Roberts v Roberts (No 2)

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
ROBERTS v ROBERTS (No 2)
[2021] SASC 91
Judgment of the Honourable Justice Blue

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS - INFORMAL OFFERS AND CALDERBANK LETTERS - GENERALLY
The applicant succeeded in his primary action in obtaining an order that the first respondent convey title to his station Pulgamurtie in return for payment of $3,808,350: Roberts v Roberts [2021] SASC 72. In his secondary action, the applicant established that the respondents repudiated the Heads of Agreement and he lawfully terminated it but failed to establish substantive damages. The two actions were initially heard together and consolidated during the trial.
The applicant seeks an order that the first respondent pay his costs of the primary action up to 14 September 2020 on the standard costs basis and from 15 September 2020 on the indemnity basis as a result of the non-acceptance by the first respondent of a Calderbank offer made on 1 September that was less favourable to the applicant than the judgment ultimately obtained.
The applicant seeks an order that the second respondent pay his costs of the secondary action on the standard costs basis. The respondents seek an order that each party bear their own costs of that action.
Held:
1By reason of the first respondent’s non-acceptance of the 1 September offer, he should pay the applicant’s costs of the primary action on the solicitor/client basis from 22 September 2020 (at [28]).
2The second respondent should pay the applicants costs of the secondary action up to 29 April 2020 (at [33]).
3The parties should notionally bear their own costs of the secondary action from 30 April 2020 onwards (at [39]).
4Broad axe assessment that 4 per cent of the combined costs of both actions from 30 April 2020 onwards related to the secondary action (at [47]).
5To avoid two taxations, a single order should be made that the first respondent pay 96 per cent of the applicant’s costs of the combined actions (at [41]).
6Orders made to this effect (at [48]).

Calderbank v Calderbank [1975] 3 All ER 333; Stewart v Atco Controls Pty Ltd (In Liquidation) (No 2) (2014) 252 CLR 331, considered.

ROBERTS v ROBERTS (No 2)
[2021] SASC 91

BLUE J: On 17 June 2021 I delivered reasons for judgment in which I concluded that in the primary action the applicant (Grant) succeeded on his cause of action in proprietary estoppel and the appropriate remedy was to order that the first respondent (Jack) convey title to Pulgamurtie in return for payment of $3,808,350.[1] I concluded that in the secondary action the second respondent (Nola) and Jack repudiated the Heads of Agreement and Grant lawfully terminated it for repudiation but Grant would only have been entitled to nominal damages if he had failed in the primary action. The two actions were initially heard together and consolidated during the trial.
[1] Roberts v Roberts [2021] SASC 72.
On 24 June 2021 I made substantive orders for the finalisation of the primary action and reserved all questions of costs and the orders to be made in the secondary action. The parties agreed on the wording of a declaration concerning termination of the Heads of Agreement and made submissions on costs.
Grant seeks an order that Jack pay his costs of the primary action up to 14 September 2020 on the standard costs basis and from 15 September 2020 on the indemnity basis as a result of the non-acceptance by Jack of a Calderbank offer made on 1 September that was less favourable to Grant than the judgment ultimately obtained. Jack does not resist an order that he pay Grant’s costs on the standard costs basis but opposes any order that he pay on the indemnity basis.
Grant seeks an order that Nola pay his costs of the secondary action on the standard costs basis. Nola and Jack seek an order that each party bear their own costs of that action.
Background
The trial of the proceeding was originally listed to commence on Monday 21 September 2020 but was deferred by one day to commence on Tuesday 22 September 2020.
On 31 August 2020 Grant filed a formal offer (the 1 September offer) under rule 132.4 of the Uniform Civil Rules 2020 (SA) (the Rules). Grant offered to settle the primary action on the basis of a consent judgment that Jack pay to him $3.5 million and pay his costs of the primary action on the standard costs basis. The offer was not served on Jack’s solicitors until the morning of 1 September 2020. The offer was not a “relevant offer” within the meaning of rule 132.10 because it was not served at least 21 days before the commencement of the trial. However, Grant seeks an order for indemnity costs in the discretion of the Court under rule 132.11 on the basis that the judgment he has obtained in the action is on terms more favourable to him than the terms of the offer.
