Mailmail v Atar (No 2)
[2018] VCC 1175
•8 August 2018
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE EXPEDITED CASES LIST | Revised Not Restricted Suitable for Publication |
Case No. CI-16-00515
| GULTEKIN MAILMAIL | Plaintiff |
| V | |
| ASHOUP ATAR | First Defendant |
| and | |
| EL PHARAOHS INSTITUTE OF TRAINING PTY LTD | Second Defendant |
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JUDGE: | HER HONOUR JUDGE A RYAN | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 2 August 2018 | |
DATE OF JUDGMENT: | 8 August 2018 | |
CASE MAY BE CITED AS: | Mailmail v Atar and Anor (No 2) | |
MEDIUM NEUTRAL CITATION: | [2018] VCC 1175 | |
RULING ON COSTS
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Subject:PRACTICE AND PROCEDURE – COSTS
Catchwords: Calderbank offers – whether terms of offers made expressed with sufficient clarity – whether there should be an apportionment of costs payable by the successful party in respect of issues abandoned at trial
Legislation Cited: County Court Civil Procedure Rules 2008
Cases Cited:APN Funds Management Ltd v Australian Property Investments Strategic Pty Ltd (Costs) [2012] VSC 365
Berrigan Shire Council v Ballerini (No 2) [2006] VSCA 65
Chan & Ors v Chen & Ors [2009] VSCA 233
McNab v Graham (No 2) [2018] VSCA 8
Sutherland v Globe Real Estate Pty Ltd & Ors [2018] VSC 408
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Richardson | Mann Lawyers |
| For the Defendant | Mr S Thomas | Verduci Lawyers |
HER HONOUR:
1 On 16 July 2018, I gave reasons for judgment in favour of the plaintiff (“Mailmail”). The parties were directed to file and serve written submissions in respect of the consequential orders to be made, including costs.
2 Pursuant to the Court’s direction, Mailmail filed submissions on 19 July 2018. The first defendant’s (“Atar”) submissions were filed on 24 July 2018. Reply submissions on behalf of Mailmail were filed on 26 July 2018.
3 Atar’s solicitors advised by way of email dated 27 July 2018 that they considered their client was at a disadvantage because the reply submissions advanced further matters relating to an analysis regarding Calderbank letters which should have been put in Mailmail’s original submissions. Had this been done, they would have responded accordingly. Consequently, I listed the matter for oral argument on 2 August 2018.
4 Mailmail seeks orders for judgment in the sum of $100,000 together with interest and his costs of the proceeding from Atar on the standard basis.
5 By contrast, Atar submits the following orders should be made:
(1)Atar pay the Mailmail the sum of $100,000;
(2)Mailmail pay Atar’s costs on an indemnity basis (alternatively, on a standard basis); and
(3)the payment referred to in paragraph (1) be stayed until the determination of Atar’s costs referred to in paragraph (2).
The Calderbank offers
6 Atar seeks to rely upon two Calderbank offers made to Mailmail by her solicitors before proceedings were commenced as providing the basis for a costs order in her favour.
7 The first offer was contained in a letter to Mantoo & Co Lawyers dated 28 October 2015 from Viclaw Lawyers (“the first offer”). The second was in a letter from Viclaw Lawyers to Mr Darroll Nelson, a solicitor, on 29 October 2015, one day later (”the second offer”). The offers are attached to the plaintiff’s first costs submissions as Schedules A and B respectively. Upon questioning, neither counsel could inform the Court why two letters were sent to different lawyers on successive days. It appears from the second offer, that Mr Nelson had written a letter to Atar on 27 October 2015 to which Viclaw Lawyers were responding. As the reasons for judgment show, Mantoo & Co Lawyers had been acting for Mailmail and sent a letter of demand to Atar on 21 September 2015. One assumes then that Viclaw Lawyers were covering the field by sending offers to both lawyers acting for Mailmail.
8 At the hearing on 2 August 2018, Mailmail’s counsel said there was no evidence the offers had been received by his client. No affidavit was produced to substantiate this assertion which was only made from the bar table. The first offer was addressed to Mantoo & Co Lawyers. As Mailmail’s counsel noted, the postal rule applied in respect of this letter. The second offer was sent by email to Mr Nelson who had sent a letter to Atar on Mailmail’s behalf on 27 October 2015. There is no reason to doubt that these letters were sent. That being so, it is inherently improbable that neither of the lawyers who had been acting for Mailmail did not seek his instructions about the settlement proposals made. Despite claiming the offers had not been received, Mailmail then made extensive submissions on the alleged deficiencies in the form of the offers. In the absence of any evidence to support the assertion of non-receipt, I reject the submission put that the offers made by Atar’s lawyers were not received by Mailmail.
