Jornad Pty Ltd v Sapme Pty Ltd (No. 3)

[2020] ACTSC 355

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title:	Jornad Pty Ltd v Sapme Pty Ltd (No. 3)
Citation:	[2020] ACTSC 355
Hearing Dates:	Decided on the papers
Submissions last
received:	16 November 2020
Decision Date:	23 December 2020
Before:	McWilliam AsJ
Decision:	See [43]
Catchwords:	COSTS – OFFER OF COMPROMISE – where plaintiff was successful in substantive proceedings – where plaintiff made an
offer in terms more favourable to two out of three defendants than
the result obtained at trial – where offer only open for 7 days when
no hearing date set and plaintiff substantially amended claim
following the rejection of the offer – where plaintiff did not succeed on all issues – whether apportionment appropriate
Legislation Cited:	Competition and Consumer Act 2010 (Cth) sch 2 Court Procedures Rules 2006 (ACT) rr 513, 1002, 1721, 1726, Pt 2.10
Cases Cited:	Amin v Vidal (No 2) [2020] ACTSC 332 Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 Clarkson Williams Partners Pty Ltd v Vaughan (No 2) [2016] ACTCA 8 Financial Integrity Pty Ltd v Farmer (No 4) [2014] ACTSC 145 Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; 234 CLR 52
Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover
Authority (No 2) [2005] VSCA 298; 13 VR 435 Hulanicki v Walton (No 2) [2015] ACTCA 45 Jones v Bradley (No 2) [2003] NSWCA 258 Jornad Pty Ltd v Sapme Pty Ltd (No. 2) [2020] ACTSC 201 Latoudis v Casey [1990] HCA 59; 170 CLR 534
Lewis v Chief Executive of the Department of Justice and
Community Safety (ACT) and Ors (No 2) [2014] ACTSC 196 Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 Norbis v Norbis [1986] HCA 17; 161 CLR 513 Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 Perisher Blue Pty Limited v Chubb Fire Safety Limited [2014] ACTCA 43 Pires v DibbsBarker Canberra Pty Limited [2014] ACTSC 283
Parties:	Jornad Pty Ltd (as trustee for the Jornad Trust) (ACN 142 547
411) (First Plaintiff)
Kevin John Barnes (Second Plaintiff) Sapme Pty Ltd (ACN 118 293 440) (First Defendant)
Stephen John Dawn (Second Defendant) Anne Dawn (Third Defendant)
Representation:	Counsel
P Walker SC with J Larkings (First, Second and Third Defendants)
Solicitors
Bradley Allen Love Lawyers (First and Second Plaintiffs)
McInnes Wilson Lawyers (First, Second and Third Defendants)
File Number:	SC 67 of 2017
McWilliam AsJ:

1.	These proceedings involved a claim of misleading and deceptive conduct in contravention of provision 18 of Sch 2 (the Australian Consumer Law), Competition
and Consumer Act 2010 (Cth) (“the ACL”). Judgment was delivered on 5 August 2020:
Jornad Pty Ltd v Sapme Pty Ltd (No. 2) [2020] ACTSC 201 (hereafter referred to as the primary judgment). The plaintiffs succeeded against the first and second defendants but did not succeed in establishing accessorial liability against the third defendant. The parties have now filed written submissions in relation to costs.
2.	The plaintiffs seek the following orders:

(1) The first and second defendants pay the plaintiffs’ costs up to 21 February

2018 on a party-party basis, and thereafter on a solicitor-client basis; and

(2) There be no order as to costs as between the plaintiffs and third defendant.

3.	The plaintiffs sent an offer of compromise to the defendants dated 21 February 2018 (Offer), which was not accepted and which the plaintiffs contend was more favourable to the first and second defendants than the outcome obtained after a fully contested hearing.
4.	If the Court does not accept the plaintiffs’ reliance on the Offer, the plaintiffs seek their
costs of the proceedings on the ordinary party-party basis as against the first and second defendants, and that there be no order as to costs as between the plaintiffs and third defendant.
5.	The defendants seek the following orders:

(a)	the first and second defendants pay 50% of the plaintiffs’ costs; and
(b)	the plaintiffs pay the defendants’ costs thrown away by reason of the

plaintiffs’ amendments to the statement of claim on 13 June 2018 and 19

February 2019.

6. The issues for determination are:

(a)	Whether there was a relevant offer of compromise that is effective to warrant a special costs order.
(b)	Whether a separate order for costs thrown away by amendments to the pleadings should be made.
(c)	Whether the defendants should only pay 50% of the plaintiffs’ costs.

Was the Offer made effective to warrant a special costs order (under the Rules or as a Calderbank offer)?

