McLennan v Meyer Vandenberg (No 2)
[2020] ACTCA 15
•3 April 2020
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
COURT OF APPEAL
Case Title: | McLennan v Meyer Vandenberg (No 2) |
Citation: | [2020] ACTCA 15 |
Hearing Date: | 12 November 2019 |
DecisionDate: | 3 April 2020 |
Before: | Burns and Mossop JJ and Robinson AJ |
Decision: | See [51] and [72] |
Catchwords: | CROSS-APPEAL – COSTS – against primary judge’s costs order – application of r 1725(2) Court Procedures Rules 2006 (ACT) – whether inclusion of equitable compensation in Statement of Claim insulates against application of the rule when that relief was not pursued – it does not – whether reasonable to reject Calderbank offer where pleaded case weak – it was not APPEAL – COSTS – costs of the substantive appeal – appellant only successful in obtaining pre-judgment interest – interest would have been awarded had the appellant directed the primary judge to it – ground of appeal on interest included as a costs ‘insurance policy’ – offer by respondent to pay pre-judgment interest – rejection of offer inconsistent with s 5A Court Procedures Act 2004 (ACT) – costs awarded to respondent upon issues in relation to which it was successful. |
Legislation Cited: | Civil Law (Wrongs) Act 2002 (ACT), s 35 Court Procedures Act 2004 (ACT), s 5A Trade Practices Act 1974 (Cth) |
Cases Cited: | Baltic Shipping Co v Dillon (1993) 176 CLR 344 CJD Equipment Pty Ltd v A&C Constructions Pty Ltd [2010] NSWSC 502 O’Doherty v McMahon [1971] VR 62 |
Parties: | Karen McLennan (First Appellant) Andrew Spong (Second Appellant) The Partnership of RA Clapham & Ors t/as Meyer Vandenberg (Respondent) |
Representation: | Counsel G Stretton SC and B Buckland (First and Second Appellant) M Walsh SC and M Karam (Respondent) |
| Solicitors J.S O’Connor Harris & Co (First and Second Appellant) McInnes Wilson Lawyers (Respondent) | |
File Numbers: | ACTCA 4 of 2019 ACTCA 18 of 2019 |
Decision under appeal: | Court/Tribunal: Supreme Court of the ACT Before: McWilliam AsJ Date of Decision: 18 April 2019 Case Title: McLennan v Clapham & Ors (No 2) Citation: [2019] ACTSC 100 |
THE COURT
Introduction
These reasons deal with the costs of the appeal (ACTCA 4 of 2019) which has been determined by the court: McLennan v Meyer Vandenberg [2020] ACTCA 7, as well as an appeal by Meyer Vandenberg against the costs order made by the primary judge (ACTCA 18 of 2019): McLennan v Clapham & Ors (No 2) [2019] ACTSC 100.
The appellants in ACTCA 4 of 2019 are the respondents in ACTCA 18 of 2019. In an attempt to avoid confusion as to the party being referred to, we will refer to the parties as McLennan (representing herself and Mr Spong) and Meyer Vandenberg respectively.
Meyer Vandenberg’s appeal on costs
The judgment below
The primary judge ordered that Meyer Vandenberg pay 75% of McLennan’s costs of the proceedings.
The issue was dealt with on the papers following the delivery of the substantive judgment. McLennan had submitted that costs should follow the event (either in whole or in part), or that McLennan should be entitled to her disbursements, but otherwise no order as to costs should be made.
Meyer Vandenberg sought an order that McLennan pay Meyer Vandenberg’s costs of the proceedings up to 10am on 23 July 2018 and pay the costs on an indemnity basis thereafter. This submission relied upon the modest award of damages and the making of a Calderbank offer sent on 19 July 2018, which expired on 23 July 2018.
Alternatively, Meyer Vandenberg sought that, pursuant to r 1725(2) of the Court Procedures Rules 2006 (ACT), McLennan only be awarded 50% of her disbursements with costs to otherwise lie where they fall up to 10am on 23 July 2018.
The primary judge rejected the submission that Meyer Vandenberg was the successful party in the proceedings. Although the amount awarded was small compared with the amount that was claimed, it was not a nominal amount. As a consequence, McLennan had established her claim and, subject to what followed, costs should follow the event.
