Repose Nominees Pty Ltd v Phillip Capital Limited (No 2)
[2021] VCC 1884
•1 December 2021
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-18-01025
| REPOSE NOMINEES PTY LTD | Plaintiff |
| v | |
| PHILLIP CAPITAL LIMITED | Defendant |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | Following a trial on 5, 6, 7, 10 and 14 August, 7 September and 9 October 2020, reasons for judgment delivered 9 November 2021 and filing of written submissions. | |
DATE OF JUDGMENT: | 1 December 2021 | |
CASE MAY BE CITED AS: | Repose Nominees Pty Ltd v Phillip Capital Limited (No 2) | |
MEDIUM NEUTRAL CITATION: | [2021] VCC 1884 | |
REASONS FOR JUDGMENT
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Subject:COSTS
Catchwords: Calderbank offer – Indemnity costs
Cases Cited:BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Industriewerke GmbH (No 3) [2012] VSC 414; Grynberg v Muller [2001] NSWSC 532; Hazeldene’s Chicken Farm v VWA (No 2) (2005)13 VR 351.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. Ribbands | Koya & Co |
| For the Defendant | Mr A. Kirby | Wotton & Kearney |
HIS HONOUR:
1I handed down my reasons for judgment in this matter on 9 November 2021 (“the principal reasons”). 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. Subsequently, the parties sought and obtained an extension of time for the filing of submissions.
PCL’s submissions
2PCL contended that Repose should pay its costs for part of the proceeding on an indemnity basis. PCL relied upon three Calderbank offers made to Repose. The offers comprised:
· an offer dated 17 December 2019 for $50,000 (inclusive of any claim for costs and interest);
· an offer dated 18 March 2020 for $250,000 (inclusive of any claim for costs and interest); and
· an offer dated 28 July 2020 for $250,000 (inclusive of any claim for costs and interest).
Repose failed to accept any of the offers and made no counter offers to PCL.
Repose’s submissions
3Repose submitted that the court should make the usual order for costs to be paid on a standard basis. Repose argued that PCL relied upon Repose’s failure both to call expert evidence and to sue 2Up. Repose contended that neither of these matters was central to the question of whether PCL owed fiduciary or contractual duties to Repose. In a general sense, Repose argued that the reasons given by PCL for the alleged problems with Repose’s case were neither persuasive nor relevant in the final outcome.
Legal Principles
4In 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].
(a) 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.
(b) 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.
(c) Thirdly, the critical question is whether the rejection of the offer was unreasonable in the circumstances. As the Court of Appeal said in Hazeldene’s Chicken Farm v VWA (No 2)[2]:
[2] (2005) 13 VR 351.
“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.”
(d) 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.
(e) 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]
(f) 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.
(g) 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.
(h) 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.
(i) Ninthly, an “all in” offer is permitted in a Calderbank offer.
[3] [2001] NSWSC 532.
Offer of 17 December 2019
5This offer was made after the completion of pleadings and discovery. The letter made various complaints about Repose’s failure to meet its discovery obligations, partly by being late and partly by producing only parts of a document or illegible copies. PCL noted that Repose had failed to file any expert evidence by the due date. Repose failed to respond to PCL’s request for confirmation of its position. PCL set out reasons why it regarded Repose’s claim as without merit. PCL offered to pay Repose $50,000 (inclusive of any claim for costs and interest) within 28 days of Repose providing to PCL signed terms of settlement. The offer was available for acceptance until noon on 24 December 2019.
6I do not regard Repose’s rejection of this offer as unreasonable in the circumstances. Repose had filed some evidence at the time and should have undertaken some preparation for trial given that the scheduled trial date was early in 2020. However, it seems to me that Repose ought not necessarily have appreciated its position at that time. I note that it appears there were problems in Repose organising itself for trial and that, in the background, there were some difficulties between Repose and its then solicitors. In addition, PCL was agitating the question of security for costs with Repose. Indeed, when the matter came before Judge Ryan in late January 2020, the trial was vacated and adjourned to 5 August 2020. It seems that the ceasing to act by the plaintiff’s lawyers may have been relevant to the adjournment. Around the same time the parties resolved the question of security between them with Repose agreeing to provide additional security. Apart from the above, the PCL offer was fairly nominal in the circumstances and, from one perspective, did not reflect a significant compromise.
Offer of 18 March 2020
7This offer referred to the earlier offer made in December the year before and repeated PCL’s view that Repose’s claim was bound to fail. Part of the offer was in similar terms to the earlier offer: it referred to the problems with Repose’s discovery; it referred to the failure by Repose to serve any expert reports by the due date in the court’s orders even though a new trial date had been set; it repeated the reasons why PCL regarded the Repose claim as lacking merit.
8The offer set out in summary form the gist of the expert evidence which PCL was seeking to rely upon. It also set out PCL’s responses to what it believed Repose might raise in argument about quantum issues even though the points were not pleaded by Repose or supported by either documentary evidence or expert opinion.
