Meyer v Cool Chilli Pty Ltd (No 2)
[2015] ACTSC 372
•25 November 2015
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Meyer v Cool Chilli Pty Ltd (No 2) |
Citation: | [2015] ACTSC 372 |
Hearing Date: | 24 November 2015 |
DecisionDate: | 25 November 2015 |
Before: | Mossop AsJ |
Decision: | See [23] |
Catchwords: | PRACTICE AND PROCEDURE – Costs – Calderbank offer made by third party not accepted by defendant – offer inclusive of costs – open to Court in exercise of costs discretion to determine effect of offer – form and content of offer do not permit comparison between outcome if offer had been accepted and outcome achieved at trial – circumstances and evidence do not permit finding that non-acceptance of offer was not reasonable – no costs consequences arise from offer |
Legislation Cited: | Court Procedures Rules 2006 (ACT) rr 1002, 1721 |
Cases Cited: | Calderbank v Calderbank [1976] Fam 93 Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 Financial Integrity Group Pty Ltdv Farmer (No 4) [2014] ACTSC 145 VanZonneveld v Seaton [2005] NSWSC 175 |
Parties: | Ashlea Meyer (Plaintiff) Cool Chilli Pty Ltd (Defendant) Royal Canberra Golf Club Limited (Third Party) |
Representation: | Counsel Mr D Shillington (Defendant) Mr B Kelleher (Third Party) |
| Solicitors Dibbs Barker (Defendant) Colin, Biggers & Paisley (Third Party) | |
File Number: | SC 233 of 2014 |
Introduction
On 30 October 2015 I gave judgment in these proceedings: Meyer v Cool Chilli Pty Ltd [2015] ACTSC 336. I gave judgment in favour of the plaintiff against the defendant in the sum of $249,464 with costs. I gave judgment in favour of the defendant against the third party in the sum of $62,366. I ordered that the third party was to pay the defendant’s costs of the third party claim. I permitted any party that wished to be further heard on costs to notify my associate of that fact and, in those circumstances, the relevant costs order would not take effect until further order of the Court. The third party sought to be further heard on costs. It submitted that instead of the order that I made requiring it to pay the defendant’s costs, the third party should only be required to pay those costs up until 18 September 2015 and that thereafter the defendant should pay the third party’s costs on an indemnity basis. The basis for that submission was the making of an offer to settle the proceedings which was served on 18 September 2015.
Evidence
The third party relied upon the affidavit of Danielle Fay Skinner dated 20 November 2015 which annexed relevant correspondence. That disclosed written offers of settlement as follows.
On 6 November 2014 the plaintiff offered to settle the proceedings for $275,000 “on a judgment basis”.
On 11 November 2014 the solicitors for the defendant forwarded that letter to the solicitors for the third party referring to it as “a Calderbank offer in the sum of $275,000 on a Judgment basis plus costs”. The defendant’s solicitors recorded their opinion that it was a reasonable offer. The letter conveyed a Calderbank offer to settle the third party claim on the basis that the third party make “a 50% contribution to a judgment or settlement sum in favour of the plaintiff up to $275,000 plus 50% of the plaintiff’s costs and disbursements to be agreed or assessed”.
On 9 December 2014 the solicitors for the third party wrote back rejecting that offer and making a counter Calderbank offer that there be judgment in favour of the third party and that the defendant and the third party bear their own costs.
On 18 September 2015 the solicitors for the third party wrote to the solicitors for the defendant by letter dated 17 September 2015 in the following terms:
In our letter of 9 December 2014 we made an offer to your client, Cool Chilli Pty Ltd (Cool Chilli), to resolve the Third Party Notice.
On a purely commercial basis, and with the view to avoiding significant costs to prepare for and appear at the upcoming trial, our client is prepared to make a further offer as follows:
1.a contribution in the sum of $95,000 all inclusive towards a joint settlement of the substantive proceedings; and
2.once, and if, the substantive proceedings settle, the Third Party Notice be dismissed with no order as to costs.
This offer is open for acceptance for 14 days.
If the matter proceeds and judgment is delivered on terms equal to or lesser than the offer set out in this letter, our client will rely on this letter and seek an order for Cool Chilli to pay its costs on an indemnity basis from the date of this letter and on any such application a copy of this letter will be tendered to the Court.
The defendant submitted that the general discretion in relation to costs under r 1721 of the Court Procedures Rules 2006 (ACT) (Rules) includes a discretion to order a costs outcome in accordance with the decision in Calderbank v Calderbank [1976] Fam 93: Quirk v Bawden (1992) 112 ACTR 1. The principles applicable to the award of costs arising out of the making of Calderbank offers are summarised in Hillman v Box (No 5) [2014] ACTSC 150 at [25]-[44]; Pires v DibbsBarker Canberra Pty Ltd [2014] ACTSC 283 at [97].
