Fullinfaw v Neil Fletcher Design Pty Ltd (No 2)
[2019] VSC 173
•21 March 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S CI 2018 01516
| ENID FULLINFAW | First Plaintiff |
| NIGEL FULLINFAW | Second Plaintiff |
| v | |
| NEIL FLETCHER DESIGN PTY LTD (ACN 087 852 328) | Defendant |
---
JUDGE: | GARDE J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 14 February and 12 March 2019 |
DATE OF JUDGMENT: | 21 March 2019 |
CASE MAY BE CITED AS: | Fullinfaw & Anor v Neil Fletcher Design Pty Ltd (No 2) |
MEDIUM NEUTRAL CITATION: | [2019] VSC 173 |
---
COSTS – Calderbank offer – Offer inclusive of court proceeding and tribunal proceeding – Relevant considerations – Standard basis of costs – Hazeldene’s Chicken Farm Pty Ltd v Victoria WorkCover Authority (No 2) (2005) 13 VR 435 – Calderbank v Calderbank [1975] 3 WLR 586.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr H Foxcroft QC | Guymer Lawyers |
| For the Defendant | Mr N Phillpott | Macpherson Kelley |
HIS HONOUR:
Background
In this proceeding (‘the court proceeding’) the plaintiffs were successful in an appeal under s 148(1) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic). The appeal related to the Tribunal decision in proceeding No. BP1326/2016 on 27 March 2018 (‘the tribunal proceeding’). The Court found that the Tribunal erred on a question of law when it dismissed the plaintiffs’ claim for liquidated damages in the sum of $14,000 (‘liquidated damages decision’).[1]
[1]Neil Fletcher Design Pty Ltd v Fullinfaw [2018] VCAT 188.
On 12 March 2019, the Court made orders setting aside the decision of the Tribunal to the extent necessary to award the plaintiffs an additional $14,000. The defendant’s claim in the Tribunal was dismissed, and an order made on the counterclaim for the defendant to pay $84 to the plaintiffs.
The plaintiffs made a Calderbank offer[2] to the defendant by letter on 13 September 2018. The offer was to settle both the tribunal proceeding and the court proceeding on the basis that each party bear their own costs.
[2]Calderbank v Calderbank [1975] 3 WLR 586.
The plaintiffs exceeded the offer by a small amount, and a potential order for costs of the court proceeding in their favour. They now seek their costs of the court proceeding on an indemnity basis.
Tribunal proceeding
The tribunal proceeding was commenced by the builder in September 2016. Following the exchange of points of claim, defence, counterclaim and reply, the proceeding was heard by the Tribunal over five days in November and December 2017. Written submissions were filed in lieu of final addresses. The Tribunal published its decision on 27 March 2018.
The Tribunal reserved issues of interest, costs, and reimbursement of fees for further consideration. No decision on these issues has been made by the Tribunal pending a decision in the court proceeding.
Court proceeding
The court proceeding was commenced in April 2018. Consent directions were given by a judicial registrar in May and an extension of time agreed in September 2018. The parties efficiently resolved interlocutory steps by agreement. Following a hearing on 14 February 2019, judgment was given on 12 March 2019.
When the court proceeding was commenced, there were two issues raised by the plaintiffs. The first related to the liquidated damages decision. This was pressed at the court hearing and was successful. The second issue related to what was described by the Tribunal as the timber floor decision (‘timber floor decision’). This was the single most significant defect alleged by the plaintiffs against the defendant, amounting to a claim of $87,337. The Tribunal assessed this item at $750. The plaintiffs did not pursue this issue at the court hearing.
Other correspondence
On 13 September 2018, the plaintiffs’ solicitors sent a Calderbank offer to the defendant’s solicitor. The offer was marked ‘Without Prejudice Save as to Costs’. It stated that the plaintiffs would confine the appeal to the liquidated damages decision only, and enclosed the opinion of Mr Foxcroft QC as to the merits of the appeal on this issue. The opinion was to the effect that the plaintiffs were likely to succeed in setting aside the liquidated damages decision of the Tribunal. The letter stated the plaintiffs would be the net winners in the tribunal proceeding albeit by a small amount. After referring to the likely costs of the court proceeding if contested to finality, the letter proposed that both the tribunal proceeding and the court proceeding be resolved with no orders as to costs. The offer referred to the decision of the Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victoria WorkCover Authority (No 2) (‘Hazeldene’)[3] and stated that the plaintiffs, if successful in the appeal, would seek court costs on an indemnity basis. It remained open until 5pm on 26 September 2018.
[3](2005) 13 VR 435 (‘Hazeldene’).
On 17 September 2018, the defendant’s solicitors advised that they were seeking instructions in relation to the offer, and requested that the plaintiffs confirm in open correspondence or amend the notice of appeal to the effect that the appeal was now confined to the question of liquidated damages only.