9The offer noted that, although there had been one relatively small costs order made in favour of Repose during the proceeding, there were four orders made against Repose. PCL had retained a costs consultant, Jenny Young, to assess the costs and disbursements payable pursuant to these four orders. Ms Young had arrived at a total of approximately $108,000. PCL attached to its offer a copy of the assessment on a “without prejudice” basis.
10PCL claimed that Repose’s case was ill prepared, supported by largely illegible and poor documentary evidence and lacked expert supporting evidence. PCL contended the claim was bound to fail. In those circumstances, PCL offered to pay Repose $250,000 (inclusive of any claim for costs and interest) within 28 days of Repose signing and returning the terms of settlement. PCL said it was motivated to make the offer by a desire to avoid incurring costs which it did not expect to recover. The offer was open for acceptance until 5:00pm on 1 April 2020.
11Repose accepted that this offer was more than merely nominal. However, Repose effectively submitted that, apart from this, it acted reasonably in refusing this offer because it suffered from the same problems as the initial offer: PCL’s argument was not compelling; PCL did not address the key complaint made by Repose; PCL’s argument did not reflect the reasons why it succeeded at trial.
12I do not accept Repose’s argument on this point. In my view, an important aspect of PCL’s case was that because the contract between Repose and 2Up was critical to determining the plaintiff’s interest in the 2Up shares, the conduct of PCL could not affect that contract. To that extent, PCL’s conduct towards Repose and its breach of any assumed duties was not the cause of any loss which Repose claimed to have suffered. In any case, it is not a prerequisite to success in these applications that a party seeking a special costs orders establishes that it explained to the other party in the offer why the latter’s case was weak.
13I consider that it was unreasonable for Repose to reject this offer. The outcome of the case was plainly far worse for Repose than the offer made under the terms of settlement which PCL proposed. Repose would not only have received $250,000 but would have avoided the substantial costs orders already made in favour of PCL. These totalled more than $100,000.
14The PCL offer was made about four months after the initial offer and after Judge Ryan had vacated the trial for early 2020. The question of security for costs was resolved by the time of this offer and, especially when the essence of the offer was the same as the first offer (except for the substantial increase in the proposed payment), Repose had sufficient opportunity to consider and assess its trial prospects.
15PCL drew attention in its offer to alleged defects in Repose’s case as it had done in its initial offer. Thus, Repose was aware of those matters from December 2019 and yet it took no significant action to address the issues raised before the expiration of the second offer. Indeed, Repose did not settle upon its final version of the claim until August 2020 after completion of the evidence at trial. This suggested that Repose was comfortable in its assessment that its case was sufficiently strong to succeed. Repose took a calculated risk in the litigation, particularly in not suing 2Up. In my view, Repose misjudged the position and rejected an offer which was a significant compromise by PCL.
Offer of 28 July 2020
16The final offer attached copies of the two prior offers and noted that Repose had not responded to either of those settlement offers. Like its predecessors, this offer to compromise said that its purpose was to communicate an offer of settlement on a “without prejudice save as to costs” basis. PCL summarised why it considered that Repose’s case was bound to fail. It referred to the poor documentary evidence, the absence of expert evidence and the failure to address the question of Repose’s entitlement to the shares with 2Up. The letter noted the report by its expert and the gist of his views. As to costs, PCL said that since its offer of 18 March 2020, it had incurred additional costs and disbursements of about $66,000 – some of the costs were attributable to PCL doing work which the court had ordered Repose to perform.
17PCL offered to pay Repose $250,000 (inclusive of any claim for costs and interest) within 28 days of providing signed terms of settlement to the defendant. PCL contended that its offer was generous in circumstances where Repose was liable for about $108,000 on existing costs orders. It suggested that Repose should be liable for more because it had failed to do other preparatory work for the hearing which PCL was forced to undertake.
18Repose put the same arguments in relation to this offer as it did in respect of the 18 March 2020 offer.
19Again, as with the second offer, I find that it was unreasonable for Repose to reject this offer. Although the offer was available for acceptance only until 5:00pm on 31 July 2020, a relatively short time, in the context this was sufficient time for Repose to consider and assess the offer. In many respects the substance of the offers put by PCL did not change. PCL’s explanation and rationale remained the same. But PCL did increase substantially the amount which it was initially prepared to pay Repose. The final offer was made shortly before trial when Repose should have been almost ready to run its case. The offer was substantial in the context where Repose faced significant risks at trial.
Conclusion
20For the reasons set out above, I find that Repose acted unreasonably in rejecting the second and third Calderbank offers made by PCL. Accordingly, I make the following orders:
1. the plaintiff’s claim be dismissed;
2. the plaintiff pay the defendant’s costs of and incidental to the proceeding, including reserved costs. The costs are to be taxed on a standard basis up to 1 April 2020 and thereafter on an indemnity basis;
3. the security for costs amounts of:
(a) $22,400.00 received 31 May 2019 (Receipt CCME458447); and
(b) $80,000.00 received 6 April 2020 (Receipt CCME478677);
which have been paid by the plaintiff to the Registrar of the Court are to be paid immediately to the defendant’s solicitors in part satisfaction of the plaintiff’s liability for costs.
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