7. The terms of the Offer were as follows:

(a) Matters SC67 of 2016 and SC168 of 2017…will both be discontinued with each

party to pay their own costs.

(b)	Our clients and your clients will each release each other from any claims arising from, concerning or associated with the sale of Uni Pub.
(c)	Each party bears their own costs associated with this settlement.

8.	The Offer was said to be made in accordance with Part 2.10 of the Rules and alternatively as a Calderbank offer, with express words as to the potential costs consequences if the Offer was not accepted and the outcome of the proceedings was no more favourable to the defendants than the terms of the Offer.
9.	The Offer was said to be open until 1 March 2018, that is, for a period of 7 days.

Was the Offer effective to enliven Pt 2.10 of the Rules?

10.	Costs are in the discretion of the Court, pursuant to r 1721 of the Court Procedures Rules 2006 (ACT) (Rules); see also Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 (Oshlack). The discretion has been described as absolute and unfettered or words to similar effect: Latoudis v Casey [1990] HCA 59; 170 CLR 534 at 557; Perisher Blue Pty Limited v Chubb Fire Safety Limited [2014] ACTCA 43 at [41]-[42]. Such discretion is guided by settled principle, but not controlled by it: Norbis v Norbis [1986] HCA 17; 161 CLR 513 at 537.
11.	Generally, the discretion is exercised in favour of the successful party: Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; 234 CLR 52; Oshlack at [66]-[68].
12.	Circumstances that may warrant a different order being made include where an offer of compromise has been made that was more favourable to the recipient party than the ultimate outcome of the matter, either pursuant to the regime contained in Pt 2.10 of the Rules or otherwise in accordance with the principles articulated in Calderbank v Calderbank [1975] 3 WLR 586; 3 All ER 333.
13.	At the time the offer was made, the matter was listed for hearing on 12 June 2018 date. That means there was more than two months before the hearing. Rule 1002(5)(a) of the Rules states as follows:

The end of a period of acceptance for an offer –

(a) For an offer made 2 months or more before the date set down for the start of the

trial – must not be less than 28 days after the day the offer is made; …

14.	The consequence of this sub-rule applying is that contrary to the plaintiffs’ submission
and expressed intention otherwise in the Offer, it was not one that complied with Pt 2.10 of the Rules. That is, the Offer was not an effective Pt 2.10 Offer.

Was the Offer effective as a Calderbank offer?

15.	The principles applicable to Calderbank offers have been set out in Hulanicki v Walton (No 2) [2015] ACTCA 45 at [13]-[16]. It is not enough that an offer is made in terms which are either equal to, or more favourable to the recipient of the offer than, the judgment obtained. A special costs order is not justified unless the Court is satisfied that the rejection of an offer that was not bettered at trial was unreasonable: Jones v Bradley (No 2) [2003] NSWCA 258.
16.	A common approach is for the Court to consider two questions, the first being whether the offer was a genuine offer of compromise, and the second being whether it was unreasonable in the circumstances for the opposing party to reject the offer.
17.	As to the first question, drawing from cases such as Pires v DibbsBarker Canberra Pty
Limited [2014] ACTSC 283 at [97] and Financial Integrity Pty Ltd v Farmer (No
4) [2014] ACTSC 145 at [24]-[46], the considerations include:

(a) whether the correspondence relied upon was either open correspondence, or

marked “without prejudice save as to costs”, enabling it to be tendered at any hearing

concerning costs;

(b) whether the offer was a genuine compromise;

(c) whether the offer was a complete or final offer (in the sense of the terms being

clear, unambiguous, and not being subject to any further negotiation); and

(d) whether the letter expressly foreshadowed the possible consequence of being
relied upon in support of a special costs order, such as for solicitor and client costs, if

the offer was not accepted.

18.	There is no doubt as to the terms of the offer being a genuine offer of compromise. It is also not disputed that the offer was complete or clear and that the Offer contained the necessary warning as to the potential for an application for a special costs order.
19.	As to the second question, the following considerations were outlined in Hulanicki at [14], citing Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; 13 VR 435 at [25] with approval:

(a)	the stage of the proceedings at which the offer was received;
(b)	the time allowed to consider the offer;
(c)	the extent of the compromise offered;
(d)	the offeree’s prospects of success as at the date of the offer;
(e)	the clarity with which the terms of the offer were expressed; and
(f)	whether the offer foreshadowed an application for indemnity costs in the event of it being rejected.

20.	A recipient of an offer (the offeree) must have available sufficient material to enable an assessment to be made of the prospects of success of the claim, together with an assessment of the damages that may be awarded: Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [9].
21.	In that regard, the Offer contained explanatory text to the terms of the compromise offered. It included the following sentence:

The context behind the offer was set out in our letter to you dated 19 November 2017.

