| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : PRIOLO CORPORATION PTY LTD -v- VANTAGE SYSTEMS PTY LTD [2013] WADC 158 (S) CORAM : SLEIGHT DCJ HEARD : 18 OCTOBER 2013 DELIVERED : 18 OCTOBER 2013 SUPPLEMENTARY
DECISION : 19 NOVEMBER 2013 FILE NO/S : CIV 2105 of 2010 BETWEEN : PRIOLO CORPORATION PTY LTD Plaintiff
AND
VANTAGE SYSTEMS PTY LTD
Defendant
Catchwords: Costs – Indemnity costs – Calderbank offer made by plaintiff before trial – Offer rejected by defendant – Plaintiff obtained a better result by judgment after trial – Test for determining whether indemnity costs should be awarded – Whether defendant's rejection of the Calderbank offer was unreasonable Legislation: Rules of the Supreme Court 1971
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Result: Application for indemnity costs dismissed
Representation: Counsel:
Plaintiff : Mr C D Clifton
Defendant : Mr A P Hershowitz
Solicitors:
Plaintiff : Clifton Tham Pty Ltd
Defendant : Batten Sacks Harvey Bruce
Case(s) referred to in judgment(s):
Ford Motor Company Australia Ltd v Lo Presti [2009] WASCA 115
Pirrotta v Citibank Ltd (1998) 72 SASR 259
Priolo Corporation Pty Ltd v Vantage Systems Pty Ltd [2013] WADC 158
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1 SLEIGHT DCJ: This decision concerns the issue of a claim for indemnity costs arising from the decision of Priolo Corporation Pty Ltd v Vantage Systems Pty Ltd [2013] WADC 158, in which Priolo's claim for damages was successful subject to an adjustment for an uncontested counterclaim. The amount of damages awarded was a net sum of $271,177.26.
2 The claim for indemnity costs arises from a Calderbank offer of settlement made by Priolo. By letter dated 26 March 2013, solicitors acting for Priolo, wrote to the solicitors acting for Vantage offering to settle the action on the following basis: 3 The letter went on to state that the offer was a Calderbank offer and that the plaintiff intended to rely upon the offer in making a submission for indemnity costs in the event that Priolo obtained a better result at trial than it would have obtained had Vantage accepted the offer. The offer was open until 5.00 pm Perth time on 5 April 2013. 4 A Calderbank offer is an informal procedure of presenting an offer in commercial litigation. It has been well recognised that such an offer can be taken into account when a court considers whether it should exercise its discretion to award indemnity costs. The purpose of taking into account a Calderbank offer is to preserve in the minds of litigants the conscious decision that their behaviour may place them at risk as to costs if they unreasonably refuse an offer of settlement. 5 The Court of Appeal in the decision of Ford Motor Company Australia Ltd v Lo Presti [2009] WASCA 115 comprehensively reviewed the legal principles in relation to a Calderbank offer. From this decision the following principles emerge: (Page 4)
3. The mere fact that the recipient of a Calderbank offer is ultimately worse off than he or she should have been had the offer been accepted, does not mean that its rejection was unreasonable: [18]. 4. In deciding whether the conduct is 'reasonable' or 'unreasonable' always involves matters of judgment and impression. Although it is neither possible nor desirable to enumerate exhaustively all of the circumstances which must be taken into account, regard should be had at least to the following: (a) the stage of the proceedings at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree's prospects of success, accessed 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: [19]. 5. The party who makes the Calderbank offer that is rejected bears the onus of satisfying the court that it should make an award of indemnity costs in his or her favour: [21]. 6. The critical question in deciding whether to award indemnity costs against a party who has rejected a Calderbank offer is whether the rejection was unreasonable in the circumstances: [23]. 7. The test of 'unreasonableness' should not be qualified by the use of expressions such as 'manifestly', 'plainly' or 'so as to cause an injustice' which might suggest a more stringent test: [28]. 8. There is the public interest in promoting an early resolution of litigation before the courts. The courts' encouragement of the early resolution of litigious matters is at least part of the underlying rationale for the availability of special costs orders where a party's rejection of a Calderbank offer was unreasonable in the circumstances. This public policy consideration is a part of (Page 5)
the context in which the court evaluates the reasonableness or unreasonableness of a party's rejection of a Calderbank offer: [39]. 9. There is no presumption of entitlement to an award of indemnity costs in the situation where in the rejection by an offeree of a Calderbank offer which is bettered on judgment. The unreasonableness of the rejection of the offer is not determined by such a presumption. Rather, it depends on the circumstances of the particular case: [31]. 6 The application of the principles concerning a Calderbank offer should conform as far as possible to the regime under the Rules of the Supreme Court for presenting an offer of settlement: Pirrotta v Citibank Ltd (1998) 72 SASR 259, 267. It is significant that amendments were made to O 24 r 10(4) of the Rules of the Supreme Court in 2007 removing an automatic entitlement for indemnity costs if the plaintiff obtained a judgment in more favourable terms than an offer made but rejected by the defendant. Under the amended rule the entitlement for costs of a successful plaintiff in such circumstances is on a party/party basis. Of course, there remains an inherent jurisdiction to award indemnity costs in circumstances justifying such an award. The amendments to O 24 r 10(4) are consistent with the principle that there is not a presumption of entitlement for indemnity costs simply on the basis that a Calderbank offer was rejected and a more favourable judgment obtained.
Submissions 7 The submission of counsel for Priolo is that, given the disparity between the amount offered in the Calderbank offer and the amount ultimately awarded, that it was unreasonable for Vantage to reject the offer. 8 The submission of counsel for Vantage is that the outcome of the trial was difficult to predict and therefore it was not unreasonable for Vantage to reject the offer. In support of this contention counsel for Vantage relied upon an observation made in my decision in Priolo Corporation Pty Ltd v Vantage Systems Pty Ltd where I observed as follows: The task in this matter of ascertaining objectively the intention of the parties is difficult. Although the parties rely upon the wording in emails before and after the alleged agreement for lease and the surrounding conduct of the parties to support their positions, in many instances the wording of emails and the conduct of the parties is equivocal. [66] (Page 6)
Conclusions 9 It is not in dispute that the Calderbank offer of Priolo was a genuine and reasonable attempt by Priolo to settle the action. The offer it presented (which was inclusive of costs) was significantly below the amount claimed and the amount ultimately awarded. Of course, in exchange for the reduction in its claim, Priolo was buying certainty if the offer was accepted. The fact that the Calderbank offer was a reasonable offer of settlement does not necessarily mean that the rejection of the offer by Vantage was unreasonable. Different considerations arise when one considers the reasonableness of the conduct of Vantage in response to the offer. The trial of this action commenced on 17 June 2013 so that the Calderbank offer of settlement was presented approximately three months before trial. The action had by that time been in progress for over two and a half years. Inevitably, Vantage would have incurred significant costs in the action up to this point and was being asked to pay a further $100,000 to settle the action. I accept that in the circumstances of this case it would have been difficult to predict the outcome of the trial and, although there was some commercial attractiveness to accepting the offer, I am not satisfied that it was unreasonable for Vantage to reject the Calderbank offer, notwithstanding the public policy consideration that I have earlier referred to. To accept the offer would have meant the abandonment of the costs incurred up to that time and an obligation to pay a further significant amount in settlement of the action. Accordingly, I dismiss the application for indemnity costs. Vantage does not oppose an order to pay Priolo the costs of the action to be taxed on a party/party basis and an order will be made in these terms.
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