Khabiya t/as Samso Wall Printing v Sachdeva & Ors (No. 2)

[2019] NSWDC 498

District Court

New South Wales

Medium Neutral Citation:	Khabiya t/as Samso Wall Printing v Sachdeva & Ors (No. 2) [2019] NSWDC 498
Hearing dates:	On the papers
Date of orders:	13 September 2019
Decision date:	13 September 2019
Jurisdiction:	Civil
Before:	Abadee DCJ
Decision:	See paragraph 36
Catchwords:	COSTS – Calderbank letter – whether offeror obtained a better result than the terms offered – where offer was made jointly by a party later that was removed from the proceedings – where offer was made in conjunction with other offers relating to different disputes – whether the terms represented a genuine offer of settlement – whether rejection of the offer was unreasonable.
Legislation Cited:	Civil Procedure Act 2005
Cases Cited:	Commonwealth v Gretton [2008] NSWCA 117 Leichhardt Municipal Council v Green [2004] NSWCA 341
Category:	Costs
Parties:	Mr Khabiya (Plaintiff) Mr Sachdeva (First Defendant) Ms Sachdeva (Second Defendant)
Representation:	Counsel: Mr C Carter (Plaintiff) Mr J Mack (First and Third Defendant)   Solicitors: Vaikom Rajeev (Plaintiff) MST Lawyers (First and Third Defendant)
File Number(s):	2016/257216
Publication restriction:	Nil

Judgment

Background

1. I delivered reasons for judgment in this matter on 22 August 2019[1] . Essentially, I found that:

1. the plaintiff made out his case of breach of contract against the second defendant and was entitled to an order for damages arising from such breach for the sum of $92,000;

2. the plaintiff failed in all his claims against the first defendant (and his statutory claim against the second defendant);

3. no further order was made against the third defendant after I had struck out the claim against it, during the trial, on account of its de-registration (the circumstance of which had only become apparent during the trial).

   1. Khabiya t/as Samso Wall Printing v Sachdeva & Ors [2019] NSWDC 431 (the ‘Reasons’)

2. I directed the parties to confer on the final orders that should be made. By way of assistance, I indicated that short minutes should make provision for pre-judgment interest and costs [2] .

   2. [284] of the Reasons

3. I also directed the first defendant, the brother-in-law of the second defendant (and ‘Official Global Representative’ of the business or trading name under which she goes by) to notify her of the reasons for judgement, so that she would also have the opportunity to make submissions as to appropriate orders following my reasons. This direction followed the second defendant’s absence during the hearing [3] . I am satisfied that the first defendant has complied with that direction [4] and that the second defendant has had the opportunity to submit as to final orders. This is so, notwithstanding the second defendant’s omission to respond to the communication she received from the first defendant. In the events that have occurred, I find that the Second Defendant has made no submission as to the final orders, despite having the opportunity to do so.

   3. The circumstances of the Second Defendant’s absence at the trial were referred to at [39]-[40] of the Reasons.

   4. This involved sending a letter by email enclosing a hard copy of the Reasons, an email link to the judgment (on the ‘Caselaw’ website) and notifying the Second Defendant of the opportunity to respond to the plaintiff’s proposed short minutes of order.

4. This meant that, as ultimately occurred during the trial, the real contest as to the final dispositive orders was only between the plaintiff and the first defendant.

The plaintiff’s procedural misconception

5. The plaintiff prepared short minutes, and the first defendant has responded to them with its own version.

6. By order 5 of its proposed short minutes of order that it conveyed to the first defendant, the plaintiff appears to have laboured under an erroneous assumption that the issue of costs would be dealt with separately from the final orders.

7. There was no reasonable basis for any such assumption. It involves a misreading of [284] of the Reasons. By its correspondence sent to the plaintiff’s solicitors, dated 30 August 2019, the solicitors for the first defendant pointed this matter out. It also involves an unnecessary fragmentation of the proceeding contrary to case management objectives. By the same letter, the first defendant’s solicitors notified the plaintiff’s solicitors of its own position on costs and invited the plaintiff to indicate whether it agreed with that position or not. It did not receive any response from the plaintiff’s solicitors.

8. Curiously, I note that, in non-compliance with the direction in [283 (d)] of the Reasons, the plaintiff omitted to send me the first defendant’s correspondence sent to it, within the time directed. This was despite being reminded by the first defendant’s solicitors of its requirement to forward correspondence to the Court in its letter of 30 August 2019. This meant that it was left to the first defendant’s lawyers to forward to my Associate the relevant correspondence, by letter to the Court dated 12 September 2019 (after having foreshadowed to the plaintiff’s lawyers, on 11 September 2019, that it would do so).

9. I am satisfied that the plaintiff has had fair and reasonable opportunity to make submissions as to costs, but has chosen not to do so.

