Henderson v Buman (No 2)

[2012] VCC 780

IN THE COUNTY COURT OF VICTORIA Revised
Not Restricted

AT MELBOURNE

CIVIL DIVISION
DAMAGES AND COMPENSATION
GENERAL DIVISION

Case No.  CI-09-05336

MARK ROBERT HENDERSON	First Plaintiff
and
LYNETTE JANE HENDERSON	Second Plaintiff
v
JOHN RAYMOND BUMAN (trading as JOHN BUMAN & CO)	Defendant

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JUDGE:	HER HONOUR JUDGE KINGS
WHERE HELD:	Melbourne
DATE OF HEARING:	24 February 2012
DATE OF JUDGMENT:	26 April 2012 (Revised) [First Revision 19 June 2012]
CASE MAY BE CITED AS:	Henderson & Anor v Buman (No 2)
MEDIUM NEUTRAL CITATION:	[2012] VCC 780

REASONS FOR JUDGMENT

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Catchwords: Supreme Court Act 1986, s.60 - Penalty Interest Rates Act 1983, s.2 – rejection of Calderbank offer – effect on interest – effect on costs

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr P Montgomery	Beck Legal
For the Defendant	Mr J O’Bryan	Lander & Rogers

HER HONOUR:

1       On 19 December 2011, I delivered judgment[1] for the plaintiffs and awarded damages in the sum of $108,000, together with interest and costs.  I concluded my judgment by saying that I would hear counsel as to interest and costs.  On 24 February 2012, the parties addressed me on:

[1][2011] VCC 1523

(i)    interest on damages from the date the proceeding commenced;

(ii)   the effect of a Calderbank offer sent to the plaintiffs’ solicitor on 26 October 2010 before the commencement of the trial;

(iii)   the effect of the failure of the plaintiffs’ claims relating to the retainer in relation to the Magistrates’ Court proceeding and the appeal;

(iv)   interest after the rejection of the Calderbank offer.

Interest

2       I determined that the plaintiffs’ damages were $108,000.  Interest on the damages of $108,000 from the date of issue of the Writ on 11 November 2009 to the rejection of the offer on 29 October 2010 is agreed at $10,845.86.  In Hartley Poynton Ltd v Ali (No 2),[2] the Court of Appeal said:

“It is customary to consider the amount of interest up to the date for acceptance of the offer but not beyond, unless there is a provision to the contrary or the offer contemplates later interest.”

[2][2005] VSCA 314 at [18]

3       Therefore, the damages, including interest to the date of the rejection of the offer by the plaintiffs, is $118,845.86

Calderbank Offer

4       On 26 October 2010, the defendant’s solicitor wrote to the plaintiffs’ solicitor and set out the following: 

“(i)      The defendant is prepared to offer the plaintiffs either:

(a)     $125,000 plus costs (to be taxed in default of agreement); or

(b)     $150,000 inclusive of interest and costs

- in full and final settlement of the claim.

(ii)If, however, the plaintiffs do not accept one of the offers, and if this matter proceeds to judgment and the plaintiffs obtain a result against the defendant that is no more favourable than one of the offers made in this letter, then we intend to produce this letter to the Court on the question of costs, and will apply for an order for costs against the plaintiffs on a solicitor to client basis, from the date of receipt of this letter and costs prior to that date on a party/party basis, in accordance with the principles applied in Calderbank v Calderbank [1975] 3 All ER 333 and Ciccone v Ark Projects Pty Ltd & Anor [1999] VSC 122.”

5       On 29 October 2010, the plaintiffs made a counteroffer, communicating through their solicitor that they would accept $180,000 in full and final settlement of their claim.

6       The defendant’s offer of 26 October 2010 was rejected on 29 October 2010 by the communication of the counteroffer.

7       Counsel for the defendant submitted that the plaintiffs obtained a result no more favourable than one of the offers made to the plaintiffs in the Calderbank letter.  Accordingly, the defendant makes application for costs on a special basis in accordance with the letter of 26 October 2010.

8       Counsel for the plaintiffs submitted that the plaintiffs' damages are $108,000.  Interest on the damages of $108,000 from the date of the issue of the Writ to 29 October 2010 is $10,845.86 and interest from 30 October 2010 until 24 February 2012 is $15,001.41, amounting to damages of $133,847.27 to 24 February 2012.  Accordingly, it was not unreasonable for the plaintiffs to reject, at the time, the Calderbank offer.

