Patel v Sengun Investment Holdings Pty Ltd (No 2)
[2022] VCC 1266
•11 August 2022
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-21-04377
| TRUPESHKUMAR RAJENDRAKUMAR PATEL | Plaintiff |
| v | |
| SENGUN INVESTMENT HOLDINGS PTY LTD (ACN 126 385 206) | Defendant |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 and 29 June 2022 | |
DATE OF JUDGMENT: | 11 August 2022 | |
CASE MAY BE CITED AS: | Patel v Sengun Investment Holdings Pty Ltd (No 2) | |
MEDIUM NEUTRAL CITATION: | [2022] VCC 1266 | |
REASONS FOR JUDGMENT (No 2)
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Subject: COSTS
Catchwords: Calderbank offer – indemnity costs – standard costs
Legislation Cited:
Cases Cited:BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Industriewerke GmbH (No 3) [2012] VSC 414; Grynberg v Muller [2002] NSWSC 350; Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J.A. Ribbands | Koya & Co |
| For the Defendant | Mr J. Kohn | MS Justice Legal |
HIS HONOUR:
1 I handed down my reasons for judgment in this matter on 15 July 2022 (“the principal reasons”). I gave judgment for the defendant (“Sengun”). This judgment assumes familiarity with the principal reasons and uses the same terminology.
2 At the conclusion of my judgment, I specified a timetable for the filing of submissions about the form of final orders and costs in the event that the parties could not agree upon orders giving effect to my judgment.
Sengun’s submissions
3 Sengun contended that Patel should pay its costs partly on an indemnity basis. This was because Sengun sent Patel a Calderbank offer on 1 June 2022. The Calderbank offer was in the following terms:
“We refer to the above matter.
We confirm that this matter is listed for Trial on the 27 June 2022 at the County Court at Melbourne.
That parties participated in a Mediation on the 27th May 2022, in which the matter was not settled.
To avoid further costs for both parties, in particular for a costly trial, our client puts forth the following without prejudice settlement offer:-
1. That the Defendant retain the property;
2. That the Defendant refund the Plaintiff with its $50,000 initial payment made (which has been offered previously to you);
3. That the Plaintiff remove the caveat it has registered on the property;
4. That the Defendant make a further payment to the Plaintiff in the amount of $20,000;
5. That each party make payment of their own legal costs.
Our final offer remains open for acceptance on or before 12.00 pm on 14 June 2022, at which time it shall lapse.
In the event that our client obtains a result more favourable than the offer set out herein, we shall be seeking an order for costs on an indemnity basis from the date of this correspondence, in accordance with the principles applied in Calderbank v Calderbank [1975] 3 All ER 333 and Cutts v Head [1984] CH 290 as adopted by the Supreme Court of Victoria in Mutual Community Limited v Lorden Holdings Pty Ltd & Ors (28 April 1993, unreported) and John Holland Constructions & Engineering Pty Ltd v Majorca Projects Pty Ltd & Anor (1 November 1996, unreported).”
4 Sengun contended that the Calderbank offer was reasonable for the following reasons:
· the Calderbank offer was made before trial and, if accepted, all the costs of the trial could have been avoided;
· the offer was open for acceptance for 14 days, which was a reasonable time period;
· the offer involved a genuine compromise. Sengun offered to return to Patel the sum of $50,000, pay an additional $20,000 and bear its own costs of this proceeding. This was more favourable to Patel than the Court’s judgment;
· Sengun referred to two letters that were sent by their solicitors to Patel’s solicitors prior to the filing of this proceeding. The first was an email sent on 22 September 2021 and the second an email sent on 28 September 2021. Sengun contended that both of the emails set out why the Heads of Agreement did not create an immediately binding contract for the sale of the Property and that Patel’s prospects of success were clear at the time that Sengun’s Calderbank offer was served; and
· the offer expressly foreshadowed an application for indemnity costs in the event that Patel rejected the offer.
5 Sengun contended that, in the circumstances, Patel’s rejection of the offer was unreasonable.
Patel’s submissions
6 For his part, Patel submitted that his refusal to accept the Calderbank offer was not unreasonable because:
· the mere fact that the outcome of the trial was less favourable than the offer was one factor to consider, but was not decisive;
· the two letters relied upon by Sengun were sent in September 2021 before the litigation began. To that extent, the correspondence was somewhat speculative because no statement of claim had been filed and there was no corresponding defence – the precise issues in dispute had not been identified;
· the Heads of Agreement document relied upon was not clear. The claim which Patel ran was arguable and not without merit. Seeking a judicial determination on the effect of the document was appropriate;
· the Calderbank offer contained no reference to any judicial authority which should have caused Patel to reassess his position; and
· the offer amounted to a virtual capitulation. If successful, Sengun was obliged to return to Patel the sum of $50,000 which he had paid. Such a repayment was no compromise. Similarly, in a case where the land in question was worth more than $4 million dollars, the payment of $20,000 to Patel to surrender his claim was minimal. Again, the amount offered was not a genuine compromise.
Legal principles
7 In deciding whether a party is entitled to costs taxed on an indemnity basis due to the rejection of a Calderbank offer, Habersberger J set out the relevant legal principles in BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Industriewerke GmbH (No 3)[1] as follows:
[1][2012] VSC 414, [59] - [67]
“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.[2]
[2]Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435, [23]
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 …[3]
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.”
[3][2002] NSWSC 350, [48]
Analysis
8 On the facts of this case, I do not consider that Patel’s refusal of the Calderbank offer was unreasonable. I have reached this view for the following reasons.
9 First, the onus is on the offeror to demonstrate the unreasonableness of the offeree’s rejection. Sengun’s submissions placed considerable emphasis on why its offer was reasonable. While this is of some relevance, the correct question to pose and answer is whether the refusal by Patel was unreasonable.
10 Secondly, the letter did not outline why Patel’s case was bound to fail. It made no reference to the Heads of Agreement or any of the arguments put forward by Sengun at trial. Sengun submitted that this was already done in the emails sent in September 2021. However, those emails were not referred to in the offer and there was no evidence that Patel was told to refer back to those emails to consider the reasons why his case was likely to fail. The offer therefore provided an uncertain basis by which Patel could assess his position. Further, while the defendant’s submission referred to the two September 2021 emails, they were not exhibited to any affidavit. The Court Book contained emails of those dates but Sengun’s material did not explicitly identify any link between the Court Book documents and the emails referred to in their submissions. Sengun should not benefit from uncertainty which it created and could easily have avoided.
11 Thirdly, there was no major compromise made by Sengun. It was very much an “all or nothing” scenario where only one party could retain the land. While the $20,000 was plainly of some value, when the land in dispute was a parcel of about 80 acres and valued at $4.1 million, it was a derisory amount.
12 Finally, the context of the dispute was difficult due to the Heads of Agreement document. While both parties contributed to that state of affairs, Sengun and its real estate agent had the greater role. The dispute raised a difficult legal question which could only be determined by a court. Litigants should not be discouraged from bringing genuine disputes to court.
13 Overall, I do not consider that Patel acted unreasonably in refusing the offer from Sengun.
Conclusion
14 For the reasons set out, I make the following orders:
(a) the plaintiff’s claim be dismissed and there be judgment for the defendant; and
(b) the plaintiff pay the defendant’s costs of the proceeding, including reserved costs, such costs to be taxed on a standard basis in default of agreement.
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