22. The earlier correspondence was also before the Court on the question of costs. The
relevant part of the document is as follows:

The rationale underlying the offer is:

(a)	Our clients suffered financial losses in the running of the busines known as Uni Pub.
(b)	Those losses exceed $500,000 not including legal fees and confidential settlement costs reached with the landlord.
(c)	There is a question in relation to the value of stock on hand.
(d)	There may also be an argument in relation to whether there was shared responsibility with the landlord in terms of the misrepresentation.
(e)	This matter has already been on foot for a year and our client is keen to move on.

23. The defendants argue their lack of acceptance of the Offer was not unreasonable for
the following reasons:

(a) The plaintiffs’ claim was amended twice after the Offer was made. The

amendments were significant and included an amendment on 13 June 2018 to include what was described as the First Representation in the principal judgment. This was one of the key issues determined by the Court in favour of the plaintiffs.

(b) At the time the Offer was made, the defendants did not have sufficient

material to enable an assessment of the prospects of the plaintiffs’ claim

and an assessment of the damages. Critically, the defendants did not have the expert accounting evidence, which was only served on 8 March 2018 after the Offer had expired.

(c) The Offer concerned two separate proceedings, one of which was resolved by consent (being SC168 of 2017 and described by the parties as the Stock Claim). That consent included the first plaintiff paying $29,187.63 plus interest and costs to the first defendant. In circumstances where the Offer combined both matters, it was not unreasonable for the first defendant, which was successful on the Stock Claim, to reject the Offer. The third defendant was also entirely successful in the proceedings.

24.	There is force in each of the submissions made by the defendants. The terms of the Offer included both proceedings and the way that the Offer is worded does not set out the proposal as enabling acceptance in respect of only one of the claims being litigated. That is, the condition that the defendants discontinue the Stock Claim as part of the compromise was intertwined with the settlement of the present proceedings.
25.	Further, I accept that the plaintiffs succeeded at trial primarily on a representation that was not pleaded as at 21 February 2018. To the extent that the plaintiffs succeeded on other representations, insufficient detail was provided in the pleadings to enable the defendants to form a view as to the likely prospects and quantum of the claims against them. The letter of 19 November 2017 does not assist in enabling the defendants to understand how the plaintiffs suffered a loss claimed of $500,000. It is a bare assertion. In particular, the accounting evidence, which would have explained to the defendants how that figure was calculated, was critical to the determination of this case, both in respect of liability and in respect of quantum.
26.	Even if all of those difficulties with the Offer were not present, I do not consider that seven days was a reasonable period of time in which to leave the Offer open where there was no imminent hearing.
27.	In those circumstances, I am not satisfied that it was unreasonable for the defendants not to accept the Offer.

Should the plaintiffs pay the costs thrown away by amendments to the pleadings?

28.	The defendants submit that rr 513(2) and 1726(2) operate such that costs orders are automatic upon a party amending its pleadings unless the Court orders otherwise. No orders were made otherwise when the amendments occurred.
29.	The defendants have further accepted that it is unnecessary for the Court to make an order confirming the automatic operation of the Rules, however the parties are each
now represented by different solicitors, and the defendants seek the order “for clarity”
on any assessment. The plaintiffs, in reply submissions, accepted the operation of the relevant rules. There is accordingly no issue genuinely in dispute between the parties for resolution with regard to this aspect of costs.
30.	In Amin v Vidal (No. 2) [2020] ACTSC 332, similar submissions made by the defendants here as to a need for clarity were recently considered, albeit in a different costs context. Where the Rules provide for automatic costs consequences and the parties are agreed that the particular rule applies, there really is no need for a court to
“clarify” that the rule applies by making an order. However, as the parties are before
the Court disputing other aspects of the appropriate orders on costs, it is convenient to include the uncontroversial order sought by the defendants.

Should the first and second defendants only pay 50% of the plaintiffs’ costs?

31. The defendants submit (in summary):

(a)	As the third defendant was successful, the plaintiffs should pay her costs.
(b)	With regard to the first and second defendants, the plaintiffs failed to establish aspects of the Further Representations (as defined in the primary judgment) and failed to establish a breach of the ACL in respect of a separate representation pleaded.
(c)	The plaintiffs did not establish the full quantum of their damages, initially claiming $441,618 but ultimately succeeding only in establishing $256,812.93 in damages.

