Garraway Metals P/L v Comalco Aluminium Ltd

[1993] FCA 321

Re: GARRAWAY METALS PTY LTD
And: COMALCO ALUMINIUM LIMITED
No. VG68 of 1991
FED No. 321
Number of pages - 3
Costs

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Heerey J(1)

CATCHWORDS

Costs - open letter of offer ("Calderbank letter") - Calderbank v Calderbank (1976) Fam 93 - rules providing for payment into court - appeal pending against judgment - judgment sum in excess of offer - failure by applicant on bulk of issues - form of costs order.

Calderbank v Calderbank (1976) Fam 93.

Cutts v Head (1984) Ch 290.

Smith v Smith (1987) 2 Qd R 807.

Messiter v Hutchinson (1987) 10 NSWLR 425.

HEARING

MELBOURNE, 10 May 1993

#DATE 10:5:1993

Counsel for the applicant: J D Elliott

Solicitor for the applicant: Phillips Fox

Counsel for the respondent: P D Santamaria

Solicitor for the respondent: Arthur Robinson and Hedderwicks

ORDER

THE COURT ORDERS:

(1) That the respondent pay the applicant's costs of and incidental to

its claim for consequential loss up to and including 11 December 1992, including reserved costs.

(2) That the respondent pay 1/6th of the applicant's costs thereafter. (3) That upon the applicant undertaking either by its counsel or by

letter filed with the Court that the amount of the judgment

ordered this day will be held in an interest bearing bank account in the name of the applicant solicitor pending the determination of the appeal with the applicant to be entitled to the interest on such amount; the respondent's application for a stay of the

judgment given this day is dismissed.

(4) That otherwise the parties pay their own costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

JUDGE1

HEEREY J The parties have made submissions as to what orders should be made as to costs in relation to the judgment of $405,383 for consequential loss. To consider these submissions it will be necessary to say a little about the history of the litigation. On 6 November 1992, I gave judgment in favour of the applicant for the two amounts of $538,070 and $310,000 and I ordered that the respondent pay the applicant's costs including reserved costs. The respondent filed a notice of appeal against that judgment. The trial of the claim for consequential loss commenced on Monday, 7 December 1992.

1. On the previous Friday, counsel for the respondent made to the applicant's counsel an open offer of $328,835. That was followed by a letter dated 11 December from the respondent's solicitors to the applicant's solicitors marked "without prejudice save as to costs". This letter confirmed the offer I have mentioned and the fact that it had been rejected. It was noted at the same time that the applicant had advised that it was not pursuing its claim for loss of goodwill. The letter continued:
   

"Our client is now prepared to offer your client $350,000 in

relation to damages arising out of consequential loss. This

offer does not include costs which will be left for the

Court to determine. This offer is not to be taken as an

admission of liability. Our client preserves its rights to

continue with its appeal on the judgment entered on 6

November 1992."

1. The trial of the consequential loss claim occupied three and a half days of hearing. Both parties filed witness statements and very detailed written submissions. The claim raised quite difficult evidentiary disputes as well as important questions of law. As my reasons have indicated, the difference in the calculation of interest which resulted in the award I have made in favour of the applicant was the subject of evidence, although of quite short duration.

2. The first question which arises is whether I should take any account at all of the respondent's solicitors letter of 11 December 1992. This form of letter has become known as a Calderbank letter, after Calderbank v Calderbank (1976) Fam 93, 106. Mr Elliott for the applicant argued that I should ignore the letter. He relied on the decision of the English Court of Appeal in Cutts v Head (1984) Ch 290 at 312 and 317. The essence of those statements by Oliver and Fox LJJ was that where rules provide for payment into court in respect of a money claim, a Calderbank letter should ordinarily not be accepted as a substitute where a payment into Court would be appropriate.

3. That approach was followed in Queensland in Smith v Smith (1987) 2 Qd R 807 at 809. However, in Messiter v Hutchinson (1987) 10 NSWLR 525 at 528 to 529. Rogers J took the view that although the Calderbank letter evolved in circumstances where the procedure of payment into Court was unavailable, there was no reason in principle why it must necessarily and inevitably be so restricted.

4. But in the present case there were in any case circumstances which made a payment into court inappropriate. The respondent, as was its right, was challenging the judgment of 6 November 1992 on appeal. If it succeeds on that appeal, of course no question of consequential loss will arise. The respondent could not therefore pay money into court on the consequential loss claim without running the risk that the applicant would take the money. If that occurred, any liability of the applicant to repay the money in the event of the appeal succeeding would be, to say the least, a matter of considerable doubt.

5. So for those reasons I think I should have regard to the respondent's letter. The question then is what is the appropriate order that should flow from that. It was conceded the respondent should be liable for the applicant's costs of and incidental to its claim for consequential loss up to and including 11 December.

6. Thereafter the position is that the applicant was obliged to continue with the litigation to achieve a result which was in excess of the amount offered in the letter, and in excess by, it has to be conceded, not a trivial amount. Nevertheless, the peculiar circumstances of this case are that the great bulk of the rest of the trial was concerned with issues on which the applicant failed. Had the remainder of the hearing been confined to the question of calculation of interest it would have been resolved in a hearing of very much less time. Indeed, there is some force in the point of the respondent's counsel that it might have been resolved by counter offer and negotiations.

7. I think the appropriate course is to allow the applicant its costs for the case after 11 December, but apportioned in the light of the time and cost that were devoted to the question of calculation of interest as against the loss of profits claim. In the event I think the applicant should be awarded 1/6th of its costs after 11 December.

8. There was also an argument that the applicant should in any event pay the costs of the respondent incurred in respect of the applicant's claim for goodwill. This was a substantial claim of some $1.6 million which was abandoned prior to trial. However, I do not propose to make any separate order in relation to that. It is one thing for a court to make an adjustment of costs orders where various issues have been run and some fail and some succeed. But I think it is going too far for courts to inquire into the merits of claims, the merits of which are never exposed to the court and which may have been abandoned for an infinite variety of reasons.

9. Finally, the parties asked that an order which will preserve the money in secure form until the current appeal is concluded should be made along the lines of paragraph 4 of my order of 6 November, 1992. It is not yet known whether there will be a cross appeal by the applicant against the judgment I have given today but in any case it is desirable that the same position be preserved in relation to the amount for which judgment has been ordered today. Therefore I will make the following orders:
   (1) That the respondent pay the applicant's costs of and incidental to
   

its claim for consequential loss up to and including 11 December 1992, including reserved costs.

(2) That the respondent pay 1/6th of the applicant's costs thereafter.

(3) That upon the applicant undertaking either by its counsel or by

letter filed with the Court that the amount of the judgment

ordered this day will be held in an interest bearing bank account in the name of the applicant solicitor pending the determination of the appeal with the applicant to be entitled to the interest on such amount; the respondent's application for a stay of the

judgment given this day is dismissed.

(4) That otherwise the parties pay their own costs.