On 28 August 2020 Grant had filed and served an earlier formal offer in which he offered to settle the primary action on the basis of a consent judgment that Jack transfer Pulgamurtie to him in return for payment of $2.85 million and pay Grant’s costs of the primary action on the standard costs basis. The judgment that Grant obtained in the action was less favourable than the terms of this offer.
On 28 August 2020 Grant’s solicitors sent a letter to Jack’s solicitors referring to the formal offer served earlier that day inviting Jack to participate in immediate settlement discussions, saying that Grant was open to all alternatives and identifying some alternative mechanisms for resolution.
On 1 September 2020 Grant’s solicitors sent a further letter to Jack’s solicitors reiterating that Grant was open to all alternatives to enable him to keep farming Pulgamurtie with financial security.
On 2 September 2020 Jack’s solicitors sent a letter to Grant’s solicitors responding to their two letters and making an offer (open for 10 days) to settle the action (the 2 September offer) on the basis that:
1Jack would pay to Grant $500,000 with or without (at Grant’s choice) an option for Grant to purchase Pulgamurtie within four months at market value as recently determined by Mr Hickey;
2Jack and Nola would make new wills leaving their estate equally to Grant, Mark and Louise; the payment of $500,000 to Grant would be called into hotchpot against Grant’s share under the will; and Jack and Nola would execute a deed binding them not to change their wills; and
3the action would be dismissed with no order as to costs.
On 3 September 2020 Grant’s solicitors sent a letter to Jack’s solicitors offering to settle the action (the 3 September offer) on two alternative bases. One offer was an elaboration on the 28 August offer (amongst other things increasing the price to $3 million and including a release of rights to make an inheritance claim). The other offer was that (amongst other things) Jack transfer a one third interest in Pulgamurtie to Grant and the parties resume a 50/50 partnership.
On 8 September 2020 Jack’s solicitors sent an email to Grant’s solicitors rejecting both alternatives. They proposed a settlement conference on 14 or 15 September.
On 14 September 2020 Jack filed and served a response to formal offer in respect of the 1 September offer. The response said that the offer was not accepted. It also said that it was not a “relevant offer” within the meaning of rule 132.10 because it was not served at least 21 days before the commencement of trial.
On 15 September 2020 the parties attended a settlement conference. Despite approximately five hours of discussions and negotiations, the matter was not resolved.
On 18 September 2020 Jack’s solicitors sent a letter to Grant’s solicitors. They offered (the 18 September offer) to settle both actions on the basis that Pulgamurtie be sold as soon as practicable; from the net proceeds of sale Grant be paid $1 million; and each party bear their own costs of each action. This offer did not include a term (such as that contained in Jack’s 2 September offer) that the $1 million be called into hotchpot against Grant’s share under Jack and Nola’s wills. However, unlike the 2 September offer, there was no term preventing Jack (or Nola) changing their wills to exclude Grant and their then current wills contained a hotchpot clause.
Costs of primary action
It is common ground that the 1 September offer was a “formal offer” within the meaning of rule 132.4 but was not a “relevant offer” within the meaning of rule 132.10 due to its late service.
It is common ground that the judgment in favour of Grant in the primary action was on terms more favourable to Grant than the terms of the 1 September offer. This is on the basis that, as at September 2020, the value of Pulgamurtie was in excess of $10 million and an order that Pulgamurtie be conveyed to Grant in return for payment of $3,808,350 was more favourable than his receiving a payment from Jack of $3.5 million.
Rule 132.11 provides:
132.11—Costs in other cases
(1)     This rule applies in cases when rule 132.10 does not apply.