On 26 September 2018, the defendant’s solicitors rejected the offer, noting that no confirmation had been received in open correspondence that the appeal was to be confined to the question of liquidated damages. They advised that they would continue to prepare for the appeal including drafting submissions on the basis that the plaintiffs were pursuing all grounds in the notice of appeal.
The following day the plaintiffs’ solicitor provided an amended notice of appeal confined to the liquidated damages decision. This in turn gave rise to further correspondence between the parties’ solicitors, as to the adequacy of the amended notice.
On 2 November 2018, in a letter marked ‘Without Prejudice Save as to Costs’, the defendant’s solicitors put an all-in offer that the plaintiffs pay the defendant the sum of $65,000 inclusive of costs, interest and GST in full and final settlement of the tribunal proceeding, the court proceeding and all other matters in dispute. This offer was to remain open until 4.00pm on Friday 16 November 2018. The plaintiffs’ solicitors rejected this offer on 19 November 2018.
Relevant legal principles
In Hazeldene, the Court of Appeal held that the discretion as to costs, like every other discretion, must be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. The Court will ordinarily have regard to at least the following matters:
(a)the stage of the proceeding at which the offer was made;
(b)the time allowed for the offeree to consider the offer;
(c)the extent of the compromise allowed;
(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.[4]
[4]Ibid 442.
Analysis
In the present case there is a significant difficulty in treating either of the offers that passed between the parties’ solicitors as Calderbank offers in the court proceeding. Both offers relate to the tribunal proceeding and the court proceeding taken together. The Court has no means of assessing the reasonableness of an offer concerning the tribunal proceeding. Apart from the appeal to the Court on the limited issue of the liquidated damages decision, the Court has no jurisdiction over, or oversight of the tribunal proceeding. The Court does not know when offers were made, what they were, or when mediation took place in the Tribunal. It is not in a position to, and should not, make any assessment of the way the parties have conducted the tribunal proceeding, or how they should have responded to offers made in that proceeding.
Issues of interest, costs and reimbursement of fees have yet to be decided by the Tribunal. The Court is unaware of these issues and has not heard the parties on them. It would be most inappropriate for the Court to make a judgment at this stage or express any view that interferes with the exercise by the Tribunal of its jurisdiction as to these matters.
As to the factors listed in Hazeldene:
(a)The offer was made at a time when the plaintiffs had begun to prepare their outline of submissions for the hearing of the appeal in accordance with the directions of the Court. The defendant was yet to prepare its outline of submissions.
(b)The time allowed for the defendant to consider the offer was 13 days. Previous offers had been made in the course of the tribunal proceeding. The defendant did not submit that the time allowed for consideration was inadequate.
(c)The extent of the compromise offered was small ($84) as compared with the ultimate result. Of more significance was the fact that the plaintiffs offered to bear their own costs of the appeal. If successful on the appeal as they were, they would ordinarily be entitled to a standard basis costs order.
(d)The plaintiffs provided an opinion of Mr Foxcroft QC in support of their offer. The opinion was very largely vindicated by the judgment in the proceeding. The provision of the opinion to the defendant was a helpful step in potentially settling the dispute. For the reasons given in the judgment, the defendant’s prospects of success on the liquidated damages decision were low, as the opinion of senior counsel suggested. On the other hand, the defendant’s prospects of success concerning the timber floor decision were good and that issue was later abandoned by the plaintiffs.
(e)The offer was clear in its language and terms. However, it included the tribunal proceeding which goes beyond the purview of the Court in resolving issues of court costs.
(f)The offer foreshadowed an application for indemnity costs in the event of rejection.
There are two additional factors that I should take into consideration. Firstly, the defendant submitted, and the plaintiffs agreed, that the proceeding had public interest because it raised significant questions of law. I was informed that this was the first occasion that a judge of the Court had considered the scope and construction of s 41 of the Domestic Building Contracts Act 1995 (Vic). The second factor relates to the abandonment of the timber floor claim. Although it was said in ‘without prejudice’ correspondence that this claim would be abandoned, it was not actually abandoned by amendment of the notice of appeal until after the expiration of the offer period.
In these circumstances, I find that this is not an occasion for the award of indemnity costs. The Court is not in a position to address the reasonableness or adequacy of the offer made by the plaintiffs in the context of the tribunal claim or the conduct of the parties in the Tribunal. Although the plaintiffs acted properly in providing their own senior counsel’s written opinion as to their prospects of success in appealing the liquidated damages decision, the abandonment of the timber floor claim, and the small size of the ultimate win all point to the award of costs on the standard basis.
In addition to a standard basis costs order, it is fair and just that the plaintiffs’ costs of and incidental to obtaining senior counsel’s opinion be paid by the defendant. The opinion assisted negotiations and proved an accurate guide for both parties as to the ultimate outcome of the appeal. Subject to hearing submissions from the parties, I will so order.
1