Koundouris v The Owners - Units Plan No 1917 (No 2)

[2017] ACTCA 47

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
COURT OF APPEAL

Case Title:

Koundouris v The Owners – Units Plan No 1917 (No 2)

Citation:

[2017] ACTCA 47

Hearing Dates:

Decision Date:

On the papers

24 October 2017

Before:

Murrell CJ, Elkaim and Jagot JJ

Decision:

See paragraph [44]

Catchwords:

COSTS – Offer of compromise – distinction between primary proceedings and appeal.

Legislation Cited:

Court Procedures Rules 2006 (ACT) rr 1002, 1010 and 5001

Cases Cited:

Calderbank v Calderbank [1975] 3 All ER 333

Cooper v Singh [2017] ACTCA 21

Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd [2017] NSWCA 27

Texts Cited:

Her Honour Justice M J Beazley AO, ‘Offers of Compromise: Following, Bending and Breaking the Rules’ (Speech delivered at the New South Wales Law Society CPD, Sydney, 5 August 2015)

Parties:

Michael Koundouris (Appellant/Cross-Respondent)

The Owners Unit Plan 1917 (Respondent/Cross-Appellant)

Representation:

Counsel

Mr DF Jackson QC with Mr B Katekar (Appellant/Cross-Respondent)

Mr N Hutley SC with Mr F Hicks (Respondent/Cross-Appellant)

Solicitors

Clayton Utz (Appellant/Cross-Respondent)

Minter Ellison (Respondent/Cross-Appellant)

File Number:

ACTCA 27 of 2016

Decision under appeal:  

Court/Tribunal:             ACT Supreme Court

Before:  Mossop AsJ

Date of Decision:         5 July 2016

Case Title:  The Owners – Units Plan No 1917 v Koundouris

Citation: [2016] ACTSC 96

THE COURT:

1. On 22 August 2017, the Court delivered its decision in this matter: Koundouris v The Owners – Units Plan 1917 [2017] ACTCA 36. The appeal was dismissed. The cross-appeal was successful.

1. The orders made on 22 August 2017 included the following:

(iii) The parties confer and within 14 days submit either agreed orders dealing with damages, interest and costs or competing orders accompanied by a written submission of no more than four pages explaining the position of the party and the reasons for it.

(iv) The parties may also file and serve within a further seven days after the expiry of the 14 day period referred to in order (iii) a further submission in reply of not more than three pages.

1. Both parties submitted proposed orders. The parties agree on the amount of damages and the amount of pre-judgment interest. They disagree on costs.

1. The costs order sought by the successful cross-appellant is as follows:

The Appellant/Cross-Respondent pay the Respondent/Cross-Appellant’s costs of the primary proceeding and the appeal proceedings:

(a) on a party and party basis up to 23 June 2015; and

(b) on a solicitor and client basis from 24 June 2015,

in an amount to be agreed or assessed.

1. The cross-appellant’s written submissions also seem to suggest an indemnity costs order. This is not part of the proposed order put forward. The Court has considered the cross-appellant’s submissions on the basis of the draft order proposed by it.

1. The costs order suggested by the cross-respondent is as follows:

The Appellant/Cross-Respondent pay the Respondent/Cross-Appellant’s costs of the appeal.

1. The cross-appellant relies on the affidavit of Mr Geoffrey Shaw, sworn on 5 September 2017, to support its submission. The affidavit refers to three separate offers that were made by the respective parties.

1. On 17 June 2015, the cross-appellant made a ‘Calderbank’ offer in the following terms:

We have been instructed that the OC is prepared to resolve the Proceedings, without an admission of any kind, on the following terms:

(a) The Defendants pay the OC $850,000.00 in full and final settlement of the Proceedings and all claims in relation to the Lagani Apartments; and

(b) The Defendants pay the OC’s costs as agreed or assessed.

