Higgins v Thermomix in Australia Pty Ltd [No 2]
[2017] WADC 101 (S)
•11 AUGUST 2017
HIGGINS -v- THERMOMIX IN AUSTRALIA PTY LTD [No 2] [2017] WADC 101 (S)
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2017] WADC 101 (S) | |
| Case No: | CIV:2165/2014 | ON THE PAPERS | |
| Coram: | BOWDEN DCJ | 11/08/17 | |
| PERTH | 25/10/17 | ||
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Costs order on a party/party basis | ||
| PDF Version |
| Parties: | ELISABETH HIGGINS THERMOMIX IN AUSTRALIA PTY LTD |
Catchwords: | Calderbank offer Offer rejected Whether objection unreasonable |
Legislation: | Nil |
Case References: | Bend-Tech Group (a Firm) v Beek [2015] WASC 491 (S) Brendan Wilfred King v Robert Lawrence Adams [2017] NSWSC 117 Caratti Holdings Co Pty Ltd v Coventry Group Ltd [2014] WASC 403 (S) Carver v BAAPLC [2008] EWCA Civ 412 Eccles v Koolan Iron Ore Pty Ltd [2013] WASC 418 (S) Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 Hall v Stone [2007] EWCA Civ 1354 Marindi Metals Ltd v Kidman Resources Ltd [2017] WASC 189 (S) Miller v Evans [2010] WASC 127 Quancorp Pty Ltd v Macdonald [1999] WASCA 101 Sakari Resources v Purvis [2016] WASCA 24 (S) Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) Whittaker v Paxad Pty Ltd [2009] WASC 47 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CIVIL
DECISION : 25 OCTOBER 2017 FILE NO/S : CIV 2165 of 2014 BETWEEN : ELISABETH HIGGINS
- Plaintiff
AND
THERMOMIX IN AUSTRALIA PTY LTD
Defendant
Catchwords:
Calderbank offer - Offer rejected - Whether objection unreasonable
Legislation:
Nil
Result:
Costs order on a party/party basis
Representation:
Counsel:
Plaintiff : Mr C Slater
Defendant : Mr M N Solomon and Mr T J Palmer
Solicitors:
Plaintiff : Morgan Alteruthemeyer
Defendant : Murfett Legal
Case(s) referred to in judgment(s):
Bend-Tech Group (a Firm) v Beek [2015] WASC 491 (S)
Brendan Wilfred King v Robert Lawrence Adams [2017] NSWSC 117
Caratti Holdings Co Pty Ltd v Coventry Group Ltd [2014] WASC 403 (S)
Carver v BAAPLC [2008] EWCA Civ 412
Eccles v Koolan Iron Ore Pty Ltd [2013] WASC 418 (S)
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115
Hall v Stone [2007] EWCA Civ 1354
Marindi Metals Ltd v Kidman Resources Ltd [2017] WASC 189 (S)
Miller v Evans [2010] WASC 127
Quancorp Pty Ltd v Macdonald [1999] WASCA 101
Sakari Resources v Purvis [2016] WASCA 24 (S)
Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)
Whittaker v Paxad Pty Ltd [2009] WASC 47
1 BOWDEN DCJ: On 16 May 2017 I dismissed Mrs Higgins' claim against Thermomix in Australia Pty Ltd (Thermomix).
2 Thermomix seek an order that Mrs Higgins pay their costs to be taxed, if not agreed, on a party to party basis until 24 October 2016 and then from that date on an indemnity basis.
3 They in effect say that an award of indemnity costs is justified on the basis that Mrs Higgins rejected two without prejudice Calderbank offers, the first offer of 18 September 2015 being for the sum of $20,000, the second offer of 13 October 2016 being for the sum of $100,000. Indemnity costs are only sought from the date of the rejection of the second offer.
4 An indemnity costs order departs from the usual costs order that costs are awarded on a party to party basis and it is discretionary as to whether a court orders indemnity costs. An order for indemnity costs will only be made in exceptional circumstances.
5 Pritchard J, in Bend-Tech Group (a Firm) v Beek [2015] WASC 491 (S), summarised the principles set out by the Court of Appeal in Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) and other cases as follows (citation omitted): [1] - [7]:
In Swansdale Pty Ltd v Whitcrest Pty Ltd the appeal court stated the following propositions:
…
1. [The Court] in its inherent jurisdiction, may make an indemnity costs order.
2. An indemnity costs order departs from the usual costs disposition order, whereby costs are awarded on a party/party basis.
3. The court's discretion as to the making of an indemnity costs order is a discretion that must be exercised judicially. In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd, Woodward J said:
'Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases, where "there is some special or unusual feature in the case to justify the court exercising its discretion in that way".' (emphasis added)
4. To obtain an indemnity costs order, it is not the case that the successful party needs to show a collateral purpose, or establish some species of fraud against the unsuccessful party. In J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2), French J by reference to the observations of Woodward J in Fountain Selected Meats, said:
'It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case.'
5. Furthermore, in Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd, French J observed:
'The categories in which the discretion may be exercised are not closed.'