Her Honour then considered whether McLennan had propounded a substantially exaggerated claim which resulted in the incurring of additional costs. She found that there was “no doubt that the quantum of damages claimed was exaggerated”. However, she considered that the majority of the hearing time and the oral and written submissions were devoted to liability not quantum. She did find that had McLennan taken proper account of the government buyback of the property then the quantum claimed would have been halved and the substantial affidavit evidence supporting the claim for costs of rebuilding would not have been required. She was of the view that it would be unjust for Meyer Vandenberg to have to pay McLennan’s costs of attempting to prove damage in respect of the rebuilding costs and associated damages after the subject property was bought by the ACT government and resold to McLennan cleared of asbestos. For this reason, she considered it appropriate that Meyer Vandenberg pay 75% of McLennan’s costs. This was subject to two further arguments put forward by Meyer Vandenberg. These related to r 1725 and the Calderbank offer that had been made.
Rule 1725 is designed to provide a costs motivation for parties to commence proceedings in the Magistrates Court where that is appropriate. Rule 1725(2) provides that if the Magistrates Court has jurisdiction to hear a matter and the amount of the judgment received is less than $50,000, the plaintiff is only entitled to 50% of its disbursements plus any “determined fee” that the plaintiff would have been entitled to recover had the proceedings been commenced in the Magistrates Court. Rule 1725(3) permits the court to make an order for costs that departs from the regime specified in r 1725(2).
Her Honour identified that McLennan had maintained a claim for equitable compensation up until the last day of the hearing, when it was abandoned. She considered that this was outside the scope of a “personal action at law” and hence a matter outside the jurisdiction of the Magistrates Court. She also said that Meyer Vandenberg had had the opportunity to strike out that aspect of the claim and chose not to do so. Although she did not say so expressly, her Honour impliedly held that this took the claim outside the scope of r 1725.
She then assumed, in Meyer Vandenberg’s favour, that the claim for equitable compensation was hopeless and should never have been included in the Statement of Claim. If that was the case, and regard was not had to the claim for the purposes of deciding the applicability of r 1725, her Honour was of the view that the court should exercise its discretion under r 1725(3).
She reasoned that a substantial part of McLennan’s claim was for damages for lost income and that this was founded upon facts “which were not proved when [Ms McLennan] gave oral evidence during the hearing”. Her Honour characterised this as being a situation in which “the oral evidence simply did not ultimately come up to proof … a fact not anticipated when the proceedings were commenced and conducted over the course of the preceding year and a half”. Added to this were “complex legal arguments addressed by both parties on liability, including causation and remoteness, and the expert evidence on liability and quantum was also of a degree of complexity” that meant that the bringing of the claim in the Supreme Court was warranted notwithstanding the final result.
She rejected Meyer Vandenberg’s submission that McLennan did not take a reasonable approach on the law. Her Honour characterised this as involving hindsight reasoning in light of the court’s factual findings. As a result, she concluded that even if r 1725(2) applied, she would have exercised the court’s discretion under r 1725(3) to make a different order.
She then turned to the Calderbank offer made on 19 July 2018. This was an offer to resolve the claim for $100,000, plus costs as agreed or assessed. It remained open until 10am on the first day of the hearing, 23 July 2018. Her Honour accepted that it was a Calderbank offer. However, she did not find that the rejection of the offer was unreasonable. She was not persuaded that McLennan had an unreasonable view of the claim for economic loss. Although she had referred to the claim for economic loss as involving “guesswork”, her Honour was “not persuaded that position was clearly apparent as at 19 July 2018 such that [McLennan was] unreasonable to pursue the claim at all”. She said that “at the time the offer was made, [McLennan] may have still reasonably considered that their claim for damages would achieve at least $100,000, taking into account the amount that was ultimately awarded and an additional component for lost wages.” She was therefore not persuaded that the failure to accept the 19 July 2018 offer reached the “unreasonable” threshold, so as to warrant a different costs order.
The end result was that Meyer Vandenberg was required to pay 75% of McLennan’s costs.
Approach of the parties to costs following appeal decision
Notwithstanding that this court allowed McLennan’s appeal and increased the award of damages to take into account pre-judgment interest, Meyer Vandenberg maintained the position that it was necessary for it to establish error in the primary judge’s costs reasons in order to succeed on appeal. Meyer Vandenberg did not adopt the position that, having regard to the variation of the judgment below, it was for the Court of Appeal to simply re-exercise the costs discretion in light of the altered outcome of the proceedings. The reason for adopting this approach was not made clear. However, given that it is an approach more favourable to McLennan, we will deal with the appeal on the basis that it was argued.
