Mediterranean Olives Financial Pty Ltd v Gita Lederberger (No 2)
[2011] VSC 333
•1 July 2011
| IN THE SUPREME COURT OF VICTORIA |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST A
No. 1385 of 2010
| MEDITERRANEAN OLIVES FINANCIAL PTY LTD and others (according to the schedule attached) | Plaintiffs |
| v | |
| GITA LEDERBERGER and SAMUEL LEDERBERGER | Defendants |
| STERLING & SHEINK (a firm) | Third Party |
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JUDGE: | Pagone J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 1 July 2011 | |
DATE OF JUDGMENT: | 1 July 2011 | |
CASE MAY BE CITED AS: | Mediterranean Olives Financial Pty Ltd & Ors v Gita Lederberger & Ors (No 2) | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 333 | |
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COSTS – Whether plaintiffs’ claim against successful defendant properly and reasonably articulated – Whether Bullock or Sanderson order should be made against unsuccessful defendant – Calderbank letter – Reasonableness of offer – Need for offer to state why proceeding will fail.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr P Fary | Herbert Geer |
| For the First Defendant | Mr M Ravech | Spigler & Schwarcz |
| For the Second Defendant | Mr D Silberman of Dov Silberman Lawyers | |
| For the Third Party | Ms R Sofroniou | Minter Ellison |
HIS HONOUR:
In this matter the plaintiffs seek their costs against the first defendant (Mrs Gita Lederberger) but are content with no costs orders against her son, the second defendant (Mr Samuel Lederberger), who the plaintiffs contend should bear his own costs. The plaintiffs’ alternative position is that I should make a “Bullock”[1] order by which Mrs Lederberger is ordered to pay both the costs of the plaintiffs and of the second defendant. In contrast, Mr Lederberger claims his costs against the plaintiffs and maintains that they should be paid on an indemnity basis. The position as between the third party and Mrs Lederberger is more straight forward. She has failed in her claim against the third party and should pay those costs.
[1]Bullock v London General Omnibus Co [1907] 1 KB 264.
In so far as Mrs Lederberger and the plaintiffs are concerned, the plaintiffs have succeeded and are entitled to their costs which, in the ordinary scheme of things, should be paid. The plaintiffs have not succeeded against Mr Lederberger on the facts as I have found them. Ordinarily the plaintiffs would therefore not be entitled to the costs as against Mr Lederberger but in some circumstances he would not be entitled to recover his costs against the plaintiffs.
The claim by Mr Lederberger for his costs is based on a number of matters, one of them being that the plaintiffs’ claim against him was said not to have been properly articulated other than by reference to the most general and possibly vague circumstances. It is also said that the principal witness for the plaintiffs had knowledge of facts that, and maintained the case upon the basis that, was wholly inconsistent with successfully maintaining the claim against Mr Lederberger personally.
It was also said that an offer of compromise had been sent on behalf of Mr Lederberger by his solicitor, Mr Silberman, to the solicitors for the plaintiffs putting an offer to settle the proceeding as against Mr Lederberger on a particular basis. That letter referred to reliance upon the principles in Calderbank v Calderbank[2] on the question of costs in the event that the offer was not accepted.
[2][1975] 3 All ER 333.
I am wholly unpersuaded to accept the submissions that have been put on behalf of Mr Lederberger either that he should get costs against the plaintiffs (other than through Mrs Lederberger), or that any costs in his favour should be made on the indemnity basis. He did not seek costs against Mrs Lederberger who was unsuccessful in the proceeding.
As I pointed out in my reasons for judgment delivered today, the case brought against Mr Lederberger was both reasonable and wholly dependent upon the factual circumstances created by him and the position adopted by the defendants in the litigation. The fact was that any contract with the plaintiffs had been made through the authorities given by Mr Lederberger in the applications to participate in the tax effective schemes. The one fact known to Mr May was that Mr Lederberger had signed an authority on behalf of somebody. Mr May’s understanding was that Mr Lederberger was signing on behalf of somebody other than himself but in the preparation of this litigation it was asserted in Mrs Lederberger's amended defence filed on 15 February 2011 that Mr Lederberger had signed the authorities on his own behalf. Mr May’s belief had been that Mr Lederberger had acted on behalf of a partnership which included Mrs Lederberger but she (who the plaintiffs had sued as principal) alleged in an amended defence that the person the plaintiffs took to be an agent was in fact the principal. The question of agency between them was something wholly within their knowledge.