(2)     When—
(a)     a party has made a formal offer;
(b)     the offer was not accepted; and
(c)     judgment is granted in respect of the action or part of an action the subject of the offer on terms no less favourable to the offeror than the terms of the offer,
the Court is to take these matters into account on the question of costs.
(3)Without affecting the generality of the discretion of the Court, in exercising its discretion as to costs under subrule (2), the Court may—
(a)     order that the offeree pay the costs of the offeror in respect of the action or the part the subject of the offer from 14 days after service of the formal offer on a specified basis;
(b)     order that the offeree bear its own costs in respect of the action or the part the subject of the offer from 14 days after service of the formal offer; or
(c)     make such other or further order as to costs as it thinks fit.
(4)Without affecting the generality of the discretion of the Court, in exercising its discretion as to costs, if the Court considers that a party unreasonably rejected a formal offer or failed to make a formal offer, the Court may—
(a)     order that that party pay the costs of the opposing party after the rejection or date when an offer should have been made on a specified basis;
(b)     order that that party bear its own costs after the rejection or date when an offer should have been made; or
(c)     make such other or further order as to costs as it thinks fit.
Jack submits that rule 132.11 effectively reflects the costs principle referred to in Calderbank v Calderbank.[2] I accept that submission.
[2] [1975] 3 All ER 333.
Jack concedes that each of the three prerequisites contained in subrule 132.11(2)(a) to (c) is met. Jack contends however that it was not unreasonable for him to reject the 1 September offer because he received substantial evidentiary material from Grant after that offer was made. Jack refers to Grant’s third list of documents filed on 1 September 2020; the reply affidavits by Mark and Grant filed on 17 and 18 September 2020 respectively; and affidavits by Mr and Mrs Scrimshaw, Mr Gould, Grant and Tatiana (in rebuttal of recent invention) filed between 6 and 11 October 2020.
It is well established that, in exercising the discretion whether to make a different costs order due to refusal of a “Calderbank offer” more favourable to the offeree that the resultant judgment, the factors taken into account include:
1the reasonableness of the offer and of its rejection;[3]
2the stage of the proceeding when the offer is made;[4]
3the time allowed to consider the offer;[5]
4the extent of the compromise in the offer;[6]
5the prospects of success at the time of the offer;[7]
6the clarity of the terms of the offer;[8] and
7whether the offer foreshadowed that indemnity costs would be sought if the offeree rejected it.[9]
[3]    Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 at [23] per Warren CJ, Maxwell P and Harper, AJA; Stewart v Atco Controls Pty Ltd (In Liquidation) (No 2) [2014] HCA 31, (2014) 252 CLR 331 at [4] per Crennan, Kiefel, Bell, Gageler and Keane JJ.
[4]    Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 at [25] per Warren CJ, Maxwell P and Harper AJA; Nominal Defendant v Dighton (No 2) [2012] SASCFC 97 at [8] per Sulan, Anderson and David JJ.
[5]    Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 at [25] per Warren CJ, Maxwell P and Harper AJA; Nominal Defendant v Dighton (No 2) [2012] SASCFC 97 at [8] per Sulan, Anderson and David JJ.
[6]    Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 at [25] per Warren CJ, Maxwell P and Harper AJA; Nominal Defendant v Dighton (No 2) [2012] SASCFC 97 at [8] per Sulan, Anderson and David JJ.
[7]    Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 at [25] per Warren CJ, Maxwell P and Harper AJA; Nominal Defendant v Dighton (No 2) [2012] SASCFC 97 at [8] per Sulan, Anderson and David JJ.
[8]    Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 at [25] per Warren CJ, Maxwell P and Harper AJA; Nominal Defendant v Dighton (No 2) [2012] SASCFC 97 at [8] per Sulan, Anderson and David JJ.
[9]    Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 at [25] per Warren CJ, Maxwell P and Harper AJA; Nominal Defendant v Dighton (No 2) [2012] SASCFC 97 at [8] per Sulan, Anderson and David JJ.
