Marindi Metals Ltd v Kidman Resources Ltd
[2017] WASC 189 (S)
•12 SEPTEMBER 2017
| JURISDICTION | : | SUPREME COURT OF WESTERN AUSTRALIA IN CIVIL |
| CITATION | : | MARINDI METALS LTD -v- KIDMAN RESOURCES LTD [2017] WASC 189 (S) |
| CORAM | : | KENNETH MARTIN J |
| HEARD | : | ON THE PAPERS |
| DELIVERED | : | 12 SEPTEMBER 2017 |
| FILE NO/S | : | CIV 2964 of 2016 |
| BETWEEN | : MARINDI METALS LTD |
Plaintiff
AND
KIDMAN RESOURCES LTD
Defendant
Catchwords:
Contract - Trial of issues determined - Defendant successful in defeat of plaintiff's action - Unsuccessful plaintiff accepts exposure to order for taxed costs - Successful plaintiff seeks indemnity costs - Rejected pre-trial Calderbank offers relied upon - Alternative contention that prosecution of the action was a pursuit of a hopeless case - Assessment as to unreasonableness of plaintiff's rejection stance concerning Calderbank offer - Failure to engage with defendant's proposal - Plaintiff's conduct assessed as unreasonable - Indemnity costs ordered from date of rejected offer
Legislation:
Nil
[2017] WASC 189 (S)
Result:
Indemnity costs awarded to defendant from fixed date
Category: B
Representation:
Counsel:
| Plaintiff | : | No appearance |
| Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Bennett + Co |
| Defendant | : | Maddocks Lawyers |
Case(s) referred to in judgment(s):
Calderbank v Calderbank [1975] 3 All ER 333
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115
Peet Ltd v Richmond [2010] VSCA 71
Sakari Resources Ltd v Purvis [2016] WASCA 24 (S)
[2017] WASC 189 (S)
KENNETH MARTIN J
KENNETH MARTIN J: On 7 July 2017, I delivered substantive reasons for decision rejecting the plaintiff's (Marindi Metals Ltd) case in the aftermath of a trial which dealt with all issues save for damages.
2 Consequent upon publication of those reasons, orders have since
been made dismissing the plaintiff's action against the defendant (Kidman Resources Ltd). The remaining issue in dispute concerns appropriate costs orders as between the parties in light of the trial's result.
3 As between the parties it has been agreed that this issue would be
determined on the papers following the parties' exchanges of written
submissions concerning the appropriate costs orders.4 Subject to two subsidiary matters, the unsuccessful plaintiff accepts
an exposure to meet the defendant's taxed costs of the unsuccessful litigation. However, the defendant is not satisfied with a costs order favouring it in such terms. It presses for an indemnity costs award to be made against the plaintiff.
5 The essential basis of the indemnity costs award as is now sought by
the defendant is twofold. First, it contends that the plaintiff's rejection of a Calderbank offer (also expressed to be made pursuant to O 24A r 10(7A) of the Rules of the Supreme Court 1975 (WA) (RSC)), supports such an order (see Calderbank v Calderbank [1975] 3 All ER 333).
6 Materials put before me for this costs application show that after the
defendant had put an initial 'walkaway' proposal to the plaintiff on 17 February 2017 (ie, that the plaintiff's action would be dismissed on the basis of each side bearing their own costs incurred to that point in the litigation) it then made a further and more generous Calderbank offer. That offer was explicitly put on the basis of being 'without prejudice save as to costs' on 1 March 2017.
7 The 1 March 2017 offer to the plaintiff gave it the opportunity to
accept a payment of $300,000 inclusive of costs. It was proposed as well that the parties would then file consent orders dismissing these proceedings with no order as to costs and with the parties mutually releasing one another from all such claims.
8 As I indicated, the 1 March 2017 proposal was also expressed to be
made pursuant to RSC O 24A r 10(7A). It was specified that if the offer was not accepted, followed by an outcome of the proceeding that was not more favourable to the plaintiff than the terms of that offer, the defendant would produce its offer letter (as has occurred) to the court after the trial
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and then seek orders that the defendant's costs be paid by the plaintiff as
from 1 March 2017 on an indemnity basis (as it now does).9 I also observe that the 1 March 2017 offer communication by the
defendant was a lengthy 15 page letter sent to the plaintiff's solicitors by the defendant's solicitors. After making the Calderbank proposal, that communication advanced to render extensive observations on the factual background of Marindi's claim and upon the issues on which it was contended the defendant would succeed (namely, that no agreement had been formed, that any agreement, if found, would almost certainly be void for uncertainty as regards an absence of essential terms and that, in any event, even if the plaintiff might surmount those issues, that an order for specific performance as sought was likely to be denied to the plaintiff).
