Gagliardi v KP Hicks (No 3)
[2018] VCC 1400
•7 September 2018
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-16-04656
| ROCCO FERNANDO GAGLIARDI | Plaintiff |
| v | |
| KP HICKS REAL ESTATE PTY LTD ACN 071 119 983 | Defendant |
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JUDGE: | HER HONOUR JUDGE MARKS | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers | |
DATE OF RULING: | 7 September 2018 | |
CASE MAY BE CITED AS: | Gagliardi v KP Hicks (No 3) | |
MEDIUM NEUTRAL CITATION: | [2018] VCC 1400 | |
REASONS FOR RULING
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PRACTICE AND PROCEDURE – COSTS – CALDERBANK OFFER – COSTS HEARING –
The plaintiff was successful in obtaining costs on an indemnity basis of the proceeding from the date a Calderbank offer expired as a result of the defendant unreasonably rejecting the offer – The defendant was successful in resisting a further application by the plaintiff for costs of the counterclaim from its inception – Whether orders should be made that the costs of the costs hearing be included in the costs of the proceeding payable by the defendant on an indemnity basis.
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiff | Mr P Wallis | Aitken Partners |
| For the defendant | Mr J Paterson | K & L Gates |
HER HONOUR:
On 29 May 2018, I delivered reasons for judgment in this proceeding: Gagliardi v KP Hicks [2018] VCC 745.
Subsequently, the parties made submissions as to what should happen with the costs of the proceeding, both in writing and in a costs hearing on 7 August 2018.
On 17 August 2018, I delivered reasons in relation to the costs of the proceeding: Gagliardi v KP Hicks No 2 [2018] VCC 1280 (the costs ruling). I said that I would make orders that:
… the agency pay Rocky’s costs of the claim and counterclaim (to be assessed by the Costs Court in default of agreement):
·on the standard basis until 19 October 2017;
·on the indemnity basis from 20 October 2017.
There is now an argument as to who should pay the costs associated with obtaining the costs ruling.
At the end of the costs ruling, I indicated my preliminary view that the agency – the defendant – should pay the costs associated with obtaining the costs ruling on the same indemnity basis as the rest of the proceeding after 19 October 2017:
93 My preliminary view is that these should be payable by the agency on an indemnity basis – like the rest of the proceeding after 19 October 2017.
94 Rocky has been successful in obtaining indemnity costs from 19 October 2017. That issue was by far the most significant aspect of the costs dispute before me. Rocky’s costs after 19 October 2017 dwarf those prior to it. The difference in costs assessed on a standard basis and costs assessed on an indemnity basis relating to the counterclaim prior to 19 October 2017 are not high in circumstances where Rocky had only spent about $75,000 on the proceeding – including the claim as well as counterclaim – prior to the Calderbank offer (as set out in Wangmann’s affidavits).
95 Rocky was also successful in resisting an order for an apportionment of costs, and for there to be no order as to costs of the directions hearing.
96 If the Calderbank offer had been accepted, the costs hearing – like the trial – would not have been necessary.
I indicated that if either party sought a different order, they could file submissions and I would deal with that issue on the papers.
The agency seeks orders in relation to the costs hearing that:
(a)the agency pay Rocky’s costs of and incidental to the Calderbank offer application on the standard basis; and
(b)Rocky pay the agency’s costs of and incidental to it successfully resisting the counterclaim costs application on the standard basis.
Alternatively, the agency seeks orders that there be no order as to costs in respect of the costs hearing.
Rocky seeks the orders I indicated I thought appropriate as my preliminary view.
Both parties have filed submissions.
Having considered these, I am confirmed in my preliminary view that the costs of and associated with the costs hearing should be payable by the agency on an indemnity basis.
The standard practice of Victorian courts is to extend an order for indemnity costs in favour of a successful party, made on the basis of the unreasonable failure by the other party to accept a Calderbank offer, to the costs of the costs hearing at which the indemnity cost order was sought: Charan v Nationwide News Pty Ltd [2018] VSC 89 at [49]; Weingart v Leanne Cain & Associates (No 2) [2018] VSC 245 at [32]; Gill v Gill (No 2) [2014] VSC 612 at [26]; MT Associates Pty Ltd v Aqua-Max Pty Ltd [2000] VSC 163 at [184]; BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Industriewerke GmbH (No 3) [2012] VSC 414 at [121]; Winky Pop Pty Ltd v Mobil Refining Australia Pty Ltd [2015] VSC 580 at [118]; and Hewitt v Count Financial Ltd [2017] VCC 405 at [53].
There is no reason in principle to treat the cost of a costs hearing about the effect of a Calderbank offer any differently to the costs of the rest of the proceeding from the date of non-acceptance of the Calderbank offer – they are costs which would not have been incurred had the party acted reasonably and accepted the offer made.