1. A Calderbank offer is derived from Calderbank v Calderbank [1973] 3 All ER 333.

1. The offer was open for acceptance until 5:00 pm on 26 June 2015.

1. Also on 17 June 2015, the cross-respondent made an offer of compromise under Part 2.10 of the Court Procedures Rules 2006 (ACT) (‘the Rules’). The offer was:

1. The proceedings are dismissed.

2. The defendants are to pay the plaintiff the amount of $300,000.00 within 28 days.

3. The defendants are to pay the plaintiff the amount of $150,000.00 in costs within 28 days.

4. No other order as to costs.

1. This offer, of effectively $450,000 inclusive of costs, was open for acceptance until 5:00 pm on 23 June 2015.

1. On 18 June 2015, a second offer was made by the cross-appellant, on the same terms as the previous offer, but this time expressed as an offer of compromise under the Rules. The offer was, like the cross-respondent’s offer, open for acceptance until 5:00 pm on 23 June 2015.

1. Suffice to say that none of the offers were accepted.

1. Rule 1010 states:

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.

1. Quite obviously, the offer made by the cross-appellant is “no less favourable” than the proposed judgment sum of $1,471,235.49.

1. By simple operation of the Rules, the cross-appellant is entitled to the costs order that it seeks. It is, however, open to the Court to “order otherwise”.

1. The cross-respondent has opposed the order for two reasons. Firstly, it says that the offer of compromise “did not provide reasonable notice”. Secondly, it says that it was “not unreasonable for Mr Koundouris not to have accepted the Calderbank offer”. It was not suggested by the cross-respondent that the offer of compromise was not technically made in accordance with the Rules.

1. It is implicit from the cross-respondent’s submissions that no objection is taken to Mr Shaw’s affidavit. Leave will, accordingly, be given for the cross-appellant to rely on this affidavit. All references to annexures in this judgment are annexures to this affidavit.

1. In respect of the question of reasonable notice, the cross-respondent makes two points. Firstly, it is said that the offer was not open for a reasonable period, having regard to the complexity of the matter and the looming trial date of 29 June 2015. Secondly, it is said that the cross-appellant, on 23 June 2015, filed a 14 page affidavit of a Dr Rushbrook which changed the quantum of the cross-appellant’s claim and the manner in which it was calculated.

1. The ‘length of reasonable notice’ is hampered by this fact: the offer made by the cross-respondent was sent by email to the solicitors for the cross-appellant on 18 June 2015 at 2:55 pm. It was expressed to be open until 5:00 pm on 23 June 2015 (Annexure ‘B’).

1. The Calderbank offer made by the cross-appellant (Annexure ‘A’) was emailed to the cross-respondent’s solicitors at 7:15 pm on 17 June 2015 and expressed to be open until 5:00 pm on 26 June 2015.

1. The offer of compromise made by the cross-appellant (Annexure ‘C’) was emailed to the cross-respondent’s solicitors at 4:31 pm on 18 June 2015 and expressed to be open until 5:00 pm on 23 June 2015.

1. Looking only at the offers of compromise, the cross-respondent’s offer, presumably in its view giving reasonable notice, was only open for 96 minutes longer than the cross-appellant’s offer. If the Calderbank offer is taken into account, noting that its terms are essentially the same as the offer of compromise, then the cross-appellant’s offer was open for almost a day longer than the cross-respondent’s offer.

1. It is difficult to understand how the cross-appellant could not have given reasonable notice if the notice is similar to, or longer than, the notice given by the cross-respondent.

1. As far as the affidavit of Dr Rushbrook is concerned, it no doubt required consideration. However, if it reduced the quantum of the cross-appellant’s claim, then its effect was to potentially lessen the liability of the cross-respondent. The offer made by the cross-respondent implies that the cross-respondent’s opinion was that it would ultimately have to pay money to the cross-appellant.

1. It is also worth noting that the Calderbank offer remained open for acceptance for a further three days, thus giving the cross-respondent more time to consider Dr Rushbrook’s affidavit.

1. The cross-respondent’s first point is, accordingly, rejected.

1. The cross-respondent’s second point, that it was not unreasonable to not accept the Calderbank offer, raises for consideration the difference between a Calderbank offer and an offer of compromise.