9 The principles in respect of Calderbank letters are well known and were summarised conveniently by Nettle JA in Berrigan Shire Council v Ballerini (No 2).[1] His Honour said at [33]:
[1][2006] VSCA 65 at [33]
“The rejection of a Calderbank offer not later bettered by judgment does not lead automatically to an indemnity costs order in favour of the offeror. The question in each case is whether the offer was a reasonable offer of compromise, and whether the rejection of the offer was unreasonable, and the answer to that question turns in each case on all the circumstances of the case. The making of an offer and its rejection are but two albeit important circumstances to which the court will have regard in the exercise of its costs discretion. As the court explained in Hazeldene’s Chicken Farm:
“The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
a) the stage of the proceeding at which the offer was received;
b) the time allowed to the offeree to consider the offer;
c) the extent of the compromise offered;
d) the offeree’s prospects of success, assessed as at the date of the offer;
e) the clarity with which the terms of the offer were expressed;
f) whether the offer foreshadowed an application for an indemnity costs [order] in the event of the offeree’s rejecting it.””
10 The principle, that the rejection of a Calderbank offer does not automatically give rise to a presumption of an order for indemnity costs if the offeree receives a less favourable result, was more recently confirmed by the Court of Appeal in McNab v Graham (No 2).[2] It still falls to be determined whether the rejection of the offer was unreasonable in all the circumstances.
[2][2018] VSCA 8 at [12]
First Offer
11 The first offer relevantly provided as follows:
“We advise that our client is considering issuing proceedings against your client to recover the $50,000.00 your client obtained, by way of deception, from our client (“our client’s funds”).
Nevertheless, in one final attempt to settle this matter and reduce the parties’ legal costs, our client is willing, in principal [sic], notwithstanding your client’s aggressive and criminal assault against our client, to pay back to your client the amount she received less all incidental costs our client incurred on the way to enter into the original contractual agreement with your client, i.e our client’s legal fees, consultation fees, registration fees, search fees and licence fees etc (“the incidental costs”).
If your client agrees, in principal [sic], to our client offer, we will, in due course, quantify our client’s incidental costs and provide you with an itemised list of same and work out a method of payment.
This offer is valid for 14 days of the date of this letter.
We consider our client’s offer as being extremely generous given the nature of the business transaction your client entered into. Should your client reject this offer, we are instructed to issue proceedings to recover our client’s funds without further notice. If this becomes necessary, this letter will be produced to court to support our client’s claim for costs.”
Second Offer
12 The relevant terms of the second offer are as follows:
“Hence, our client will consider terminating the original agreement with Mr Mailmail and refund him his payment if Mr Mailmail reimburses our client for all the incidental costs which our client incurred on the way of making the agreement (“the incidental costs”).
Our client’s incidental costs include, but not limited to:
1. The legal costs for drafting and overseeing the execution of the:
a.Original agreement; and
b.Contemplated work needed to terminate same.
2. All consultation(s), registration(s), search(s) [sic] and licence fees, if any.
If Mr Mailmail makes the above offer, we trust our client will accept it. If this happens, we will, in due course, advise you of same and provide with an itemised list of all incidental costs, as invoiced, and work out a method of refunding the balance to Mr Mailmail.”
13 Atar contends that each of the offers represented a genuine compromise on her part. She said the offers sought to restore Mailmail to the same position he was in pre-contract (save for a deduction as to the cost of preparing the agreement which was the subject of this proceeding). Atar was also willing to forego any counterclaim by the second defendant in respect of the loan alleged to have been made by the second defendant to Mailmail in the sum of $50,000. It was said Mailmail would have been in a much better position had he accepted the offers than the position he achieved following the trial.
14 Atar also relied upon an email dated 23 November 2015 attached to the plaintiff’s costs submission as Schedule C, being a letter from Atar’s then solicitors, Kenna Law. The email says that this would have shown that the amount yielded to Mailmail would have been in the order of $180,000 (inclusive of the $50,000 refunded to Mailmail) had he accepted the offers. Additionally, the parties would not have expended legal costs in relation to embarking upon a two year proceeding. Atar contends it was unreasonable for Mailmail in the circumstances not to have accepted the Calderbank offers. The offers were genuine pre-proceeding offers which would have ended the dispute and therefore, provide a basis for awarding costs to Atar on an indemnity basis or a standard basis. Although both offers said claims for costs would be sought, neither offer foreshadowed an application for indemnity costs.