6. Competing principles need to be balanced in assessing the making of a potential award of indemnity costs. In Quancorp Pty Ltd v MacDonald, Wheeler J observed:
'On the one hand, a party should not be discouraged, by the prospect of an unusual costs order, from persisting in an action where its success is not certain. Uncertainty is inherent in many areas of law, and the law changes with changing circumstances. It is inappropriate that a case be too readily characterised as "hopeless" so as to justify an award of indemnity costs to the successful party. However, where a party has by its conduct unnecessarily increased the cost of litigation, it is appropriate that the party so acting should bear that increased cost. Persisting in a case which can only be characterised as "hopeless" is an example of the type of conduct which may lead the court to a view that the party whose conduct gave rise to the costs should bear them in full.'
7. An indemnity costs order may be appropriate in situations which are shown to involve some element of improper, or at least unreasonable, conduct by a party or the party's legal advisers.
8. A properly crafted special costs order may obviate the need for an indemnity costs order, where components of cost scale items are allowed above the applicable scale ceiling.
9. An indemnity costs order may not be appropriate if the claimed costs would be likely to be recovered under the standard order for party and party costs, or under a special order raising or removing a scale ceiling allowance.
10. Nonetheless, an indemnity costs order will constitute an appropriate sanction marking the disapproval of improper or unreasonable conduct. In Flotilla, Pullin J said:
'A solicitor should not, in my view, resort to an application for an indemnity costs order merely to secure the recovery which could be achieved by a properly formulated special costs order, unless the unsuccessful party's conduct is genuinely to be impugned by the successful party.'
The principles applicable to Calderbank offers
6 Calderbank offers were considered by the Court of Appeal in Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115. Buss JA cited all the relevant principles and the following propositions can be extracted from his Honour's reasons.
7 A Calderbank offer will not justify an award of indemnity costs unless its rejection was unreasonable: [16]. All relevant facts and circumstances must be considered in determining whether a party's rejection of a Calderbank offer was unreasonable: [17].
8 The mere fact that the recipient of a Calderbank offer is ultimately worse off than he would have been had the offer been accepted does not mean that its rejection was unreasonable: [18].
9 Whether the conduct in rejecting the offer is reasonable or unreasonable involves matters of judgment and imprecision and, although not exhaustive, ordinarily regard should be had to at least the following factors:
(a) the stage at the proceedings in which the offer was received;
(b) the time allowed to consider the offer;
(c) the extent of the compromised offer;
(d) the offeree's prospects of success assessed as at the date of the offer;
(e) the clarity in which the terms of the offer was expressed; and
(f) whether the offer foreshadowed an application for indemnity costs in the event of its rejection [19].
10 The onus of satisfying the court that it should make an award of indemnity costs is on the party who made the rejected offer [21].
11 Other relevant matters to consider are whether the Calderbank offer gave fair warning to the other party of the merits of the case that was going to be advanced against it: Marindi Metals Ltd v Kidman Resources Ltd [2017] WASC 189 (S).
12 There have been cases where indemnity costs have been awarded because it should have been apparent to the other party that its case was weak: Sakari Resources v Purvis [2016] WASCA 24 (S), and where a plaintiff had failed to properly engage with the defendant over the explicitly identified legal weakness of its case: Marindi Metals Ltd v Kidman Resources Ltd.
Consideration of the application – the Calderbank offer
The stage of the proceedings at which the offer was received
13 The first offer was made on 18 September 2015, that is, some one and a half years after the proceedings had been commenced on 3 July 2014.
14 The second offer was made on 13 October 2016 when proceedings had been on foot for some two and half years. The timing of the second offer was appropriate.
The time allowed to consider the offer
15 The second offer was open for acceptance for 14 days, being until 27 October 2016. Mrs Higgins' solicitors wrote to Thermomix rejecting the second offer on 24 October 2016, however, no counter proposal was put.
16 There was sufficient time allowed for Mrs Higgins to properly consider the offer.
The extent of the compromise
17 The $100,000 offered in the second offering included $50,000 for legal costs incurred to that date and $50,000 for the claim and interest.
18 Mrs Higgins' particulars of damage dated 26 October 2015 claimed, alternatively, $693,220 or $1,122,268. In opening submissions at the trial, Mrs Higgins claimed a ball park figure of $500,000 (ts 52). In her closing submissions she sought approximately $418,000.
19 Leaving aside the legal costs incurred, the amount of the second offer was approximately 15% of the lowest amount being sought by Mrs Higgins at about the time the offer was made, although it equated to about 25% of the figure sought by Mrs Higgins in her closing submissions. However, if costs incurred as at the date of the offer are considered, the amount offered would, in my view, at a conservative estimate be less than 10% of the lowest amount being sought by Mrs Higgins at about the time the offer was made. With hindsight it is easy to say the offer ought to have been accepted, however, that is not the test.
The offeree's prospects of success assessed as at the date of the offer
20 This really involves a consideration of whether the case being made by Mrs Higgins was hopeless and devoid of any reasonable prospect of success and that fact ought to have been known to Mrs Higgins and/or her advisors.
