Pacific Building Services Pty Ltd v Lau (No. 2)
[2017] ACTSC 279
•22 September 2017
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Pacific Building Services Pty Ltd & Anor v Lau & Ors (No. 2) |
Citation: | [2017] ACTSC 279 |
Hearing Date: | On the papers |
DecisionDate: | 22 September 2017 |
Before: | McWilliam AsJ |
Decision: | 1. The costs order of 24 August 2017 be varied to read: The applicants are to pay the respondents’ costs of the proceedings up to and including 24 August 2017. |
Catchwords: | COSTS – Calderbank letter – where offer not a genuine compromise and allowed insufficient time to respond – reasonableness of a party’s conduct |
Legislation Cited: | Court Procedures Rules 2006 (ACT) r 1721 |
Cases Cited: | Becker v Queensland Investment Corporation and Bovis Lend Lease (No 2) [2009] ACTSC 147 Calderbank v Calderbank [1976] Fam 93 Vizovitis v Ryan (No 2) [2014] ACTSC 301 |
Parties: | Pacific Building Services Pty Ltd ACN 132 571 343 (First Applicant) Amrollah Aghili (Second Applicant) Henry Han Ho Lau (First Respondent) Shuk Han Lau (Second Respondent) Hanson Australasia Pty Ltd ACN 128 924 443 (Third Respondent) |
Representation: | Counsel Mr Abbas (Applicants) Mr Johannessen (Respondents) |
| Solicitors High Ford Law Practice (Applicants) Johannessen Legal & Migration (Respondents) | |
File Number(s): | SC 147 of 2017 |
McWilliam AsJ:
On 24 August 2017, I ordered the withdrawal of a caveat lodged by the applicants in respect of a property owned by the first and second respondents, and ordered the applicants to pay the respondents’ costs: see Pacific Building Services Pty Ltd & Anor v Lau & Ors [2017] ACTSC 245 (Pacific).
The respondents have subsequently made an application for a variation of the costs order, seeking that such costs be paid on an indemnity basis.
In accordance with subsequent directions of the Court, the application has been determined on the papers, following written submissions received by both parties.
Nature of the respondents’ claim for indemnity costs
The respondents submit that indemnity costs are appropriate in circumstances where two ‘reasonable attempts’ were made to try to bring the matter to an end, through correspondence on 19 May 2017 and 13 June 2017, with the latter purporting to be ‘in accordance with principles set down by the High Court in Calderbank v Calderbank’, although the intended reference must be to the principles laid down by the Court of Appeal of England and Wales in Calderbank v Calderbank [1976] Fam 93.
The respondents argue they made the applicants aware of the difficulties with the application, which were ultimately the subject of the judgment ordering the withdrawal of the caveat, and that in the meantime over $35,000 has been incurred defending an application that the respondents contend had ‘no leg to stand on’.
The respondents further request the Court to take into account the conduct of the applicants, which I infer is a submission that the conduct was unreasonable. The respondents point primarily to the default judgment that was obtained in these proceedings on 12 May 2017, which I set aside on 6 July 2017 on the basis of a lack of proper service of the originating application, reserving the question of costs at the time.
A separate submission is also made that the second respondent was an entirely unrelated party, and has incurred costs and therefore suffered financial loss, in order to defend her proprietary rights in respect of the caveat lodged against her interest ‘without an iota of justification’.
Issues
From the above submissions, all of which are disputed by the applicants, I consider the following issues as operating (either separately or cumulatively) on the Court’s exercise of discretion whether to make a special order as to costs:
(a)Whether the applicants’ case was clearly hopeless and known to be so;
(b)Whether there was an effective Calderbank offer;
(c)If so, whether the Calderbank offer was unreasonably rejected; and
(d)Whether the conduct of the applicants throughout the hearing was otherwise unreasonable.
Principles
Costs are in the discretion of the Court, pursuant to r 1721 of the Court Procedures Rules 2006 (ACT) (Rules). The obligation is on the respondents as the moving parties to satisfy the Court that it is appropriate to depart from the usual order that costs follow the event (which has already been made).
Similarly with regard to Calderbank offers, the onus lies upon the respondents to establish to the satisfaction of the Court that in all the circumstances, the failure of their opponents to accept the offer was unreasonable: Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [26]; cited in Kemp v Ryan [2011] ACTSC 42 at [18] and in Vizovitis v Ryan (No 2) [2014] ACTSC 301 (Vizovitis) at [17].
The history of the development of the Calderbank offer and other special costs orders has been summarised by Refshauge J in Becker v Queensland Investment Corporation and Bovis Lend Lease (No 2) [2009] ACTSC 147 (Becker) at [8]-[12], the reasoning of which I gratefully adopt, and it is unnecessary to repeat the principles in detail here.
