McFadzean & Ors v Construction Forestry Mining and Energy Union & Ors (No 2)

[2007] VSCA 313

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No. 7980 of 1999

GAVAN MCFADZEAN & ORS (according to schedule attached)

Appellants

v

CONSTRUCTION FORESTRY MINING & ENERGY UNION & ORS (according to schedule attached)

(No.2)

Respondents

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JUDGES:	WARREN CJ, NETTLE and REDLICH JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	17 December 2007
DATE OF JUDGMENT:	18 December 2007
MEDIUM NEUTRAL CITATION:	[2007] VSCA 313

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COSTS – Indemnity costs – Offer of compromise – Whether rejection was unreasonable

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APPEARANCES:	Counsel	Solicitors
For the appellants	Mr K D Mueller	Willams Winter
For the respondents	Mr D G Collins SC	Slater & Gordon

WARREN CJ
NETTLE JA
REDLICH JA:

1. Following delivery of judgment on the appeal the successful respondents sought an order for their costs from the appellants, including costs on an indemnity basis from 14 November 2006 onwards.  The indemnity costs were sought on the basis of an offer to compromise the appeal in the form of a Calderbank letter served by all the respondents, bar one, on the appellants.  The letter provided:

“We refer to the above appeal proceedings, in relation to which we are instructed to make the following offer.

Subject to acceptance of the present offer by all of the appellants:

1.The respondents will consent to an order releasing the monies held by the Senior Master (including interest accrued since the monies were placed with the Senior Master) to the appellants. We estimate that the monies held by the Senior Master, including interest, would now total approximately $230,000.00;

2.The respondents will pay to the appellants a further sum so that the monies received by the appellants total $300,000. For example, if the monies held by the Senior Master, including interest, total $228,000.00, the respondents will pay a further sum of $72,000.00;

3.The respondents will agree to not seek to enforce against or recover from the appellants or any of them the costs ordered in favour of the defendants' (respondents') taxed in the sum of $329,102.80, or the interest presently accruing thereupon, in respect of the costs of defending the plaintiffs' (appellants') claims below;

4.The respondents will consent to an order releasing to the appellants the monies totalling $99,000.00 held as security for the costs of the appeal;

5.The respondents will agree to not seek to enforce against or recover from the appellants or any of them monies due to the respondents pursuant to the two interlocutory costs orders made in favour of the respondents in the appeal on 22 July 2005 and 26 May 2006. You will recall that an independent costs consultant assessed the fees and disbursements to which the respondents would be entitled pursuant to those two orders as totalling $82,937.50;

6.The respondents and the appellants will consent to orders that the appellants` appeal and their application for leave to appeal be struck out, with no order as to costs, whereby the respondents and appellants respectively will each bear their own costs of the appeal

7.The CFMEU's Forestry Division will make the following statement of regret:

"in relation to the Supreme Court proceeding brought by a number of plaintiffs against the Construction, Forestry, Mining and Energy Union (CFMEU), a CFMEU official and 13 timber workers over events at SSP Track in the Otways in January 1999, in which proceeding Justice Ashley delivered Judgment on 19 August 2004, the CFMEU's Forestry and Furnishing Products Division expresses its regret over the events for which Justice Ashley found the Defendants responsible which he found caused distress."

This offer is made in accordance with the principles arising from Calderbank v Calderbank [1975] 3 All ER 33. Should the appellants decline the offer contained in this letter and, as anticipated, not achieve a more favourable outcome than the terms of the offer made, the respondents will produce this letter to the Court in support of an application that the appellants pay the respondents' costs on an indemnity basis from the date of this offer.

We note acceptance of this offer will secure for the appellants the following financial advantages compared to losing the appeal: receipt of the sum of $300,000.00 (points 1 & 2 above); release from liability in the amounts of $329,102.80 (plus interest) and $82,937.50 (estimated); and avoidance of liability for the respondents' party/party costs to the date of this offer, and a likely liability for the respondents' solicitor/client costs thereafter.

This offer is open to be accepted by the appellants until 4pm on Monday 13 November 2006, whereupon it is revoked.

Please acknowledge receipt of this letter.”

1. In summary, the offer on its face provided potential benefits to the appellants:

1.   Release of approximately $230,000 held as security for costs for the trial.

2.   The additional sum of $72,000 top up of the sum held as security for costs.

3.   Release from the obligation to pay the costs ordered against them by the trial judge in the sum of $329,102-80 or interest accrued thereon. 

4.   Release of $99,000 held as security for costs of the appeal.

5.   Release from the order for interlocutory costs in the sum of $82,937-50.

6.   The appeal and application for leave to appeal would be struck out with no order as to costs together with the bearing of their own costs.