9       The authorities make it clear that the practice of making Calderbank offers is to facilitate the public policy objective for the litigants to end litigation as soon as possible.  Such an offer causes the offeree to consider the offer seriously.[3]  I accept that the plaintiffs were intent on ending the litigation.  They made a counteroffer to the Calderbank offer which represented a compromise on their claim.

[3]Leichhardt Municipal Council v Green [2004] NSWCA 341

10      The Court of Appeal in Hazeldene Chicken Farm Pty Ltd v Victorian WorkCover Authority[4] enunciated the principle that the rejection of the Calderbank offer does not create a presumption in favour of a special costs order and a court will only make such an order where it is concluded that the rejection of the offer was unreasonable.  In this sense, the rejection of a Calderbank offer is a factor the Court should have regard to when considering whether to order indemnity costs[5] and that it remains for the defendant to demonstrate that a special costs order should be made.

[4][2005] 13 VR 435

[5](ibid) at paragraph [20]

11      In Hazeldene, the Court of Appeal set out the principles governing the awarding of costs in respect of a Calderbank offer.  The Court of Appeal stated:

“The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations.  It is neither possible nor desirable to give an exhaustive list of relevant circumstances.  At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:

(a)the stage of the proceeding at which the offer was received;

(b)the time allowed to the offeree to consider the offer;

(c)the extent of the compromise offered;

(d)the offeree’s prospects of success, assessed as at the date of the offer;

(e)the clarity with which the terms of the offer were expressed;

(f)whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.”

12      In referring to the matters to be taken into account, the Court of Appeal was providing a guide as to the matters the trial Judge should ordinarily have regard to, in addition to such other matters as the Judge might consider relevant.  It is for the Judge to give such weight, if any, as seems appropriate.[6]  In determining whether the plaintiffs acted unreasonably in not accepting the offer, it is important that the assessment is made at the time at which the offer was made and not with the benefit of hindsight, in particular, after a contested trial in which the facts have been the subject of detailed evidence.[7]

[6]Foster v Galea No 2 [2008] VSC 33 at paragraph [9]

[7]Eshuys v St Barbara Ltd (No 2) [2011] VSC 150 per Kaye J

13      I accept that the defendant made the offer at a reasonable time and in clear terms.  The defendant placed no time limit on acceptance of the offer.  I am satisfied in the circumstances the defendant gave the plaintiffs sufficient time to consider the offer.  I accept the offer made to the plaintiffs involved compromise by both parties.

14      In the substantive proceeding the plaintiffs made a claim in negligence for breach of duty in the handling of a single retainer.  However, I found there were two retainers: the first related to the sale of business and the second to the conduct of the Magistrates’ Court litigation and subsequent appeal. 

15      In this case, the Calderbank offer was marginally more than the award of damages and interest to the date of the rejection of the Calderbank offer.  In these circumstances, the defendant submitted it was unreasonable for the plaintiffs to reject the Calderbank offer because they were unlikely to receive a more favourable outcome at trial.  This was because the Magistrates’ Court and subsequent appeal retainer involved work which would fall within the advocate’s immunity.  In respect to the sale of business, the plaintiffs pleaded a loss of opportunity, which was always going to involve a degree of conjecture as to the loss sustained.  The plaintiffs should have considered theses matters when assessing the offer.

16      Counsel for the plaintiffs said that this was an unusual case as the litigation in the Magistrates’ Court proceeding arose because of the negligence of the defendant in the sale of business retainer; therefore, no issue of advocate’s immunity arose.  In addition, counsel for the plaintiffs said it was not foreseeable that damages would be reduced by 25 per cent in respect to the sale of business transaction. 

17      Given the nature of the claim brought by the plaintiffs, the fact that the plaintiffs were successful on the first substantive claim and the small difference between the Calderbank offer and the damages ordered, I do not consider the plaintiffs’ conduct in not accepting the offer was unreasonable.  Accordingly, I do not propose to order the plaintiffs pay the defendant’s costs on a special basis in accordance with the letter of 26 October 2010.

Costs before the Calderbank offer

18      Counsel for the defendant sought an order for costs for successfully defending the claim made by the plaintiffs in relation to the retainer in respect of the Magistrates’ Court proceeding and the appeal and that these costs amounted to between 25 to 30 per cent of the work in the proceeding.