Meyer Vandenberg contends that the primary judge fell into error in a number of ways. They may be summarised as follows:
(a)failing to take into account s 5A of the Court Procedures Act 2004 (ACT) when considering the application of rr 1721 and 1725 (ground 1);
(b)failing to find that r 1725 was engaged and failing to make an order consistent with r 1725(2) (grounds 2 and 3);
(c)making an order pursuant to r 1725(3) in the absence of finding “special circumstances” (ground 4);
(d)in relation to whether McLennan unreasonably rejected the Calderbank offer, failing to take into account relevant considerations and failing to view objectively McLennan’s lack of prospects of success as at the date of the offer (ground 5); and
(e)failing to take into account relevant considerations when determining that it was appropriate that Meyer Vandenberg pay 75% of McLennan’s costs (ground 6).
Rule 1725 (ground 2, 3 and 4)
The primary judge placed some significance on the fact that the relief claimed in the Further Amended Statement of Claim (FASOC) included “restitution and equitable compensation”. That relief was sought in addition to common law damages, damages for breach‑of‑contract and damages for breach of the Trade Practices Act 1974 (Cth), the Fair Trading Act 1992 (ACT) and the Australian Consumer Law. It is the claim for “equitable compensation” that was relied upon by the primary judge.
The FASOC alleged negligence, breach of contract and breach of the Trade Practices Act, Fair Trading Act and the Australian Consumer Law. There was no pleading of any breach of any equitable obligation. In those circumstances there was no basis for the inclusion of a claim for equitable compensation. There was no attempt by McLennan at trial to rely upon the claim for equitable compensation.
In those circumstances the claim for relief was one without any pleaded or other basis and which was not ultimately relied upon by McLennan. McLennan made no attempt on the costs appeal to justify or otherwise support the inclusion of that aspect of the claim. Does such a claim, if wrongly included in a Statement of Claim, prevent the operation of r 1725? In our view it does not. It would be inconsistent with the purpose of the Rules if such a misconceived claim for relief, which bore no relationship to any of the causes of action pleaded in the body of the Statement of Claim, could operate to insulate a claim in the Supreme Court from the costs consequences of r 1725. Her Honour erred in concluding that the reference to “equitable compensation” in the FASOC was sufficient to avoid the operation of r 1725.
There is a further reason why the primary judge would have been in error even if there was a plausible basis upon which the pleaded claims could have given rise to relief in the form of equitable compensation. Notwithstanding that s 257 of the Magistrates Court Act 1930 (ACT) limits the jurisdiction of the court to a “personal action at law”, s 258 of that Act provides power to the court to grant relief in relation to such a cause of action. It provides, inter alia, that the court may grant any relief, redress or remedy that the Supreme Court could grant in a similar action. Thus, given that the causes of action pleaded by McLennan were personal actions at law, if equitable compensation was an appropriate form of relief for such an action, then the Magistrates Court would have had jurisdiction to grant that relief.
Because r 1725 applied, grounds 2 and 3 are made out.
However, ground 4, which asserts a requirement for “some special circumstances” prior to the making of any order under r 1725(3), is not made out. The submissions made by Meyer Vandenberg were to the effect that it was necessary for the court to find that there were “some special circumstances” which would justify the making of a different order. It referred to the decision of the full court of the Supreme Court of Victoria in O’Doherty v McMahon [1971] VR 625 at 628 where such a requirement was articulated in the context of a rule which had a purpose similar to r 1725.
In our view care must be taken not to put a gloss on the general language used in the rule so as to impose a higher threshold for the making of an order than the rule provides. The rule does not itself require special circumstances. It provides an unconstrained discretion to make a different order. That requires the court to be satisfied that a different order is appropriate. Obviously that discretion has to be exercised in the context of the rule itself, which is clearly designed to encourage parties to commence claims in the appropriate court within the judicial hierarchy. It must also be exercised in light of the requirements of s 5A of the Court Procedures Act.
Having regard to the fact that error has been established in relation to the applicability of r 1725, it is unnecessary to consider further the contingent reasons given by the primary judge for the making of an order under r 1725(3), as those issues may be considered when re-exercising the costs discretion.
