Russell v RCR Tomlinson Ltd
[2012] WASC 405 (S)
•24 SEPTEMBER 2013
RUSSELL -v- RCR TOMLINSON LTD [2012] WASC 405 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASC 405 (S) | |
| Case No: | CIV:1229/2010 | 27 NOVEMBER 2012 & ON THE PAPERS | |
| Coram: | PRITCHARD J | 24/09/13 | |
| 17 | Judgment Part: | 1 of 1 | |
| Result: | Defendant to pay the plaintiff's costs of the action Defendant to pay interest to the plaintiff Plaintiff's application for indemnity costs is refused | ||
| B | |||
| PDF Version |
| Parties: | DAVID WILLIAM RUSSELL RCR TOMLINSON LTD |
Catchwords: | Circumstances in which an order for payment of interest may be made pursuant to s 32 of the Supreme Court Act 1935 (WA) Exercise of discretion in relation to an order for costs pursuant to O 66 of the Rules of the Supreme Court 1971 (WA) Application for indemnity costs on the basis of unreasonable failure to accept a Calderbank offer |
Legislation: | Rules of the Supreme Court 1971 (WA) Supreme Court Act 1935 (WA) Trade Practices Act 1974 (WA) |
Case References: | Calderbank v Calderbank [1975] 2 All ER 333 Craddock Brothers v Hunt [1923] 2 Ch 136 Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 Russell v RCR Tomlinson Ltd [2012] WASC 405 Souter v Condor Developments Pty Ltd [2012] WASCA 22 Utopia Financial Services Pty Ltd v Financial Ombudsman Service Ltd [2012] WASC 279 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
RCR TOMLINSON LTD
Defendant
Catchwords:
Circumstances in which an order for payment of interest may be made pursuant to s 32 of the Supreme Court Act 1935 (WA) - Exercise of discretion in relation to an order for costs pursuant to O 66 of the Rules of the Supreme Court 1971 (WA) - Application for indemnity costs on the basis of unreasonable failure to accept a Calderbank offer
Legislation:
Rules of the Supreme Court 1971 (WA)
Supreme Court Act 1935 (WA)
Trade Practices Act 1974 (WA)
Result:
Defendant to pay the plaintiff's costs of the action
Defendant to pay interest to the plaintiff
Plaintiff's application for indemnity costs is refused
Category: B
Representation:
Counsel:
Plaintiff : Mr P Willox
Defendant : Mr J L Snaden
Solicitors:
Plaintiff : King & Wood Mallesons
Defendant : Clayton Utz
Case(s) referred to in judgment(s):
Calderbank v Calderbank [1975] 2 All ER 333
Craddock Brothers v Hunt [1923] 2 Ch 136
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
Russell v RCR Tomlinson Ltd [2012] WASC 405
Souter v Condor Developments Pty Ltd [2012] WASCA 22
Utopia Financial Services Pty Ltd v Financial Ombudsman Service Ltd [2012] WASC 279
1 PRITCHARD J: I delivered my reasons for decision in this matter last year.1 These reasons should be read in conjunction with those earlier reasons. In summary, following RCR's termination of his employment, Mr Russell commenced an action in which he claimed:
(i) that RCR had breached his contract of employment (the Contract) by failing to pay a Retirement Benefit which, on the proper construction of the Contract, was due to him, in the sum of $297,500;
(ii) in the alternative, that the Contract should be rectified to embody the agreement actually made between Mr Russell and RCR. The basis for that claim was that the Contract was executed by the parties in the mistaken belief that the Contract embodied their intention that the Retirement Benefit should be paid if Mr Russell's employment was terminated other than for cause (for example, misconduct), and irrespective of his length of service;
(iii) in the alternative, that RCR should pay damages for misleading and deceptive conduct arising from representations Mr Russell claimed had been made to him by Mr Noordhoek (the Chief Executive Officer of RCR at the time) to the effect that Mr Russell would be paid the Retirement Benefit if his employment was terminated other than for cause.