The third party made the following submissions about the offer and the circumstances in which it was made:
(a)the letter of offer was clearly marked without prejudice save as to costs and it offered a genuine compromise;
(b)it was in clear terms a final offer and not subject to any further negotiation;
(c)the offer was inclusive of costs but that was not a bar to the offer having effect: see Hillman at [31] and Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [5]-[7], [137]-[144];
(d)the letter expressly stated that if the offer was not accepted that an indemnity costs order would be sought and the offer was expressed to be open for a reasonable period of 14 days;
(e)the offer gave the offeree a reasonable chance to consider the strength of the offeror’s case given it was made three weeks from the date fixed for hearing;
(f)the defendant was in a good position to assess the relative strengths of the contest as it then stood as the case involved quite straightforward issues, a modest number of medical reports, no expert liability reports and only a small number of lay witnesses;
(g)at the time the offer was made the plaintiff had not amended her statement of claim to include the breach of statutory duty which was ultimately picked up by amendment of the third party claim and on which the defendant was ultimately successful against the third party;
(h)no enquiry was made by the defendant of the third party to break down the offer, the defendant was in a position to enquire of the plaintiff what party and party costs might have been and, further, the defendant, as an institutional litigant, was well able to assess the likely party and party costs at that stage;
(i)the offer involved a real compromise so far as the third party was concerned as it had a strong case on liability at that point;
(j)assuming, as ultimately found, the defendant was entitled to a 25% contribution from the third party, then the offer was equivalent to a capacity of the defendant to settle with the plaintiff for a sum of $380,000 inclusive of costs which, when compared with the ultimate judgment, permitted up to $130,000 on account of the plaintiff’s costs.
In those circumstances the third party submitted that the rejection of the offer by the defendant was unreasonable and the Court should exercise its discretion to order that the defendant pay the third party’s costs on an indemnity basis from the date of the letter.
The defendant submitted that having regard to the nature of the offer made it was not possible to assess whether the third party had achieved a better outcome than it had offered. Further it submitted that it was a factor relevant to the exercise of the discretion that the rules relating to offers of compromise required that an offer not be an offer inclusive of costs: r 1002(2)(c) of the Rules. It also pointed to those decisions of single judges which indicated that offers which were inclusive of costs would generally not give rise to costs consequences: Financial Integrity Group Pty Ltdv Farmer (No 4) [2014] ACTSC 145 at [25]; VanZonneveld v Seaton [2005] NSWSC 175 at [6]; Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97 at 101-102.
Consideration and conclusion
The letter may be relevant to costs: I accept that an offer which is inclusive of costs may provide a basis upon which the Court exercises its discretion to award a better than usual costs order to an offering party. Whether or not to make such an award involves the exercise of a discretion. Like Beazley JA in Elite Protective Personnel (at [5]), I do not consider it open to lay down a rigid rule or principle that only offers exclusive of costs can ground a favourable exercise of the discretion. That would introduce a rigidity which is inconsistent with the fact that costs are in the discretion of the Court. It is plainly possible to imagine circumstances in which an offer to settle inclusive of costs should have consequences for the exercise of discretion in relation to costs. Having said that, the question then becomes whether in all the circumstances the making of such an offer provides a proper basis for making an order more beneficial to the party relying upon the offer than would otherwise be made. That exercise of discretion must clearly take into account those practical considerations which have been identified as tending against giving effect to offers which are inclusive of costs. Those include the difficulty for the offeree in assessing the value of the offer and the difficulty for the Court in determining whether the offer has been bettered. The interests of justice will not be served by generating collateral issues associated with assessment of the value of a non-rules based offer in order to resolve a question of costs at the end of the case: Elite Protective Personnel at [144] per Basten JA. Those considerations lie behind the exclusion from offers of compromise of offers which are inclusive of costs: r 1002(2)(c) of the Rules. Such an approach gives effect to the policy reflected in the Smallacombe line of authority without fettering the exercise of discretion. Ultimately, regard must be had to the underlying purpose of giving effect to Calderbank offers, namely, the encouragement of the parties to take a realistic stance in relation to settlement of proceedings with the consequent benefits to the parties and the courts.
The decisions of Refshauge J in Hillman and Pires provide useful practical guidance as to what should be included in a Calderbank offer in order to make it as easy as possible for the offering party to achieve a more favourable costs outcome. Notwithstanding this very clear guidance to practitioners, correspondence labelled as Calderbank offers is often drafted without regard to such statements. This is such a case. There may well have been commercial or other reasons why the offer was put in the terms that it was but those terms make it more difficult for the third party to improve its position in relation to costs than would have been the case had the offer been drafted with attention to the guidance given by the authorities.
The terms of the offer: A number of features of the offer made need to be considered. First, the offer does not in fact suggest the terms of any order that the Court could make or reflect an outcome which could actually arise from the third party proceedings. The orders that the Court could make in order to finalise the third party claim would be to give judgment in favour of the defendant against the third party in a particular sum and make an order for costs. No such order or orders was contemplated by the offer. Instead the offer appeared to contemplate an agreement that if the defendant was able to settle the proceedings with the plaintiff then the third party would contribute a total of $95,000 to the plaintiff. Second, as will be apparent from this explanation, the offer was contingent upon there being a settlement with the plaintiff and it appeared to contemplate that the amount offered would be paid directly by the third party to the plaintiff. Third, no amount would be paid to the defendant on account of its costs incurred in pursuing the third party claim.
