Mainteck Services Pty Ltd v Stein Heurtey SA (No 2)

[2014] NSWCA 214

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Mainteck Services Pty Ltd v Stein Heurtey SA (No 2) [2014] NSWCA 214

Hearing dates:

On the papers

Decision date:

03 July 2014

Before:

Ward JA; Emmett JA; Leeming JA

Decision:

1. Mainteck pay the respondents' costs of the appeal (a) on an ordinary basis in respect of costs incurred on or before 30 October 2013 and in respect of its application for special costs orders, and (b) on an indemnity basis in respect of costs incurred after 30 October 2013, save for its costs in respect of its application for special costs orders.

2. Remit, pursuant to s 51(4) of the Supreme Court Act 1970 (NSW), to the Equity Division the questions whether the costs orders the subject of order 1 above should be the subject of a gross sum costs order under s 98(4) of the Civil Procedure Act and, if so, what the gross sum should be.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:

COSTS - application for indemnity costs following Calderbank letters - application for gross sum costs order

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98
Supreme Court Act 1970 (NSW), s 51

Cases Cited:

Hamod v State of New South Wales [2011] NSWCA 375
Rosebanner Pty Ltd v EnergyAustralia (No 2) [2011] NSWCA 150

Category:

Costs

Parties:

Mainteck Services Pty Ltd (Appellant)
Stein Heurtey SA (First Respondent)
Stein Heurtey Australia Pty Ltd (Second Respondent)

Representation:

Counsel:
F Corsaro SC / F Kalyk (Appellant)
P Taylor SC / JTG Gibson (First and Second Respondents)
Solicitors:
Piper Alderman (Appellant)
Jones Day (First and Second Respondents)

File Number(s):

2013/125562

 Decision under appeal 

Citation:

[2013] NSWSC 266

Date of Decision:

2013-05-31 00:00:00

Before:

Sackar J

File Number(s):

2007/266650

Judgment

1. THE COURT: By orders made on 6 June 2014, the Court dismissed Mainteck's appeal and directed (in accordance with Stein Heurtey's request) that the parties be heard further as to costs on the papers by the exchange of short submissions: [2014] NSWCA 184 at [255]. That has now occurred, by submissions dated 20 and 30 June 2014 filed in accordance with the Court's directions.

1. It is agreed that Mainteck should pay Stein Heurtey's costs of the appeal which this Court dismissed. In addition, Stein Heurtey seeks, and Mainteck opposes, (a) orders that Mainteck pay, on an indemnity basis, either its costs of the whole appeal, or the costs it incurred after 30 October 2013, and (b) that, instead of assessment, Stein Heurtey's costs be the subject of a gross sum order, made either by this Court or else remitted to the Equity Division where there is a pending undetermined application for a gross sum costs order of the costs at first instance.

Indemnity costs

1. Mainteck commenced this litigation, and, after 45 hearing days between October 2010 and October 2012, obtained judgment in the amount of $159,813. That was a tiny fraction of what it had sought. On 2 July 2010, Stein Heurtey made a Calderbank offer in the amount of $1,000,000, as a result of which Mainteck was ordered to pay its costs at first instance on an indemnity basis after 2 July 2010. That costs order was the subject of ground nine of the appeal, and was addressed at [246]-[254] of the Court's judgment delivered on 6 June 2014.

1. The first basis on which Stein Heurtey seeks an indemnity costs order for its costs of the appeal relies on the Calderbank offer before trial (as well as an earlier, non-compliant offer of compromise). Although "[g]enerally, if an offer is not renewed (either in the same or different terms) prior to the appeal, the Court will not make a special costs order in respect of the appeal", the fact of a pre-trial offer is relevant to the costs of the appeal, especially if the issues are in substance the same: see Rosebanner Pty Ltd v EnergyAustralia (No 2) [2011] NSWCA 150 at [11] and [19].

1. The present case is different. Although there was a deal of commonality between the issues at first instance and on appeal, there were also significant differences between the basis on which the 2010 Calderbank offer was put and the issues on appeal. Those differences included differences arising from (a) the referee's determination that there was no contract, (b) the death of Mainteck's principal witness shortly before the hearing commenced, (c) a narrowing of issues on appeal (notably, the misleading and deceptive conduct claim was abandoned).

1. Stein Heurtey also relies on some aspects of Mainteck's submissions which were criticised in this Court's reasons. However, many (although not all) of those criticisms were addressed to submissions which were not pressed, or only barely pressed, orally, during the course of the hearing of the appeal over four days. The majority of the time of the hearing of the appeal was occupied by submissions which were reasonably arguable.

1. Accordingly, neither the 2010 Calderbank offer (or the earlier offer of compromise) nor the submissions advanced on appeal warrant departure from the ordinary order as to costs.