2 RCR denied that it was liable to pay the Retirement Benefit to Mr Russell, or that there had been any agreement to that effect, and denied that it was liable to pay damages to Mr Russell for a breach of contract or misleading and deceptive conduct. It also sought to set off against any award which might be made against it the sum of $41,666.64, which RCR claimed to have overpaid Mr Russell (the set-off claim).
3 Initially, RCR pursued a counter claim in which, in essence, it alleged that Mr Russell had acted in breach of fiduciary duties he owed to RCR in disposing of property owned by RCR. On the first day of the trial, the counterclaim was formally abandoned.
4 I concluded that the breach of contract and misleading and deceptive conduct claims failed, but I found that the Contract should be rectified as Mr Russell contended. I also concluded that RCR's set-off claim failed.
5 Following the publication of my reasons for decision, a dispute arose between the parties about the orders which could and should be made in light of my reasons, having regard to the relief sought in the statement of claim. At a hearing on 27 November 2012, Mr Russell sought an order for rectification of the Contract, and an order that RCR pay Mr Russell the sum of $297,500, plus an order for the payment of interest, and costs. RCR opposed the making of orders for the payment of $297,500 and interest, on the basis that this relief had never formed part of the relief sought in the action, that an order for the payment of $297,500 amounted to an order for specific performance, and that an award of interest could not be made in respect of an order for specific performance.
6 However, that initial dispute about the orders which should be made gave rise to a further dispute about whether Mr Russell, and in turn RCR, should be permitted to re-open their cases and to amend their pleadings. The matter was subsequently referred to mediation.
7 After that mediation, the parties advised the Court that they had reached agreement that certain orders should be made by consent. Those orders included an order that Mr Russell be granted leave to amend the prayer for relief in his statement of claim to add a claim for specific performance of the Contract as rectified, a claim for damages in lieu of, or in addition to, specific performance of the Contract as rectified, and to amend the claim for interest.
8 In addition, the parties agreed to orders for the payment of costs in respect of RCR's counterclaim.
9 Subsequent to those orders being made by consent, an amended Statement of Claim was filed. The prayer for relief in its amended form now reads:
AND THE PLAINTIFF CLAIMS AGAINST THE DEFENDANT:
A. The sum of $297,000.
B. Further and in the alternative to A and C, damages pursuant to section 82(1) of the Trade Practices Act 1974 (Cth).
C. Further and in the alternative, the Contract be rectified so as to embody the agreement actually made between the Plaintiff and the Defendant, or their true intentions at the time of executing the same, in the respects pleaded in paragraphs 20 and 21 herein and to have the Contract treated as being so rectified.
D. Specific performance of the Contract as rectified pursuant to prayer C above.
E. Damages in lieu of or in addition to specific performance of the Contract as rectified.
F. Interest, by way of equitable relief or otherwise, on the amount payable to the Plaintiff at the rate of 6% per annum pursuant to section 32 of the Supreme Court Act 1935 or on such other basis or at such other rate as the Court may deem fit, from the time for payment specified in the Contract until payment.
G. Costs.
H. Such further or other orders or relief as this Honourable Court considers appropriate.
10 The Court was also advised that the parties had agreed that when final orders are made in this matter, those orders should include (in addition to any orders the subject of these reasons for decision) an order for the rectification of the Contract, and for the payment by RCR to Mr Russell of the sum of $297,000.
11 As a result of this agreement, the only issues which remain in dispute between the parties are whether an order can be made for the payment of interest, and what order or orders should be made for the costs of the action, other than in respect of RCR's counterclaim.
12 For the reasons outlined below, I have determined that an order for the payment of interest may be made pursuant to s 32 of the Supreme Court Act 1935 (WA) (SC Act). I have also concluded that RCR should pay Mr Russell's costs of the action.