Orders by consent

10. I make the following orders which are substantially consented to:

1. The Plaintiff’s claims against the First Defendant are dismissed.

2. Verdict and judgment in favour of the Plaintiff, as against the Second Defendant, in the sum of AUD $92,000.

3. On the judgment sum referred to in order 2, the Second Defendant pay pre-judgment interest to the Plaintiff in the sum of AU$19,896.

4. The Second Defendant is also liable to pay post-judgment interest from 22 August 2019 at the rate of 7.5%per annum.

Costs

11. The only real and remaining issue in dispute is between the plaintiff and the first defendant concerns the question of costs.

12. It is trite that costs are in the discretion of the Court (Civil Procedure Act 2005, s 98). The exercise of that discretion is guided by rules of Court (the ‘UCPR’). The rules that would ordinarily be applicable are that: (a) costs ‘follow the event’ (r 42.1 of the UCPR); and (b) costs are payable on the ordinary (party and party) basis (r 42.2 of the UCPR).

13. The application of both rules would conventionally result in:

1. The Second Defendant paying the Plaintiff’s costs, on the ordinary basis, as agreed or assessed; and

2. The Plaintiff paying the First Defendant’s costs, on the ordinary basis, as agreed or assessed.

14. In circumstances where the action against the Third Defendant was struck out because of its status, and without any hearing on the merits, I am inclined to order that there be no costs ordered against the Third Defendant.

15. The first defendant invites the Court to depart from the result identified in paragraph 13(b) above. He does so on the basis of a Calderbank letter sent to the plaintiff’s solicitor dated 22 July 2019, 10 days before commencement of the trial.

The Calderbank letter

16. The terms of the offer of settlement contained in this letter were:

“the Plaintiff will pay the First and Third defendants’ $50,000 (in total) for legal costs incurred into the MST Trust Account on or before five days after receipt of written acceptance of our clients’ offer being provided to our office;

the parties will provide mutual releases of any and all claims they have against the others from the date of acceptance of this offer. To avoid confusion, this includes:

A. The plaintiff’s claim under District Court matter 2016/257216;

B. The First Defendant’s claim under the Local Court matter 2018/295797;

the parties will submit consent orders to the Court to dismiss the Proceedings within five business days of receipt of the $50,000 into the MST Trust Account.”

17. The explanation for these settlement terms was put as follows:

“The First Defendant did not deal with the Plaintiff in a personal or individual capacity and instead acted as an agent of (the Second Defendant). Further, the First Defendant denies that he represented to the Plaintiff that he would be liable for any losses suffered;

the Third Defendant was not a party to any agreement between the parties and therefore any claims against it are embarrassing;

our clients do not believe the Plaintiff has a strong case against them; and

our clients all real concerns that the Plaintiff will be unable to meet any adverse costs order resulting from these proceedings. The Plaintiff is yet to pay the $5,228.62 judgment debt made against him on 3 October 2018 and has continually delayed payment and ignored correspondence on the matter. The costs incurred over the course of the proceedings by all parties have been substantial and will increase over the course of the trial.”

18. The letter concluded with the warning that the offer of settlement contained in the letter was in accordance with Calderbank principles and said that if the offer was rejected and the proceeding continued, the first and third defendants would rely upon its content on the question of costs. The offer was open for acceptance until 30 July 2019, ie the day before the commencement of the trial.

Consideration

19. It is generally understood that compared to ‘rules offers,’ offers of settlement in the form of Calderbank letters may not carry the usual presumptive, or conditional entitlement to costs, where the offeror obtains a more favourable result than what is proposed in the offer; but they remain relevant to the exercise of the Court’s discretion. Plainly, in principle, they serve the important policy of encouraging opposing parties in litigation to assess, long and hard, the merits of their cases before trial and, in that way, may facilitate its timely compromise.

Did the offerors obtain a better result?

20. This Calderbank letter did not explicitly state that it would be relied upon in the event that the offerors obtained a better result than the terms offered; although that might be thought to be implied (at least, by custom).

21. The relevant result or ‘event’ here, is that, prima facie, the First Defendant obtained a judgment in its favour. But an initial problem for the applicants for the special costs order is that the offer was made also on behalf of the Third Defendant. There was no outcome that the Third Defendant exceeded by the offer on its behalf. The positions of the First and Third defendants were assimilated.

22. A further problem is that, by their terms, the offer to settle this proceeding was made in conjunction with an offer to settle proceedings commenced by the First Defendant in the Local Court. This Court has no knowledge or information, whatsoever, as to what that proceeding concerns. It also speaks, in inclusive terms, of releases affecting other claims which, it appears, might even extend beyond this proceeding, and the Local Court proceeding.

23. I infer from this, that the offer of settlement made on 22 July 2019 was substantially a global offer to deal with a range of actual or potential disputes between these litigants. That being so, it seems to me to be artificial to isolate one result from one proceeding and say that one (but not both) of the offerors had bettered the settlement term offered.

