Knight Frank Australia Pty Ltd v Australian Central Credit Union Ltd (No 2) - [2019] SASC 41

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
KNIGHT FRANK AUSTRALIA PTY LTD v AUSTRALIAN CENTRAL CREDIT UNION LTD (No 2)
[2019] SASC 41
Judgment of The Honourable Justice Stanley
27 March 2019
PROCEDURE - COSTS - GENERAL RULE - COSTS FOLLOW THE EVENT
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS - INFORMAL OFFERS AND CALDERBANK LETTERS
Application for the costs of proceedings at trial in the Magistrates Court and on appeal to the Supreme Court.
The appellant was unsuccessful at trial and on appeal. The respondent obtained a judgment from the Magistrates Court for the sum of $71,980 plus interest and costs. The Magistrate directed that the question of costs of the proceedings in the Magistrates Court would be determined after the judgment on appeal to the Supreme Court.
Prior to trial, on 18 December 2017 the respondent filed an offer of settlement in the Magistrates Court for the sum of $36,000 plus costs and disbursements. On 26 October 2018, after judgment in the Magistrates Court had been delivered, the respondent made an informal offer by letter to the appellant, expressed to be a Calderbank offer, to accept the sum of $70,000 all inclusive in full and final settlement of all issues in the litigation. That offer was open for three business days. Both offers were refused by the appellant.
The respondent seeks an order for payment of its costs of proceedings at trial in the Magistrates Court and on appeal to the Supreme Court.
Held (per Stanley J):
1. It was appropriate that the Court make orders for the disposition of the costs in the Magistrates Court in order to avoid further costs being incurred by the parties.
2. No special reasons existed to depart from the order contemplated by r 58(2)(a) of the Magistrates Court (Civil) Rules 2013 (SA). Accordingly, the appellant is to pay the respondent its costs of the proceedings in the Magistrates Court until 15 January 2018 on a party/party basis and from that date, on a solicitor/client basis.
3. The appellant did not act unreasonably in not accepting the offer contained in the letter of 26 October 2018. The circumstances did not justify the unusually short period of time for which the offer was open. The appellant is to pay the respondent its costs of and incidental to the appeal to this Court on a party/party basis.
Magistrates Court (Civil) Rules 2013 (SA) r 58(2)(a), referred to.
Essential Beauty Franchising (WA) Pty Ltd v Pilton Holdings Pty Ltd (No. 2) (2014) 120 SASR 433, applied.
Calderbank v Calderbank [1975] 3 All ER 333, considered.

