Savills (NSW) Pty Ltd v ATF Cth Pty Ltd (No 2)

[2020] NSWSC 1098

Supreme Court

New South Wales

Medium Neutral Citation:

Savills (NSW) Pty Ltd v ATF CTH Pty Ltd (No 2) [2020] NSWSC 1098

Hearing dates:

On the papers

Decision date:

19 August 2020

Jurisdiction:

Common Law

Before:

Adamson J

Decision:

(1)   Order the plaintiff to pay the defendant’s costs of the proceedings on the ordinary basis up to and including 19 April 2019 and on an indemnity basis thereafter.

Catchwords:

COSTS — Party/Party — Indemnity basis — Calderbank offer made by successful party — Whether offer defective — Whether rejection of offer unreasonable — Order for costs on indemnity basis made

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98

Cases Cited:

Calderbank v Calderbank [1975] 3 All ER 333

Savills (NSW) Pty Ltd v ATF CTH Pty Ltd [2020] NSWSC 956

Category:

Costs

Parties:

Savills (NSW) Pty Ltd (ABN 93 002 647 225) (Plaintiff)
ATF CTH Pty Ltd (ABN 52 169 623 741) (Defendant)

Representation:

Counsel:
C Wood SC (Plaintiff)
A Cheshire SC (Defendant)

Solicitors:
BBW Lawyers (Plaintiff)
Eakin McCaffery Cox (Defendant)

File Number(s):

2017/293995

Judgment

Introduction

1. On 27 July 2020 I ordered judgment for the defendant and published reasons which determined this matter, save as to costs: Savills (NSW) Pty Ltd v ATF CTH Pty Ltd [2020] NSWSC 956.

2. The defendant applied for an order that the plaintiff pay its costs on the ordinary basis until 29 March 2019 and on an indemnity basis thereafter. The plaintiff opposed the order. The defendant also sought an order vacating freezing orders which had previously been made by the Court. The orders relating to the vacation of the freezing orders were made by consent and therefore do not need to be addressed.

The facts relevant to costs

3. The proceedings were commenced by statement of claim filed on 28 September 2017. In February 2019 the plaintiff served its evidence in chief, which comprised an affidavit of Michael Simpson dated 1 February 2019 and the affidavit of Glen Boultwood dated 8 February 2019.

4. On 29 March 2019, before it had served its evidence, the defendant made an offer in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333 by letter to the plaintiff’s solicitors, which said, relevantly:

“The plaintiff has now served its evidence in this proceeding.

Having considered the plaintiff’s evidence, the defendant is confident that it will successfully defend that claim.

We note some important flaws in the plaintiff’s case:

1.    The defendant's evidence will challenge the plaintiff's evidence that a signed copy of an agency agreement was ever produced. Without a signed agreement, section 55 of the Property Stock and Business Agents Act 2002 applies and the conditions for relief under section 55A do not apply. The plaintiff is not entitled to commission or expenses.

2.    Even if the plaintiff establishes that a signed contract was produced (which it cannot), the property described in the unsigned draft agreement was not the same as the property ultimately sold. The unsigned draft agreement related to the hotel component of a stratum development. After the plaintiff’s involvement ceased the entire stratum development was sold. Accordingly the plaintiff will not be able to rely on the contract as a basis to recover commission.

…

In an attempt to bring the proceeding to an early resolution, the defendant offers, without prejudice, to pay the plaintiff $50,000, on terms that the proceedings be dismissed with no order as to costs. This offer is open for acceptance until 19 April 2019.

In the event that this offer is not accepted, the defendant will rely upon it for the purposes of any appropriate application for costs.

This offer made by our client is based on the principles outlined in the case of Calderbank v Calderbank [1975] 3 All ER 333.”

5. The defendant’s unchallenged evidence was that it had incurred in the order of $50,000 in costs by the time it made the offer. The plaintiff did not accept this offer. There is no evidence of any other material offer.

Consideration

6. As referred to above, I ordered judgment for the defendant. It is common ground that, unless I make the order sought by the defendant that its costs be paid on a higher basis, the defendant is entitled to have its costs of the proceedings paid by the plaintiff on the ordinary basis.

7. The plaintiff submitted that the offer was not, in substance, a Calderbank offer because it was inclusive of costs and it did not offer a sufficient amount to constitute a true compromise of the proceedings. Further, the plaintiff submitted that I could not be satisfied that its rejection of the offer was unreasonable since it was not, at the time the offer remained open for acceptance, aware of what evidence would be relied on by the defendant. Mr Wood SC, who appeared for the plaintiff at the hearing and made written submissions on its behalf on the question of costs, emphasised that the defendant called Peter Keenan in its case but that the plaintiff was not aware of this evidence until he was actually called, although a summary of his expected evidence had been provided. The plaintiff did not dispute that the defendant had sufficiently foreshadowed its intention to rely on the offer for the purposes of costs.