The basis for the order for the payment of $297,500 to the plaintiff
13 Before dealing with the parties' submissions in relation to the award of interest, it is appropriate to say something more about the basis upon which the parties agreed that the final orders in this action should include an order for the payment of $297,500 to Mr Russell (being the amount of the Retirement Benefit the subject of the Rectification claim). The Court was advised that the parties had not agreed on the characterisation of that payment, and despite further conferral since mediation had been unable to agree on the characterisation of the payment. The position is therefore that the parties agree that an order for the payment to Mr Russell of $297,500 falls within the scope of the amended prayer for relief, so that the Court is entitled to make the order for payment of that sum, but they disagree on the characterisation of the payment.
14 In an email dated 9 September 2013, the solicitors for Mr Russell advised the Court:
The plaintiff's position is that the relief sought, namely payment of the principal sum (ie the retirement benefit) and interest on that sum, can be pursuant to either:
1. specific performance (in relation to payment of the retirement benefit) and, in addition, an award of equitable damages (where the amount of damages is calculated by reference to the amount of interest accruing in the principal sum since it was due to be paid under the contract) (see prayers D and E in the plaintiff's amended prayer for relief); or
2. common law damages in lieu of specific performance (in the amount of the retirement benefit) and an order for statutory interest pursuant to section 32 of the Supreme Court Act accruing since the time payment was due under the contract (see prayers E and F in the plaintiff's amended prayer for relief).'
15 In an email dated 9 September 2013, the solicitors for RCR advised the Court that the parties
did not agree on the characterisation of the payment of the sum of $297,500 …
The defendant submits that the payment of the Retirement Benefit [ie the sum of $297,500] falls within the amendment that has been consented to; specifically, it should be characterised as an order for specific performance of the rectified contract.
But for the amendments that the parties have consented to - and, more specifically, the amendment concerning specific performance - the defendant submits that there would have been no proper basis for the plaintiff to be entitled to receive the Retirement Benefit.
In these circumstances where the remedy is to compel performance of a contractual obligation, there is no basis for an order for payment of interest.
16 It is not possible to make any determination about the basis for the order which the parties have foreshadowed they will seek, namely that RCR pay Mr Russell $297,500 other than that there is no dispute that it falls within the prayer for relief. However, it is not necessary to determine whether the basis for the order is as contended by Mr Russell or RCR. Even if RCR is correct in that the basis for the payment is that it constitutes specific performance of the Contract as rectified, in my view s 32 of the SC Act will be applicable, so that an order for the payment of interest may be made.
The interest claim - overview of the parties' positions
17 Counsel for Mr Russell placed primary reliance on s 32 of the SC Act as the source of power to award interest in this case. In the alternative, counsel for Mr Russell also submitted that an award of interest could be made pursuant to s 25(10) or s 24(7) of the SC Act.
18 Counsel for RCR submitted that this was not a case in which an order for the payment of interest could be made pursuant to s 32 of the SC Act, and that no other basis existed for an order for the payment of interest in this case.
19 I did not understand there to be any dispute between the parties as to the calculation of the interest which should be awarded under s 32(1) SC Act, if power existed under that subsection to make an order for the payment of interest. What was in dispute was whether s 32(1) applied in this case.
Does s 32 of the SC Act permit an order for the payment of interest in this case?
20 Section 32(1) of the SC Act provides:
(1) In any proceedings for the recovery of any money (including any debt or damages or the value of any goods), the Court may order that there shall be included, in the sum for which judgment is given, interest at such rate as it thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date when the judgment takes effect.
21 It is apparent that the words 'proceedings for the recovery of any money' are intended to have a broad operation. 'Any' such proceedings for the recovery of 'any' money are within the purview of s 32. The breadth of that phrase is further confirmed by the examples given in parentheses, which confirm that a proceeding for the recovery of money applies not only to a proceeding to recover a debt, but also extends to a proceeding where an award of damages is sought.