KNIGHT FRANK AUSTRALIA PTY LTD v AUSTRALIAN CENTRAL CREDIT UNION LTD (No 2)
[2019] SASC 41
STANLEY J:
Introduction

This is an application by the respondent for its costs of proceedings at trial in the Magistrates Court and on appeal to this Court.
The appellant was unsuccessful at trial and on appeal. The respondent obtained a judgment from the Magistrates Court for the sum of $71,980 plus interest and costs. Its appeal to this Court was dismissed.
On 18 December 2017 the respondent filed an offer of settlement in the Magistrates Court for the sum of $36,000 plus costs and disbursements.
Pursuant to r 58(2)(a) of the Magistrates Court (Civil) Rules 2013 (SA) (Magistrates Court Rules), a plaintiff who obtains final judgment for a sum of money that is more than the amount of its offer, plus the costs and interest due at the time of the offer, is entitled to solicitor/client costs from 14 days after the offer was filed, unless there are special reasons to order otherwise.
On 25 October 2018, after judgment had been delivered in the Magistrates Court, a magistrate made an order, in the absence of the appellant, that the respondent was entitled to payment of its costs on a solicitor/client basis unless within 14 days the appellant requested the matter be called on. Ultimately, the magistrate heard the parties at a further directions hearing and directed that the question of costs of the proceedings in the Magistrates Court would be determined after the judgment on appeal to this Court.
On 26 October 2018 the respondent sent an informal offer by letter to the appellant’s solicitors. It was expressed to be a Calderbank offer.[1] The respondent offered to accept the sum of $70,000 all inclusive in full and final settlement of all issues in the litigation. The offer was open until Wednesday, 31 October 2018 at 5 p.m. At that time, the appellant had instituted an appeal to this Court from the judgment of the Magistrates Court.
[1] Calderbank v Calderbank [1975] 3 All ER 333.
On 7 February 2019, this Court dismissed the appellant’s appeal.
The respondent seeks its costs of the Magistrate Court proceedings on a party/party basis until 15 January 2018 and, from that date, on a solicitor/client basis. It further seeks an order for payment of its costs of the appeal to this Court on an indemnity basis or, in the alternative, an order for payment of its costs of the appeal to this Court until 31 October 2018 on a party/party basis and, from that date onwards, on an indemnity basis.
The respondent submits that this Court has the power to make an award of costs in respect of the Magistrates Court proceedings and should do so in order to avoid the need for a further hearing before a magistrate. It submits that the Court should make the order because the appellant unreasonably refused to accept either of its offers.
Principles applicable to informal offers
In Essential Beauty Franchising (WA) Pty Ltd v Pilton Holdings Pty Ltd (No. 2),[2] Blue J considered the principles applicable to the issue of whether to make a costs order other than the usual order by reason of the rejection or non-acceptance of an informal offer. Those principles are as follows:[3]
1.The mere fact that it was open to the offeror to file a formal offer under the Rules is not in itself a reason to discount reliance upon rejection or non-acceptance of an informal offer as a reason to make an order departing from the general rule that costs on a party and party basis follow the event (a special costs order).
2.While non-acceptance or rejection of an informal offer can be a relevant factor to take into account, it is not the only relevant factor and all relevant factors should be considered in deciding whether to make a special costs order.
3.In assessing whether the offeree had a reasonable time to assess whether to accept the offer, it is necessary to take into account all the circumstances, including the stage the action has reached, the information available to the offeree, previous negotiations between the parties, legal representation of the offeree, the nature of the issues in the action and whether there was a response by the offeree to the offer.
4.In deciding whether to make a special costs order, it is relevant to compare the form and substance of the informal offer with the form and substance required of a formal offer under the Rules.
5.The mere fact that an offer is expressed to remain open for less than 14 days, or for less than the period required of a formal offer under the Rules, is not in itself fatal to an application for a special costs order founded on non-acceptance of the informal offer.
[2] [2014] SASC 141, (2014) 120 SASR 433.
[3] [2014] SASC 141 at [56], (2014) 120 SASR 433 at 445.
Consideration
In my view, it is appropriate that this Court should make orders for the disposition of the costs in the Magistrates Court in order to avoid further costs being incurred by the parties.
I am satisfied that the respondent is entitled to the order contemplated by r 58(2)(a) of the Magistrates Court Rules. The respondent obtained a judgment that far exceeded the sum offered. No special reasons exist to depart from the order contemplated by the rule. Accordingly, I would order that the appellant pay the respondent its costs of the proceedings in the Magistrates Court until 15 January 2018 on a party/party basis and from that date, on a solicitor/client basis.
On the other hand, I would not order the appellant to pay the costs of the appeal to this Court on an indemnity basis. I do not consider the appellant acted unreasonably in not accepting the offer contained in the letter of 26 October 2018. That offer was open for three full business days only. The rules require that a formal offer had to be open for 14 days. Of course this was an informal offer not a formal offer. At the time the offer was made the appeal had not yet been listed for hearing. The circumstances did not justify the unusually short period of time for which the offer was open. Notwithstanding that the appellant was represented by solicitors, it was entitled to a longer period of time within which to consider the offer. The appeal was not untenable. At the time the question of the costs of the trial had not been finally determined. In Morris v McEwen and Anor,[4] White J, with whom Debelle J agreed said:[5]
…a court may have regard to a Calderbank letter even though an offer in accordance with the Rules of Court could have been lodged. … there are some limitations on the circumstances in which it will be appropriate to attach any weight to a Calderbank letter. … in order for effect to be given to a Calderbank letter, it should be framed in terms which are consistent with the spirit and intent of Rule 40. In particular, for effect to be given to a Calderbank letter where an offer in accordance with the Rules of Court could have been lodged, the Calderbank letter should not impose more onerous obligations on the recipient than would an offer filed in accordance with the Rules. The procedure specified in the Rules for the lodgement of an offer is to be understood as an expression of what the Court regards as a reasonable approach.
[4] [2005] SASC 284, (2005) 92 SASR 281.
[5] [2005] SASC 284 at [74], (2005) 92 SASR 281 at 300.
The period of three business days during which the offer was open to be accepted was inadequate to permit a considered and reasoned assessment of the offer by the appellant. I would order that the appellant pay the respondent its costs of and incidental to the appeal to this Court on a party/party basis.
Orders
1.I order that the appellant pay the respondent its costs of the proceedings in the Magistrates Court until 15 January 2018 on a party/party basis.
2.I order that the appellant pay the respondent its costs of the proceedings in the Magistrates Court after 15 January 2018 on a solicitor/client basis.
3.I order that the appellant pay the respondent its costs of and incidental to the appeal to this Court on a party/party basis.