15 Mailmail submits the two offers made by Atar should be disregarded. In respect to the first offer, it should not be accorded any weight in circumstances where:
(a)The first offer did not state it was made in accordance with the principles applicable in the Calderbank case;
(b)The first offer stated that Atar was “willing, in principle … to pay back to (Mailmail) the amount she received less all incidental costs …”. Mailmail submits that the words “in principle” causes confusion as to the certainty of Atar to categorically make the offer.
16 In respect to the first offer, it was said that Mailmail should not be left in any reasonable doubt as to the nature and extent of what was being offered. The offer was ambiguous because of the failure to calculate the incidental costs at the time the offer was made. This resulted in uncertainty in terms of the amount which would be paid to Mailmail if he had accepted the offer. Mailmail contends that it was not possible to determine whether the first offer was reasonable given the undisclosed amount. Further, the offer purported to quantify Atar’s incidental costs after Mailmail had accepted the first offer.
17 The issue then is whether it was unreasonable for Mailmail to reject this offer. The offer was received prior to the institution of proceedings. The offer is to the effect that Atar will not commence proceedings to recover the $50,000 which she said was owed if Mailmail was willing to settle on the terms offered. As the reasons for judgment disclose, he paid the sum of $200,000 to the second defendant as an investment. Atar refunded $50,000 after Mailmail made a demand for payment. Following the deregistration of the second defendant, the counterclaim seeking recovery of this amount was not pursued at trial.
18 Atar was willing to refund amounts paid by Mailmail less all incidental costs. This then raises the issue as to whether the terms of the offer were expressed with sufficient clarity. The difficulty with the offer is that the quantum of the incidental costs is unknown so that Mailmail could not assess what amount he was likely to receive had he chosen to accept the offer. The reasonableness of the offer is to be assessed at the time when the offer is made.
19 The other matter is that there is no reason or explanation given as to why Mailmail should be held responsible for the so-called incidental costs. These were costs incurred by Atar in engaging her lawyers in respect of the share sale agreement and associated costs in transferring shares to Mailmail in the second defendant’s business. It is not readily apparent why Mailmail should bear those costs as they were costs incurred by Atar as the vendor in the transaction. The letter did not explain why Mailmail had any obligation to pay these sums and the sums were simply demanded. These incidental costs were not claimed by Atar in the proceeding. In the absence of some persuasive reason why the incidental costs should be paid by Mailmail, it cannot be said he acted unreasonably in declining to do so.
20 The fact that the letters did not expressly refer to the Calderbank decision by name is not necessarily fatal. The issue still remains whether it was unreasonable for the offeree not to have accepted the offer, which is a question of fact.[3] Whilst the offers did not foreshadow an order for indemnity costs, that is but one of the considerations the Court will take into account when assessing the efficacy of the offer.
[3]Law of Costs, Dal Pont, LexisNexis Butterworths, 3rd ed at 13.59
21 In regard to the terms of the first offer, I am not satisfied it was unreasonable for Mailmail to have rejected this offer because:
· the amount he would receive had he accepted was unknown because the incidental costs were not quantified;
· there was no reason given why he should be liable to pay the incidental costs in any event such that he ought to have agreed to reduce his claim by these amounts;
· he was not at risk of being ordered to repay the sum of $50,000 Atar had paid him as this payment did not constitute a loan to the second defendant as alleged but was a partial refund of the moneys paid by Mailmail to the second defendant.
22 The second offer should not be considered by the Court as submitted by Mailmail for the following reasons:
(a) The second offer was made one day after the first offer and causes confusion as to whether it superseded the first offer;
(b) The second offer did not state it was made in accordance with the Calderbank principles;
(c) The second offer states that Atar will “consider terminating the original agreement with Mr Mailmail … if Mr Mailmail reimburses Atar [for all the incidental costs].”
23 Whilst the second offer gave a summary of how the incidental costs had been incurred, it did not give a calculation of those costs, notwithstanding that those were matters within the knowledge of Atar at the time of making the second offer. It is also stated that if Mailmail were to make the offer, the solicitors trusted that their client would accept it. If that were to occur, then a list would be given of all the incidental costs and a method worked out of refunding the balance to Mailmail. Again, that leads to uncertainty because of the unknown amount of the incidental costs and the method for payment had yet to be agreed upon.
24 Properly construed, the second offer is not an offer but is seeking an offer from Mailmail. It has been held that it is not unreasonable to refuse offers which are in effect offers to negotiate.[4] Further, the second offer is uncertain because again, the amount which Mailmail would receive is unknown. As with the first offer, there is no reason put forward as to why Mailmail should be liable for the repayment of the “incidental costs”. For all these reasons, I consider it was not unreasonable for Mailmail to have rejected the second offer.