7.   Receipt of a statement of regret from the respondents.

1. The appellants responded to the offer on 8 November 2007 as follows:

“We confirm receipt of your letter of 6 November 2006.

We are obtaining our clients’ instructions and to assist us with our discussions with them we would be grateful if you could advise as to whether or not the Offer covers Donald Gordon Pearce.”

1. On 10 November 2006 the respondents’ solicitors advised the appellants that “[the] offer was made on behalf of the respondents.  Mr Pearce is not a respondent.”  We were informed that, the appellants did not accept the offer and, subsequently, on 15 November 2006, two days after the time for acceptance for the offer expired the appellants served a counteroffer.  It appears it too was not accepted.

1. At the time the offer was made by the respondents Mr Pearce was not joined as a respondent to the appeal by the appellants.  Later, on 1 December 2006, he was joined as a respondent.  Mr Pearce was a defendant to the proceeding at trial and thus benefited, jointly and severally, from the order for costs made by the trial judge against the appellants as plaintiffs in favour of the respondents as defendants.  This factor was important.  The offer of compromise was subject to acceptance by all the appellants and they responded as already recited.  However, the offer was not made by Mr Pearce as a respondent.

1. Hence, on analysis, the offer of compromise given its non-inclusion of Mr Pearce reveals that its net potential benefits to the appellants were:

1.   Receipt of $72,000.00 top up on the security for costs of the appeal.

2.   Release of the security for costs of the appeal of $99,000.00.

3.   Release from the order for interlocutory costs of $82,937.50.

4.   The non-incurring of any costs of the appeal to date.

5.   The proposed statement of regret by the respondents.

1. Conversely, whilst Mr Pearce was not a party to the offer of compromise the disbenefits to the appellants were:

1.   The order for costs made by the trial judge of $329,102.80 plus accrued interest remained standing against them in favour of Mr Pearce.

2.   The security for costs amount of approximately $230,000.00 continued to operate in favour of Mr Pearce.

3.   No letter of regret was provided by Mr Pearce, he having been a protagonist in the events described in the reasons for judgment at trial.

1. Mr Collins for the respondent conceded the net effect of the offer of compromise as to paragraphs one and two concerning the disbenefits.

1. The context of the offer of compromise is also relevant.  At that time the appeal was due to be heard on 4 December 2006.[1]  The appellant had provided a Summary of Proceedings, Issues and Facts earlier in November 2006 and their initial Statement of Argument on 21 July 2006 of 35 pages length (later substituted on 29 November 2006 by a revised version of 80 pages).  The respondents had not filed their Statement of Argument and did not do so until later in November 2006 (on a date after the time for acceptance of the offer expired).  Hence, at the time the offer was made the appellants did not know the real strengths and weaknesses of the respondents’ arguments on the appeals.  Whilst there had been interlocutory applications relating to the appeal the substantive position of the respondents had not been fully articulated at the time of the offer.  Whilst the appellants doubtless had a fair idea of what they faced, it may be accepted that they were not then in a real position to assess the strength (or weakness) of what they might face on the appeal.  Simultaneously they had, as borne out by the reasons for judgment on the appeal, arguable grounds of appeal including on topics of reasonable egress from the protest site through the bush, the role of the police gate as a form of restraint and public nuisance.  While the appellants had to deal with the findings of fact against them by the trial judge, including findings against their credit, it remained that it was at least arguable that the appellate court should set aside the judgment in accordance with the relevant authorities.[2]

   [1]It was subsequently adjourned to 9 February 2007 to facilitate preparation of the appeal by the parties.

   [2]Fox v Percy (2003) 214 CLR 118; Warren v Coombes (1979) 142 CLR 531.

1. When these matters are weighed up against the true value to the appellants of the offer of compromise combined with the continued liabilities and risks arising from the orders in favour of Mr Pearce it could not be said in our view that the rejection of the offer of compromise by the appellant was unreasonable in the circumstances.[3]  It was submitted for the respondents that not withstanding the non-inclusion of Mr Pearce in the offer of compromise, the offer would still have been of real benefit to the appellants.  The submission misconceives the applicable legal principle.  It is a question of whether the rejection of the offer by the appellants was unreasonable in the circumstances.  There is no presumption of entitlement to indemnity costs upon rejection of a Calderbank offer if the offeree achieves less than that which was offered.[4]

   [3]See Hazeldene’s Chicken Farm Pty Limited v Victorian Workcover Authority (No. 2) (2005) 13 VR 407, [20] – [23].

   [4]Ibid, [18] – [20].

1. We reject the submission for the respondents seeking costs on an indemnity basis from 14 November 2006.  We would make the usual order for costs in favour of the successful party, the respondents, about which there is no issue.