In relation to the questions of reasonableness and prospects of success, in Stewart v Atco Controls Pty Ltd (In Liquidation) (No 2)[10] the High Court said:
The non-acceptance of a Calderbank offer is a factor, in some cases a strong factor, to be taken into account on an application for indemnity costs. The respondent submits that its rejection of the offer was not unreasonable. If that be the test, it would appear to require at the least that the respondent point to a reason for not accepting the offer beyond the usual prospects of being successful in litigation.[11]
[10] (2014) 252 CLR 331.
[11] At [4] per Crennan, Kiefel, Bell, Gageler and Keane JJ.
The 1 September offer implicitly foreshadowed that indemnity costs would be sought if Jack rejected it because it was a formal offer under the Rules. Its terms were clear. It was expressed to be open for acceptance for 14 days, which is the period required by the Rules for a formal offer to be a “relevant offer”; this was an adequate time for Jack to decide whether to accept it; Jack effectively decided on 2 September not to accept it (although technically Grant’s offer remained open, Jack’s counter offer was inconsistent with any contemplation that he might accept it) and Jack formally responded on 14 September not accepting it. The extent of the compromise was substantial compared to the judgment which Grant obtained.
Turning to the reasonableness of the offer and its rejection, the stage when it was made and the prospects of success at the time, the fact that Grant made discovery of a substantial number of documents on 1 September is not significant. The documents discovered were not significant to the result of the action and Jack does not identify any particular document, or class of documents, in that list of documents that he suggests was significant to the prospects of success.
The reply affidavits of Grant and Mark were not particularly significant to the result of the case. They were essentially responsive to the affidavits of Jack, Nola, Louise and Anne. Jack knew the thrust of the evidence that Grant and Mark were to give from their primary affidavits. Indeed, in a case in which evidence is adduced orally in the traditional way, Jack would not have had such a detailed knowledge of the evidence that Grant and Mark were to give.
It is true that Jack only received the affidavits of Mr and Mrs Scrimshaw, Mr Gould and Tatiana after the trial commenced and after the primary cross-examination of Grant had been completed and that evidence was relevant to an assessment of Grant’s credit (albeit it was not probative of the objective fact as to Grant’s conversations with Jack). However, that evidence only became admissible as a result of its having been put to Grant in cross-examination that his story was a recent invention and that evidence could not have been brought forward earlier. It was inherently likely and hence readily foreseeable by Jack that, if Grant’s story was true, it was likely that Grant had told it to other people before 2017 and hence likely that Grant would adduce rebuttal evidence of this type if recent invention were put to him in cross-examination. Rebuttal evidence is always on the cards in such a trial. Moreover, on my findings, Jack knew that he was falsely denying that he had agreed (in the colloquial sense) with Grant in 2012 to sell Pulgamurtie to Grant. This cannot be ignored when considering Jack’s contention that his assessment of Grant’s prospects of success would have been different before Grant adduced the rebuttal evidence.
In assessing the parties’ approach to resolution of the action, Grant made several different forms of offers and repeatedly expressed a willingness to consider alternative forms of offers and alternative terms. By contrast, the only offers made by Jack were in effect to advance a portion of Grant’s inheritance, in the sum of $500,000 in the 2 September offer and in the sum of $1 million in the 18 September offer. Jack and Nola conducted their case on the basis that they did not intend to disinherit Grant because Grant had brought the action or due to his other conduct. It is apparent that, if the action had been resolved on the basis of a payment by Jack to Grant of $500,000 or $1 million, Jack would have deducted that amount from the amount that he would otherwise have left to Grant by his will. My assessment is that Grant made genuine and reasonable offers to resolve the action and Jack did not.
