Grewal v Layton (No 2)

[2018] NSWSC 1910

Supreme Court

New South Wales

Medium Neutral Citation:	Grewal v Layton (No 2) [2018] NSWSC 1910
Hearing dates:	10 December 2018
Decision date:	12 December 2018
Jurisdiction:	Equity - Commercial List
Before:	Ball J
Decision:	The first defendant pay the plaintiff’s costs of the proceedings on the ordinary basis up to and including 6 July 2018 and on an indemnity basis on and from 7 July 2018
Catchwords:	COSTS – Party/Party – Exceptions to general rule that costs follow the event – Offers of compromise/Calderbank offers – Whether the plaintiff’s offers were genuine offers of compromise and whether their rejection was unreasonable – Whether a gross sum costs order would be appropriate
Legislation Cited:	Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Calderbank v Calderbank [1975] 3 All ER 333 Grewal v Layton [2018] NSWSC 1634 Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344
Category:	Costs
Parties:	Manvinder Grewal (Plaintiff) Stephen James Layton (First Defendant) Furnmart Australia Pty Ltd (In Liquidation) ACN 150 948 799) (Second Defendant)
Representation:	Counsel: J Dooley (Plaintiff) Litigant in Person (First Defendant)   Solicitors: Clyde & Co (Plaintiff) Litigant in Person (First Defendant)
File Number(s):	2018/44464
Publication restriction:	None

Judgment

Introduction

1. On 1 November 2018, I delivered judgment in this matter in favour of the plaintiff, Mr Manvinder Grewal, in the sum of $204,871.66 (Grewal v Layton [2018] NSWSC 1634). At that time, I also made an order that the first defendant, Mr Stephen Layton, pay the plaintiff’s costs and suspended the operation of that order for a period of time to permit either party to apply for some different order in relation to costs.

2. Consistently with those orders, Mr Grewal has applied to vary my costs order to seek costs on an indemnity basis and also to seek a gross sum costs order.

Background

3. The proceedings were commenced on 9 February 2018.

4. As originally pleaded, Mr Grewal, sought to recover a loan of $175,000 he made pursuant to an agreement entered into through an exchange of SMS messages with Mr Layton, together with interest on the amount lent at court rates. As originally pleaded, Mr Grewal contended that the loan had been made jointly and severally to Mr Layton and the second defendant, Furnmart Australia Pty Ltd, a company controlled by Mr Layton that is now in liquidation. The amount lent had been paid to Furnmart pursuant to a direction given by Mr Layton.

5. Shortly before the hearing, Mr Grewal amended his claim to plead that, in the alternative, the loan was made to Mr Layton alone. It is that claim that succeeded at trial.

6. In all, Mr Grewal made three offers to settle the proceedings.

7. The first was an informal offer of compromise expressed to be made in accordance with the principles set out in Calderbank v Calderbank [1975] 3 All ER 333. It was made by letter dated 23 March 2018. That offer explained Mr Grewal’s case in summary form. It then stated:

Our client will also be able to demonstrate that he has incurred interest charges of at least $10,501.51 claimed in the Statement of Claim and legal costs in excess of $20,000 to date in seeking repayment of the amounts you owe him.

8. Against that background, Mr Grewal offered to settle the proceedings “for the amount of $175,000 (being the Loan Funds) and you and our client enter into an appropriate Deed of Settlement with full mutual releases and covenants not to sue”. The letter went on to state that Mr Grewal was willing to accept payment of $175,000 in equal monthly instalments over 8 months. The offer was expressed to be open for two weeks.

9. The second offer was made on 11 May 2018. Relevantly, it also was expressed to be made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333. The offer was in the following terms:

1.   Mr Layton make payment to our client of $175,000 (inclusive of interest) payable within 28 days of the date of this letter; and

2.   The proceedings are dismissed with each party to bear their own costs; and

3.   Our respective clients enter into an appropriately worded Deed of Settlement with full mutual releases and covenants not to sue.