Calderbank offer (ground 5)
The amount offered in the Calderbank offer made on 19 July 2018 was almost three times the amount awarded by the primary judge ($100,000 versus $37,638.34). It was more than double the amount awarded by this court on appeal ($100,000 versus $44,661.02). The basis upon which the primary judge declined to find that the non-acceptance of the offer was unreasonable appears to have been that “[McLennan] may not have had an unreasonable view about their claim for economic loss”. Her Honour said “although the finding with regard to the evidence led to support the claim for economic loss referred to ‘guess work’ (McLennan at [123]), a finding relied upon by [Meyer Vandenberg] in their reply submissions, I am not persuaded that position was clearly apparent as at 19 July 2018 such that the [appellants] were unreasonable to pursue the claim at all”.
The primary judge appears to have accepted that McLennan ought to have recognised the likelihood that she would only receive modest damages because of the ACT government buyback scheme. That meant that the possibility of receiving some additional damages as a result of the economic loss claim became more significant.
To adopt the language of McDougall J in CJD Equipment Pty Ltd v A&C Constructions Pty Ltd [2010] NSWSC 502 to at [23], the obligation on a party to litigation is to conduct “an independent and dispassionate analysis” of its position in order to determine whether or not to accept an offer of settlement. That obligation has been imposed upon parties as a matter of public policy and it is now reinforced by the terms of s 5A of the Court Procedures Act.
Given that questions of costs will usually be determined in a summary fashion, whether or not a party has acted unreasonably by failing to conduct such an analysis or, having conducted such an analysis, unreasonably failed to accept an offer, will often be a matter of inference drawn from an objective assessment of the position of the party as at the date of the offer.
In this case the claim brought by McLennan at trial involved a number of substantial components:
(a)a claim for damages based upon the repurchase of the block and rebuilding of a new home on it;
(b)a claim for mental harm done to Ms McLennan and Mr Spong; and
(c)a claim by Ms McLennan for economic loss arising from her inability to conduct a consultancy business.
So far as the cost of repurchase and rebuilding claim is concerned, it is relevant that although the Calderbank offer itself did not articulate the difficulties with this aspect of the claim, an earlier offer of compromise had articulated at some length Meyer Vandenberg’s contention that costs incurred after the buyback money was paid were not causally related to the alleged negligence and not recoverable. Having regard to the magnitude of the claim, the fact that McLennan’s claim alleged that in the absence of negligence there would have been no transaction and the magnitude of the buyback payment, the real difficulties with the claim which manifested themselves in the primary judge’s decision ought to have been recognised when considering the settlement offer.
So far as the claim for mental harm was concerned, it must be recognised that Meyer Vandenberg had not at that stage pleaded or otherwise identified s 35 of the Civil Law (Wrongs) Act 2002 (ACT) as being any obstacle to recovery. However, McLennan ought to have been recognised that, having regard to the decision in Baltic Shipping Co v Dillon (1993) 176 CLR 344, the claim for damages was weak and that even if successful the award of damages would be modest. So far as any damages under the Fair Trading Act were concerned, it is clear from the manner in which the trial was conducted that no emphasis was placed upon this aspect of the claim so far as damages for mental distress were concerned.
So far as the claim for economic loss is concerned, the difficulty with declining to find unreasonableness on the basis of the possible economic loss claim was that McLennan must be taken to have known of the limited evidence that could be given by Ms McLennan in support of that claim. It is not a case in which an expert or third-party lay witness failed to come up to proof. Rather, the relevant evidence was to be given by Ms McLennan herself. There was no evidence to support the proposition that the evidence in McLennan’s case “simply did not ultimately come up to proof”. Further, there was no evidence suggesting that senior counsel at the trial had failed to lead available evidence from Ms McLennan as to her economic loss claim. Thus, for the purposes of assessing, objectively, McLennan’s prospects of success on this aspect of the claim, that must be done on the basis that the evidence led was all the evidence that was available to be led.
In those circumstances the conclusion reached by the primary judge in McLennan v Clapham [2019] ACTSC 1 at [111]-[114] as to the evidence given by Ms McLennan, the characterisation of the assumptions founding the economic loss report as “speculation or guess work” at [123] and the conclusions of this court on appeal in McLennan v Meyer Vandenberg at [54]-[55] as to the absence of any persuasive evidence in relation to the economic loss claim are all relevant. The evidence was clearly inadequate to establish the substantial claim for damages over the several years that were sought in the pleaded claim. Further, the limitations on that evidence existed in relation to the period prior to the ACT government buyback, as well as after it. As a consequence, when assessed objectively, the existence of the economic loss claim did not provide a basis upon which to conclude that it was reasonable for McLennan to fail to accept the Calderbank offer.