Weighing all the circumstances, I exercise my discretion to order that Jack pay Grant’s costs of action on the solicitor/client basis on and after 22 September 2020. The difference between the solicitor/client basis and the indemnity basis is the onus of persuasion.[12] Although rule 132.10 would have provided for indemnity costs if the 1 September offer had been a “relevant offer”, I consider that in the exercise of my discretion in making an order under rule 132.11 the onus should be on Grant at a taxation to demonstrate that the costs recoverable from Jack were reasonably incurred in the proceeding (albeit not by reference to the Higher Courts costs scale as is the case in respect of the standard costs basis). Although Grant seeks costs on the higher basis from 15 September 2020 (being two weeks after his 1 September offer) I consider that in the excise of my discretion costs on the higher basis should commence from the start of the trial on 22 September 2020.
[12] See the respective definitions in rule 191.1 of the Uniform Civil Rules 2020 (SA).
Costs of secondary action
Grant seeks an order that Nola pay his costs of the secondary action on the basis that he succeeded in obtaining a declaration that Nola wrongfully terminated the Heads of Agreement, failing only on his damages claim, and costs should follow the event. Nola and Jack seek an order that each party bear their own costs of that action on the basis that Grant’s failure on his damages claim offsets Nola’s failure in seeking a declaration that she had validly terminated the Heads of Agreement.
Costs up to 29 April 2020

The secondary action was instituted by Nola on 3 February 2020 seeking a declaration that Grant had repudiated the Heads of Agreement and she or Jack were entitled to terminate it. Grant filed a defence on 4 March and all parties had made discovery by 17 March 2020.
On 26 March 2020 Nola purportedly terminated the Heads of Agreement on the ground of repudiation by Grant. On 29 April 2020 Grant purportedly terminated the Heads of Agreement on the ground of wrongful termination by Nola.
Up to 29 April 2020 no question of a loss of bargain damages claim by Grant arose because he only became entitled to claim damages after Nola allegedly breached the agreement on 26 March and after he terminated the agreement on 29 April.
Up to 29 April 2020, the only issue in the action was whether Grant had repudiated the Heads of Agreement and Nola or Jack were entitled to terminate it. Grant succeeded at trial of this issue. It follows that Grant is entitled to an order for his costs of the action up to and including 29 April 2020.
Costs from 30 April 2020
On 29 May 2020 Grant filed his cross claim against Nola and Jack seeking a declaration that he had validly terminated the Heads of Agreement and seeking loss of bargain damages. Although each party continued to seek declarations that they had validly terminated the Heads of Agreement, that issue in itself would have been moot if Grant had not pursued a claim for damages. There would have been no point in either party incurring the costs of seeking a declaration in those circumstances and in any event it is likely that I would have declined to make a declaration or decide the issue on the ground that it was moot.
The result at trial of Grant’s claim for loss of bargain damages was that Grant succeeded on the issue of liability (establishing that he had not repudiated the Heads of Agreement) but failed on the issue of causation of loss. This is a mixed result.
A unifying principle in determining how to exercise the costs discretion often involves determination of the question which party caused or contributed to the incurring of the costs in question.[13] The answer to that question in respect of the costs incurred after 29 April 2020 is also mixed.
[13] Koonara Management Pty Ltd (Receivers and Managers Appointed) v Fabriano Pty Ltd [2019] SASC 99 at [51]; Bell v Deputy Coroner of South Australia (No 2) [2020] SASC 77 at [24]; Duncan as Liquidator of WDR Iron Ore Pty Ltd (In Liquidation) v SMA Industries Pty Ltd (No 2) [2020] SASC 127 at [29]; Mayfield Family Wines Pty Ltd v Growers Wine Group Pty Ltd (No 2) [2021] SASC 75 at [6].
At the issue level, on the one hand, Nola’s conduct may be characterised as having caused the incurring of the costs of the liability issue by unsuccessfully contending that Grant had repudiated the Heads of Agreement. On the other hand, Grant’s conduct may be characterised as having caused the incurring of the costs on the causation of loss issue by unsuccessfully contending that he would otherwise have entered into a back to back sale transaction. Considered at the issue level, costs incurred on the liability issue greatly exceeded the costs incurred on the causation of loss issue.