Relevant to the present case, in order to be effective, the Calderbank offer must contain a genuine element of compromise, as opposed to being designed merely to trigger costs sanctions: Vizovitis at [19]. The terms of the settlement offered must be unambiguously clear: see Becker at [12] and the cases there-cited.
As to the rejection of an otherwise effective Calderbank offer, unreasonableness is not necessarily established by failing to do better than was offered: Cowie v Gungahlin Veterinary Services Pty Ltd [2016] ACTSC 311 at [103].
In determining whether rejection of a Calderbank offer was unreasonable, the Court may take into account, inter alia, the time allowed to the offeree to consider the offer: Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; 13 VR 435 at 442, Becker at [12]; Hillman v Box, Box and Box as executors of the estate of Graeme Box (No 5) [2014] ACTSC 150 (Hillman) at [40] and the cases there-cited.
Consideration
The first question is whether the application to extend the caveat was clearly hopeless, with the respondents submitting the applicants gave no reasonable consideration to their prospects of success.
Although unsuccessful, I do not accept that the application was entirely without merit. The Court has yet to determine whether there is a caveatable interest arising from the agreement between the first applicant and the first and second respondent: see Pacific at [13]-[16].
The issue that defeated the applicants was the precise wording of the caveat and the fact that the words extended the operation of the caveat to the interest of the second respondent. That matter was not raised by the respondents in either the email communication on 19 May 2017 or the letter dated 13 June 2017. The first time the issue on which the respondents were successful was brought to the applicants’ attention was through the respondents’ written submissions (at [16]) in the substantive proceedings, provided to the Court on 21 August 2017.
Further, this was not the type of case where I would be satisfied that the applicants ought to have known the application to extend the caveat was doomed to fail. The legal authorities ultimately relied upon in the substantive proceedings, though plainly highly persuasive, were derived from other jurisdictions and not binding on this Court.
I do not consider that the underlying merit of the proceedings (or lack thereof) provides any reason to depart from the usual order.
As to the letter of 13 June 2017, the terms of the offer are contained in the following paragraphs:
In the circumstances, we are instructed to make the following offer. Your client is to remove Caveat 20436040 immediately, and confirmation of withdrawal to be emailed to us by 12 noon on Thursday, 15 June 2017. Our client, in exchange will agree to withdraw the application under s 30 of the Land Titles Act 1925 and any further claims under Tort.
...
The above offer will expire at 12.00pm, Thursday 15 June 2017.
It is apparent that the letter falls well short of the requirements of a Calderbank offer. The terms of the ‘offer’ are not a genuine offer of compromise at all. They are in the nature of a demand. Further, the offer is silent on the costs of the parties, so that I am unable to draw any inference that the offer in substance was a ‘walk away’ offer, with each party to pay their own costs.
Even if the letter were an effective Calderbank offer, I would not have considered it unreasonable to reject such an ‘offer’, when it was only open for a day and a half. The reasonableness of the period during which an offer is open needs to be assessed in the light of what is known about the state of preparation of the case: Forge v Rewers (No 2) [2017] ACTSC 273 per Mossop J at [33]. Although his Honour was there considering an offer of compromise made under the Rules, the same may be said in the context of offers made outside the operation of the Rules, having regard to the authorities referred to by Refshauge J in Hillman at [42] as to what constitutes a reasonable period of time. Here, there was no hearing imminent and the parties had not fully articulated any arguments ultimately put to the Court. A period of a day and a half was plainly insufficient to enable a proper opportunity to consider the ‘offer’.
As to the conduct of the applicants in the proceedings, and in particular with regard to the costs of the application seeking to set aside default judgment, having reviewed the transcript when the matter came before Acting Justice Ashford on 12 May 2017, I do not consider that there was any improper or unreasonable conduct on the part of the legal representative for the applicants. While it subsequently transpired that the service of the originating application had not been properly effected, it is clear that her Honour was not knowingly misled by the applicants (with the email correspondence relied upon for service handed up to the Court) and that the order was made expressly with a view to the preservation of the respondents’ rights to make an application to have the order set aside upon sufficient reason (transcript of these proceedings on 12 May 2017, at lines 14-18).
The correspondence relied upon on in the costs application does not otherwise establish unreasonableness on the part of the applicants sufficient to disturb the present order for costs. Nor does it establish that there were any separate costs incurred by the second respondent that have not also been incurred by the first and third respondents, so that I do not consider this an appropriate case to distinguish between the costs payable to each respondent.
Conclusion
There is no basis for varying the costs order made on 24 August 2017 to make a special order for indemnity costs. However, the respondents, having been unsuccessful on their application for such costs, ought not be entitled to recover their costs following the delivery of judgment in the substantive proceedings.
Accordingly, the orders of the Court are:
1. The costs order of 24 August 2017 be varied to read: The applicants are to pay the respondents’ costs of the proceedings up to and including 24 August 2017.
| I certify that the preceding twenty-six [26] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam. Associate: Date: |
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