[4]Law of Costs, Dal Pont, LexisNexis Butterworths, 3rd ed, at 13.66
25 I accept Mailmail’s submission that the email of 23 November 2015 which gave some quantification of the likely incidental costs is irrelevant. The email itself does not constitute an offer and by the time it was sent, the first and second offers had already expired.
26 Given the foregoing, I find that Mailmail did not act unreasonably in not accepting the first or second offers. Consequently, I am not persuaded a costs order should be made against him, either on an indemnity or standard basis, being the orders sought in the alternative by Atar.
Apportionment on issues
27 The other matter raised by Atar is that there should be a reduction or “carve out” of the order for costs made on the basis of various issues that arose at trial. It is said that any order for costs made against her should exclude two days of trial which were largely occupied by Atar being cross-examined in relation to her financial affairs as well as some examination-in-chief of Mr Ibsa Hassan, Atar’s accountant. It said that this evidence was only relevant in relation to the unjust enrichment claim advanced which was later abandoned.
28 Under Rule 63A.04 of the County Court Civil Procedure Rules 2008 the Court may make an order for costs in relation to a particular question in or a particular part of a proceeding. This power permits orders depriving an ultimately unsuccessful party of its costs or part of its costs or by awarding an unsuccessful party some of its costs. A successful party may recover only a portion of its costs when that party has been unsuccessful in respect of certain discrete issues. But that should not be done as a matter of course. An issue does not necessarily mean a precise issue in the pleading but relates to any disputed question of fact or law. [5] Where there has been a multiplicity of issues and mixed success, a Court may take a pragmatic approach in making costs orders, taking into account the success or lack of success on an issues basis. Generally, the order made results in the successful party being awarded a proportion of its costs but not the full amount.[6] The power should be exercised only where the court on consideration of all the circumstances, concludes that the raising of the issue was so unreasonable that it is fair and just to make the order.[7]
[5]APN Funds Management Ltd v Australian Property Investments Strategic Pty Ltd (Costs) [2012] VSC 365, [11]
[6]Chan & Ors v Chen & Ors [2009] VSCA 233, [10]
[7]Sutherland v Globe Real Estate Pty Ltd & Ors [2018] VSC 408, [33, (f) and (g)]
29 Mailmail submits that any lengthening of cross-examination and maintenance of arguments by the plaintiff which might have otherwise have been withdrawn at an earlier time were in part due to Atar’s persistent failure to provide discovery and comply with numerous court orders. That being so, the ongoing non-compliance by Atar was the cause of many delays and she should bear the costs consequences. It was put that had she complied with her obligations to discover, the cross-examination of Atar on her financial records could have been negated. Further, the failure to discover, notwithstanding the orders compelling her to discover, necessitated the questioning of Atar’s accountant.
30 Claims for unjust enrichment and a failure of consideration were abandoned by Mailmail at trial. As events turned out, cross-examination of Atar as to her financial affairs and also the examination of Mr Hassan, her accountant, did not ultimately bear upon the legal issues which fell to be determined. However, paragraph 10 of Atar’s defence pleads that the moneys invested by Mailmail were expended as agreed on legitimate company business. To some extent, this raised an issue as to what Atar had done with the moneys such that it cannot be said that some questioning along these lines was so unreasonable as to displace the usual order relating to costs. Whilst I consider there was some time wasted in the evidence of Atar and Hassan, I accept this was due in part to her repeated failure to give discovery and providing documents at the start of the trial. Consequently, I consider there was fault on both sides with the result that I am not persuaded to make a “carve out” order as sought by Atar.
31 Mailmail sought an order that the costs of the costs hearing be borne by Atar on an indemnity basis because the arguments put on her behalf were “absurd”. I disagree. Atar was entitled to raise these matters and although ultimately unsuccessful, there is no reason to award costs against her on an indemnity basis. Atar’s counsel resisted the order for costs sought against her and argued Mailmail should have got his submissions right the first time. I was not persuaded that Mailmail’s reply submissions relating to the analysis of the Calderbank offers did in fact put Atar at any disadvantage. Given Atar did not succeed in the costs arguments she put forward, I consider she should pay the costs incurred in respect of the costs application.
32 I will order as follows:
(a) There be judgment for the plaintiff against the first defendant in the sum of $100,000, together with interest of $24,394.72;
(b) The second defendant’s counterclaim is dismissed;
(c) The first defendant pay the plaintiff’s costs of the proceeding, including the costs of the costs application on 2 August 2018, together with any reserved costs, on the standard basis to be taxed in default of agreement.
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Certificate
I certify that these 11 pages are a true copy of the Reasons for Judgment of Her Honour Judge A Ryan delivered on 8 August 2018.
Dated: 8 August 2018
Associate to Her Honour Judge A Ryan
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