Freestyle Building v Calco Timbers (Costs Decision)
[2014] VMC 7
•19 MARCH 2014
| IN THE MAGISTRATES’ COURT OF VICTORIA |
AT MELBOURNE
CIVIL DIVISION
Case No. C13303510
| FREESTYLE BUILDING CO PTY LTD | Plaintiff |
| -and- | |
| CALCO TIMBERS PTY LTD | Defendant |
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MAGISTRATE: | GINNANE |
WHERE HELD: | MELBOURNE |
| DATE OF FINAL WRITTEN SUBMISSIONS ON COSTS: | 3 MARCH 2014 |
DATE OF DECISION: | 19 MARCH 2014 |
CASE MAY BE CITED AS: | FREESTYLE BUILDING v CALCO TIMBERS (COSTS DECISION) |
REASONS FOR DECISION
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Catchwords: Costs – plaintiff’s proceeding dismissed – application by defendant for indemnity costs or uplift to next applicable scale – offer of compromise made by defendant and rejected by plaintiff – consideration of principles applicable – application refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms Cooper | Marshalls & Dent |
| For the Defendant | Mr Catlin | Harwood Andrews |
HIS HONOUR:
On 21 February 2014 I delivered written reasons for decision in which I dismissed the plaintiff’s claim. On taking judgment counsel for the defendant Mr Catlin applied for a special costs order. He relied upon a written submission.
Counsel for the plaintiff opposed the making of a special costs order. Ms Cooper sought the opportunity for the plaintiff to file any submission in opposition in light of my reasons for decision.
The defendant submitted that there should be a departure from the ordinary award of costs on scale because of the circumstances attendant on the service by it of an offer of settlement expressed as a Calderbank offer and its rejection by the plaintiff.
Calderbank offers derive their name from the English Court of Appeal decision in Calderbank v Calderbank[1] which approved the practice of making offers of compromise expressed to be “without prejudice” but reserving a right to refer to the document on the question of costs. Although initially thought to be confined to matrimonial proceedings where no payment into court procedure existed, following on the English Court of Appeal decision in Cutts v Head[2] the practice was formally approved for all manner of cases—but only where the option of making a payment into court was inappropriate. The use of Calderbank offers is nowadays a common occurrence.
The applicable legislation and rules relating to costs
[1] [1975] 3 All ER
[2][1984] 1 All ER 597
The power to order costs is found in s.131 of the Magistrates’ Court Act 1989. It relevantly provides–
131 Costs to be in the discretion of the Court
(1)The costs of, and incidental to, all proceedings in the Court are in the discretion of the Court and the Court has full power to determine by whom, to whom and to what extent the costs are to be paid.
(2)Subsection (1) applies unless it is otherwise expressly provided by this or any other Act or by the Rules or the regulations.
(2A)In exercising its discretion under subsection (1) in a proceeding, the Court may take into account any unreasonable act or omission by, or on behalf of, a party to the proceeding that the Court is satisfied resulted in prolonging the proceeding.
The Magistrates’ Court General Civil Procedure Rules 2010 are also applicable.
Rule 63.02 General powers of Court
The power and discretion of the Court as to costs under section 131 of the Act must be exercised subject to and in accordance with this Order.
Without descending into an analysis of Calderbank offers as opposed to Offers of Compromise under the Rules of Court, it is arguably sufficient to say that as between a Calderbank offer and an Offer of Compromise pursuant to the rules, that as far as the latter is concerned, it “prescribes presumptive costs entitlements in the offereor (subject to the court’s discretion to order otherwise), whereas the former rests entirely on the court’s discretion” (see: Dal Pont, Law of Costs, LexisNexis Butterworths 2009).
Calderbank Offers
There is an abundance of first instance and appellate decisions touching on the issue before me. In MT Associates Pty Ltd v Aqua-Max Pty Ltd (No 3[3]) Gillard J adopted the following passage from the judgment of Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corporation[4] :
…the evidence of a Calderbank letter, the rejection of the offer contained therein and the failure to obtain a result better than the offer, places the offeror in the position that a court should approach an application by that party for indemnity costs with a predisposition to holding that it is entitled to indemnity costs.