In cases of some complexity it is necessary to be cautious in reaching a conclusion that the rejection of an offer was unreasonable. It must be remembered that offering parties have available to them the offer of compromise procedure if they wish to ensure greater certainty of outcome in relation to costs. However, in this case the nature of the claims, assessed in light of what is known about the position of McLennan as at 19 July 2018, is such that the refusal of the offer should have been characterised as unreasonable because the prospects of success on the claim for damages that had been articulated by McLennan were poor.
Therefore this ground of appeal is made out.
The remaining grounds of appeal (grounds 1 and 6)
In light of the fact that Meyer Vandenberg has established error on the part of the primary judge in relation to her decision on costs and this court will be required to re‑exercise the discretion in any event, it is possible to deal with the remaining grounds very briefly.
So far as Meyer Vandenberg submit that there was an error in failing to apply s 5A in relation to the court’s exercise of discretion (ground 1), we are not satisfied that this ground is made out. It is true that the primary judge made no express reference to s 5A. However, a judge will not lightly be presumed to have forgotten about such a fundamental principle relevant to the exercise of discretion because he or she has not ritualistically recited it in reasons for a decision. No additional error arises from the failure by the primary judge to expressly consider the effect of s 5A on the question of costs.
The ground of appeal alleging a failure to take into account relevant considerations (ground 6) largely recapitulates various other grounds of appeal, characterising them as involving a failure by the primary judge to take into account a relevant consideration and it is not necessary to deal with them separately.
Re-exercise of discretion
In light of the way the parties approached this appeal (see [16] above), and having identified a number of errors in the primary judge’s approach, it is appropriate that this court re-exercise the discretion in relation to costs. It is appropriate, having regard to the outcome of the substantive appeal, that this discretion be exercised on the basis that the amount recovered by McLennan was $44,661.02.
The first issue is whether or not it is appropriate to make an order under r 1725(3) that McLennan is entitled to a different amount for costs and disbursements than would be allowed under r 1725(2).
The primary judge relied upon the potential of the substantial economic loss claim to lead to a significant award of damages and the proposition that the evidence “simply did not ultimately come up to proof”. As pointed out above, that was not an accurate characterisation of the situation. It does not provide a proper basis for a departure from r 1725(2).
The additional basis articulated by the primary judge for making an order under r 1725(3) was the complex legal arguments on liability including causation and remoteness and the degree of complexity in the expert evidence on liability and quantum.
In our view the quantum claimed and the complexity of the professional negligence claim made against Meyer Vandenberg made it reasonable for McLennan to commence the proceedings in the Supreme Court. It must be remembered that even though they ultimately only recovered much less than was claimed, the case was a solidly contested professional negligence claim in which McLennan was successful in establishing liability. Further, even though ultimately unsuccessful in establishing the very significant quantum of damages claimed, it cannot be said that the only reasonable course for McLennan to have adopted was to have abandoned all aspects of their claim above $250,000 at the point of commencement of the proceedings or at the point at which it was ultimately heard.
For these reasons, the nature and complexity of the claim made it reasonable to commence the proceedings in the Supreme Court and have them determined there. It provided an appropriate basis upon which to depart from the strictures of r 1725(2).
Once r 1725(2) is departed from, the starting point is that McLennan succeeded in the claim and costs should therefore follow the event.
That entitlement is qualified as a result of the failure to accept the Calderbank offer. For the reasons given earlier that failure was unreasonable. In our view, the appropriate costs consequence is that McLennan pay Meyer Vandenberg’s costs from 10am on 23 July 2018. That is consistent with the regime that applies in relation to offers of compromise and there are no sufficient reasons in the present case to impose a less significant costs consequence upon McLennan.
Finally, notwithstanding the approach adopted by the primary judge, in our view no reduction is required by reason of what the primary judge described as an exaggerated claim for damages. That is because the claim for damages based upon the methodology propounded by McLennan was not hopeless, the costs of the hearing itself are to be paid by McLennan and there is no injustice in requiring Meyer Vandenberg to pay McLennan’s costs, having regard to the capacity of Meyer Vandenberg to have protected its interests by the making of earlier offers of compromise or Calderbank offers.