22 In view of the amendment of the prayer for relief, there is in my view no doubt that these proceedings can be characterised as proceedings for the recovery of money. That is so whether the nature of these proceedings, for the purposes of s 32, pertains to the proceedings as a whole as described in the amended statement of claim, or only to that part of the proceedings on which Mr Russell was successful. That is because the rectification claim is now coupled with a claim for specific performance of the Contract (as rectified) which involves the payment of money or with a claim for damages in lieu of, or in addition to, specific performance of the Contract as rectified. I note that the practical effect of the rectification of the Contract will be that the Contract will be read as if it was originally drawn as containing the rectified term.2 The effect of the rectification of the Contract will be that RCR will have been obliged to pay the Retirement Benefit since 17 March 2010 at the latest. The order for the payment of $297,500 – whether characterised as an order for specific performance, or for damages in lieu thereof, clearly involves the recovery of the payment of the amount of the Retirement Benefit.
23 I turn, then, to consider why RCR says that interest cannot be awarded under s 32 of the SC Act in this case.
24 Prior to the amendment of the pleadings, RCR submitted that it was not open to the Court to make an order requiring RCR to pay a judgment sum to Mr Russell. However, RCR conceded that if the Court were to make an order that RCR pay Mr Russell a judgment sum, then the Court would have jurisdiction to order the payment of interest pursuant to s 32 of the SC Act, and 'there was no obvious reason it should not do so'.3 Now that the parties have agreed to the amendment of the Statement of Claim, it appears that RCR's sole objection to an award of interest lies in its submission that the order for the payment of $297,500 which the parties have agreed is to be made by the Court is not an order for the payment of a judgment sum, but rather an order for specific performance. RCR contends that an order for the payment of interest pursuant to s 32 of the SC Act cannot be made in respect of an order for specific performance.
25 In support of that contention, RCR relied upon the decision of Le Miere J in Utopia Financial Services Pty Ltd v Financial Ombudsman Service Ltd.4In that case, the defendant (FOS) in its counterclaim sought an order for the specific performance of its contract with the plaintiff (Utopia). That contract required Utopia to act in accordance with a determination made by FOS, by paying a sum of money to the Rees, who were clients of Utopia in its capacity as a financial services provider, but who were not parties to the contract between Utopia and FOS. Le Miere J held that an order for specific performance should be made. FOS also sought an order for the payment of interest. Le Miere J concluded that there was no basis upon which a payment of interest could be made. His Honour held:5
The counterclaim is not a proceeding for the recovery of any money. It is a claim for specific performance of Utopia's obligations under the contract between Utopia and FOS. Paragraph 9.5 of the Terms of Reference provides that FOS may decide that the Financial Services Provider [ie Utopia] pay interest on a payment to be made by the Financial Services Provider to the Applicant [ie the Rees]. However, FOS did not decide that Utopia pay interest on the payment to the Rees. There is no basis for the court to order Utopia to pay interest.
26 Factually, Utopiais very different from the present case, particularly as the only order sought in the counter claim in Utopiawas one for the specific performance of a contractual obligation. The case is distinguishable from that perspective. More importantly, Utopia does not establish, as a general proposition, that an order for the payment of interest pursuant to s 32 cannot be made in any case where specific performance is sought. Although his Honour's reasons are not fulsome, it appears that the basis on which Le Miere J held that an order for interest under s 32 could not be made in that case was that the order for specific performance which was sought and made was for the performance of a contractual obligation between Utopia and third parties, namely the Rees. FOS' counterclaim against Utopia was not one in which it sought to recover any money from Utopia. The contractual obligation which FOS sought to have specifically performed was a term of a contract between FOS and Utopia, by which Utopia agreed to comply with a determination made by FOS in a dispute between Utopia and the Rees. The effect of that determination was to require Utopia to pay money to the Rees. FOS would receive no monetary payment as a result of the specific performance of its contract with Utopia. Hence, his Honour went on to observe that the counterclaim was not a proceeding for the recovery of any money but was a claim for specific performance of Utopia's obligations under the contract between Utopia and FOS.
27 When his Honour went on to discuss how interest could have been awarded, it is apparent that he was not discussing an award of interest payable to FOS, pursuant to s 32 of the SC Act. Rather he was discussing how interest could have been payable by Utopia to the Rees. The only means by which this would have been possible had nothing to do with s 32 of the SC Act, but depended instead on FOS having included in its determination a decision that Utopia should pay interest to the Rees. An order for the specific performance of Utopia's contractual obligation to FOS would thus have resulted in Utopia's payment to the Rees of a sum for interest. As FOS had not included an interest component in its determination, and as s 32 of the SC Act did not apply, no interest was ultimately payable to the Rees.
28 In the present case, even if the proposed order for the payment of $297,000 is characterised, as RCR submits, as an order for specific performance of the Contract as rectified, the effect of that order will clearly result in Mr Russell's recovery of money. In the circumstances, the action can in my view properly be characterised as a proceeding for the recovery of money, and an order may be made for the payment of interest by RCR to Mr Russell, pursuant to s 32 of the SC Act.
29 In view of that conclusion it is unnecessary to consider the alternative bases upon which Mr Russell contended that interest could be awarded.
The costs claim - overview of the parties' positions
30 References to costs in the reasons below refer to the costs of the action, other than in respect of the counterclaim (an order as to the costs of the counterclaim having been agreed between the parties).
31 In relation to costs, Mr Russell seeks an order that RCR pay his costs of the action up to 15 February 2012 on the usual party/party basis, and thereafter that RCR pay his costs on an indemnity basis, on the basis that RCR unreasonably refused a Calderbank offer.6
32 RCR, on the other hand, seeks orders that it pay one third of Mr Russell's costs of the action, and an order that Mr Russell pay two thirds of RCR's costs of the action.
33 I will deal first with the costs of the action generally, and then deal with the application for an order for indemnity costs based on the rejection of the Calderbank offer.
The costs of the action - the parties' submissions
34 Counsel for Mr Russell submitted that RCR should pay Mr Russell's costs of the action, because Mr Russell was successful in the action, and the general rule is that the Court will order that a successful party recover his costs. Counsel for Mr Russell submitted that the action involved a narrow dispute, and that the evidence in respect of each of the three claims made by Mr Russell was the same. He submitted that the rectification claim (in respect of which Mr Russell was successful) required a consideration of the terms of the contract, and that an analysis of those terms was necessary for the breach of contract claim. He also submitted that the rectification claim required that evidence be given as to the pre-contractual negotiations and their context, and that the misleading and deceptive conduct claim involved a different legal characterisation of the same evidence. He submitted that the only 'extraneous' issue (by comparison) was the set off argument, and Mr Russell was successful on that issue.
35 In contrast, counsel for RCR submitted that the Court should make orders that it pay one third of Mr Russell's costs of the action, and that Mr Russell pay two thirds of RCR's costs of the action, pursuant to O 66 r 2(a) of the Rules of the Supreme Court 1971 (WA) (RSC). He submitted that in this case there were three distinct causes of action, and although there was some factual overlap, those three causes of action did not involve the same facts.
36 In the course of his submissions, counsel for RCR accepted that there was quite a significant overlap in the evidence and the facts relevant to each cause of action. However, he pointed out that the legal issues raised by each cause of action were different, and dealing with them involved time and expense for RCR. He submitted that the appropriate way of delineating between those costs which were to be paid by Mr Russell and those to be paid by RCR was on the basis that each cause of action advanced by Mr Russell represented approximately one third of the entire action.
37 In respect of the set-off claim, counsel for RCR noted that that claim was not one of the causes of action, and it was therefore inappropriate to take the resolution of that claim into account in determining the extent to which Mr Russell's costs should be paid by RCR. Furthermore, he submitted that if the Court determined that no order should be made for the payment of any sum to Mr Russell, then no basis would have existed for taking into account any set off in any event. In those circumstances, he submitted that the costs of the set-off component of RCR's case should be paid by Mr Russell.
Disposition of applications for costs other than the application for indemnity costs
38 By virtue of s 37 of the SC Act, the Court has a broad discretion to make orders in relation to the costs of, and incidental to, a proceeding. However, that statutory discretion, while broadly stated, is not unqualified and the discretion must be exercised judicially in accordance with established principle and factors directly connected with the litigation.7 The most important factor which guides the exercise of the costs discretion is the result of the litigation.8 Generally speaking, the Court will make an order that the successful party to an action recover his costs from the unsuccessful party. This principle is reflected in O 66 r 1(1) RSC. In Oshlack v Richmond River Council McHugh J explained the rationale for this approach as follows:
The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
39 The starting point for considering the proper exercise of discretion with respect to costs is thus that Mr Russell as the successful party should be able to recover his costs from RCR.
40 However, there are exceptions to this general approach to costs. Generally speaking, these exceptions derive from the conduct of the successful party in relation to the litigation, or leading up to the litigation, which is seen to disentitle that party to the benefit of the exercise of the discretion in its favour.9 Considerations of that kind do not arise here.
41 On the other hand, Mr Russell was unsuccessful in respect of two out of the three causes of action he pursued against RCR. The question is whether, and if so, how, that should be taken into account in the exercise of the discretion to award costs. The RSC contemplate that a departure from the usual order as to costs will sometimes be required if a successful party has not been successful on all of the issues raised in the proceedings. By way of example, O 66 r 1(3) provides:
Where a party though generally successful in an action has, by the introduction of some issue or issues on which he has failed, increased the costs the Court may order such party to pay the costs of such issue or issues.
42 By way of further example, O 66 r 2 RSC relevantly provides:
In the absence of any special order -
(a) where the statement of claim contains more than one cause of action and the plaintiff succeeds on one or more causes of action and the defendant succeeds on another or others, costs shall be allowed to the plaintiff on the cause or causes of action on which he succeeds and to the defendant on that or those on which he succeeds, in the same manner as if separate actions had been brought.
43 These provisions, and the authorities pertaining to them, were recently discussed by the Court of Appeal in Souter v Condor Developments Pty Ltd.10 Newnes JA (with whom Buss and Murphy JJA agreed) made the following observations about the application of these provisions:11
It is trite law that the court has a very wide discretion as to costs, albeit it is a discretion to be exercised judicially. The general rule is that a successful party is entitled to an order for costs: O 66 r 1(1), Rules of the Supreme Court 1971 (WA). There are, however, two well-established exceptions to that rule to which it is necessary to refer.
First, where a party, although generally successful, has failed on some issue or issues which increased the costs of the action, the court may order the party to pay the costs of those issues: O 66 r 1(3). But that is a power to be exercised with caution and not as a matter of course. While parties should be encouraged to litigate only those matters which are properly and reasonably in issue, parties should not be dissuaded by the risks of an adverse costs order from canvassing all issues which might be material to the proper determination of a case: Keet v Ward. Moreover, any practice of determining costs on the basis of a painstaking analysis of which party won on which issue would simply add to the time, costs and uncertainty of litigation: see Bowen v Alsanto Nominees Pty Ltd. Such an approach may also fail to do justice in cases where the issues were intertwined or overlapped, or there was only one substantive issue. The exercise of the power to adjust an order for costs by reference to particular issues upon which an otherwise successful party has failed will ordinarily be appropriate only where the party has failed on discrete and severable issues which have added to the costs of the action in a significant and readily discernible way: Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Hannell.
Where the court considers that an order as to costs should reflect the failure of the successful party on some issues in the action, the better approach will often be to award the successful party a proportion of its costs, or to make no order as to costs, rather than attempt to award costs to the respective parties on an issue by issue basis: Phillips Fox (A Firm) v Westgold Resources NL. Where a party is awarded only a proportion of its costs, the exercise of discretion involved will inevitably be more a matter of art than science, depending upon matters of impression and evaluation, and mathematical precision will be illusory: Amaca; Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd.
Secondly, where a plaintiff pleads two or more causes of action but succeeds on only some of those causes of action, the general rule is that the plaintiff is entitled to costs on the causes of action on which it was successful and the defendant is entitled to costs on the causes of action on which it was successful, as if separate actions had been brought: O 66 r 2(a). Again, and for similar reasons, an order of that kind is not to be made as a matter of course. It is necessary for the court to look at the realities of the case and attempt to do substantial justice in the particular circumstances. In some cases, while it might be strictly correct to say there are different causes of action involved, there may have been only one contest in substance. That will often be so where all causes of action arise out of the one course of dealings, the one transaction, or the same facts, in which case there would usually be one order for the general costs of the action, moulded as necessary to ensure that substantial justice is done: Permanent Building Society v Wheeler [No 2]; Keet v Ward.
(Case citations omitted.)
44 Having taken into account all of the circumstances of the case, and the submissions of counsel, and having taken into account the approach referred to in Souter, I have formed the view that the proper exercise of discretion in relation to the costs of this case is that RCR should pay Mr Russell's costs of the action. I have reached that view for the following reasons. First, the facts of the case were relatively narrow in compass, and, there was a significant factual overlap between each cause of action. The facts which pertained to the causes of action for breach of contract, or to the misleading and deceptive conduct claim, but not to the rectification claim, were very confined indeed. Secondly, at least in so far as the trial was concerned, the breach of contract and misleading and deceptive conduct claims did not significantly increase the duration of the trial. Finally, in my view this is a case which should be viewed as arising, essentially, from one course of dealing, or one set of facts, between the parties, so that the just outcome in the circumstances is simply to require RCR to pay Mr Russell's costs of the action, rather than to make an order pursuant to O 66 r 2(a) RSC.
45 The only remaining question is whether any alteration to that order should be made to take into account the fact that RCR refused to accept an offer to settle made on behalf of Mr Russell and which expired on 15 February 2012.
The application for indemnity costs after 15 February 2012
46 Counsel for Mr Russell sought indemnity costs after 15 February 2012, on the basis that RCR had, unreasonably, failed to accept an offer to settle the action by that date.
47 By letter dated 10 February 2012 to RCR's solicitors, Mr Russell's solicitors made an offer to settle the whole action. The terms of that offer (the settlement offer) were as follows:
Our client offers to accept the amount of $330,000 from your client, inclusive of interest, in settlement of the whole proceedings on the basis that your client will pay his costs to be taxed or agreed.
48 The interest component of that offer to settle was calculated as interest at the rate of $48.90 per day (which corresponds to a claim for pre-judgment interest at 6% per annum).
49 The letter also made an offer to settle the costs claimed by Mr Russell in a fixed sum, to be paid by RCR within 7 days of settlement (the costs offer).
50 The settlement offer and costs offer contained in this letter were said to be made in accordance with the principles established in Calderbank v Calderbank.12The offers were left open until 15 February 2012, but RCR's solicitors did not reply to them.
51 Counsel for Mr Russell submitted that if it is accepted that Mr Russell is entitled to the payment of the sum of $297,500 plus interest, then the total amount awarded to Mr Russell will exceed the settlement offer made and he should be awarded costs on an indemnity basis from the date of the settlement offer.
52 Counsel for RCR submitted indemnity costs should not be awarded. He submitted that if an order for interest were not made, the amount of the settlement offer would exceed the sum awarded to Mr Russell. In addition, counsel for RCR submitted that Mr Russell had not established that it was unreasonable for RCR not to accept the settlement offer, and the mere fact that the settlement offer was less than the amount ultimately awarded was not sufficient, of itself, to establish unreasonableness.
53 The principles in relation to an award of indemnity costs following rejection of a Calderbank offer were set out by Buss JA in Ford Motor Company of Australia Ltd v Lo Presti.13They include that a Calderbank offer will not justify an award of indemnity costs unless its rejection was unreasonable. The party who makes a Calderbank offer which is rejected bears the onus of satisfying the court that it should make an award of indemnity costs in his or her favour.
54 I am not persuaded that Mr Russell has established that RCR's failure to accept his settlement offer was unreasonable, in all of the circumstances, for three reasons. First, at the time the settlement offer was made RCR expected that it would be able to rely on evidence from Mr Noordhoek, as well as evidence from Ms Higgins, as to the pre-contractual discussions between Mr Russell and Mr Noordhoek.14 RCR anticipated that Mr Noordhoek would give evidence which would be inconsistent with Mr Russell's evidence about what the parties had agreed.15 On the basis of that anticipated evidence, RCR was entitled to consider that it had at least a fair prospect of success at trial.
55 Secondly, the offer which was made was effectively an offer to settle for an amount which was approximately 1% less than the amount to which Mr Russell considered he was entitled as at the date of the offer (having regard to the amount of the retirement benefit, and pre-judgment interest until the date of the offer). The extent of the compromise involved on Mr Russell's part was extremely modest.
56 Thirdly, RCR had effectively only three business days to consider the offer (10 February 2012 was a Friday, and the offer expired on Wednesday 15 February 2012 at 5pm). There was no apparent need for such urgency in the consideration of the offer - the action was not tried for another five months.
57 In circumstances where RCR was entitled to anticipate that on the strength of its anticipated evidence it had at least fair prospects of success, where Mr Russell's offer involved only a very modest compromise on his part, and where there was only a very short period available in which to consider and respond to the offer before it expired, despite the trial being some months away, I do not consider that it was unreasonable for RCR not to accept the settlement offer put to it. Mr Russell's application for indemnity costs from 15 February 2012 is refused.
Conclusion
58 I will make an order for the payment of interest pursuant to s 32 of the SC Act calculated with respect to the amount of $297,500, and an order that RCR pay Mr Russell's costs of the action, to be taxed if not agreed.
59 The parties' solicitors should confer about the form of orders giving effect to these reasons, including the precise amount of interest pursuant to s 32 of the SC Act, and in relation to the additional orders which they have agreed should be made to finalise the action.
1Russell v RCR Tomlinson Ltd[2012] WASC 405.
2Craddock Brothers v Hunt[1923] 2 Ch 136, 151 (Lord Sterndale MR).
3 Defendant’s submissions, 18 December 2012, [21].
4Utopia Financial Services Pty Ltd v Financial Ombudsman Service Ltd[2012] WASC 279.
5Utopia Financial Services Pty Ltd v Financial Ombudsman Service Ltd[2012] WASC 279 [60].
6Calderbank v Calderbank [1975] 2 All ER 333.
7Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 96 [65] (McHugh J).
8Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 96 - 97 [66] (McHugh J).
9Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 97 [69] (McHugh J).
10Souter v Condor Developments Pty Ltd [2012] WASCA 22.
11Souter v Condor Developments Pty Ltd [2012] WASCA 22 [27].
12Calderbank v Calderbank [1975] 2 All ER 333.
13Ford Motor Company of Australia Ltd v Lo Presti[2009] WASCA 115 [16] - [32] (Buss JA, Wheeler JA agreeing).
14 ts 13 February 2012, 4; ts, 27 November 2012, 197.
15 ts 27 November 2012, 183; Letter from Clayton Utz to King Wood Mallesons dated 26 March 2012, attachment JCB22 to affidavit of Jessica Clare Bowman in support of special costs orders, 25 November 2012.
0
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