21 The fact that Mrs Higgins' case failed does not mean that her case was always destined to fail; far less does it mean that such failures would have been foreseen. The outcome of litigation cannot always been predicted: Miller v Evans [2010] WASC 127. Litigation is uncertain. In many cases proceeding to trial simply proves that one of the two lawyers was wrong because both lawyers think their case is going to be successful.
22 It is seldom possible to predict with certainty what findings of fact will be made. An honest plaintiff might be discouraged from bringing a claim if an adverse result is followed by an order that the losing party indemnify the successful party against the latter's cost: Brendan Wilfred King v Robert Lawrence Adams [2017] NSWSC 117 [45]; Eccles v Koolan Iron Ore Pty Ltd [2013] WASC 418 (S) [12].
23 The mere fact that Mrs Higgins was ultimately unsuccessful does not, by itself, establish that her rejection of the Calderbank offer was unreasonable. The question of the unreasonableness of the offers' rejection is not to be made with the benefit of hindsight gained from the outcome of the trial, but upon the circumstances as they were presented to Mrs Higgins at the time the offer was made: Whittaker v Paxad Pty Ltd [2009] WASC 47.
24 Mrs Higgins suggests that Thermomix's offers lacked a real and genuine element of compromise. She points out that Thermomix did not apply for summary judgment and that liability depended on the assessment of a considerable volume of material and that much of the evidence led by Thermomix was not pleaded or particularised carefully, was not the subject of documentary discovery and only referred to in vague terms in the witness statements and only assessable after the witness had given evidence.
25 Mrs Higgins says that Thermomix was in a superior position to anticipate precisely how the case may unfold as it controlled the bulk of the records of witnesses and says she was not able to make an accurate assessment of the case because Thermomix had pleaded no more than general denials. Mrs Higgins says that due to the evolving changes to Thermomix's case, the high level of generality of their assertions in their pleadings and correspondence to her lawyers and the difficulties with discovery of documents, that her rejection of the offer was not unreasonable.
26 Irrespective of these complaints, the case really turned on the written representations made in the group leader manual and the group leader manual addendum. I accept that there were some difficulties with discovery, however, I do not accept that they were of the dimension referred to by Mrs Higgins.
27 Whilst I do not accept the validity of the points raised above by Mrs Higgins, I do not consider that her rejection of the offer was unreasonable. Potential litigants must not unnecessarily be discouraged from bringing their disputes to the court. Her case was weak but not unarguable, her position in respect of each of the issues for determination were not so untenable that it ought be dismissed out of hand as a nonsense. There is a difference between a weak or marginal argument and a truly hopeless one: Quancorp Pty Ltd v Macdonald [1999] WASCA 101 [7]; Caratti Holdings Co Pty Ltd v Coventry Group Ltd [2014] WASC 403 (S).
The clarity with which the terms of the offer were expressed
28 The terms of the offer were clear and unambiguous. The terms required payment of money in full and final settlement of all matters in dispute with the requirement for a deed of settlement.
Whether the offer foreshadowed an application for indemnity costs in the event of its rejection
29 The second offer clearly states that, if it is rejected, the fact of the offer would be relied upon in making an application for indemnity costs.
Other relevant matters
30 The second offer was accompanied by a detailed analysis of the difficulties confronting Mrs Higgins' claim including drawing Mrs Higgins' attention to Thermomix's ultimately successful submission, that the representations which formed the very core of her case could not be construed from the words used in the documents said to support those representations.
31 The analysis also drew Mrs Higgins' attention to the fact that she had consented to the transfers of consultants by signing consent forms and drew her attention to those portions of the Thermomix manual which referred to Thermomix's discretion to reduce her area and specified the reasons for terminating her contract.
32 Thermomix also asks me to consider Mrs Higgins' failure to make any counteroffer. It is a matter of concern that Mrs Higgins chose not to make a counteroffer. It was, or should have been, clear to both parties that the trial was likely to take about five days and legal costs were likely to be high.
33 Whilst I found against Mrs Higgins on all of the crucial issues such as the representation clause, the implied term cause, the consent issue and on unconscionable conduct, it was not unreasonable for her to pursue the claim. She was entitled to have a court determine the issues she raised. Although Mrs Higgins was not successful, her case was not hopeless, nor properly advised should she or her legal advisors have known they had no chance of success.
34 Neither the rejection of the offer nor any aspect of the manner in which her case was conducted conveys, in my view, any sufficient basis to order indemnity costs.
35 I accept that in modern courts both sides are expected to conduct themselves in a reasonable way and to seek agreement where possible: Hall v Stone [2007] EWCA Civ 1354. Compromise is seen as an object worthy of promotion and a compromise is better than a conflict for litigants, the court and the administration of justice as a whole: Carver v BAAPLC [2008] EWCA Civ 412.
36 However, notwithstanding that Mrs Higgins' failure to offer a sensible compromise and the desirability from the court and the community's point of view of effective compromise, her conduct in rejecting the second offer and pursuing her weak, but not hopeless, case was not unreasonable and Thermomix have not satisfied me that it is appropriate to make an order for indemnity costs.
37 I order that Mrs Higgins pay Thermomix's costs to be taxed, if not agreed, on a party/party basis.
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