It is therefore appropriate that Meyer Vandenberg pay McLennan’s costs up until 10am on 23 July 2018 and that McLennan pay Meyer Vandenberg’s costs thereafter.
Orders in appeal ACTCA 18 of 2019
Having regard to Meyer Vandenberg’s success on its appeal in relation to costs it is appropriate that McLennan pay Meyer Vandenberg’s costs of the costs appeal.
The orders of the Court in proceedings ACTCA 18 of 2019 are:
1.The order of the court made on 18 April 2019 is set aside and in its place the following orders are made:
(a) The defendant is to pay the plaintiffs’ costs up until 10am on 23 July 2018; and
(b) The plaintiffs are to pay the defendant’s costs from 10am on 23 July 2018.
2.The respondents are to pay the appellants’ costs of the appeal.
Costs of McLennan’s appeal
Outcome of the appeal
In the substantive appeal (ACTCA 4 of 2019), McLennan succeeded in having the judgment increased from $37,638.34 to $44,661.02. This was because of success on ground 19 of the appeal which led to an amount of $7022.68 being awarded as pre‑judgment interest. McLennan was unsuccessful on grounds 1 to 18.
Position of the parties
McLennan submitted that the appeal and cross-appeal should be dealt with together and that, following the dismissal of the cross-appeal, the overall order should be that Meyer Vandenberg pay 50% of McLennan’s costs of the appeal and the cross-appeal.
Meyer Vandenberg, on the other hand, submitted that in light of the attempts to settle the ground of appeal relating to interest:
(a)McLennan should pay Meyer Vandenberg’s costs of the appeal; or alternatively
(b)McLennan should pay Meyer Vandenberg’s costs of the appeal except for ground 19 which should be dealt with either by making no order as to costs or alternatively requiring Meyer Vandenberg to pay McLennan’s costs of that ground.
Offer made on ground 19
In assessing the significance of McLennan’s success on ground 19 for the question of costs, it is necessary to take into account the evidence relating to the offer made by Meyer Vandenberg to resolve the ground of appeal relating to interest.
The Notice of Appeal was filed on 19 February 2019. Following the filing of the Notice of Appeal, on 15 April 2019 the solicitors for Meyer Vandenberg wrote to the solicitors for McLennan requesting that McLennan particularise the quantum of interest that McLennan contended should have been awarded by her Honour at first instance and on what basis the figure was calculated.
McLennan’s solicitor responded by email on 13 May 2019 explaining in narrative terms the basis upon which McLennan contended that the primary judge should have awarded interest but declining to undertake the calculation exercise. The email explained that what was sought was pre-judgment interest calculated in accordance with schedule 2.1 of the Court Procedures Rules. McLennan’s solicitor contended that “if and when the appeal is allowed, the judgment sum awarded by the Court of Appeal may vary significantly from that awarded by her Honour, which will yield a different calculation once interest is properly allowed on that sum. To perform that exercise at this stage would be an inefficient use of our client’s resources”.
On 30 August 2019 the solicitors for Meyer Vandenberg wrote to the solicitors for McLennan putting to them an offer to resolve the issue raised by ground 19 of the Notice of Appeal. This was said to be an offer of compromise made in accordance with pt 2.10 of the Court Procedures Rules but also relied upon as a Calderbank offer.
It was open to Meyer Vandenberg to make an offer of compromise under the Rules because r 5001 includes pt 2.10 in the “applied civil rules” which apply “with any necessary changes” to an appellate proceeding that is a civil proceeding. The offer of compromise process could therefore be deployed in the appeal.
The letter contained a spreadsheet containing calculations leading to what the solicitors for Meyer Vandenberg considered to be a generous estimate of pre-judgment interest. The calculations were detailed and the rates and other assumptions related to the calculations were set out. This represented the exercise that the solicitors for McLennan had declined to undertake. The calculations identified a total award of interest of $9644.06 on the amount awarded by the court of $37,638.34. The letter identified that if certain assumptions favourable to McLennan were not made then the amount of pre-judgment interest would be approximately $8600.
The letter recorded the offer made in the following terms:
In the interest of resolving the issue early, we are instructed to make the following offer on a without admission basis:
(a) the respondent pay the appellants $10,000 on account of pre-judgment interest on the Judgment Sum;
(b)the resolution of paragraph 4(19) of the Notice of Appeal in respect of the Judgment Sum be noted on the Court’s file prior to the commencement of the hearing; and
(c) there being no order as to costs in relation to paragraph 4(19) of the Notice of Appeal insofar as it relates to interest on the Judgment Sum.
