favourable than the final judgment. Rather, the question is whether, in all the circumstances, the failure to accept the offer warrants departure from the ordinary rule as to costs, which is a matter to be determined having regard to the circumstances at the time that the offer fell to be considered.

5. Relevant factors in determining whether the failure to accept an offer was unreasonable include:

1. the stage of the proceeding at which the offer was received;

2. the time allowed to the offeree to consider the offer;

3. the extent of the compromise offered;

4. the offeree’s prospects of success, assessed as at the date of the offer;

5. the clarity with which the terms of the offer were expressed; and

6. whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.

Written Submissions

8. In written submissions dated 27 January 2022 counsel for the defendant submitted that the failure of Forte to accept the offer was unreasonable in circumstances where:

1. The offer represented a significant compromise of Moits’ cross-claim.

2. The offer was made at a late stage of the proceedings, so that Forte had a reasonable opportunity to consider all relevant material in assessing the offer.

3. The offer was open for a period of a little over a fortnight, which was a reasonable period in which to consider the offer and obtain legal advice about it.

4. Forte’s claim had poor prospects of success.

5. The offer made it plain to Forte that Moits would seek indemnity costs if it achieved an outcome that was materially better than the terms of the offer.

9. Those written submissions said that the appropriate order would be for Forte to pay the costs of Moits on an ordinary basis up to 13 September 2021 and on an indemnity basis from 14 September 2021.

10. In written submissions which were undated, the plaintiff acknowledged that the defendant’s offer was a proper Calderbank offer. The plaintiff agreed that the question was “one of reasonableness” but did not provide any submission on that topic. The plaintiff did submit that any indemnity costs order, if made, should run from the date the offer expired (29 September 2021), rather than from the date of the offer itself (13 September 2021). No authority for such submission was cited.

11. In its written submissions in reply dated 11 March 2022 the defendant submitted that Leichhardt Municipal Council v Green [2004] NSWCA 341 was authority for the proposition that indemnity costs, if awarded, should run from the day after the offer was made. At [46] in that judgment the Court of Appeal said:

“…there is no principle of law or persuasive policy reason why a defendant's unaccepted offer of compromise made by Calderbank letter should give rise to costs sanctions on any basis different to that provided by the Rules.”

12. The Rules in relation to offers of compromise give a successful party indemnity costs running from the day after the offer is made. I accept the defendant’s submission on this point.

Consideration

13. The plaintiff failed entirely in its claim and the defendant substantially succeeded on its cross-claim. The result of the trial was that the plaintiff ended up considerably worse off under the judgment than if the offer had been accepted. The difference between the outcome of the trial and the offer is over $400,000 plus the costs payable by the plaintiff to the defendant. The threshold requirement for a Calderbank offer has easily been met.

14. It is clear from the affidavit of Mr Rashid-Ring that the offer was made at a time when most of the evidence had been served. The parties, particularly in a commercial case, should have been able to assess the merits of their case and their prospects of success.

15. The offer was a genuine offer of compromise, a matter conceded by the plaintiff.

16. Since most of the evidence had been served, and the parties had met more than once to discuss the issues, 14 days was a reasonable length of time for the plaintiff to properly consider the offer.

17. The offer was expressed in very clear terms and foreshadowed an application for indemnity costs if the offer was not accepted.

18. In all the circumstances I find that the failure of the plaintiff to accept the Calderbank offer made by the defendant was unreasonable.

Orders

19. My orders are:

1. Order that the costs payable by the plaintiff to the defendant are to be assessed on an ordinary basis up to and including 13 September 2021 and on an indemnity basis after that date.

2. Order that the costs of this application for indemnity costs be paid by the plaintiff to the defendant on an indemnity basis.

Postscript: Preparation of Court Books by Mr Cameron

20. I wish to commend Mr Cameron, the solicitor for the plaintiff, upon his preparation of the Court Books, which ran to about 2,500 pages.

21. Most emails are sent as a reply to another email, which is reproduced below the reply. When email chains are put into evidence solicitors simply print and photocopy each email in the chain, which often gives many inchmeal iterations of the same conversation. To add to the difficulty in reading these emails, the conversations are all in reverse order, with the first thread at the end, often several pages away from a particular email which is important.

22. Mr Cameron went to the trouble of reproducing each email by itself and in chronological order. It looked like he used the high tech method of covering up the email either side with blank pieces of paper.  What it meant was that the Court Book read in one direction, and emails appeared in the same chronological fashion that a string of letter correspondence did. The narrative flowed which made it easier to understand and made it easier for witnesses to follow the questioning.

23. The trial was conducted with attention to detail and economy by both parties, but the process was greatly aided by the way in which Mr Cameron reproduced the many emails in the Court Books.

24. Judges, advocates and witnesses (especially) do not need to wade through ten different versions of the one email. Ralph Waldo Emerson said: “There are many things of which a wise man might wish to be ignorant”.

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Decision last updated: 15 March 2022