10 The 1 March 2017, 15 page offer communication was, therefore,
more than comprehensive in terms of putting the defendant's case to the plaintiff and correspondingly explaining to the plaintiff the multiple deficiencies in its case as then assessed by the defendant - observations which, in the end, were largely confirmed under my reasons for decision after the trial.
11 The evidence before me upon this costs application indicates the
plaintiff's solicitors acknowledged a receipt of the Calderbank communication on 3 March 2017, in accord with RSC O 24A r 3(4). The defendant's 1 March Calderbank offer had been expressed to be open for consideration and acceptance for a period of 28 days. However, on 16 March 2017 the plaintiff, via its legal representatives, rejected the defendant's earlier 'walkaway' proposal of 17 February 2017 and also rejected the $300,000 (inclusive of costs) proposal made under the defendant's lawyers' letter of 1 March 2017.
The plaintiff's lawyers wrote in these terms to the defendant's lawyers on 16 March 2017:
For the avoidance of doubt, the offer contained in your letter of 17 February 2017 and the offer contained in your letter of 1 March 2017 are both rejected.
Notwithstanding the matters set out in your letter of 1 March 2017, the contents of which have been carefully considered, my client remains of the view that it enjoys reasonable prospects of succeeding in the action.
As at this date you have available to you my client's witness statements. The risks inherent in your client's continuing defence of the litigation are
[2017] WASC 189 (S)
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obvious. In addition, the commercial uncertainty arising from the pending
litigation impacts both companies.In that context, my client's rejection of your client's offers is not unreasonable.
As is now known, there followed a court sponsored mediation conducted between the parties which did not lead to any settlement.
The action then proceeded to a trial in the period between 29 - 31 May 2017. The plaintiff's action was assessed to fail in the respects as identified in my reasons delivered 7 July 2017. Clearly, as matters turned out, the outcome for the plaintiff (ie, total failure and a costs exposure of some degree) is far worse than the position it would have been in, had it accepted the defendant's $300,000 (costs inclusive) proposal.
15 That is the underlying basis for the first way in which the defendant
contends the plaintiff should now be liable to it for not only taxed costs on a party and party basis but, beyond that, liable to an order for indemnity costs from 1 March 2017.
16 To be clear, the defendant does not merely contend that simply
because the plaintiff rejected its 1 March 2017 Calderbank proposal and then ultimately ended up in a worse position is the exclusive factual platform on which such an order should be made. That is not the law. Rather, it contends, in accordance with established case authority that the overall assessment of the plaintiff's conduct has been shown (with the defendant accepting that it carries the onus to establish this standard) that the plaintiff's conduct must be assessed overall, as unreasonable.
17 An alternative basis on which an indemnity costs award is sought by
the defendant contending that the present is the rare genre in which all material facts were known to the parties from the outset. The plaintiff, somewhat unusually, was always in possession here of sufficient information to make what should have been a reliable assessment as to its ultimate chances of success at a trial. Consequently, the submission of the defendant is that the plaintiff ought never to have started then pursued this action and ought to have been aware of the fatal defects in its case from the beginning.
18 The defendant argues it was always clear, supported by the ultimate
findings of the court, that there was no binding legal agreement. Further, there was, in any event, always uncertainty upon surrounding issues as to essential terms, and that even if those anterior hurdles could be
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surmounted, the plaintiff was most unlikely to be awarded the equitable remedy of specific performance - thereby limiting the plaintiff's potential remedy, at best, to an award of common law damages - which would need to be assessed.
19 The defendant contends, therefore, that this plaintiff is to be assessed
as a party that has persisted in the running to trial of what should have always been properly assessed by it and its legal representatives, as a hopeless case. Consequently, the plaintiff, it is said, has acted unreasonably by putting the defendant to the significant cost of defending a hopeless claim. That provides the independent justification for an award of indemnity costs.
20 As I mentioned, the parties are agreed that it is appropriate I resolve
the disputed issue over costs orders as between them (essentially, deciding between either indemnity costs or taxed costs for the defendant) on the papers. To that end, I hold an affidavit submitted on the part of the defendant containing the passing Calderbank exchanges before trial and other without prejudice material as to costs. Of course, I hold as well all the evidence that was tendered at the trial.
21 The material provided concerning costs after trial by the defendant is
found in the affidavit of Lauren Alexandra Shave sworn 14 July 2017. It includes the relevant pre-trial legal correspondence passing between the parties' legal representatives to which I have referred.
