Newlinx Pty Ltd v John R Keith (NSW) Pty Ltd (No 2)

[2015] NSWLC 19

Local Court

New South Wales

Medium Neutral Citation:	Newlinx Pty Ltd v John R Keith (NSW) Pty Ltd (No 2) [2015] NSWLC 19
Hearing dates:	In chambers – by written submissions
Decision date:	02 February 2015
Jurisdiction:	Civil
Before:	O’Brien DCM
Decision:	Further to Order 2 made 15 December 2014 it is ordered: (i) That excepting costs which are the subject of orders previously made in this proceeding, the plaintiff is to pay the defendant’s costs on the ordinary basis up to and including 14 August 2014 and on an indemnity basis thereafter.
Catchwords:	COSTS – non-acceptance of offer of compromise – non-acceptance of Calderbank offer - indemnity costs
Legislation Cited:	Building and Construction Industry Security of Payments Act 1999 Civil Procedure Act 2005, s 98
Cases Cited:	Caine v Lumley General Insurance Limited (No 2) [2008] NSWCA 109 Calderbank v Calderbank [1975] 3 All ER 333
Category:	Costs
Parties:	Newlinx Pty Ltd (plaintiff) John R Keith (NSW) Pty Ltd (defendant)
Representation:	Solicitors: Bartier Perry (for the defendant) No submissions filed for the plaintiff
File Number(s):	2014/131680

Judgment

Judgment as to Costs

1. On 15 December 2014 in the Downing Centre Local Court I delivered my judgment in this matter.

2. On that day I made the following orders in respect of the substantive proceedings:

1. (1)    Verdict for the defendant

2. (2)    I will hear the parties on the question of costs

3. In respect of order (2) I then made the following further orders:-

1. The plaintiff is to pay the defendant’s costs as agreed or assessed.

2. In the event that the defendant seeks an order for costs other than on the ordinary basis then such application will be dealt with in chambers and I direct that the defendant is to file and serve written submissions in support by 12 January 2015 with the plaintiff to reply by 27 January 2015.

3. In the event that the timetable in (ii) is not complied with, then any further application regarding costs will be deemed abandoned.

4. On 12 January 2015 the defendant filed written submissions in the court registry seeking an order for indemnity costs.

5. No submissions were received from the plaintiff by 27 January 2015, nor have any been subsequently received.

6. Accordingly, I will regard the plaintiff as not wishing to make any submissions in reply to those filed by the defendant, and I propose to proceed to determine and finalise the costs issue.

7. The orders sought by the defendant in respect of costs are alternatively:

1. Excepting costs which are the subject of orders previously made in this proceeding, that the plaintiff pay the defendant’s costs on the ordinary basis up to and including 14 August 2014 and on an indemnity basis thereafter; or

2. Excepting costs which are the subject of orders previously made in this proceeding that the plaintiff pay the defendant’s costs on the ordinary basis up to and including 28 October 2014 and on an indemnity basis thereafter.

8. In support of order (1) sought the defendant relies upon an offer of compromise made pursuant to rule 20.26 of the Uniform Civil Procedure Rules and dated 14 August 2014. The terms of that offer of compromise were as follows:

The defendant offers to compromise the whole of the proceedings on the following terms:

1) Verdict for the defendant

2) Each party pay its own costs

Note: 1. This offer will remain open for acceptance until 12 midnight on 19 August 2014.

2. This offer is made in accordance with Rule 20.26 of the Uniform Civil Procedure Rules 2005.

9. The alternative costs order sought by the defendant relies upon correspondence dated 28 October 2014, which is in the following terms:

We refer to the hearing of this matter which was part heard on 20 August 2014 and is scheduled to resume on 3 November 2014.

On a commercial basis, and to resolve the proceedings, we are instructed to make the following offer:

1. The proceedings be dismissed

2. The costs order made on 20 August 2014 in favour of the plaintiff is vacated.

3. Each party bear its own costs in the proceedings.

This offer is open for acceptance in writing until 5pm on Thursday 30 October 2014. This offer is made in accordance with the principles enunciated in Calderbank v Calderbank [1975] 3 ALL E R 333.

10. Neither offer was accepted by the plaintiff and it is submitted by the defendant that the orders made by me upon determination of the hearing represent a more favourable outcome for the defendant that the terms of either of the offers made. The defendant submits that this is so notwithstanding the fact that on the first day of the hearing (being 20 August 2014 when the matter was adjourned at 2.30pm), I made an order that the defendant was to pay the plaintiff’s costs of that day as agreed or assessed.

11. The court’s power to award costs on an indemnity basis derives from section 98(1)(c) of the Civil Procedure Act2005. Caution should be exercised by a court in making such an order. Indemnity costs are compensatory and not punitive. The discretion to award costs on an indemnity basis is most often exercised where offers of compromise pursuant to either the Uniform Civil Procedure Rules or the principles in Calderbank v Calderbank have been made.

12. Failure to accept on offer of compromise in accordance with the Uniform Civil Procedure Rules better than the result ultimately obtained creates a prima facie entitlement to indemnity costs, as to which the offered must establish a basis for some other order: see Caine v Lumley General Insurance Limited (No 2) [2008] NSWCA 109. That prima facie entitlement may be displaced by demonstrating that rejection of the offer was unreasonable in the circumstances of the particular case having regard to the strength of it at the time the offer was made. Another factor relevant to the reasonableness of rejection is whether full parameters of the dispute were still uncertain at the time of the offer, or the offeror’s case changed after the offer was made. In those circumstances, where all relevant evidence had not been served prior to the offer, the discretion to award indemnity costs may not be exercised.

13. An offer of compromise must be genuine and contain a real element of compromise. The question to be asked is whether it formed part of a genuine attempt to reach a negotiated settlement. Further, an offer of compromise should be left open for a reasonable period of time and if made pursuant to the Uniform Civil Procedure Rule must, in accordance with those Rules be made exclusive of costs.

14. The effect of the non-acceptance of a Calderbank offer is similar to that pertaining to an offer of compromise save that the making of a Calderbank offer better than the result ultimately obtained does not automatically translate into an indemnity costs order. The court’s discretion to make such an order is enlivened by the rejection of a Calderbank offer where the final result is less favourable to the offeree. It does not create a prima facie entitlement in the same way as does an offer of compromise pursuant to the Rules.

15. In this matter, I have considered both the offer of compromise and the further Calderbank offer. I have also borne in mind that the issue upon which I found for the defendant was one pleaded in its Defence and one that was well known to the parties from the time that the pleadings had closed and certainly well in advance of the offer of compromise being made. I found that the payment claim made by the plaintiff did not satisfy the requirements of the Building and Construction Industry Security Payment Act 1999 and that in those circumstances the plaintiff’s claim was in essence fundamentally flawed. The offer made by the offer of compromise of 14 August represented a genuine compromise in that it contained a term that each party was to pay its own costs. In all of the circumstances of the matter I am satisfied that the offer was left open for a reasonable period of time and note its terms to be exclusive of costs.

16. I have also had regard to the fact that the plaintiff has elected not to make submissions with a view to displacing what is otherwise a prima facie entitlement in the defendant to the indemnity costs that are sought.

17. I am satisfied that this is an appropriate matter for the court to exercise is exceptional power to make an order for indemnity cost for part of the proceedings.

18. Accordingly, the following orders are made:

Further to Order 2 made 15 December 2014 it is ordered:

1. That excepting costs which are the subject of orders previously made in this proceeding, the plaintiff is to pay the defendant's costs on the ordinary basis up to and including 14 August 2014 and on an indemnity basis thereafter.

Deputy Chief Magistrate C O’Brien

Downing Centre Local Court

15 December 2014

**********

Decision last updated: 09 December 2015