[3][2000] VSC 163
[4](1996) 138 ALR 425 at 446
As events transpired the defendant’s offer to settle proved better than the result for the plaintiff. Therefore according to the applicable authorities in this area of the law I am next directed to identifying and considering whether in light of the circumstances prevailing at the time the offer was rejected, the rejection was reasonable. In Colgate Palmolive Company v Cussons Pty Ltd.[5] Sheppard, J. listed amongst the circumstances he considered as warranting the exercise of the discretion to award indemnity costs –
an imprudent refusal of an offer to compromise.[6]
[5] (1993) 46 FCR 225.
[6] At 233.
In Aljade and MKIC v OCBC,[7] Redlich, J. (as he then was) rejected the notion of any the existence of presumptions, holding that the weight of authority –
strongly points to an approach that involves no preconceptions about when the rejection of a Calderbank offer should lead to the making of a special costs order. It will do so where it is concluded that the rejection of the offer was unreasonable.
[7] [2004] VSC 351 (Redlich, J., 22 September 2004).
I think therefore that I would fall into legal error by elevating any particular discretionary consideration applied in one case to inform the result in all applications. I am satisfied that the weight of authority is to the effect that there is in fact no presumption that the party rejecting the offer and who does not best it at trial should pay the offeror’s costs on an indemnity basis if the offeree receives a less favourable result.[8] Furthermore as Redlich J said, an approach predicated on such a presumption is not justified and as he referred to, has been rejected in cases by the New South Wales Court of Appeal, by the Federal Court of Australia and by the Queensland Court of Appeal.
[8] See, for example, Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425.
In SMEC Testing Services Pty Ltd v Campbelltown City Council[9] Gyles, J.A expressed a similar approach as applied in Aljad but expressed in these terms:
In the end the question is whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rules as to costs...
[9] [2000] NSWCA 323 at [37]
The Court of Appeal in Hazeldene’s Chicken Farm v The Victorian WorkCover Authority (No.2)[10] approved the approach of Redlich J in Aljad as correct and therefore the rejection of a Calderbank offer should be treated as a matter to which the Court should have regard when considering whether to order indemnity costs but not as determinative of the application. I have adopted this reasoning in my consideration of and determination of the matter.
[10][2005] VSCA 298
The principles underpinning settlement procedures
The decision in Grbavac v Hart,[11] is a relevant. Hayne, J.A. (as he then was) cited with approval what had been said by the New South Wales Court of Appeal in Maitland Hospital v Fisher (No.2)[12] about the policy rationale underlying the availability of special orders for costs where offers of compromise are rejected. As the Court of Appeal in Hazeldene pointed out, although what was said in Grbavac v Hart was expressed in relation to offers of compromise, the exposition is equally relevant to the exercise of the costs discretion where a Calderbank offer has been made. The policy objectives underlying offers were said to be:
[11] At 164-165
[12] (1992) 27 NSWLR 721 at 724
(1)To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff’s real claim which can be placed before its opponent without risk that its ‘bottom line’ will be revealed to the court;
(2)To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and
(3)To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances that party should ordinarily bear the costs of litigation.
These policy underpinnings were tempered by the Redlich, J’s recognition in Aljade,[13] that there are other competing objectives of equal importance.
Potential litigants should not be discouraged from bringing their disputes to the Courts. It is such considerations which underlie the general rule that an order for special costs should only be made in special circumstances.
[13] (supra) at [60]
In Hazeldene, the Court of Appeal said that in its view these competing considerations can be sufficiently accommodated by applying a test of (un)reasonableness. The critical question becomes whether the rejection of the offer was unreasonable in the circumstances. The Court of Appeal said that it saw no justification for a more stringent test such as “manifestly” or “plainly” unreasonable.
There is no ready answer to deciding whether conduct is “reasonable” or “unreasonable” as it will always involve matters of judgment and impression. These are questions about which different judicial officers might properly arrive at different conclusions. As Gleeson, C.J. has said, “Unreasonableness is a protean concept”.[14] Nonetheless, the test of reasonableness is the yardstick against which I have exercised my discretion.
Factors relevant to assessing reasonableness
[14]ReMinister for Immigration and Multicultural Affairs; ex parte Applicant S20/2002 (2003) 77 ALJR 1165 at 1170 [20]
The exercise of the discretion with respect to costs must, like every discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations.[15] It must be exercised according to law. Therefore, it is not sensible to compile an exhaustive checklist of relevant circumstances but in considering a submission that the rejection of a Calderbank offer was unreasonable I should at least have regard to the following matters identified in Hazeldene:[16]
[15] See House v R (1936) 55 CLR 499 at 505
[16] (supra) at [25]
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 in the event of the offeree’s rejecting it.