The plaintiffs’ position in the litigation was a belief that they had contracted with someone. The only options about the authorities signed by Mr Lederberger was that they had been given either for others or on his own behalf. The one certainty was Mr Lederberger’s involvement; the doubt was who he acted for if he was not acting for himself. The alternatives were inextricably intertwined and they were raised sharply by Mrs Lederberger’s amended defence before Mr Lederberger had been made a party to the proceeding. It was Mrs Lederberger’s pleading which first asserted the fact that the authority had been signed by Mr Lederberger on his own behalf. That pleading was signed by counsel and filed by solicitors. The contents of pleadings should be taken seriously and the plaintiffs were put on notice by Mrs Lederberger’s pleading of what responsible legal practitioners and officers of the court had been instructed to be the fact about Mr Lederberger’s position when signing the authorities. The allegation was made in clear terms as an amendment to pleadings already filed for Mrs Lederberger and, being signed by independent counsel and filed by solicitors, carried with it some weight that the pleading had some substance and was not a mere fiction.[3] It was reasonable for the plaintiffs to assume that there was some basis for the allegations made in Mrs Lederberger’s pleading against them and to take the allegations seriously. In those circumstances, and in particular the assertions by Mrs Lederberger that her son was acting on his own behalf in signing the authorities, it was not unreasonable for the plaintiffs to commence the action against Mr Lederberger, as it was, and to be maintained against him, as it was.
[3] Great Australian Gold Mining Co v Martin (1877) 5 Ch D 1, 10 (James LJ); Gippsreal Ltd v Kurek Investments Pty Ltd [2009] VSC 344, [5].
Mr Silberman used the word “improper” when making the submission that the plaintiffs ought not to have commenced and maintained the proceeding against his client. I will not explore what the word might have meant or whether it was used appropriately by Mr Silberman. I was surprised to hear the word used in the context of this proceeding and coming from the solicitors acting for the person who I have found had been behind the difficulties that gave rise to the proceeding. It is sufficient, however, for me to say this: there is no evidence of any kind to suggest that the case against Mr Lederberger was maintained upon a basis that can be described as improper, whether in a negative pejorative sense or in a more technical and blameless sense. On the contrary, the evidence in this proceeding, the logic of the facts known to Mr May, and the amended pleading filed by Mrs Lederberger, all justified joining Mr Lederberger as the most likely alternative contracting party, as a proper, reasonable and appropriate thing to do. If there be any impropriety it would possibly lie with whoever was responsible for the allegation raised in Mrs Lederberger’s amended defence to which I have already referred.
It is not strictly necessary for me to deal with the “Calderbank” offer, but lest the matter become relevant elsewhere, I should say something about the offer. The question in this case is whether the rejection of the offer was unreasonable in the circumstances.[4] In Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2),[5] the Court of Appeal held that a court should have regard to the following matters when considering whether the rejection of a Calderbank offer was unreasonable:
[4]Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435, 441 (Warren CJ, Maxwell P and Harper AJA).
[5](2005) 13 VR 435.
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 in the event of the offeree’s rejecting it.[6]
Counsel for the plaintiffs contended that given the disparity between what was offered by Mr Lederberger and what was claimed, the offer was little more than an invitation for the plaintiffs to capitulate. I am grateful for counsel for having drawn to my attention the recent decision of Sifris J in IPEX ITG Pty Ltd (in liq) v State of Victoria (No 2),[7] and I respectfully adopt what his Honour said in that case in paragraphs 28, 29 and 30.
[6]Ibid 442 (Warren CJ, Maxwell P and Harper AJA).