8. I am satisfied that it is appropriate to make the order sought by the defendant. The offer was not inclusive as to costs. It was expressed to be a payment to the plaintiff of $50,000 with no order as to costs. Thus, the defendant was expressly foregoing its right to have its own costs paid (which already amounted to $50,000) and was not offering to pay any amount for the plaintiff’s costs. While the offer cannot be described as generous, in the context of the plaintiff’s claim for $876,700, it was sufficient, in the context of the present case, to amount to a real and genuine compromise, particularly when the defendant’s costs are taken into account.

9. It is of significance that the defendant included in the offer two bases on which it contended that it would be successful in the proceedings: first, that there was no written agreement; and, secondly, if there were, it did not entitle the plaintiff to commission. The first was a matter of evidence; and the second was a matter of construction of the agreement. The defendant succeeded on both grounds. Although I found that there was no executed agreement, I also determined that if it had been executed, the plaintiff would not have been entitled to commission in any event, as a matter of construction of the agreement. It is convenient to address these matters in turn.

10. By the time the plaintiff had served its evidence, it knew that it did not have a copy of the executed agreement and that the defendant had not discovered a copy of the executed agreement. It also knew, from the defence that had been filed, that the defendant denied that any agreement had ever been executed. Thus, the plaintiff can be taken to have appreciated that its prospects of proving that the agreement was executed turned on the probative value of the secondary evidence from Mr Simpson, which had already been served. The reliability of that evidence could be assessed in the orthodox way by comparing what he said occurred with contemporaneous business records and communications. Although the plaintiff did not know what the defendant’s witnesses would say, it must have appreciated that they would not admit that the agreement had been executed, having regard to the denials in the defence.

11. The task which I undertook in determining the matter on a final basis involved the very task which was open to the plaintiff to perform when it received the offer: a chronological comparison between what Mr Simpson said in his affidavit and what he and others were saying in communications between them through the relevant period. The plaintiff was in possession of all of these documents, which largely comprised emails between it and the defendant. Thus, the plaintiff was in a position to make an assessment of the reliability of Mr Simpson’s evidence.

12. There is no suggestion that the plaintiff knew what evidence Peter Keenan would give, which included evidence that Mr Simpson had admitted to him that he left for the international road show without an agreement having been executed by the defendant. Mr Keenan had worked for the plaintiff but had left its employ by the time of the Calderbank offer. However, Mr Keenan’s evidence, though powerful, was consistent with the contemporaneous documents which were in the plaintiff’s possession.

13. Further, by the time the offer was made, the plaintiff knew that the defendant had sold the fee simple of the site because it had adjudged that the proposed development which included the hotel component (which the plaintiff was appointed to sell as agent for the defendant) was no longer viable. In these circumstances, the plaintiff was in a position to assess its prospects of being entitled, as a matter of interpretation of the draft agreement, to commission when the fee simple of the undeveloped property was sold. The defendant correctly anticipated, in its Calderbank offer, my reasons for judgment on the question of construction. My reasons for finding that the draft agreement did not entitle the plaintiff to its commission as a matter of construction accorded with what the defendant put in its Calderbank offer.

14. In addition, the plaintiff knew that the defendant’s assessment of the viability of the development was based on construction costs which it had provided to the defendant. Thus, it knew that the decision not to develop the property was not made out of any desire to get out of paying commission to the plaintiff but rather it was made for understandable commercial reasons. In these circumstances, it must have appreciated that its allegations of bad faith and unconscionable conduct were unlikely to be made out.

15. In these circumstances, I am satisfied that it was unreasonable of the plaintiff to refuse the Calderbank offer made by the defendant. Had it accepted the offer, it would have been in a significantly better position. It would have received $50,000, saved the further amounts which it spent on the costs of the proceedings and avoided liability for the defendant’s costs of the proceedings.

16. I am persuaded that the discretion as to costs conferred by s 98 of the Civil Procedure Act 2005 (NSW) ought be exercised in the defendant’s favour. However, I do not consider that these costs ought run from the date of the offer but rather from the date after the expiry of the offer on 19 April 2019.

Orders

17. For the reasons given above, I make the following order:

1. Order the plaintiff to pay the defendant’s costs of the proceedings on the ordinary basis up to and including 19 April 2019 and on an indemnity basis thereafter.

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Decision last updated: 19 August 2020