19      Counsel for the plaintiffs opposed the costs order sought by the defendant.  The submission was it was not unreasonable for the plaintiffs to run the case as one retainer given there was one firm acting in both the sale of the business and the subsequent Magistrates’ Court proceeding and appeal.  The plaintiffs were successful in relation to the sale of business claim. 

20      I accept that it was not unreasonable to argue the case as the plaintiffs did and the plaintiffs’ claim could not be characterised as hopeless.  Accordingly, I propose to order that the plaintiffs be entitled to their costs in this proceeding in respect to the claim relating to the Magistrates’ Court proceeding and the appeal.  The general rule is that costs should follow the event.  Absent disqualifying conduct, the successful party should recover its costs even where it has not succeeded on all heads of claim.[8]  Accordingly, I reject the defendant’s submission.

Interest after the rejection of the Calderbank offer

[8]Joseph Street Pty Ltd & Ors v Khay Tek Tan [2011] VSC 41 per Forrest J

21      The defendant seeks an order that from 29 October 2010 to 24 February 2012, the appropriate rate for interest is the rate set by the Commonwealth Bank of Australia for monies on deposit in the period 29 October 2010 to 24 February 2012.

22 Section 60 of the Supreme Court Act provides that an award of interest is a matter of discretion.  The Court may refuse to award interest if good cause is shown to the contrary.  I was referred to the decision in Cameron v McMahon (2).[9] Section 60 is in the following terms:

“The Court, on application in any proceeding for the recovery of debt or damages, must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under s.2 of the Penalty Interest Rates Act 1983 as it thinks fit from the commencement of the proceeding to the date of judgment over and above the debt or damages awarded.”

[9][2009] VSC Davies J, at paragraph [7]

23      Gillard J in Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 3),[10] said:

“The interest rate specified by s60(1) is “the rate for the time being fixed under s2 of the Penalty Interest Rates Act 1983”. The subsection requires the court to fix a rate not exceeding that fixed rate and it is a question of discretion as to what is the appropriate rate. As a general rule, the starting point is that rate.”

[10][2003] VSC 244 (unreported) at [63]

24 On the wording of the section, there is a statutory entitlement to interest from the date of commencement of the proceeding unless good cause is shown to the contrary. What constitutes good cause in any given case will depend on the particular facts and circumstances. I have to be satisfied on the material before me that there is good reason not to apply the general rule in favour of awarding interest to the plaintiffs in accordance with s.60 of the Act.

25      The good cause requirement has to be considered against the purpose of the statutory power to award interest.  First, to compensate a plaintiff for the loss or detriment that he or she has suffered by being kept out of his or her money and deprived of its use during the relevant period.  Secondly, to encourage the early resolution of litigation.[11] 

[11]Ruby v Marsh [1975] HCA 32; (1975) 132 CLR 642, 652 Barwick CJ concerning s.79A, the predecessor of s.60

26      It was submitted on behalf of the defendant that good cause has been shown in two respects.  A proper offer was put to the plaintiffs, which was better than they achieved at trial.  Had they accepted the offer, they would not have been prejudiced in the terms of quantum of damages and they would not have been out of their money.  The fact that they have been out of their money since refusing the offer is a matter of their choice and the defendant should not have to compensate them for that.  Secondly, the defendant has complied with the requirement that parties seek early resolution by making its offer.  Having done that, the defendant should not be penalised for having done so.

27      Accordingly, Counsel for the defendant submitted that the Court should exercise its discretion and refuse to give damages in the nature of interest to the plaintiffs from the time of their refusal to accept the Calderbank offer on 29 October 2010.  Alternatively, if the Court gives damages in the nature of interest from 29 October 2010 until judgment, it should not give interest at the full rate specified under the Penalty Interest Rate Act for the relevant period.  A proper rate would be the rate given by the Commonwealth bank on monies on deposit in the period 29 October 2010 to 24 February 2012.

28      I am not satisfied that this is “a rare case”, as suggested by Gillard J in Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 3).[12] Further, the defendants have had the use of the money since the proceedings were commenced. Accordingly, I conclude that interest should be ordered pursuant to s.60 for the period 29 October 2010 to 24 February 2012 at the penalty rate from time to time.

[12](ibid) at paragraph [45]

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