Assessment of the offer: In the light of the outcome of the proceedings and the factors pointed to by the third party, it can be seen that the offer made by the third party was a genuine compromise and a reasonable offer of settlement.
However it is not in my view possible to say that the offer was a more favourable outcome to the defendant than was achieved at trial or that the non-acceptance of the offer was unreasonable. Because the focus is on the reasonableness of the defendant’s conduct, consideration must be given to the outcome of the case both in relation to the third party as well as in relation to the plaintiff.
So far as the outcome in relation to the third party is concerned, I accept that in terms of its commercial effect the fact that no allowance was made for the costs of the third party claim to be paid to the defendant is not fatal to considering whether it is more favourable to the defendant than the outcome achieved by the defendant at trial. In terms of its commercial effect, to the extent to which it would relieve the liability of the defendant to the plaintiff, it can be seen as relieving the defendant of the overall burden of the case including the costs of prosecuting the third party claim against the third party. However that means that for the purposes of the comparison between the outcome offered and the outcome achieved, the offer of $95,000 must be compared to the liability ultimately found plus the costs of the third party claim. This inevitably brings significant uncertainty to the comparison exercise. That is because there is no evidence as to the likely level of costs of the third party claim.
It is possible, having regard to how the trial was run, to make some estimate of the level of the costs of the third party claim although in the absence of evidence such a speculative exercise would be unreliable. Having regard to the uncertainty and unreliability of such an exercise, I do not consider that it forms an appropriate basis upon which to reach a conclusion that the defendant’s non-acceptance of the offer was unreasonable and that costs consequences should follow.
So far as the outcome in relation to the plaintiff is concerned, it is not at all clear that the acceptance of the offer would have put the defendant in a better position than it achieved at trial. First, there is no evidence that in September 2015 the plaintiff remained prepared to settle the case for the sum of $275,000 which she had offered in November 2014, some ten months earlier. Second, even if it is assumed that the plaintiff would have settled on those terms then it is not clear that acceptance of the third party’s offer would have put the defendant in a better position than achieved at trial. At trial the judgment against the defendant was $249,464 plus the plaintiff’s costs of the proceedings. It obtained the third party’s contribution of $62,366 and an order for costs of the third party claim. That resolves to a liability of $187,098 plus the plaintiff’s costs of the proceedings less the costs of the third party claim. In contrast, had the offer been accepted then the liability of the defendant would have been $275,000 plus the plaintiff’s costs to the settlement of the proceedings less $95,000. That resolves to a liability of $180,000 plus the plaintiff’s costs to the date of the settlement. While there is a small difference in the headline figure it is not obvious in the absence of evidence and without further assessment that, even if the assumptions underlying this methodology were established, the outcome achieved is necessarily better than the outcome had the offer been accepted. It is certainly not established that, having regard to the terms of the offer, the non-acceptance of the offer was unreasonable.
If parties wish to take advantage of Calderbank offers then it is well within their capacity to make offers which are clear in their terms and which can readily be assessed in order to determine whether or not the offering party has achieved a better outcome than offered. That might easily have been done in the present case by drafting the offer in a form consistent with the orders that the Court might ultimately have made, for example:
(i)judgment be entered for the defendant against the third party in the sum of $75,000 (or some other specified figure);
(ii)the third party is to pay the defendant’s costs of the third party claim.
In such a case the relevant comparison would be clear. It would be clearly tied to the orders that the Court might ultimately make and would not be contingent on a settlement with the plaintiff. It would be clear whether the third party did better than its offer and an assessment of the reasonableness of the conduct of the defendant in failing to accept the offer could be made.
No doubt the solicitors for the third party were aware of the desirability of making such an offer if it was desired to maximise the prospects of a favourable costs outcome if the offer was not accepted. However such an offer obviously has, built into it, an uncertainty about the extent of the costs liability attracted and does not bring immediate commercial certainty in terms of the dollar figure outcome of the case. Parties make choices. In this case the choice was between an offer which gave commercial certainty as to the quantum of exposure of the third party or an offer which, consistently with the well established case law, maximised the prospects of the Court making a more favourable costs order because of the making and non-acceptance of the offer. The third party chose the former over the latter.
Because of the form of the offer I cannot, in the absence of speculation, be satisfied that the offer was more favourable than the outcome achieved. In any event, where there are a series of unknowns in relation to which there is no evidence I cannot be satisfied that the defendant failed to act reasonably in considering the offer and not accepting it. In those circumstances I cannot be satisfied that the rationale for giving effect to Calderbank offers warrants a different order from that which I indicated when I gave my decision on 30 October 2015.
Orders
The order of the Court is:
1. Order 5 made on 30 October 2015 now takes effect and order 6 made on that date is discharged.
| I certify that the preceding twenty-three [23] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Associate Justice Mossop. Associate: Date: 2 December 2015 |
8
1