Kizmann v De Maine (No 3)

[2024] ACTSC 171

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title:

Kizmann v De Maine (No 3)

Citation: 

[2024] ACTSC 171

Hearing Date: 

23 May 2024

Decision Date: 

23 May 2024

Before:

McCallum CJ

Decision: 

(1)    The amount of interest referred to in Order 1 made on 9 May 2024 be determined in the agreed amount of $142,658.63.

(2)    The costs the subject of Order 3 made on 9 May 2024 be assessed on a party-party basis up to and including 16 June 2023, and on a solicitor-client basis from 16 June 2023.

Catchwords: 

CIVIL LAW – PRACTICE AND PROCEDURE – Costs – application for indemnity costs – where offer of compromise by plaintiff not accepted – whether it was unreasonable for the first defendant to have subjected the plaintiff to the expenditure of the hearing – timing of offer of compromise

Legislation Cited:

Court Procedures Rules 2006 (ACT), rr 1002, 1010

Court Procedures Act 2004 (ACT), s 5A

Cases Cited: 

Lehrmann v Network Ten Pty Limited (Costs) [2024] FCA 486

Kizmann v De Maine (No 2) [2024] ACTSC 139

Parties: 

Ivan Gerard Kizmann ( Plaintiff)

Gregory John De Maine ( First Defendant)

Shostko Systems Pty Ltd (deregistered) (Second Defendant)

Representation: 

Counsel

P Hohnen ( Plaintiff)

N Gabbedy ( First Defendant)

Solicitors

Legal on London ( Plaintiff)

Gabbedy Milson Lee ( First Defendant)

File Number:

SC 586 of 2019

McCALLUM CJ:       

EX TEMPORE REASONS (REVISED) 

1․In these proceedings, Mr Ivan Kizmann sought to enforce loans made through negotiation with a longstanding friend, Mr Gregory De Maine.  The single issue in the proceedings by the time it was heard by me was whether the loans were made to Mr De Maine personally or instead to his now defunct company, Shostko Systems Pty Ltd.

2․In a judgment published on 9 May 2024, I found in favour of Mr Kizmann against Mr De Maine personally; see Kizmann v De Maine (No 2) [2024] ACTSC 139. I ordered that the first defendant pay the plaintiff's costs. However, upon being informed that there was an application by the plaintiff for a different order as to costs, I stood the matter over to today for determination of that application.

3․There was a further question that remained to be determined following publication of the primary judgment as to the interest on the judgment debt.  Happily, the parties are agreed on the relevant sum of interest.  I am grateful for their cooperation on that issue.

4․As to costs, the plaintiff seeks indemnity costs on the basis of the first defendant’s allegedly unreasonable conduct in defending the proceedings, relying on the recent decision of Lee J in Lehrmann v Network Ten Pty Limited (Costs) [2024] FCA 486, published on 10 May 2024. In that decision, Lee J upheld a claim for indemnity costs on the basis of a finding that, in bringing proceedings for defamation on an imputation that he had sexually assaulted Ms Brittany Higgins, Mr Lehrmann had in effect prosecuted what he knew to be a lie and so should pay indemnity costs on the grounds of his unreasonable conduct in bringing the proceedings.

5․In the alternative to that application, Mr Hohnen, the solicitor for Mr Kizmann, seeks an order for costs in accordance with the rules following Mr De Maine's failure to accept an offer of compromise served last year. 

6․Mr Gabbedy, who appears for Mr De Maine today, is in the awkward position of not having instructions in respect of those alternative applications.  However, he made general submissions as to the applications based on the history of the proceedings and the relevant principles, and I am grateful for his assistance in relation to those matters.  Mr Gabbedy accepts that he could not be heard against the alternative order sought by Mr Hohnen, namely, an order in accordance with the rules following upon the failure to accept the offer of compromise.

7․Dealing first within the application for indemnity costs for the whole proceedings, the relevant principles are set out helpfully in Lee J's decision at [27] to [30].  His Honour noted that, in the circumstances of that case, four aspects of those principles needed to be emphasised.  Three of those are relevant here.

8․First, his Honour noted at [27] that an award of costs is in the discretion of the court and that, although it has often been remarked that the discretion is unfettered, the statute that applies in the Federal Court requires the court to take account of any failure by a party to comply with the overarching purpose of the civil procedure provisions, which is to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible. A similar provision applies in this court: see s 5A of the Court Procedures Act 2004 (ACT).

9․Secondly, his Honour noted that an award of indemnity costs is not a punitive measure but is designed to compensate a party fully for costs incurred when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure in question.  That is a principle of general application.

10․The third matter focussed on by Lee J derives exclusively from the provisions of the Defamation Act 2005 (NSW) and need not be considered here.

11․Fourthly, at [30], his Honour noted a number of factors that are relevant in considering whether the rejection of Calderbank offer was unreasonable.  I will return to those matters.