24. These circumstances suggest that it is not possible for the Court to be satisfied that the offerors have bettered the result that they offered to the plaintiff. I would be inclined to reject the application of Calderbank principles on this basis alone and would not exercise my discretion to make a special costs order in favour of the first defendant on account of the results in this proceeding.

25. If, however, I am wrong in such finding, there are other considerations that are necessary to consider.

26. Usually, there are two relevant considerations in considering the consequences of party’s rejection of a Calderbank letter are whether (a) the offer represents a genuine offer of settlement; and (b) it was unreasonable for the offeree to reject the offer[5] .

    5. Commonwealth v Gretton [2008] NSWCA 117 per Beazley JA (as her Excellency then was; with the agreement of Mason P and Hodgson JA) at [44]

27. As indicated, because of the way that the offer was framed and the multiple offerors on whose behalf it was made, there are difficulties in satisfying the latter element. I will address that element with reference, also, to the explanation offered in the Calderbank letter for why the offer should be accepted, later.

No genuine offer of settlement

28. I will now deal with the former element – whether the terms represented a genuine offer of settlement. In my view, they patently are not. The terms offered go beyond mere capitulation which is usually a finding that is fatal to establishing this requirement. By its offer for the plaintiff to pay $50,000 to the first and third defendants, the plaintiff is not only being invited to abandon its claim, but to pay a not insubstantial sum of money to the first and third defendants. This involves no element of compromise by the first and third defendants at all. In my view, the terms of the offer are so antithetical to the making of a genuine offer of settlement as to invite the conclusion that the only reason the offer was made was to set up an application for a partial order for indemnity costs in the event that, as has transpired, the plaintiff lost its case against the first and third defendants[6] .

    6. Leichhardt Municipal Council v Green [2004] NSWCA 341 per Santow JA (with whom Bryson JA and Stein JA agreed) at [39]

Rejection of offer not unreasonable

29. Returning to the latter element, the reasonableness of rejection of the offer, it stands to reason that it is not unreasonable to reject an unreasonable offer of settlement. But for completeness, I would address each of the components ‘explanation’ supplied on behalf of the offerors as to why the offer of settlement should be accepted. These matters are also to be read with the matters referred to in paragraphs 20-24 (incl) above.

30. The first defendant did not act in a personal capacity. This point was put forcefully on the first defendant’s behalf at trial, with reference to the statutory count of misrepresentation. The point was rejected: see [214]-[218] of the Reasons.

31. Claims against the Third Defendant are embarrassing. It did not become necessary to assess the merits of this contention. But if the Third Defendant considered that this was the case, it took no steps to seek the summary disposal of the claim against it.

32. The First and Third Defendants did not believe the plaintiff had a strong case against them. Not many defendants who contest a plaintiff’s claims up to within one week of the scheduled commencement of a trial do believe that the plaintiff has a strong case against them. For defendants who contemplate making an offer of settlement to potentially enliven special costs orders, however, it is necessary for them to provide something more than bare expression of opinion.

33. I also note – and this is relevant also to the genuineness of the settlement offer – that the representation case against the first defendant was not hopeless or such that would reasonably indicate a foregone conclusion: see [242]-[274] of the Reasons.

34. Concerns about the plaintiff’s capacity to meet an adverse costs order. Although he sued in his business, or trading, name, the plaintiff is personally liable for any adverse costs order against him. It would not have been possible for the defendants to obtain an order for security for costs against him. That is irrelevant, however, to the question whether a plaintiff should reasonably maintain a proceeding in the face of a reasonable offer of settlement.

35. The explanations, or reasons, why the plaintiff should have rejected the offer of settlement, in the proposed terms, are not convincing; let alone compelling. In the circumstances, I find that even if the offer represented a genuine offer of settlement (which I do not), it was not unreasonable for the plaintiff to reject it.

36. I find that the first (and third) defendants have not made out any basis for departing from the usual cost orders. That being so, I make the following final orders to dispose of this proceeding:

1. The Plaintiff’s claims against the First Defendant are dismissed.

2. Verdict and judgment in favour of the Plaintiff, as against the Second Defendant, in the sum of AUD $92,000.

3. On the judgment sum referred to in order 2, the Second Defendant pay pre-judgment interest to the Plaintiff in the sum of AU$19,896.

4. The Second Defendant is also liable to pay post-judgment interest from 22 August 2019 at the rate of 7.5%per annum.

5. The Second Defendant is to pay the Plaintiff’s costs of his claim against the Second Defendant as agreed or assessed, on the ordinary basis.

6. The Plaintiff is to pay the First Defendant’s costs of the claims made against him, as agreed or assessed, on the ordinary basis.

7. There is no order as to costs of the proceeding against the Third Defendant.

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Endnotes

Decision last updated: 13 September 2019