1. This point was considered by this Court in Cooper v Singh [2017] ACTCA 21, although in the context of a personal injuries case. The Court referred to Beazley P’s paper, ‘Offers of Compromise: Following, Bending and Breaking the Rules’, including these observations:

11. Rule compliant offers have this advantage – if the offer is not accepted, and the order made by the court is as good as or better than the offer made by the offeror, the rules operate so as to provide for an indemnity costs order from the date of the offer. While it is subject to the court’s discretion to provide otherwise, the onus of persuading the court to order otherwise has shifted to the party opposing the indemnity costs order. By contrast, the making of a Calderbank offer does not displace the ordinary rule that the party seeking a departure from the general rule as to costs bears the persuasive onus of establishing that a favourable costs order ought to be made. (Footnotes omitted)

1. The Rules in the Australian Capital Territory are different in that they provide for costs being assessed on a solicitor and client basis, rather than an indemnity basis. Otherwise, the principles are the same.

1. Where an offer of compromise has been exceeded by a verdict, assuming reasonable notice was given, the Court should only order ‘otherwise’ in exceptional circumstances. The general discretion that arises when considering Calderbank offers does not arise in respect of offers of compromise.

1. The Court is of the view that effect should be given to the offer of compromise, in preference to the Calderbank offer. This is because the rules based offer has been made in accordance with the court process and is designed specifically to encourage compromise in litigation. While Calderbank offers undoubtedly have their place, preference should be given by the Court to offers made under its own rules.

1. This approach, in this case, removes consideration of discretionary issues which might have arisen if only the Calderbank offer was being considered.

1. Thus, the offer being in an appropriate form, reasonable notice having been given and the verdict sum being no less favourable than the offer of compromise, the cross-appellant is entitled to a costs order in accordance with r 1010.

1. The next point to arise is the scope of the costs order; should the orders apply only to the costs of the proceedings in the court below or should they also extend to the costs of the appeal?

1. There can be no doubt that the orders should apply to the hearing at first instance. The effect of the appeal is to state what the verdict should have been. As already observed, it is in a sum in excess of the offer of compromise. The offer of compromise therefore has its intended effect.

1. No fresh offer of compromise was made following the lodging of the notice of appeal or the cross appeal. There was no correspondence making a fresh Calderbank offer or endeavouring to ‘renew’ the offer of compromise.

1. The cross appellant has submitted that the offer of compromise is equally applicable to the appeal as it was to the costs below. This is because r 1002 refers to an offer being made to compromise “any claim in proceedings” and there is no reason for an appeal not to be regarded as part of the claim.

1. The opposing argument is that absent renewal of the offer of compromise, it does not apply to the costs of the appeal. Firstly, it is said that r 5001 specifically allows for the offers of compromise rules to be applied to appeals.

1. Secondly, the cross respondent relies on the recent New South Wales Court of Appeal decision in Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd [2017] NSWCA 27. Bathurst CJ said this at paragraphs [237] - [238]:

Tzaneros somewhat faintly argued that if successful on the appeal it should have its costs of the appeal on an indemnity basis notwithstanding the failure to renew the offer of compromise following the conclusion of the trial.

Although there is authority that an offer of compromise retains significance for the purpose of cost orders on appeal (Ettinghausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 at [409]-[410]), subsequent decisions of this court have expressed a contrary view: Coombes v Roads & Traffic Authority (NSW) (No 2) [2007] NSWCA 70 at [79]-[82]; Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [37]-[43].

In the present case the appeal was arguable and raised some difficult questions. The offer of compromise not having been renewed, there is no reason to make an order other than the usual order for costs.

1. Accepting that the cross appellant more than “faintly argued” its request for application of the offer of compromise to the appeal, it nevertheless faces the difficulty that the offer was not renewed following the filing of the appeal. In addition, the rules allow for the making of a fresh offer of compromise.

1. Further, the appeal here was certainly “arguable and raised some difficult questions”. The Court is of the view that, in the circumstances, the ‘normal’ order should apply to the appeal.

1. The following orders are made:

(a)The appellant/cross-respondent is to pay the respondent/cross-appellant’s costs of the primary proceedings:

(i)on a party and party basis up to 23 June 2015; and

(ii)on a solicitor and client basis from 24 June 2015;

in an amount to be agreed or assessed.

(b)The appellant/cross-respondent is to pay the respondent/cross-appellant’s costs of the appeal proceedings on a party and party basis in an amount to be agreed or assessed.

I certify that the preceding forty-four [44] numbered paragraphs are a true copy of the Reasons for Judgment of their Honours Chief Justice Murrell, Justice Elkaim and Justice Jagot.

Associate:

Date: 24 October 2017