Because the unreasonable refusal of an offer of compromise is, by itself, a proper ground for the award of indemnity costs it seems that it is unnecessary that the plaintiff make out facts that might be relevant to other, well-recognised, grounds for indemnity costs. This was explained by Redlich, J. in Aljade, as follows:
It is not necessary to establish misconduct by the offeree before the rejection of the offer can be viewed as unreasonable. Lack of merit in the way a party has conducted its case is not a pre-requisite for the making of an indemnity costs order [on this ground].[17]
[17] At [93]
It is also unnecessary for the offeror to show that the offeree acted with “wilful disregard of known facts or clearly established law”, or that it acted with “high-handed presumption”.[18]
Application of principles to facts
[18] cf. Colgate Palmolive (supra) loc cit.
The proceeding was commenced on 27 November 2012. The offer was made on 19 December 2012, that is very soon after the proceeding had been commenced. Indeed the date of the letter of offer and the date the defence was filed were the same. The offer was expressed to remain open for a period of 21 days. However the defendant points to the intervention of the Christmas break as a relevant discretionary fact working against the offer in terms of the time available to consider it.
In Hall v Manark Printing Pty Ltd[19] at [51] I said:
I think there may well be instances in which the time allowed or expressed for which an offer remains open could be of such a limited duration that it would be plainly unreasonable to sanction a rejection of it as warranting a special costs order. However, the time allowed for this offer needs to be evaluated against the background well-known to the parties by this date.
[19][2005] VSCA 29810 December 2013
I repeat and adopt that statement. I don’t regard the effective time available for its consideration by the plaintiff as a disentitling factor in itself.
I did not regard the plaintiff’s claim as unmeritorious. It must be understood that a claim under the consumer law statute and the prospects of its success will sometimes be informed by facts similar to a claim in contract or negligence but often the facts will be different or differently nuanced so as to enliven an action, for example, of statutory misrepresentation. In my published reasons, I said at [60] that:
Counsel for the defendant in both his written and oral submissions was at pains to emphasise that the plaintiff’s claims were not brought in contract law. So much is readily apparent. Furthermore the defendant characterised the plaintiff’s claim as “highly novel” and its “novelty” being “manifestly evident from what it would mean for all quotes – a flood of misrepresentation claims”. If that is the consequence of an application of the law to the facts, so be it.
The plaintiff’s claim was not as the defendant described a “‘try on’. It attempted to bind a party to a mere quote using laws of misrepresentation[20]”. It is sufficient to say that to utilise the Australian Consumer Law where contract or other avenues of remedies are not open should not be thought as engaging in a ‘try on”.
[20] Defendant’s costs submissions
The extent of the compromise expressed in the defendant’s solicitor’s letter was for the plaintiff to walk away and for each party to bear its own costs. It required more than that however and was expressed in these terms:
“If the plaintiff discontinues the proceeding at this early stage our client is prepared to, on a without prejudice basis, bear its own costs in relation to the proceeding. This offer is subject to the plaintiff waiving its rights in relation to the tender process for the project and the project”.
I do not regard the rejection of the offer on those terms at that date as unreasonable.
I am not persuaded that I can make anything of the submission by the defendant’s counsel in support of his claim for a departure from the regular costs order by reason that neither the filing of the defence (the same day as the Calderbank offer) or the subsequent provision of discovery made any qualitative difference to the view I should form of the reasonableness of the rejection of the offer at the date it was made.
In Hall v Manark Printing referred to earlier there had been two Calderbank Offers and the second of them was made just prior to the commencement of the hearing. I had no reservation in finding that whilst the rejection of the first offer should not have been adjudged unreasonable, the second rejection occurring at the stage of the proceedings it did was unreasonable. The position in Manark was quite different to the application at hand.
I note for the sake of completeness that the parties agreed that the offer was expressed in sufficiently clear and cogent terms and also that the letter of offer foreshadowed such an application for costs as has been made by the plaintiff.
Conclusion
I am not satisfied having regard to the entirety of the case, in particular having regard to the stage at which the offer was made and the terms of the offer that the plaintiff should be required to compensate the defendant with an award of costs that departs from the regular order. Accordingly, I order that the plaintiff pay the defendant’s costs on scale F and in default of agreement the order for costs be taxed.
I reserve liberty to apply.
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