Although it was implicit in the terms of the offer that the remainder of the appeal would be defended, the offer did not state “whether the remainder of the proceedings will be defended or conceded”. It therefore did not comply with r 1002(2)(b)(ii).
The solicitors for McLennan responded to this offer on 11 September 2019 by accepting that the “sum offered in relation to interest is reasonable” but the offer as a whole was not reasonable because it made no provision for McLennan’s costs of the appeal. The letter indicated that if Meyer Vandenberg were to make an offer regarding ground 19 of the appeal which included a provision for McLennan’s costs of the appeal “my clients would be willing to consider that offer”.
Conclusion
Because the offer made by Meyer Vandenberg did not include the statement required by r 1002(2)(b)(ii) it was not an effective offer under r 1002. However, it may nevertheless be considered as a Calderbank offer or otherwise taken into account in relation to costs.
It is clear that Meyer Vandenberg appreciated the strength of McLennan’s ground of appeal relating to interest. It may be inferred that, in order to protect Meyer Vandenberg’s position in relation to costs, it wished to make an offer to resolve that part of the appeal which it was unable to defend, because otherwise McLennan may obtain a costs order in her favour even if otherwise unsuccessful on all other aspects of the appeal.
It is likely that McLennan also perceived the strength of her appeal in relation to interest and the potential for the ground of appeal to be an “insurance policy” in relation to costs. It is that desire which is likely to have led to the careful rejection of the offer made by Meyer Vandenberg and the failure to make any counter-offer or otherwise indicate how the issue of costs might be disposed of.
The issue should be resolved having regard to the rationale of Calderbank offers, assessed in light of the obligations on parties under s 5A of the Court Procedures Act. Parties acting in accordance with s 5A would be concerned to resolve any part of the appeal where the outcome could be agreed upon. To do so would have the effect of focusing on the real issues in contest, would more efficiently use the judicial resources of the court, allow the court to more efficiently dispose of its overall caseload and reduce the costs burden upon the parties that would be involved in contesting the issue to finality.
In the present case what was involved was a failure to award interest in circumstances where the award of interest would have followed almost as a matter of course had McLennan directed the primary judge to that issue. It was thus a case in which there was potential to resolve the issue of interest by consent in a manner which removed one issue in contention but preserved McLennan’s entitlement to argue the other grounds of appeal. Had it not been for the desire of McLennan to retain a ground of appeal which would serve as an “insurance policy” in relation to the costs of the appeal then it is likely that the offer would have been accepted. The desire to maintain an “insurance policy” ground of appeal is a forensic consideration that is not consistent with the purpose of the civil procedure provisions as outlined in s 5A. On an issue such as this s 5A obliged McLennan to seek to resolve the issue by consent.
The issue of costs referred to in the email of 11 September 2019 did not provide a proper reason to reject the offer. First, that was because there was no indication that the resolution of ground 19 would lead to the resolution of the matter overall and there was no indication or evidence that there were any severable costs associated with ground 19. Second, as pointed out in the court’s earlier reasons (at [106]), the primary judge’s oversight in dealing with the question of interest was significantly contributed to by the failure of counsel for McLennan to identify interest as an issue which needed to be determined. It was therefore not an issue in relation to which there would be the usual expectation in relation to costs.
In light of the manner in which the issue arose, the rejection of the offer for the reasons that it was should be characterised as involving a forensically targeted avoidance of the substance of what was being offered, rather than genuine engagement with the real issues in the proceeding, as required by s 5A.
For these reasons we consider that the success of McLennan in relation to ground 19 should not result in a costs order in McLennan’s favour. In our opinion, the balance of the grounds of appeal in this case are severable and it is appropriate to consider separately those issues upon which McLennan succeeded and those upon which she failed. Having regard to her failure on grounds 1 to 18 we consider that the appropriate order is that McLennan pay Meyer Vandenberg’s costs of the appeal.
Orders in ACTCA 4 of 2019
The orders of the Court in relation to costs in ACTCA 4 of 2019 are:
1. The appellants are to pay the respondent’s costs of the appeal other than the costs of ground 19 in relation to which each party shall bear its own costs.
| I certify that the preceding seventy-two [72] numbered paragraphs are a true copy of the Reasons for Judgment of the Court of Appeal. Associate: Date: 3 April 2020 |
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