1. Stein Heurtey's second basis for seeking a special costs order turns on its solicitor's letter dated 30 October 2013 which is expressed to be "without prejudice except as to costs". At that time, the position on the principal judgments of the primary judge was known, and although his Honour had not made an order for indemnity costs by reason of the 2 July 2010 Calderbank letter, the analysis of costs proceeded, correctly as it turns out, on the basis that such an order would be made. At that stage, Stein Heurtey's solicitor-client costs exceeded $7,600,000 excluding interest. The letter observed that Stein Heurtey was not entitled to all of its costs on an indemnity basis, that the amount recoverable on assessment would be smaller still, and the relatively small judgment obtained by Mainteck would have to be deducted. Making those allowances, the letter said that the total amount of recoverable costs and interest was some $7,929,062.

1. It is perfectly possible that there was a measure of over-statement in the calculations in Stein Heurety's solicitor's letter dated 30 October 2013. As to that it is not necessary to express a view. It suffices for present purposes to observe that as things stood on 30 October 2013, subject to Mainteck's pending appeal, Stein Heurtey would on any view be entitled to many millions of dollars by way of costs orders in its favour.

1. In those circumstances, Stein Heurtey offered to compromise "all outstanding claims and costs orders in the NSWSC Proceedings and the Appeal Proceedings on the basis of a payment of $2,000,000 by your client to our clients". The offer was open until 15 November 2013. It expressly invoked Calderbank principles.

1. Plainly enough, Stein Heurtey's offer represented a real compromise. It was left open for a period of around two and a half weeks, which in the circumstances was a reasonable period of time for its consideration (Mainteck did not submit to the contrary). Although Mainteck did not at the time have Stein Heurtey's written submissions on the appeal, it had the benefit of advice from solicitors and counsel who had been involved in the litigation for years. Moreover, the nature of appeals is that relatively few are dismissed by reason of completely novel arguments which are difficult to anticipate in advance of the respondent's written submissions, and Mainteck's appeal did not fall within rare class. The most important issues, in terms of the quantification of Mainteck's claim, were those of contractual construction and causation for the claim for delay and disruption, and these issues were well and truly familiar to the parties. In those circumstances, it was unreasonable for Mainteck to reject Stein Heurtey's offer.

1. In accordance with ordinary principles, the offering by Stein Heurtey of a significant compromise which was unreasonable for Mainteck not to accept leads to the discretion as to costs being exercised such that Mainteck should pay Stein Heurtey's costs of the appeal on an indemnity basis after 30 October 2013.

Gross sum costs order

1. Section 98(4) of the Civil Procedure Act2005 (NSW) authorises the Court to make an order to the effect that the party to whom costs are to be paid is to be entitled to "a specified gross sum instead of assessed costs". Without seeking to prejudge the exercise of discretion that is involved (bearing in mind that substantially the same issue in relation to the costs at first instance is yet to be determined), it is clear that the costs of this appeal are a candidate for a gross sum costs order, having regard to their magnitude, the complexity of the proceedings, and the (claimed) potential incapacity of Mainteck to satisfy its total costs liability: cf the principles stated by Beazley JA in Hamod v State of New South Wales [2011] NSWCA 375 at [813]-[820].

1. However, the costs of the appeal are dwarfed by the costs at first instance. As to the latter, there is an undetermined application for a gross sum costs order before a judge in the Equity Division. There is no sound reason for there to be two hearings on the exercise of the same discretion to make a gross sum costs order for two different costs orders between the same parties arising out of the same dispute. As both parties' submissions acknowledged, the efficient course is for the balance of the appeal to be remitted, pursuant to s 51(4) of the Supreme Court Act 1970 (NSW), to the Equity Division for the determination of the only outstanding questions, namely, whether the costs orders made in this Court should be the subject of a gross sum costs order under s 98(4) of the Civil Procedure Act and, if so, what the gross sum should be, instead of the ordinary process of assessment.

1. Stein Heurtey has had a measure of success on its applications in relation to costs, and should have its costs of those applications, but on an ordinary basis.

Orders

1. Accordingly, the Court orders that:

1. Mainteck pay the respondents' costs of the appeal (a) on an ordinary basis in respect of costs incurred on or before 30 October 2013 and in respect of its application for special costs orders, and (b) on an indemnity basis in respect of costs incurred after 30 October 2013, save for its costs in respect of its application for special costs orders.

2. Remit, pursuant to s 51(4) of the Supreme Court Act 1970 (NSW), to the Equity Division the questions whether the costs orders the subject of order 1 above should be the subject of a gross sum costs order under s 98(4) of the Civil Procedure Act and, if so, what the gross sum should be.

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Decision last updated: 03 July 2014