In terms of exchanged written submissions on the costs orders issue, I hold the defendant's extensive written submissions of 28 July 2017 contending for indemnity costs. They were responded to by the unsuccessful plaintiff's written submissions of 4 August 2017.
23 The plaintiff's submissions accept, in effect, a post-trial exposure to
an award of taxed costs to the defendant (subject to a minor issue in respect of the costs of interlocutory applications which I need to resolve). I also need to render a determination in respect of the interlocutory costs reserved over a successful challenge to the plaintiff's pre-trial without prejudice claims over certain exchanged SMS messages as between these parties in the days just prior to this action being commenced. That without prejudice claim by the plaintiff was the subject of urgent resolution under the ex tempore reasons provided by the Chief Justice who, because of expressed possible conflict concerns for myself as trial judge, was required to determine that issue on the Friday prior to the commencement of the trial. His Honour concluded that the exchanged
[2017] WASC 189 (S)
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SMS materials as between the parties were not properly the subject of any subsisting without prejudice privilege by the plaintiff. Therefore, they were required to be produced for inspection. The Chief Justice reserved all questions of costs of that application to the trial judge.
24 I am of the view that the defendant, who was successful in
challenging the plaintiff's assertion of without prejudice privilege over those SMS materials, should have its costs of successfully prosecuting that application. Whether those costs should be taxed at scale or awarded on an indemnity basis is a result that I consider should accompany whatever decision I ultimately reach in respect of the substantive arguments concerning the costs of the trial - now, of course, sought by the defendant on an indemnity basis from 1 March 2017.
The defendant filed some brief submissions in reply of 11 August 2017 in order to facilitate an on the papers determination.
26 There was no dispute as between the parties concerning applicable
principles of law concerning Calderbank offers. Those principles are discussed in the reasons of Buss JA (as he then was) in Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 (with whom Wheeler JA agreed). In particular, I note the observations upon principle at between [16] - [22] of those reasons, which I will not set out. I direct particular attention, however, to the six factors as identified under [19] of the reasons towards rendering any assessment about whether a rejection of a Calderbank offer has been established as unreasonable. The nominated factors included:
(a) the stage of the litigation at which the offer was put; (b) the time allowed for the consideration of the offer by the offeree; (c) the extent of the compromise offered under the proposal; (d)
the offeree's prospects of success at the time the Calderbank proposal was being assessed by the offeree;
(e)
the clarity with which the terms of the Calderbank proposal was made; and
(f)
whether the Calderbank proposal as put explicitly foreshadowed the making of an application for indemnity costs in the event of the rejection of the proposal and the ultimate success of the offerer on conclusion of the trial.
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27 A seventh consideration discussed in later cases to add to these six
factors is whether the Calderbank proposal gave fair warning to the offeree of the substance or merits of the case that was going to be advanced against the offeree at the trial: see Peet Ltd v Richmond [2010] VSCA 71 [31] - [34].
The parties' respective written submissions on costs discuss at some length these factors and their repercussions in the present context.
29 In short, I am of the view that the 1 March 2017 proposal was made
at a time approximately three months before the commencement of the trial. It allowed the plaintiff, in effect, a full month to consider the proposal. As seen, however, the plaintiff through its legal representatives only required 16 days to consider but then reject the proposal.
30 In some cases, the information held by a party is incomplete and is
still being unearthed or being augmented as a matter proceeds toward trial. For those cases, it may be that a rejection of a Calderbank or O 24A settlement offer proposal cannot be considered to be unreasonable as there presents, at that earlier time, a lack of material information. But that is not the case here.
31 In the present case, the relevant underlying facts appear to have been
fully or at least very substantially known to the parties by the time the plaintiff filed its first statement of claim. That pleading did not greatly alter before the trial began. Nothing greatly material appears to have emerged in the period after 1 March 2017 to any real extent. Indeed, by the time of trial most surrounding and underlying facts were then relatively uncontroversial as between the parties, as I noted.
32 This is not then, on my assessment, the type of case where a plaintiff
lacked material information required to reliably determine its overall prospects of trial success at the time it was considering a Calderbank or O 24A offer, with the benefit of legal advice.
33 The amount of time allowed for this plaintiff to consider the
Calderbank proposal was proper and adequate. Indeed, only half that amount of time was required in order for the plaintiff's solicitors to respond for their client, albeit negatively, when rejecting the $300,000 proposal.