At the higher macro level, Grant’s conduct may be characterised as having caused the incurring of the costs because he persisted with a claim for loss of bargain damages which was unsuccessful and, in the absence of which, the earlier issue as to repudiation would have been moot.
Balancing all of these considerations, given his success on liability, it is not appropriate to order that Grant pay Nola’s costs and indeed Nola does not seek such an order. However, nor is it appropriate to order that Nola (or Jack) pay Grant’s costs after 29 April 2020 when the matter is considered at the macro level. Accordingly, the notional order should be that each party bear their own costs of the secondary action from 30 April 2020.
Form of order in respect of costs from 30 April 2020
If an order were made that each party bear their own costs of the secondary action from 30 April 2020, multiple issues would arise before the taxing officer as to whether particular items of cost incurred by Grant were incurred as part of the primary action (in which case Grant would be entitled to recover them) or the secondary action (in which case Grant would not be entitled to recover them). This would be a complex process because both actions were heard together and indeed the two actions were consolidated during the trial (albeit on the basis that the consolidation would not affect issues such as costs).
An alternative approach is to make a broad axe assessment of the proportion of costs attributable to the secondary action out of the total costs incurred in both actions combined from 30 April 2020 and order that Grant recover from Jack his combined costs of action incurred after that date less the proportion attributed to the secondary action. All three parties accept that this would be an appropriate approach.
The overwhelming majority of time spent at trial on evidence and addresses related to the issues in the primary action as opposed to the secondary action.
In terms of testimonial evidence, the evidence of Mr Lowe was relevant principally to the secondary action, although it had some relevance to the question of relief in the primary action. Mr Lowe’s evidence took approximately two hours and occupied approximately 50 pages of transcript. A small proportion of Grant’s evidence was relevant to the secondary action, taking approximately one hour and occupying approximately 28 pages of transcript. The combined evidence represented a little less than four per cent of the total oral evidence at trial. There was no written evidence from Mr Lowe and virtually no written evidence from Grant relevant to the secondary action.
In terms of documentary evidence, the entirety of the Westpac file was tendered by Jack and Nola, which comprised several lever arch folders, but much was not referred to and references to it during the trial occurred largely in the course of the evidence of Grant and Mr Lowe referred to above.
In terms of addresses, a little more than three per cent of the written closing addresses and a little less than 10 per cent of the oral closing addresses was devoted to the secondary action.
My assessment is that the relative time spent on secondary action issues during the trial outside court hours would have been proportionate to time spent in court during trial. My assessment is that the relative time spent on secondary action issues between 30 April 2020 and the commencement of trial on 22 September 2020 would have been somewhat less than the relative time spent at trial.
My overall assessment is that four per cent of the combined costs of action incurred on and after 30 April 2020 should be apportioned to secondary action issues.
Conclusion
Subject to hearing counsel, I will make the following orders:
1The action by Nola (originally action number 87 of 2020) is dismissed.
2On the cross action by Grant (originally action number 87 of 2020), it is declared that Nola and Jack Roberts repudiated the Heads of Agreement dated 28 November 2018 between Nola, Jack and Grant, and Grant validly terminated the Heads of Agreement himself on 29 April 2020.
3Jack is to pay Grant’s costs of action in respect of action number 996 of 2018 up to and including 29 April 2020 on the standard costs basis.
4Nola is to pay Grant’s costs of action in respect of action number 87 of 2020 up to and including 29 April 2020 on the standard costs basis.
5Jack is to pay 96 per cent of Grant’s costs of action in respect of action number 996 of 2018 and action number 87 of 2020 from 30 April 2020 up to and including 21 September 2020 on the standard costs basis.
6Jack is to pay 96 per cent of Grant’s costs of action in respect of action number 996 of 2018 and action number 87 of 2020 on and after 22 September 2020 on the solicitor/client basis.
7Costs certified fit for two counsel including senior counsel.

[2021] SASC 91

28 July 2021