The only difference between the costs orders ruled in the costs ruling, and those sought by Rocky, was that Rocky sought indemnity costs of the counterclaim from its inception, 25 November 2016. I ordered indemnity costs on the counterclaim from 20 October 2017.
As Rocky submitted, Rocky was very successful in his costs application in terms of money value:
Mr Gagliardi’s costs up to the date for acceptance of the Calderbank offer were $73,571 of his total costs of the proceeding (not including the costs of the costs hearing) of $331,226. Assuming (generously to Hicks RE) that Mr Gagliardi’s costs up to the date for acceptance of the Calderbank offer were split evenly between the claim and counterclaim, then indemnity costs orders have been made in respect of ($331,226 - $36,785) ÷ $331,226 = 89% of the total costs in respect of which Mr Gagliardi sought indemnity costs in the proceeding.
The agency seeks to distinguish the cases set out above because Rocky here adopted a two pronged approach: he did not just seek costs going forward from the non-acceptance of the Calderbank offer, he also sought costs of the counterclaim from its inception (the counterclaim inception costs claim).
The agency argues that the counterclaim inception costs claim was ‘not an insignificant application’ and that it raises serious issues to do with the agency’s motivation in bringing the counterclaim. It argues that the Court was referred to many authorities in the course of the argument about that issue and that a considerable portion of the written and oral submissions were directed at the counterclaim inception costs claim.
It submits that ‘approximately half’ of Rocky’s written submissions, ‘one-third’ of the agency’s written submissions, and ‘52 pages of transcript’ were directed at the counterclaim inception costs claim.
Having reviewed the submissions of both parties, and the 180 page transcript, I do not accept that the amount of submissions and transcript directed solely at dealing with the counterclaim inception costs claim was as high as suggested by the agency.
It is significant that one of the factors Rocky submitted the Court should take into account in ordering costs on an indemnity basis from after the Calderbank offer was rejected was that at that time – the time of the Calderbank offer – the counterclaim had little merit.
It is true that Rocky sought costs on the indemnity basis from the counterclaim’s inception, but most of the arguments made by Rocky about the counterclaim applied equally to the fact that it was maintained at the time of the Calderbank offer, and afterwards. The majority of the submissions about the counterclaim were directed to the question of what the merit of the counterclaim was, on an objective basis, at the time the Calderbank offer was sent. There was no evidence of the merits of the counterclaim having changed between its inception and the Calderbank offer.
A review of the Travis Robert Payne affidavit (sworn 20 July 2018, and relied on by the agency) indicates that he was principally there concerned with detailing what the agency considered to be the strength of its position, in relation to the defence and counterclaim, at the time the Calderbank offer was sent. There are only a few sentences in it that go further than that to deal with the agency’s position at the time the counterclaim was instigated – no doubt because that was not any different to its position later when the Calderbank offer was sent.
The agency also argues that its submissions about the costs of the directions hearing on 19 October 2017, and the apportionment of costs argument, were of relevance to costs on Rocky’s claim and were not of relevance to the arguments in the counterclaim inception costs claim. This appears to be directed to my preliminary view at [93] and [95] of the costs ruling.
However, I consider the result of both those issues to be relevant to my decision as to the costs of the costs hearing. They are two further issues on which Rocky was successful, which took up time in preparation and in the hearing.
The directions hearing dealt with what happened in the proceeding, which at that time included both claim and counterclaim. It is simply a part of the proceeding. The agency sought to carve out what happened in relation to the costs of that direction hearing unsuccessfully.
The apportionment of costs argument was relevant to Rocky’s claim in that the agency argued that costs should be apportioned because it had been successful on a small portion of its defence of Rocky’s claim. The agency did not succeed in obtaining a ruling that costs be apportioned.
The agency stated in its written submissions ‘that the court did not make orders that the plaintiff’s costs of the directions hearing on 19 October 2017 should be on an indemnity basis’. That is correct. However, I did not uphold the agency’s submission that there should be no costs of that directions hearing.
Instead, in the costs ruling at [92] I stated in relation to the costs of that directions hearing:
… no reason could be advanced as to why these costs should be dealt with differently to other reserved costs. It is customarily the case that the losing party pays reserve costs. I will not make an order that there be no order of costs of the direction hearing. They will form part of the costs the agency pays as losing party.
The directions hearing occurred on 19 October 2017. My costs reasons indicated that the agency is to pay Rocky’s costs up to 19 October 2017 on a standard basis, and thereafter on an indemnity basis. The costs of the directions hearing are thus payable on the standard basis.
The costs of and associated with the costs hearing are to be included in the cost of the proceeding payable by the agency on an indemnity basis from 20 October 2017.
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Certificate
I certify that these 6 pages are a true copy of the reasons for ruling of her Honour Judge Marks, delivered on 7 September 2018.
Dated: 7 September 2018
Samantha Marinic
Associate to Her Honour Judge Marks
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