34 The extent of the offered compromise (namely, $300,000 inclusive
of costs) was a respectable amount of money, albeit proposed on the basis
[2017] WASC 189 (S)
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of being inclusive of costs. This was not a demand for a proposal for an
unconditional surrender - as is sometimes seen.35 The clarity with which the terms of the offer were put by the
defendant was unambiguous. The 1 March 2017 proposal explicitly foreshadowed a later Calderbank application for indemnity costs - in the event of a rejection and correlative success of the defendant at trial - as has unfolded.
36 Furthermore, the 1 March 2017 defendant's lawyers' 15-page
communication (appended as attachment LAS2 to Ms Shave's affidavit of 14 July 2017) elaborates in great detail upon the nature of the defendant's arguments that would be run against the plaintiff at a trial. In the main, these points were later upheld at the trial.
37 In other words, for this plaintiff there were no forensic surprises
which this defendant had kept up its sleeve for the purposes of the looming trial. All its cards were on the table for this plaintiff to evaluate from 1 March 2017.
38 Factor (d) above needs some further comment concerning the
required assessment of the offeree's prospects of its success being made as at the date of an offer in a required context of assessing the reasonableness of its rejection of that offer.
39 To this end, the trial evidence, but in particular the evidence
unearthed as a consequence of the challenge to the without prejudice privilege assertions, then assessed as wrongly advanced on the basis of a without prejudice privilege by the plaintiff, all bear on this issue. They provide insights towards what was a careful and calculated rejection this plaintiff made of the 1 March 2017 offer.
40 From page 178 of the trial bundle, a communication, which issued
from the managing director of the plaintiff by SMS to the managing director of the defendant on 14 November 2016, provides relevant commercial insights towards the plaintiff's position. The SMS text sent at this time read:
Without prejudice
Martin
We are confident in our position
[2017] WASC 189 (S)
KENNETH MARTIN J
We have rights and those rights have value. We believe if this goes to court it is 50:50
That is we have zero downside because at present we have nothing. KDR [ie, the defendant] have 50:50 chance of success and 100 per cent downside. We would look to a corporate transaction that reflects that and recognises our rights. We again suggest that both parties go into a trading halt to negotiate. We have an operative in Sydney who would be available to come to Melbourne at short notice today to talk through our position.
Joe
41 That SMS communication, found by the Chief Justice not to be the
proper subject of without prejudice privilege at the time of trial, provides direct insight towards the plaintiff's position in pursuing this litigation. It saw its position as being fifty-fifty at a trial. From a position of 'nothing', therefore, it said it had a 'zero downside'.
42 This plaintiff did not assess its position to be strong or better than the
defendant's. Nor did it suggest it had received any legal advice giving it the comfort of holding anything beyond an even bet. It was effectively, therefore, foreshadowing that it was prepared to 'roll the dice' and gamble giving its perceived zero downside at a trial. Hence it gambled, but ultimately lost.
43 The question then is whether, assessed by reference to all relevant
facts and circumstances, the plaintiff's conduct, including its rejection of the Calderbank offer for $300,000, is properly shown as unreasonable. The principles in Ford Motor Company of Australia Ltd v Lo Presti were recently repeated and applied by the Court of Appeal in Sakari Resources Ltd v Purvis [2016] WASCA 24 (S) [12] - [14] by the judgment of that court (Buss, Newnes and Murphy JJA). At [13] their Honours, having referred to the six key considerations I earlier synthesised, then said:
The assessment of unreasonableness is not to be made with the benefit of hindsight and the rejection of a Calderbank offer will not be unreasonable merely because the offeree is ultimately worse off than it would have been had it accepted the offer.
44 When assessing if an O 24A offeree has acted unreasonably, like
principles apply. The offeror bears the onus of proof to show that the RSC O 24A threshold of unreasonableness has been demonstrated in the offeree (see particularly O 24A r 10(7A)).
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45 Likewise, a court must be satisfied that a plaintiff's failure to accept
the defendant's O 24A offer was unreasonable (unless the interests of
justice require otherwise).
Determination
46 By its written submissions on costs the plaintiff contends its conduct
does not warrant any costs sanction and that there is no reasonable basis
for ordering indemnity costs in favour of the defendant.47 I accept the plaintiff's submission that its case was not 'hopeless' and
that the court made no finding to that effect. Consequently, the alternate basis for indemnity costs as propounded by the defendant, namely, that the plaintiff has persisted with a hopeless case, is not, on my assessment, established.
48 The only legitimate basis then upon which an indemnity costs award
might be sustained here is if the overall assessment of the plaintiff's conduct including by it rejecting the 1 March 2017 Calderbank proposal is proved by the defendant to be unreasonable conduct by the plaintiff. In my view, it has.