32.	The first and second defendants also raised what amounts to a submission about
disentitling conduct, alleging that there were difficulties with obtaining the plaintiffs’
business and accounting records, and the fact that when the records were obtained, they were confusing, which increased the hearing time and complexity of the matter. The defendants submit this is a factor that should be weighed against a costs order in favour of the plaintiffs.
33.	Rather than trying to offset such factors, the first and second defendants contended for a costs order in favour of the plaintiffs, but set at 50% of their party and party costs.
34.	The first and second defendants rely on the following principles set out in Clarkson Williams Partners Pty Ltd v Vaughan (No 2) [2016] ACTCA 8 at [10]-[11]:

Bostik Australia Pty Ltd v Liddiard (No 2

In ) [2009] NSWCA 304 at [38], the NSW where the successful party has not succeeded on all issues:

•	Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed.
•	In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument. A similar approach is adopted on appeal.
•	If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue.
•	Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed.
•	A separable issue can relate to “any disputed question of fact or law” before a
court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter.
•	Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation.

(Citations omitted.)

11. … Refshauge J in [Lewis v Chief Executive of the Department of Justice and

Community Safety (ACT) and Ors (No 2) [2014] ACTSC 196 stated] at [26] that:

Even where the issues are separable, it would seem to me that, unless they played either a dominant part in the proceedings or have extended the hearing or the preparation for it appreciably, it would not usually be in the public interest to make separate costs provisions for such issues.

35. These are the principles that apply here.

Consideration

36.	I accept that the third defendant should have her costs of defending the proceedings paid by the plaintiffs. I do not accept that the plaintiffs should be deprived of their costs in respect of the proceedings against the first and second defendants.
37.	The plaintiffs did not succeed in establishing the full suite of the representations pleaded, but there was no one issue or particular representation that was dominant or clearly separable. Similarly, the fact that the plaintiff did not entirely succeed in
establishing the quantum of damages claimed does not negate the plaintiffs’
substantial success on damages. This is not a case where there was a vastly exaggerated claim or where the plaintiffs were only nominally successful.
38.	In written submissions, the first and second defendants sought to reduce the proportion of costs payable by reference to a mathematical process, including adding up the deductions from the quantum claim and calculating a combined percentage reduction
of the plaintiffs’ damages claim of over 40%. That is not the approach the Court takes
to the question of costs when considering apportionment. There is no mathematical precision involved. Even if I took the effect of that submission into account, what it demonstrates is the substantial success of the plaintiffs in achieving more than half of what was sought.
39.	As to the accounting records and expert accounting reports, although the state of the
plaintiffs’ accounting records produced a state of confusion, one of the reasons why
the hearing time and complexity of the matter increased was that the experts took different views about various items of claimed loss and were cross-examined at length in order to truly understand the points of difference. However, that was but one of many reasons for what became a lengthy and complex trial. This was protracted litigation involving a hearing over numerous days and with a number of interlocutory disputes and contests about obtaining evidence and then interpreting the figures, and requiring witnesses to be recalled. Neither the plaintiffs nor the defendants can lay claim to an efficient running of the matter. I am not persuaded there was any disentitling conduct on the part of the plaintiffs.

Conclusion

40.	The result of the above findings is that costs will follow the event. The first and second
defendants will pay the plaintiffs’ costs and the plaintiffs will pay the third defendant’s
costs. The remaining issue is how the orders should reflect that result. In this case, the first and second defendants expressly seek a reduction in the percentage of the
costs payable by them to reflect the third defendant’s success in the proceedings. This
appears to be a practical measure for the purposes of assessment (presumably if the parties are unable to agree on the quantum of costs), no doubt having regard to the fact that the second and third defendants are husband and wife.
41.	Ordinarily, the success of one defendant would not result in an order for apportionment in respect of the remaining defendants, as they are separate legal entities. However, there is merit in an approach that will not overly complicate a costs assessment process. As the third defendant has consented to such an approach (through the submissions made by her counsel), I will adopt that course.
42.	The defendants submitted that the Court should proceed on the basis that equal time was spent on the matter in respect of the three defendants. I do not accept that is the
case. The third defendant’s role, both in fact and law, was minor. As set out in the
primary judgment (at [189]-[197]), the third defendant prepared one sheet of handwritten figures, had one conversation with the second plaintiff and sent a number
of emails. The evidence and submissions directed to the third defendant’s involvement
do not reflect an even division of the costs incurred vis-à-vis the three defendants. I
will reduce the plaintiffs’ costs by 15%.
43.	The Orders of the Court are as follows:

(a) The plaintiffs are to pay the defendants’ costs thrown away by the

amendments of their claims dated 13 June 2018 and 19 February 2019.

(b) The first and second defendants are otherwise to pay 85% of the plaintiffs’

costs, on a party and party basis.

I certify that the preceding forty-three [43] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam.

Associate:

Date: