Oliver Hume (Vic) Pty Ltd v Santa Monica (Aust) Pty Ltd (No 2)

[2017] VCC 1239

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-16-05251

Oliver Hume (Vic) Pty Ltd (ACN 076 196 408)	Plaintiff
v
Santa Monica (Aust) Pty Ltd (ACN 105 665 067)	Defendant

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JUDGE:	HIS HONOUR JUDGE WOODWARD
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers
DATE OF JUDGMENT:	5 September 2017
CASE MAY BE CITED AS:	Oliver Hume (Vic) Pty Ltd v Santa Monica (Aust) Pty Ltd (No 2)
MEDIUM NEUTRAL CITATION:	[2017] VCC 1239

RULING
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Subject:  COSTS

Catchwords:             Calderbank offer – short time for acceptance

Legislation Cited:     County CourtCivil Procedure Rules 2008 r26.03

Cases Cited:Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298, (2005) 13 VR 435; Thomopoulos v Faulks (No 2) [2006] VSC 286; Auswest Timbers Pty Ltd v Secretary to the Department of Sustainability and Environment [2010] VSC 513; Management 3 Group Pty Ltd (in liq) v Lenny’s Commercial Kitchens Pty Ltd (No 3) [2011] FCA 725; (2011) 278 ALR 754; Northwest Capital Management v Westate Capital Ltd [2012] WASC 211; Mischel v Mischel Holdings Pty Ltd (in liq) (No 2) [2012] VSC 421

HIS HONOUR:

1       On 23 August 2017, I awarded judgment in this proceeding in favour of the plaintiff (“Oliver Hume”) for the full amount of its claim of $135,000.  I noted in my reasons for judgment my tentative view that the orders should include an order that the defendant (“First National”) should pay Oliver Hume’s costs of the proceeding (including reserved costs), to be taxed on the standard basis in default of agreement.  The parties were afforded an opportunity to file written submissions on the question of costs and have done so.

2       Oliver Hume has submitted that the order on costs should be to the effect that First National pay Oliver Hume’s costs on the standard basis in respect of costs incurred up to and including 4 July 2017 and on an indemnity basis thereafter.  Oliver Hume relies in support of that submission on a Calderbank offer by letter from its solicitors Strongman & Crouch dated 5 July 2017, offering to accept $120,000 (inclusive of interest and costs) in full settlement of Oliver Hume’s claims.  First National has submitted that its decision not to accept the offer was not unreasonable and therefore costs should be ordered on the standard basis only.

3       Oliver Hume made two offers to settle the proceeding on 5 July 2017.  The first was an offer by letter from Strongman & Crouch to First National’s solicitors Ascot Solicitors, offering to accept $170,000 in full settlement of Oliver Hume’s claims.  The offer was open for acceptance until 4pm on 10 July 2017 and set out in some detail the reasons why Strongman & Couch considered that First National’s defence to the proceeding would fail.  Among other things, Strongman & Crouch was critical of First National’s argument that the commission sharing agreement was entered into “on terms such that our client would only be entitled to a commission if the purchaser it introduced to your client was not known previously to your client”.

4       Ascot Solicitors responded the same day rejecting Oliver Hume’s offer, primarily on the basis that the offer discounted Oliver Hume’s claim by only $30,000.  Ascot solicitors asserted that a discount of only $30,000 was an unreasonable offer to make on the eve of trial.  The letter from Ascot Solicitors went on to make a counter-Calderbank offer of $40,000, inclusive of costs and interest, which was open for acceptance until 5pm on 10 July 2017.  In setting out the basis for the counter-offer, Ascot solicitors stated:

“Both parties have had ample opportunity to consider their respective positions. In proceeding towards trial both parties are taking a risk that they may fail at trial. We are therefore instructed to make this offer to avoid increasing the cost of the risk by the substantial amount of preparation that would have to be made just before trial.”

5       Strongman & Crouch’s second offer rejected the counter-offer from Ascot Solicitors and made the further offer to accept $120,000 in full and final settlement of Oliver Hume’s claim.  The offer was otherwise on the same terms as the first offer, including that it was open for acceptance until 4pm on 10 July 2017.  It represented a reduction of $50,000 on what Strongman & Couch had proposed earlier in the day.  There is no record of any response to this offer, although it is common ground that it was not accepted by or on behalf of First National.

6       The principles to be applied in determining costs where a party has achieved a less favourable result than a Calderbank offer are well-established and it is unnecessary to repeat them.[1]  The key matters in play here are the stage of the proceeding at which the offer was made and the time allowed for First National to consider the offer.  I am satisfied that the second offer from Oliver Hume represented a genuine compromise of Oliver Hume’s claim.  I am also satisfied that the offer was expressed in clear terms and unequivocally foreshadowed an application for indemnity costs if First National rejected the offer.

[1]Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435

7 It is a common feature of offers made shortly before trial that the time for acceptance is brief. Indeed, the minimum acceptance period of 14 days prescribed by r26.03 of the County Court Civil Procedure Rules 2008 (“the Rules”) in respect of an Offer of Compromise under O26, is often the reason that parties making a late settlement offer do so by a Calderbank offer.  And while a period of only a few business days to consider an offer will often be a significant factor weighing in favour of the reasonableness of a decision to reject the offer, this is not invariably the case.  The courts have recognised that a period as short as a day or even a period measured in hours, might afford a sufficient opportunity to consider some offers.[2]

[2]Management 3 Group Pty Ltd (in liq) v Lenny’s Commercial Kitchens Pty Ltd (No 3) [2011] FCA 725; (2011) 278 ALR 754; at [52] per Dodds-Streeton J and Northwest Capital Management v Westate Capital Ltd [2012] WASC 211 at [43] per Edelman J

8 Further, the period prescribed by the Rules for an Offer of Compromise is “no more than a guide or a yardstick”.[3]  As Calderbank offers are not subject to the formal requirements of the Rules, what constitutes a reasonable period for the offer to be open for acceptance is more flexible. It will vary depending upon the particular circumstances, including the complexity of the proceeding and the extent to which the offeree might reasonably be thought to have understood the claims and evidence and have been able to assess its position in an informed and considered manner.[4]

[3]Thomopoulos v Faulks (No 2) [2006] VSC 286 at [13] per Cavanough J

[4]Mischel v Mischel Holdings Pty Ltd (in liq) (No 2) [2012] VSC 421 at [33]-[34] per Croft J

9       In this case, both parties asserted in their respective offers (correctly, in my view) that the outcome of the proceeding depended primarily on findings of fact.  This was not a complex case.  Ascot Solicitors’ recent submission that the Oliver Hume Calderbank offer “was too late and our client was focused on defending the claim”, does not sit comfortably with either:

·    the fact that Ascot Solicitors was able to consider and reject as unreasonable the first offer from Strongman & Crouch on the day it was received; or

·    the statement in their offer of the same date that “both parties have had ample opportunity to consider their respective positions”.

10      In my view, this was also a case where the closeness of the trial precluding the offer remaining open for longer, was counterbalanced by the fact that the parties were better appraised of the strengths and weaknesses of their respective cases.  In particular, the extent of First National’s departure at trial from its pleaded case,[5] would suggest that First National assessed at least this aspect of its case as weak, consistently with Strongman & Crouch’s criticism referred to above.  Accordingly, in my view, First National acted unreasonably in failing to accept Oliver Hume’s Calderbank offer, despite the relatively brief period of five days (three business days) allowed for First National to consider the offer.

[5]Reasons for judgment at [57]

11      However, I am satisfied that I can and should take into account the time given to First National to consider the offer in deciding when the consequences of the Calderbank offer commence. It is clear that, unlike the regime for costs consequences for an Offer of Compromise under the Rules, the court has a discretion to decide this question. In exercising this discretion, in my view, First National should pay Oliver Hume’s costs on an indemnity basis on and from the date of the expiry of the offer, not from the date the offer was made. This approach is consistent with that adopted by Croft J in Auswest Timbers Pty Ltd v Secretary to the Department of Sustainability and Environment.[6]

[6][2010] VSC 513 at [16]

12      I will therefore order as follows:

(a)  There be judgment for the plaintiff against the defendant in a sum of $135,000.

(b) The defendant pay the plaintiff interest on the judgment sum at the rate prescribed from time to time under s2 of the Penalty Interest Rates Act 1983 (Vic), on and from 25 October 2014 to the date of payment.

(c)  The defendant pay the plaintiff’s costs of the proceeding (including reserved costs) to be taxed in default of agreement:

(i)    on the standard basis in respect of costs incurred up to and including 10 July 2017; and

(ii)  on an indemnity basis in respect of costs incurred on and from 11 July 2017.

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Certificate

I certify that these 5 pages are a true copy of the reasons for Ruling of His Honour Judge Woodward delivered on 5 September 2017.

Dated:      5 September 2017

Simon Bobko

Associate to His Honour Judge Woodward