Hali Retail Stores Pty Ltd v Hafaz

[2007] NSWSC 427

CITATION:	Hali Retail Stores Pty Ltd v Hafaz [2007] NSWSC 427
HEARING DATE(S):	11 April 2007
JURISDICTION:	Equity Division
JUDGMENT OF:	Brereton J
EX TEMPORE JUDGMENT DATE:	11 April 2007
DECISION:	Indemnity costs refused; plaintiff to pay defendant’s costs on party-party basis
CATCHWORDS:	COSTS – indemnity costs – Calderbank letter – where plaintiff failed to better defendant’s offer – where offer was not and could not have been made as formal offer under rules
LEGISLATION CITED:	(NSW) Supreme Court Rules 1970, Pt 51A, r 22(6) (NSW) Uniform Civil Procedure Rules 2005, Pt 20, r 26
CASES CITED:	Calderbank v Calderbank [1976] Fam 93 Leichhardt Municipal Council v Green [2004] NSWCA 341
PARTIES:	Hali Retail Stores Pty Ltd (plaintiff) Ayaz Hafaz (defendant)
FILE NUMBER(S):	SC 1715/07
COUNSEL:	TGR Parker SC (plaintiff) CM Wilson (defendant)
SOLICITORS:	Arnold Bloch Leibler (plaintiff) Peter D White & Co (defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
DUTY JUDGE LIST

BRERETON J

Wednesday 11 April 2007

1715/07 Hali Retail Stores Pty Ltd v Ayaz Hafaz

JUDGMENT (ex tempore)

1 HIS HONOUR: I decline to make an indemnity costs order.

2 On 23 March 2007 I gave judgment following a hearing of these proceedings on 21 March 2007. I ordered that the Plaintiff's claim for relief in paragraphs 1, 2, 3 and 3(a) of the Summons be dismissed. I declared that the Plaintiff was entitled to the return of the deposit. I ordered that the defendant do all things, execute all documents and give all authorities and directions necessary or convenient to procure the release of the deposit by the agent to the Plaintiff. I ordered that the Plaintiff, as the unsuccessful party, pay the Defendant's costs of the proceedings to date, and stood the balance of the Summons over to today for mention, anticipating that any party who wished to file any further evidence on the remaining issues would do so by that date. The Defendant foreshadowed an application for an order that the costs which the Plaintiff must pay the Defendant be assessed on the indemnity basis, and I indicated that I would deal with that application today.

3 That indemnity costs application is based on an offer made by the Plaintiff's solicitors to the Defendant's solicitors on 20 March 2007. The evidence does not indicate at what time on 20 March 2007 that offer was made, a fact not without significance as the hearing was set down for 21 March. The offer was in the form of a letter marked "without prejudice save as to costs", in which, while rejecting the Plaintiff's claim that there was an enforceable agreement for lease, the Defendant offered to permit the Plaintiff to take up a lease of the subject premises commencing on 1 August 2007, with rent to commence on 1 September 2007, for a term of three years with an option to renew for five years, and otherwise on uncontroversial terms. The offer provided that each party was to bear its own costs of the proceedings, and said that it was made in accordance with the principles in Calderbank v Calderbank [1976] Fam 93.

4 It is evident from my judgment of 23 March that the Plaintiff, far from bettering that offer, has failed to obtain an enforceable lease at all. On the other hand, the offer did not deal with the deposit, the return of which the Plaintiff has obtained (although I do not consider that a matter of much significance, since the deposit was not addressed in the Summons, or otherwise in the proceedings, until very late in argument).

5 Because the offer was made by letter, and not in accordance with (NSW) Uniform Civil Procedure Rules 2005, Pt 20 r 26, there is no starting position prescribed by the rules in favour of a particular costs outcome.

6 Mr Parker submitted that on the authority of Leichhardt Municipal Council v Green [2004] NSWCA 341, in any event the starting position in the case of a Defendant's offer was not that there would be an indemnity costs order in favour of the Defendant after the date of the offer. However, as emerged in argument, Leichhardt Municipal Council v Green was concerned with former (NSW) Supreme Court Rules 1970, Pt 51A, r 22(6) and its District Court equivalent, which provided that where an offer was made by a Defendant and not accepted by the Plaintiff, and the Plaintiff obtained a result not more favourable than the offer, then except in an exceptional case the Plaintiff was entitled to an order against the Defendant for costs up to and including the day the offer was made on a party-party basis and the Defendant was entitled to an order against the Plaintiff for the Defendant's costs thereafter, assessed on a party-party basis. UCPR 42.15 changes that position, so that where a Defendant's offer is not accepted and the Plaintiff obtains a judgment no more favourable than the offer, the Defendant is entitled to an order for costs assessed on the indemnity basis from the day after the offer was made. That change in the Rules undermines the continued application of Leichhardt Municipal Council v Green.

7 However, that change in the Rules does not alter the position that the present offer not having been made in accordance with the Rules, the prima facie consequences provided by the Rules do not apply. Moreover, there are other reasons why those consequences should not follow. First, this offer was made, it would seem, at best, within 24 hours before the commencement of an expedited hearing. In that context, it is just not reasonable to expect parties to be distracted from the urgency of preparing for a hearing the next day, in order to give careful consideration to a last minute offer. Secondly, not only was the offer not made in accordance with the Rules, but it could not have been made under the Rules, because it provided that each party was to bear its own costs. A third factor that I take into account is that, although the Defendant succeeded on the question whether there was an enforceable agreement for lease, the Defendant also raised a defence of hardship to the Plaintiff's specific performance, on which it failed.

8 Taking those matters together, and observing that the prima facie position under the Rules in the case of offers of compromise is not attracted, I decline to order that the costs which the Plaintiff must pay the Defendant be assessed on an indemnity basis. They are to be assessed on a party-party basis.

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