[7][2011] VSC 39.
Calderbank offers vary in kind from one case to another. In M.T. Associates Pty Ltd v Aqua-Max Pty Ltd,[8] Gillard J held that courts should encourage litigants to make offers to compromise and that “it is in the interests of the administration of justice that litigation should be compromised as soon as possible.”[9] It is undesirable that Calderbank letters be burdened with technicality.[10] However, in this “Calderbank” letter there is nothing that, as a matter of drafting, might usefully persuade the recipient of the letter to think or evaluate whether the proceeding should be compromised. The only statement in the letter that might conceivably cause the recipient to think that they might settle the case is what appears in paragraph 3. That paragraph says this:
[8][2000] VSC 163.
[9]Ibid [72].
[10]BMD Major Projects Pty Ltd v Victorian Urban Development Authority [2007] VSC 441, [5].
Your clients’ case is fundamentally flawed. In order to succeed, your clients must overcome several legal obstacles which are so serious as to make their prospects of success in prosecuting the Proceedings minimal. These obstacles and poor prospects of success are, or ought to be, presently apparent on the face of the pleadings, and from evidentiary material currently in your clients’ custody or control.
There is no further articulation of anything that a reasonable reader might regard as a reasonable fact or circumstance beyond the baldest of assertion that the proceedings should be given up. Bald assertions of this kind are unlikely to persuade the recipients of Calderbank letters to consider settling a case. If a party believes that the opponent’s case is “fundamentally flawed” or has “poor prospects of success”, then it would be useful for those drafting the letter to elaborate why that is so. In Dukemaster Pty Ltd v Bluehive Pty Ltd,[11] Sundberg and Emmett JJ said:
Whatever the position may be with an offer made under O23, a Calderbank offer, or any offer of compromise outside the regime in O23, is unlikely to serve its purpose of attracting an indemnity award of costs if the rejecting applicant fails to recover more than what is offered, unless the offer is a reasonable one and contains a statement of the reasons the offeror maintains that the application will fail.[12] (my emphasis)
By including such a statement in an offer, the recipient of the letter can be informed of why it might be in their interests to accept the offer. The statement of a reason why an offer should be accepted is a material factor in deciding whether an offer ought reasonably to have been accepted. As against the bald assertion that the plaintiffs’ case had no foundation the plaintiffs had the earlier amended pleading filed for Mrs Lederberger by practitioners and signed by counsel which (presumably upon instructions) had asserted the very opposite. In those circumstances I would not make, and would wholly reject, the orders sought by Mrs Lederberger based upon the Calderbank offer.
[11][2003] FCAFC 1.
[12]Ibid [8]; See also Nutrientwater Pty Ltd v BACO Pty Ltd (No 2) [2010] FCA 304, [33] – [34] (Kenny J).
The fundamental question for me now is whether the order should be in the form of a Bullock[13] order or a Sanderson[14] order. This is a case where the plaintiffs ought not be at risk that any indemnity that Mrs Lederberger might give might not be met, and in those circumstances I propose to order that the costs of the plaintiffs including the costs of the second defendant, be paid by the first defendant. The costs of the third party should also be paid by the first defendant.
[13]Bullock v London General Omnibus Co [1907] 1 KB 264.
[14]Sanderson v Blyth Theatre Co [1903] 2 KB 533.
SCHEDULE OF PARTIES
| No. 1385 of 2010 | |
| BETWEEN: | |
| MEDITERRANEAN OLIVES FINANCIAL PTY LTD | Firstnamed Plaintiff |
| MEDITERRANEAN OLIVES ESTATE LTD | Secondnamed Plaintiff |
| ALBANY FINANCIAL PTY LTD | Thirdnamed Plaintiff |
| WA BLUE GUM LTD | Fourthnamed Plaintiff |
| - and - | |
| GITA LEDERBERGER | Firstnamed Defendant |
| SAMUEL LEDERBERGER | Secondnamed Defendant |
| STERLING & SHEINK (a firm) | Third Party |
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