49 On my assessment, there should for this litigation be an order for
indemnity costs favouring the defendant from 1 March 2017 in this action. I reach that conclusion taking account of the key factors enumerated above. Evaluating all facts and circumstances, I am of the view that there was here, in substance, a regrettable failure by this plaintiff to properly engage with the defendant over the explicitly identified legal weaknesses in its case that were pointed out with in the 15-page communication of 1 March 2017.
50 This plaintiff, with the benefit of legal advice, on my view, has had
every opportunity to assess the legal deficiencies in its case, then to respond on an engaged basis through its legal representatives to the weaknesses that were explicitly made to it by the defendant.
51 Instead, the plaintiff's rejection response, on my assessment, was too
brief and too blunt. It was an unreasonably disengaged plenary dismissal
of what was a carefully put submission to it.52 A failure to seriously engage and respond against the deficiencies
that were raised and which, in the end, I essentially accepted after a 3-day trial, persuade me, in the end, that the plaintiff's stance by persisting with
[2017] WASC 189 (S)
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this litigation beyond 1 March 2017 and to trial after rejecting the all
inclusive amount of $300,000, was unreasonable.53 It is not just the case that because this plaintiff's end position as now
seen is a lot worse than holding the $300,000 offered that this indemnity costs outcome results. Rather, it is a failure to seriously engage with the defendant, combined with its rejection conduct, which in aggregate persuades me, at the end, that this defendant has met the threshold necessary to show that this plaintiff has acted unreasonably overall.
54 The plaintiff's rejection conduct and march to a trial was reflective of
a stance it held and articulated by SMS that it had a fifty-fifty chance of success at trial and that its downside commercially was less than that of the defendant. There must be, in my view, a just price to be paid at the end of the day for a disengaged commercial gamble ultimately backfiring.
55 An indemnity costs determination favouring the defendant from
1 March 2017 also then carries through to the reserved costs of the interlocutory application that was determined urgently and in the defendant's favour by the Chief Justice one working day before the trial began. The defendant should have its costs of that application to be met by the unsuccessful plaintiff on an indemnity basis as well for that urgent interlocutory exercise, which also backfired for the plaintiff.
Costs of earlier interlocutory production of documents application
56 There is a further minor issue raised by the plaintiff's submissions,
concerning the costs of an earlier interlocutory application, where the defendants had sought production of many documents that the plaintiff resisted. There was yet another urgent argument before me, heard over a period of about two hours at a special appointment on 13 April 2017. I ultimately resolved that interlocutory clash with the parties concerned by my on the papers ruling issued on 27 April 2017.
57 The plaintiff points out that at the end I had disallowed inspection on
31 out of 34 of the documents which had then been sought on that application brought by the defendant. Hence, it is contended the plaintiff was substantially successful both mathematically and practically in opposing that inspection application by the defendant and should have its costs.
58 But I am of the view that, as regards the costs of that inspection
application, there was a measure of success and failure on both sides in terms of its ultimate outcomes. It is undesirable, on my assessment, to
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descend towards impracticable proportionality outcome assessments concerning interlocutory outcomes as regards discovery and inspection applications of this kind. A robust and plenary approach to their costs is called for.
59 In the circumstances, given measures of success and failure on both
sides within that documents application, I am of the view that it ought ultimately to carry no orders as to its interlocutory costs, one way or the other. In other words, there should be no order as to the costs of that application in any respects. A no costs outcome delivers a sensible measure of practicable justice to both sides, given the end outcome and, as well, at a policy level, a general discouragement to arguments upon such discovery applications which can and should be generally resolved by a sensible conferral between the parties.
60 Consequently, I am of the end view that the defendant has
established to my satisfaction it is entitled to an award of indemnity costs against the parties in respect of this litigation from 1 March 2017. That follows in light of all the relevant prevailing facts and circumstances assessed at and after that time.
The final costs orders, therefore, will now issue upon the publication of these reasons. The order is in the following terms:
Save for the costs of the defendant's interlocutory application of 12 April 2017 (determined by the court's consequential ruling of 27 April 2017 and as to which there will be no orders as to costs), the plaintiff is to pay the defendant its taxed costs of this action to be assessed on a party and party basis for the period up until 1 March 2017 but then, for all periods thereafter, paid by the plaintiff on a solicitor and client (ie, indemnity) basis to the defendant, save for any costs that are assessed by a taxing officer to be of an unreasonable amount, or which were unreasonably incurred.
62 For the avoidance of any doubt, the costs of this on the papers
determination should be the defendant's on the same (ie, indemnity) basis.
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