12․The critical question in the present application, in my assessment, is whether it was unreasonable for Mr De Maine to have subjected Mr Kizmann to the expenditure of the defended hearing.  It is not enough for that purpose to point to the fact that Mr De Maine lost.  Attention must be paid to the course of the proceedings.  It is significant in that context to note, as Mr Gabbedy submitted, that the claim began as a pleading that the debts in question were owed not by Mr De Maine but by the now defunct company, Shostko System Pty Ltd.

13․As I noted in the first paragraph of the primary judgment, that company was wound up in 2021 with no distribution to unsecured creditors and has since been deregistered.  It was in that circumstance that the single issue in the proceedings became whether the sums advanced by Mr Kizmann were owed by that entity, plainly meaning there would be no prospect of any recovery, or by Mr De Maine personally.

14․Mr Gabbedy also noted that the earlier pleadings pleaded other causes of action which were not pursued at the hearing.  The point is that even Mr Kizmann, through his lawyers, at one point prosecuted an allegation that, on the objective theory of contract, the debt was with the company and not the individual.

15․In April 2021, an amended statement of claim was filed in which it was pleaded that the debt was owed jointly by both the company and Mr De Maine.

16․The offer of compromise under the Court Procedures Rules 2006 (ACT) was dated 31 May 2023. Mr Hohnen submitted on behalf of Mr Kizmann that it could be regarded as also having the effect of a Calderbank letter, having been marked “without prejudice save as to costs”. It is not necessary to decide whether that is the case, although I would note that, in my experience, I would expect a Calderbank letter to at least put forward some arguments on the part of the party making the offer as to why the claim ought to be compromised. The letter in the present case was perfectly compliant with r 1002 of the Court Procedures Rules.  However, it put forward no arguments urging the defendant to compromise the claim.  It was simply an offer to compromise the whole of the plaintiff’s case in the amount of $125,000 plus costs.  The offer plainly was “no less favourable” to the plaintiff than the result he ultimately achieved, which saw him obtain judgment in the sum of $858,767.46.  But, returning to the point about a Calderbank letter, the significant context is that the offer was made at a time when the pleadings alleged liability jointly on the part of both defendants. 

17․Shortly after the expiration of the period for acceptance of the offer of compromise on 16 June 2023, the plaintiff filed his further amended statement of claim on 20 June 2023.  That pleading also alleged that it was agreed that the plaintiff would lend monies to both defendants and that they would be jointly and severally liable to repay the monies lent.  That was the pleading on which the claim was determined. 

18․I have concluded that the case does not fall within the circumstances where, in accordance with the principles discussed by Lee J in his costs decision in the Lehrmann proceedings, the defendant should pay costs on the indemnity basis.  My reasons for coming to that conclusion are, firstly, that, as I have indicated in the facts just recited, the offer of compromise was made after Mr Kizmann himself had initially pleaded the case in the same way as Mr De Maine contended it should be analysed, namely, that the debt was that of the company.  It may be accepted that the offer of compromise was generous, in what was in effect an all or nothing case.  However, the case ultimately fell to be determined not, as in Lehrmann, according to what the judge found was known by the plaintiff but according to the objective theory of contract.

19․Determination as to the entity to which (or whom) the loans were made required a careful and detailed consideration of many, many communications between the two men.  The fact that Mr Kizmann initially pleaded the case in precisely the way Mr De Maine contended it should be analysed I think itself indicates that I cannot conclude it was unreasonable for Mr De Maine to defend the case.  For that reason, I decline to make an order for costs on the indemnity basis. 

20․As already indicated, Mr Gabbedy accepted, with respect correctly, that there is no real argument that can be put against the costs consequences of not accepting the offer of compromise in accordance with the rules governing this determination.

21․Rule 1010 of the Court Procedures Rules provides:

1010 Offer not accepted and judgment no less favourable to plaintiff

(1)This rule applies if an offer is made by the plaintiff in relation to a claim, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim no less favourable to the plaintiff than the terms of the offer.

(2)Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff’s costs in relation to the claim—

(a) if the claim is a personal injury claim—assessed on a solicitor and client basis for the whole of the proceeding; or

(b) in any other case—

(i)    assessed on a party and party basis up to the time when the costs are to be assessed on a solicitor and client basis under subparagraph (ii); and

(ii)      assessed on a solicitor and client basis—

(A) if the offer was made before the first day of the trial—from the day the period for acceptance of the offer ends; and

(B) if the offer was made on or after the first day of the trial—at and from 11 am on the day after the offer was made.

22․No reason having been put forward to order otherwise, it is appropriate to make the order sought.

Orders

23․For those reasons, I make the following orders:

(1)The amount of interest referred to in Order 1 made on 9 May 2024 be determined in the agreed amount of $142,658.63.

(2)The costs the subject of Order 3 made on 9 May 2024 be assessed on a party-party basis up to and including 16 June 2023, and on a solicitor-client basis from 16 June 2023.

24․I note that order (2) extends to the costs of today’s hearing.

I certify that the preceding twenty-four [24] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Chief Justice McCallum.

Associate:

Date: