Mortgage Finance Options Pty Ltd v UniQ Finance Australia Pty Ltd (No 2)
[2020] VCC 555
•7 May 2020
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-18-00016
| MORTGAGE FINANCE OPTIONS PTY LTD | Plaintiff |
| v | |
| UNIQ FINANCE AUSTRALIA PTY LTD | Defendant |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 5 February 2020. The plaintiff filed further submissions and materials on 12 February 2020. The defendant filed further submissions and materials on 5 March 2020 and 10 March 2020. | |
DATE OF JUDGMENT: | 7 May 2020 | |
CASE MAY BE CITED AS: | Mortgage Finance Options Pty Ltd v UniQ Finance Australia Pty Ltd (No 2) | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 555 | |
REASONS FOR JUDGMENT
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Subject: COSTS
Catchwords: COSTS – offer of compromise – offer refused – Calderbank offer – plaintiff made Calderbank offers to the defendant – costs on an indemnity basis – Magistrates Court jurisdictional limit
Legislation Cited: Civil Procedure Act 2010 (Vic); County Court Civil Procedure Rules2018 (Vic)
Cases Cited:BHP Billiton Olympic Dam Corp Pty Ltd v Steuler Industriewerke GmbH (No 3) [2012] VSC 414; Chen v Chan [2009] VSCA 233; Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Ltd (1993) 46 FCR 225; Li v So (No 2) [2019] VSC 655;
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr B Barr | Oceania Lawyers & Consultants |
| For the Defendant | Mr S Thomas | Rothwell Lawyers |
HIS HONOUR:
Background
1 On 19 December 2019, I handed down reasons for judgment in this matter (“the principal reasons”). The main question in the case was the extent of the damages which MFO was entitled to recover as a result of UniQ’s repudiation of the agreement between them. I found that MFO was entitled to damages in the sum of $58,951, together with GST (assuming MFO incurs a taxation liability to pay the same). I directed the parties to file and serve by 24 January 2020 any material with respect to the form of final orders and costs. These reasons assume familiarity with the principal reasons and adopt the same terminology.
Summary of parties’ positions
2 MFO contends that it should receive damages, costs, and interest on its claim and that UniQ should pay its costs of the claim and UniQ’s counterclaim on an indemnity basis.
3 UniQ accepts that it must pay MFO the damages awarded, together with interest and any GST payable by MFO with respect to the damages. However, UniQ submits that MFO should pay UniQ’s costs of defending the claim on an indemnity basis.
Chronology
4On 20 January 2020, the parties emailed the court attaching signed consent orders requesting an extension of time to file and serve their materials regarding the final orders and costs. The next day my associate on my behalf emailed the parties informing them that I refused the parties' request for an extension of time.
5On 21 January 2020, MFO’s solicitors filed an affidavit of Melinda Li sworn on the same date as well as submissions as to GST, interest and costs.
6On 28 January 2020, UniQ’s solicitors filed an affidavit of Tracey Rothwell sworn 24 January 2020.
7On 29 January 2020, UniQ’s solicitors filed its submissions as to costs.
8On 4 February 2020, MFO’s solicitors filed a further affidavit of Melinda Li sworn on 2 February 2020.
9On 5 February 2020, the parties appeared before me at a hearing which culminated in orders being made requiring MFO to file and serve any expert costs consultant report upon which it relied, together with an outline of submissions of no more than five pages in length, by 12 February 2020. UniQ was directed to do the same by 27 February 2020.
10On 12 February 2020, MFO’s solicitors filed their further submissions as to costs as well as the affidavit of Penelope Frances Robertson (“Robertson”) sworn 10 February 2020.
11On 27 February 2020, UniQ’s solicitors emailed the court attaching an affidavit of Dipal Divya Prasad (“Prasad”) which was also filed. In the email, UniQ’s solicitors requested an extension to file and serve any other affidavit that UniQ intended to rely on until 5 March 2020. UniQ received the extension.
12On 5 March 2020, UniQ’s solicitors filed an affidavit of Tracey Rothwell sworn that day. Later on the same day, UniQ’s solicitors emailed the court attaching its further submissions as to costs.
13On 6 March 2020, MFO’s solicitors emailed the court attaching reply submissions as to costs.
14On 6 March 2020, UniQ’s solicitors emailed the court objecting to the filing of MFO’s reply submissions as to costs. In the event that clause A of the submissions were to be relied upon, UniQ sought a further six weeks to inspect the costs file of MFO.
15On 10 March 2020, UniQ’s solicitors filed a further affidavit of Dipal Prasad in response to MFO’s reply submissions as to costs.
Issues
16 The parties’ submissions raised a number of issues, including:
· the costs of the counterclaim;
· the making and withdrawal of a fraud allegation;
· the effect of various Calderbank letters and offers of compromise;
· the relevance of the damages award being less than the jurisdiction of the Magistrates Court.
General principles regarding costs
17 There are some well accepted legal principles with respect to the court’s powers regarding costs:
(a) the only immutable rule in relation to costs is that there are no immutable rules;
(b) the award of costs is within the discretion of the court;
(c) the discretion must be exercised judicially. It cannot be exercised arbitrarily or capriciously. Nor can it be exercised on grounds unconnected with the litigation or the circumstances leading up to the litigation;
(d) costs are compensatory in the sense they are awarded to indemnify the successful party against the expense to which it has been put by reason of the legal proceedings. The aim of a costs order is not to punish the unsuccessful party;
(e) as a general rule, costs should follow the event with the result that, in the absence of special circumstances, a successful party should obtain its costs of the proceeding even if it fails to establish all heads of claim;
(f) rule 63A.04 of the County Court Civil Procedure Rules 2018 (Vic) (“the Rules”) permits the court, in its discretion, to make an order not only as to a distinct question or issue in the pleading sense, but also to any part of the proceeding; and
(g) the making of an allegation of fraud which is not proved may warrant a special circumstances justifying an indemnity costs order.[1]
[1]Chen v Chan [2009] VSCA 233 at [10].
UniQ’s submissions on costs
18 UniQ submitted that while it was liable for damages and interest, it should recover the costs of the proceeding from MFO on an indemnity basis. UniQ argued that it made an open offer on 30 August 2018 to pay UniQ $10,000, reinstate trailing commission and otherwise each party bear its own costs. MFO rejected the offer.
19 I consider there is no basis upon which I could properly award the costs of the proceedings to UniQ.
20 First, UniQ lost the proceeding. It was MFO which obtained an order for damages in excess of $58,000.
21 Secondly, there was nothing remarkable about MFO’s conduct of the litigation which would justify awarding costs against the successful party.
Magistrates’ Court jurisdiction claim
22 UniQ also made reference to Rule 63A.24 of the Rules. In substance, this provision says that where, in a proceeding for debt or damages the plaintiff recovers an amount not exceeding $50,000 (being half the jurisdictional limit of the Magistrates’ Court in civil proceedings), the plaintiff shall, unless the court otherwise orders, be entitled only to the costs which it would have been entitled to had it brought the proceeding in the Magistrates’ Court.
23 UniQ submitted that MFO was awarded $58,951 where the defendant conceded $9,471.43 was owed to the defendant, being the amount withheld between the time of the cessation of the trailing commissions and their reinstatement. This, according to UniQ, equated to the plaintiff being successful in the amount of $49,479.57, which was less than half of the jurisdictional limit of the Magistrates’ Court in civil proceedings.
24 I reject this argument. UniQ failed to properly include in its calculations the interest and GST components which were awarded to MFO. Had they been factored into UniQ’s calculations, it would have arrived at an amount comfortably above $50,000.
25 Even if my conclusion about this is wrong, I am satisfied that the court should “otherwise order” within the terms of Rule 63A.24. Courts have identified various factors which can be taken into account in determining how to exercise the discretion about costs in this context. They include:[2]
[2]Dal Pont, Law of Costs, [12.15].
· the amount claimed and the reasons for this;
· the amount actually recovered and the reasons for this;
· the difficulty or otherwise of assessing the likely damages awarded;
· the complexity or otherwise of the case, factually and/or legally;
· the nature of the proceedings in question and how this impacts, if at all, upon the need to proceed in the higher or specialist court; and
· the conduct and attitude of the parties to the litigation.
26 There was considerable argument about the appropriate measure of damages and how they should be assessed. In this and in other respects, the facts of the case and aspects of the expert evidence led at trial were extensive and complicated, especially in circumstances where experts were giving conflicting evidence about the various valuation methodologies. I am satisfied that this litigation was appropriately brought in this court even if, in the final analysis, the amount of damages fell within the jurisdiction of the Magistrates’ Court.
27 In my view, the interests of justice are best served by MFO recovering its costs from UniQ. In a case where MFO won the major issues at trial, it should recover its costs on the County Court scale.
Experts
28 After I gave my reasons for judgment in December 2019, the parties sought to engage costing consultants to address the issue of costs. Robertson produced an expert report dated 10 February 2020 on behalf of the plaintiff, while Prasad prepared a report dated 27 February 2020 for UniQ. I accept that both consultants were experts.
29 Robertson gave a detailed recitation of MFO’s costs comprising 849 entries in the bill which she prepared. She summarised the costs and disbursements incurred to the time each of MFO’s three offers were made. The table below sets out the amounts found to be incurred by Robertson and compares them with the lower amounts assessed by Prasad at the same date.
Date offers were made Robertson’s calculation Prasad’s calculation First offer- 13 September 2018 $25,554.31 $16,585.95 Second offer- 19 December 2018 $42,560.49 $30,056.27 Third offer- 11 February 2019 $67,893.04 $52,413.20
30 Prasad did not examine MFO’s file. The evidence did not disclose whether MFO offered to make the file available for inspection. In one of her affidavits, Prasad said that she regarded it as normal to prepare a report about another party’s costs without inspecting the file. She said that she examined the itemised bill which Robertson prepared and made particular objections or comments about aspects of that bill of costs. Prasad said that the Costs Court lacked power to enable a party in UniQ’s position to inspect MFO’s file.
31 Having read Prasad’s report, I accept that she examined and commented about Robertson’s report on an item by item basis. Prasad drew attention to claims which she regarded as excessive or unreasonable. For example, she noted that MFO claimed 7 days and 7.5 hours preparation before the first day of trial as preparation fees.
32 Neither costs consultant was cross-examined. Ultimately, I make no definitive findings about the reports and the costing exercises which the experts carried out. It would come as no surprise to me if the most accurate assessment of costs lay somewhere between the competing figures.
MFO’s submissions on costs
33 MFO’s primary submission was that UniQ should pay its costs of the whole proceeding on an indemnity basis. This was based on a combination of the abandoned defence, unproven allegations of fraud and offers of settlement.
34 MFO argued that:
(a) it succeeded in its claim and obtained an award of damages, albeit for a lesser amount than it sought;
(b) UniQ abandoned its defence and counterclaim on the second day of trial, thereby conceding liability and limiting its argument to the issue of quantum; and
(c) UniQ’s abandonment constituted a surrender to, and an acknowledgment of, MFO’s claim.
Abandoned defence and counterclaim
35 The critical point MFO made was that UniQ acted unreasonably in bringing, and then abandoning, its defence and counterclaim.
36 MFO contended that to initiate such a case, and then persist with it until the second day of trial, UniQ knew or should have known from its legal advisors that it had no chance of success. In that case, UniQ was presumed to have begun and/or continued with the case from some ulterior motive or wilful disregard of the known facts or law. When a party persists with what should be recognised as a hopeless case, the court’s jurisdiction to award indemnity costs is enlivened.[3]
[3]Colgate-Palmolive Company and Colgate-Palmolive Pty Limited v Cussons Pty Ltd (1993) 46 FCR 225 at 233 – 234.
37 UniQ’s submissions did not address this point in any detail. UniQ said that the decision to withdraw the counterclaim, concede liability, and withdraw the fraud allegation was due in part to the court’s refusal of its application to amend the defence and counterclaim.[4] Beyond this, UniQ argued that its conduct did not fall within the types of behaviour referred to in the authorities which could properly justify indemnity costs. In particular, UniQ argued that it did not engage in behaviour which could fairly be described as delinquent.
[4]Defendant’s Submissions as to Costs at paragraph 12.
38 I consider that MFO is entitled to its costs of the counterclaim on an indemnity basis. In my view, UniQ’s counterclaim was weak and it was not appropriate that it should have been run until the second day of trial. There was a clear breach of contract which MFO was entitled to pursue. The major element of the defence related to quantum. This was the only aspect of the defence and counterclaim which was meritorious. UniQ should have acted sooner to confine the case to the real issue in dispute.
39 I am fortified in this view by UniQ’s failure to give any detailed explanation of why it made, and then later abandoned, its counterclaim in the way that it did.
Fraud allegation
40 MFO relied in its argument on UniQ making allegations of fraud and forgery. I accept that unfounded allegations of fraud and forgery constitute a well-established basis for awarding indemnity costs against the offending party.[5]
[5]Li v So (No 2) [2019] VSC 655 at [18].
41 Here, UniQ did not plead or particularise the allegation of fraud. Counsel for UniQ made the allegation in his opening without giving substantive details of the conduct relied upon. The next morning, he withdrew the allegations. While it is offensive and improper to make such allegations without a sound basis, it must be noted that the allegations were not made in documents filed in court (and thus available to be examined by the public) but were only made orally in court during one day and then withdrawn the following morning. This situation is significantly different from those canvassed in various authorities where the circumstances, history, and publicity of the fraud allegations had the scope to be far more damaging. I consider the circumstances of this case do not justify an order for indemnity costs on the sole basis of the unproven fraud allegation.
Offers of settlement
42 MFO made five offers of settlement to UniQ during the course of the proceeding. MFO originally contended that each of those offers, considered independently and/or in conjunction with other factors, warranted a special costs order in its favour. These offers included both Calderbank offers and offers of compromise under the Rules. However, in its further submissions dated 12 February 2020, MFO said that it no longer relied upon its third Calderbank offer or its second offer of compromise but relied upon all the earlier offers.
43 In my view, the form of offers made by, and relied upon by MFO, creates problems which militate against the interests of a party in MFO’s position. Expert costing reports are relevant in this case only because MFO’s offers were inclusive of costs. Hence, it became necessary to know the quantum of recoverable costs at the time of each offer and what an offeree in the position of UniQ should reasonably have appreciated about those offers. Enquiries about each such matter can raise complicated questions regarding the assessment of costs and an offeree’s knowledge of not only the costs likely to have been incurred but the overall merits of the case. It means also that there are likely to be differences of opinion between costing experts. Such differences are not easily resolved. These difficult issues can be avoided or reduced to an extent where a settlement offer relates only to quantum and is exclusive of costs with the offeror claiming taxed costs in addition to the damages.
44 There are some general principles regarding Calderbank offers and their potential impact on an award of costs. These matters should be borne in mind when examining the various offers relied upon by MFO. The position was conveniently summarised by Justice Haberberger in BHP Billiton Olympic Dam Corp Pty Ltd v Steuler Industriewerke GmbH (No 3),[6] where he said:
[6][2012] VSC 414.
Steuler next based its claim for indemnity costs in respect of part of the proceedings on the existence of seven separate offers of settlement, some of which were made in accordance with the decision in Calderbank v Calderbank. There are a number of relevant principles regarding Calderbank offers of settlement which it is appropriate to note before examining each of the offers made by Steuler. The standard starting point for such an examination is the joint judgment of Warren CJ, Maxwell P and Harper AJA in Hazeldene’s Chicken Farm Pty Ld v Victorian Workcover Authority (No 2) (Hazeldene).
First, the fact that a less favourable result is achieved does not give rise to a presumption of a special costs order. The making of an offer and its rejection are “but two albeit important circumstances” to which the court will have regard in the exercise of its costs discretion.
Secondly, the competing policy objectives relevant to the exercise of the costs discretion are principally the desirability of promoting settlement and reducing litigation costs as against the undesirability of discouraging potential litigants from bringing their dispute to the courts.
Thirdly, the critical question is whether the rejection of the offer was unreasonable in the circumstances. As the Court of Appeal said in Hazeldene:
In our view, these competing considerations can be sufficiently accommodated by applying a test of (un)reasonableness. The critical question is whether the rejection of the offer was unreasonable in the circumstances. We see no justification for a more stringent test such as “manifestly” or “plainly” unreasonable
Fourthly, a court considering submissions that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed for 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; and
(f)whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.
Fifthly, as the determination of whether it was unreasonable for the offeree to have rejected the offer is made “as at the time, or within a reasonably short time after, the offer” was made, the court should not too readily embrace submissions that it was inevitable that the proceedings would fail. As Hamilton J put it in Grynberg v Muller:
These submissions focus the bright light of hindsight. Hindsight sings a siren song of which Judges must be cautious …
Sixthly, the onus lies on the offeror to demonstrate the unreasonableness of the offeree’s rejection of the offer. This means that it is necessary to analyse what was proposed.
Seventhly, there is no general rule that the Calderbank offer must set out with specificity the basis for the offeror’s contention that the offeree should accept the compromise. Whether there is a need to do so depends upon a consideration of all of the circumstances existing at the time of the offer.
Eighthly, it is not necessary for the applicant for an indemnity costs order to establish matters which might be relevant to other, well-recognised, grounds for indemnity costs. Such conduct is not a pre-requisite for a finding that the rejection of the Calderbank offer was unreasonable.
Ninthly, an “all in” offer is permitted in a Calderbank offer.[7]
[7]Ibid at [58]-[67].
45 Rule 26.08(2) of the Rules sets out the cost consequences upon a defendant failing to accept a plaintiff’s offer of compromise where the defendant ultimately receives a judgment that is not more favourable than the compromise offer made. It states:
Costs consequences of failure to accept
(1)This Rule applies to an offer of compromise which has not been accepted at the time of verdict or judgment.
(2)Where an offer of compromise is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains a judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled—
(a)if the claim of the plaintiff is for damages for or arising out of death or bodily injury, to an order against the defendant for the plaintiff's costs in respect of the claim, taxed on an indemnity basis;
(b)in the case of any other claim of the plaintiff, to an order against the defendant for the plaintiff's costs in respect of the claim before 11.00 a.m. on the second business day after the offer was served, taxed on the ordinarily applicable basis and for the plaintiff's costs thereafter taxed on an indemnity basis.
MFO’s first Calderbank offer – 13 September 2018
46 On 13 September 2018, MFO’s solicitors sent a letter to UniQ’s solicitors which was said to be “without prejudice save as to costs”. The letter outlined MFO’s claim, the reasons why it would succeed, and the reasons why UniQ’s defence and counterclaim would fail. The letter included a calculation by MFO of the net present value of its unpaid trail commissions. They totalled approximately $220,000 including GST. MFO said that it expected to be awarded approximately that amount plus interest and costs.
47 The letter made two offers to settle the proceeding, only one of which now remains relevant. The terms of the offer were as follows:
(a)UniQ pay $110,000 all in to MFO in full and final settlement of the proceeding including the counterclaim, payable within 21 days of acceptance of the offer;
(b)MFO assign to UniQ its rights to all future trail commission to which it would have otherwise been entitled pursuant to the Agreement;
(c)MFO not take any steps to seek to refinance the loans in respect of which it would have otherwise been entitled to trail commission pursuant to the Agreement; and
(d)The parties execute a Deed of Settlement including the above terms, mutual releases and provision for the proceeding to be dismissed with no order as to costs.
48 This offer was in clear terms and readily capable of being understood. It gave reasons justifying the offer and was made after mediation at a time when the parties should have understood the strengths and weaknesses of their positions. The offer was open for eight days and explicitly referred to the potential use of the offer on the question of costs.
49 UniQ rejected the offer. In assessing the value of the offer at the time it was made, one needs to compare its terms to the judgment which MFO obtained in order to decide whether UniQ suffered a result at trial which was no more favourable than the terms of the offer.
50 At trial, I awarded MFO the sum of $82,290 less the amount of $23,339 which UniQ paid as trailing commission after 21 May 2018, giving a total sum payable of $58,951.[8] In addition, provided MFO proves that it owed and paid the Commonwealth of Australia GST on that sum, that amount of GST is also recoverable from UniQ. Further, MFO is also entitled to interest from the date of issue until the date of judgment. In its final submissions, UniQ acknowledged MFO’s entitlement to interest.[9] UniQ did not take issue with the amount of interest sought by MFO.
[8]Between the trial and the handing down of reasons, UniQ paid further trailing commissions in the amount of $3,336.05 excluding GST. This reduced the judgment sum payable to $55,614.95.
[9]Paragraph 2 of UniQ’s Submissions filed 29 January 2020.
51 I accept the calculations in paragraph 63 of MFO’s submissions to the effect that the notional judgment amount at September 2018 was $77,396.52. The GST payable on that sum would be $7,739.65. In relation to the interest payable, that would be interest on $77,396.52 at 10% per annum for the period between 4 January 2018 when the proceeding was issued, and 13 September 2018 when the offer was made. This totals $5,364.75. Hence the total figure for the notional judgment, GST and interest, was $90,500.92. The costs were assessed by MFO’s expert at 13 September 2018 as $25,554.31. This gives a total sum of $116,055.23. MFO argued that this was an outcome which exceeded the offer of $110,000.
52 Because UniQ’s expert allowed the lower amount of $16,585.95 for costs to the relevant date, UniQ arrived at a total of $101,722.12, which was below the sum contained in the offer.
53 Given the difference in opinion between the costing experts, I am not prepared to find that UniQ acted unreasonably in rejecting the first Calderbank offer and should thereby be required to pay MFO’s costs thereafter on an indemnity basis.
MFO’s first offer of compromise – 19 December 2018
54 On 19 December 2018, MFO served its first offer of compromise which was an offer to accept $125,000 inclusive of costs.
55 In its calculations detailed in its further written submissions on costs, MFO submitted that it had obtained a result at trial ($129,308.87) that was no less favourable than the terms of the offer ($125,000). The trial result was derived in the following way. The notional judgment amount was $72,538.74, which was the loan book value of $82,290 less the trailing commission paid between 21 May 2018 and 21 December 2018 of $9,751.26. The GST on the notional judgment at 21 December 2018 was $7,253.87 and interest was $6,955.77. These sums were added to the costs figure determined by Robertson as at the date of the offer, namely, $42,560.49.
56 MFO argued that the result of the notional judgment in December 2018 was better than the offer of compromise by a little over $4,000.
57 UniQ’s expert assessed a lower costs amount for the same period, namely, $30,056.27. If that figure is correct then MFO’s outcome from the judgment would be less favourable than the terms of its offer. The figures are not sufficiently clear for me to find that MFO bettered the offer of compromise and is entitled to costs on an indemnity basis for the period after December 2018.
MFO’s second Calderbank offer – 11 February 2019
58 On 11 February 2019, MFO’s solicitors sent a letter to UniQ’s solicitors which was said to be “without prejudice save as to costs”. The terms of the “all-in” offer contained in this letter were substantially the same as the terms of the first Calderbank offer outlined above, except that this offer was for the higher sum of $125,000. Robertson assessed MFO’s costs on a standard basis as at the date of the offer as $67,893.04. The letter referred to and relied upon previous correspondence between the parties’ solicitors, including the two prior offers.
59 The letter of offer also argued that UniQ was likely to have a significant costs liability to MFO, no matter the outcome of the proceeding. The letter proceeded to elaborate upon the reasons that MFO’s claim was likely to succeed and UniQ’s counterclaim was likely to fail. It assessed UniQ’s liability in the proceeding on the basis of Mr Lee’s report as to the value of the loan book, less the commission paid since reinstatement, plus interest and costs, totalling approximately $185,000.
60 MFO submitted in its calculations, which were detailed in its further written submissions, that it had obtained a result at trial ($152,075.08) which was no less favourable than the terms of the offer ($125,000). This arose as follows. The value of the loan book was $82,290 less the trailing commissions paid between 21 May 2018 and 11 February 2019 of $12,757.43. This gave a notional judgment as the later date of $69,532.57. The GST on this amount was $6,953.26 and the interest at that date was $7,696.21. Hence, the total sum payable to MFO exclusive of costs was $84,182.04. Robertson’s figure for costs was $67,893.04 giving a total amount of $152,075.08.
61 An important aspect of this offer is the timing. The initial trial date was 3 October 2018. However, by reasons of consent orders made in September 2018, the trial was refixed for hearing 20 February 2019. So, this offer was made shortly before the scheduled hearing date at a time when UniQ should have been in a good position to make an informed judgment about its prospects of success at the hearing. By that time, mediation was finished and interlocutory steps were, or should have been, complete. I do not regard it as especially relevant that UniQ decided to change solicitors shortly before the scheduled trial. The mere occurrence of a change of lawyers cannot be used an excuse for not engaging with the settlement offer or for somehow disqualifying MFO from seeking to rely upon the second Calderbank offer. The fact that the father of UniQ’s director was allegedly dying at the time was also unfortunate timing but does not prevent MFO from relying on the offer. It is simply another factor to take into account.
62 One difference from the prior offers was the time allowed to UniQ for considering the offer. The first offer or compromise was by letter dated 13 September 2018. It was available for acceptance until 4:00 pm on 21 September 2018. Depending upon the speed of the mail, UniQ had about seven days to respond.
63 The offer of compromise was sent by email at 4:16 pm on 19 December 2018. The offer gave UniQ 21 days to accept or reject the offer.
64 MFO emailed the final offer relied upon at 1:34 pm on 11 February 2019 and said that UniQ could accept it until 4:00 pm on 14 February 2020. Thus allowed a period of just over 72 hours. Commonly, offers are open for up to 14 days, so this offer is notably different. However, it was the third offer to UniQ. It followed the initial Calderbank offer which set out over about four and a half pages why UniQ should accept the offer. The offer of compromise was brief and in standard form. The third offer also gave a rationale about why UniQ should accept its terms.
65 On this offer, Prasad assessed MFO’s costs at $52,413.20 compared to Robertson’s assessment of $67,893.04, a difference of almost $15,500. Even if Prasad’s figure were correct (and I would assume it probably understates the recoverable costs to some degree) when interest is added to the other amounts the notional judgment at the date of offer is about $136,595. This means that even on the defendant’s own assessment of the situation, the total amount recoverable by MFO comfortably exceeded the Calderbank offer.
66 In my view, UniQ’s rejection of the second Calderbank offer was not reasonable. As observed earlier, it was made just before the scheduled trial date. There was a real and not illusory compromise from MFO’s perspective. At this time, there was a solid basis for MFO to believe it would recover rather more than $125,000 for damages, GST, interest and costs. MFO’s assessment of the strength of its claim and the weakness of the counterclaim was reasonably accurate. UniQ produced no material to persuade me that this assessment of the position was mistaken. Indeed, UniQ’s actions at trial confirmed it when it abandoned the counterclaim and the case narrowed to a dispute about quantum. The offer was in clear terms and foreshadowed the claim for indemnity costs.
67 Consequently, I find it was unreasonable for UniQ to not accept the offer put to it by MFO. UniQ ought to pay MFO’s costs of the counterclaim on an indemnity basis and its costs of the claim on a standard basis pursuant to the County Court scale up to 14 February 2019 (being date by which UniQ was to accept MFO’s second Calderbank offer) and thereafter on an indemnity basis.
Conclusion
68 Accordingly, having regard to the material before me, I make the following orders:
1. Judgment for MFO against UniQ for damages in the following amounts:
(a) $55,614.95; and
(b) $5,561.49 in respect of the GST payable by MFO on the sum of $55,614.95; and
(c) interest of $13,022.28.
2. The amounts payable under Orders 1(a) and 1(c) are payable forthwith.
3. MFO shall provide a tax invoice for $55,614.95 plus GST to UniQ upon request by UniQ.
4. The amount payable under Order 1(b) is payable within 30 days after UniQ receives a tax invoice pursuant to Order 3.
5. Within 30 days of paying to the Commissioner of Taxation GST in respect of the amount payable under Order 1(a), MFO shall provide to UniQ written proof of that payment, including the precise amount of the payment.
6. In the event that MFO pays to the Commissioner of Taxation GST in an amount less than $5,561.49, that MFO forthwith repay to UniQ the difference between the amount paid for GST and $5,561.49.
7. The counterclaim is dismissed.
8. UniQ pay MFO’s costs of the counterclaim on an indemnity basis and its costs of the claim on a standard basis pursuant to the County Court scale up to 14 February 2019 and thereafter on an indemnity basis.