10. Again, the offer was expressed to be open for 14 days.

11. The third offer of compromise was made on 6 July 2018. Relevantly, it was expressed to be a formal offer of compromise in accordance with Part 20 Division 4 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). The offer was in these terms:

1.   The First Defendant is to make payment to the Plaintiff the sum of $175,000.

2.   The proceedings are dismissed.

3.   No order as to costs.

4.   This offer is open for acceptance by the First Defendant for a period of 28 days after service of this offer of compromise.

The claim for indemnity costs

12. The issue in relation to the first two offers is whether they were genuine offers of compromise and whether Mr Layton’s refusal to accept them was unreasonable: see 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).

13. In my opinion, each of the offers was a genuine offer of compromise. Although each offer was for the whole of the amount of principal claimed by Mr Grewal, in my opinion that claim was a strong one and in that context, the offer not to claim interest or costs represented a genuine compromise.

14. However, I am not satisfied that it was unreasonable for Mr Layton to refuse to accept the offers. Both offers were conditional on execution of Deeds of Release which were to include “full mutual releases”. The terms of those releases were not provided to Mr Layton. He was only given two weeks in which to consider the offer. There were other dealings between the parties and in that context the precise scope of the proposed releases was unclear.

15. So far as the third offer is concerned, UCPR r 42.14 provides:

(1)   This rule applies if the offer is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim no less favourable to the plaintiff than the terms of the offer.

(2)   Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim:

(a)   assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and

(b)   assessed on an indemnity basis:

(i)   if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and

(ii)   if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.

16. In my opinion, there is no reason to order otherwise in this case. As I have explained, in my opinion the offer was a genuine offer of compromise. Mr Layton submitted that the Court ought to order otherwise in this case because the case on which Mr Grewal succeeded was different from the case that had been pleaded at the time. The case that was pleaded against Mr Layton at the time the offer was made was that he was jointly and severally liable for the debt with Furnmart. The case that succeeded was that he was liable for the debt alone. In my opinion, the difference between those two cases is not sufficiently significant to provide a reason to order otherwise in relation to costs. The case was that Mr Grewal had lent money which was paid to Furnmart, but which Mr Layton was liable to repay. In substance, that case did not change and was the one that succeeded at trial. No other reason was advanced why the Court should order otherwise.

17. It follows that Mr Grewal should be entitled to his costs on the ordinary basis up until 6 July 2018 and on the indemnity basis from 7 July 2018.

Gross sum costs order

18. The power to make a gross sum costs order is conferred by s 98(4)(c) of the Civil Procedure Act 2005 (NSW). It “is not confined, and may be exercised whenever the circumstances warrant its exercise”: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [21] per Giles JA. However, there must be some feature of the case which makes it an appropriate one for a gross sum costs order.

19. I have concluded that it is not appropriate to make a gross sum costs order in this matter.

20. There are no particular features of the case which make it an appropriate one for a gross sum costs order. It is a straightforward case. There is no evidence before the Court that the costs of assessment will be grossly disproportionate to the costs claimed or that assessment is likely to be unreasonably delayed. There is no evidence before the Court from which the Court could conclude that Mr Layton would be unable to meet any costs order.

21. In addition, the material before the Court in relation to the disbursements claimed by Mr Grewal is insufficient for the Court to make any assessment whether those disbursements are reasonable.

22. Mr Grewal claims a total amount of $62,538.31 (assuming that he is entitled to indemnity costs from 7 July 2018), which includes $24,897.57 in disbursements. Most of those disbursements consist of counsel fees. Mr Grewal’s claim for a gross sum costs order includes 100 per cent of those disbursements. However, counsel fee notes are not included in the material before the Court and the daily or hourly rate charged by counsel is not in evidence. Consequently, there is no means by which the Court can satisfy itself that the amount charged was reasonable.

23. It follows that the order of the Court is that the first defendant pay the plaintiff’s costs of the proceedings on the ordinary basis up to and including 6 July 2018 and on an indemnity basis on and from 7 July 2018.

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Decision last updated: 12 December 2018