Gideon Rathner as trustee for Garland Lot 4 Unit Trust v Bartlett (No 2)

[2023] NSWSC 1166

Supreme Court

New South Wales

Medium Neutral Citation:

Gideon Rathner as trustee for Garland Lot 4 Unit Trust v Bartlett (No 2) [2023] NSWSC 1166

Hearing dates:

On the papers

Decision date:

28 September 2023

Jurisdiction:

Equity - Technology and Construction List

Before:

Ball J

Decision:

The defendants’ notice of motion filed on 11 September 2023 be dismissed with costs

Catchwords:

COSTS — Party/Party — Bases of quantification — Indemnity basis — Calderbank offer — “Walk away” offers — Offers were not genuine offers of compromise

Cases Cited:

Calderbank v Calderbank [1975] 3 All ER 333

Gideon Rathner as trustee for Garland Lot 4 Unit Trust v Bartlett [2023] NSWSC 1026

Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; 13 VR 435

Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358

Leichhardt Municipal Council v Green [2004] NSWCA 341

Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344

Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124

Category:

Costs

Parties:

Gideon Rathner as trustee for Garland Lot 4 Unit Trust (Plaintiff | First Cross Defendant)
Philip Bartlett (First Defendant)
Janet Pennington (Second Defendant)
P&J Projects Pty Ltd (Third Defendant | Cross Claimant)
Australian Securities & Investments Commission (Second Cross Defendant)

Representation:

Counsel:
SA Lawrance SC with A Campbell (Plaintiff | First Cross Defendant)

Solicitors:
Mangioni Biggs + Co (Plaintiff | First Cross Defendant)
Henry William Lawyers Pty Ltd (Defendants | Cross Claimant)

File Number(s):

2020/129269

20

JUDGMENT

Introduction

1. I delivered judgment in this matter on 29 August 2023 in which I dismissed the proceedings and ordered that the plaintiff pay the defendants’ cost: see Gideon Rathner as trustee for Garland Lot 4 Unit Trust v Bartlett [2023] NSWSC 1026. By a notice of motion filed on 11 September 2023, the defendants seek to vary that costs order so that it provides that the plaintiff pay the defendants’ costs up to 20 August 2021 on the ordinary basis and that he pay the defendants’ costs on an indemnity basis from that date. In support of that application, the defendants rely on three informal offers of compromise served in accordance with the principles stated in Calderbank v Calderbank [1975] 3 All ER 333. On 14 September 2023, I made orders by consent that the notice of motion be determined on the papers.

The offers

2. The offers of compromise were made on 20 August 2021, 18 February 2022 and 4 July 2023. Each offer was in similar terms. Each proposed that the claim and cross‑claim be discontinued on the basis that each party bears their own costs. It was also proposed that the parties execute a deed of release by which they released each other from all claims arising from the subject matter of the proceedings. The last offer proposed that Keybridge Capital Limited, which funded the claim, be a party to the deed.

3. It appears that the defendants’ total costs at the time the first offer was made were $47,500. It is unclear how much they were at the time of the second offer. They were asserted to be $444,000 in the third offer.

Relevant principles

4. In considering whether to make an order for indemnity costs in favour of defendants who have done better than an informal offer of compromise made by them, the Court must be satisfied (1) that the offer was a genuine offer of compromise, and (2) that it was unreasonable for the offeree not to accept the offer: Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8] per Basten JA, with whom McColl and Campbell JJA agreed; Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124 at [10] per Bathurst CJ, with whom Allsop P and Beazley JA agreed.

5. A genuine offer of compromise is one which involves a party giving something away: Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 at 368 per Giles J; Miwa at [9].

6. In some cases a “walk away” offer may be regarded as a genuine offer of compromise: for discussion, see Leichhardt Municipal Council v Green [2004] NSWCA 341 at [31]ff per Santow JA with whom Bryson and Stein JJA agreed. Normally, however, that will only be the case where it is apparent at the time the offer was made that the offeror had very good prospects of success.

7. The reasonableness of the response of the offeree must be assessed at the time the offer was made, not with the benefit of hindsight: Miwa at [11]. In considering whether the offeree acted unreasonably, it is relevant to consider, among other things, the stage the proceeding had reached, the extent of the compromise offered and the offeree’s prospects of success, assessed at the date of the offer: see Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; 13 VR 435 cited with approval in Miwa at [12].

8. Although the amount of the costs incurred by the offeror at the time the offer is made will be relevant in considering both whether a “walk-away” offer of compromise was a genuine one and whether the offeree acted unreasonably in rejecting the offer, it must be remembered that the costs incurred by the offeree will also be relevant, since the effect of accepting a “walk-away” offer is that the offeree agrees to bear those costs as well as foregoing whatever other rights it may have had.

Consideration

9. I am not satisfied that any of the offers was a genuine offer of compromise. It was not obvious that the plaintiff’s claim would fail. It failed for two reasons. The first was that the correct characterisation of the payment in respect of which contribution was sought was not a payment under the relevant guarantee. The second was that it could be implied from the circumstances that the parties intended to exclude rights of contribution between them in respect of the guarantees they gave. The first of these matters depended on the correct characterisation of the payment, which was arguable. The second was an argument that was never clearly raised by the defendants, at least before the hearing commenced. It involved a conclusion concerning the implied intention of the parties to be derived from a complicated set of facts. Again, the plaintiff’s case on that issue was reasonably arguable. Had the plaintiff’s arguments succeeded, he would have been entitled to recover the total amount of his claim (subject to qualification referred to in para [75] of my earlier judgment) plus costs and interest. A walk away offer was not a genuine compromise of a claim that had that outcome as a realistic possibility.

10. Even if that conclusion is wrong, for similar reasons, in my opinion, it was reasonable for the plaintiff to reject the offers. The claim raised difficult questions of law. The letters making the offers of compromise — particularly the letter dated 20 August 2021, which was referred to in the latter letters — gave reasons for why the plaintiff’s claim would fail. But the plaintiff was entitled to form the view at the time that each of those reasons was contestable; and, indeed, a number of reasons advanced by the defendants ultimately were not pressed or were reformulated. The extent of the compromise offered was minimal whereas the plaintiff (at the time) might reasonably have concluded that she had reasonable prospects of success. Accordingly, she did not act unreasonably in refusing to accept or in rejecting the offers.

11. It follows that the defendants’ notice of motion filed on 11 September 2023 must be dismissed with costs.

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Decision last updated: 28 September 2023