Skalkos v Assaf (No 2)

[2002] NSWCA 236

CITATION:	SKALKOS v ASSAF (NO 2) [2002] NSWCA 236
FILE NUMBER(S):	CA 40860/00
HEARING DATE(S):	On the papers
JUDGMENT DATE:	23 July 2002
PARTIES :	THEODORE SKALKOS & ANOR v JOSEPH ASSAF & ANOR (nO 2)
JUDGMENT OF:	Mason P; Giles JA; Fitzgerald AJA

COUNSEL:	Appellants: J A Darvall Respondents: K Rees
SOLICITORS:	Appellants: Tony Lazaropoulos Respondents: Mallesons Stephen Jaques
CATCHWORDS:	COSTS - indemnity costs in Court of Appeal - offer of compromise from plaintiff ignored by defendants - broad judicial discretion - Calderbank letter a relevant but not determinative factor - whether judgment was a substantial improvement on terms offered - whether appellants' conduct can be categorised as unreasonable. (ND)
CASES CITED:	Cases Cited Assaf v Skalkos [2000] NSWSC 935 CBA Investments Ltd v Northern Star limited (No 2) [2000] NSWCA 146 Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 Nobrega v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (No 2) [1999] NSWCA 133 Patronis v Oinoi & Kampi Pty Ltd (unrep, NSWSC, 30/11/93) Sanko Steamship Co Ltd v Sumitomo Australia Ltd (unrep, Fed Ct, No 22/96, 7/2/96) Skalkos & Anor v Assaf & Anor (2002) NSWCA 14 SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323
DECISION:	Appellants to pay the respondents' costs of the appeal on an indemnity basis.

CA 40860/00

MASON P
GILES JA
FITZGERALD AJA

Tuesday 23 July 2002

THEODORE SKALKOS & ANOR v JOSEPH ASSAF & ANOR (No 2)

JUDGMENT

1 THE COURT: On 13 February 2002 this appeal was dismissed with costs, with liberty to apply within 28 days if some special costs order was sought (see Skalkos & Anor v Assaf & Anor (2002) NSWCA 14). The Court rejected an application for indemnity costs to the extent that it was based upon the submission that the appellants had pressed an unarguable case. However, liberty to apply for a special costs order was reserved in case indemnity costs were sought on the basis of an unaccepted settlement offer (at [86]).

2 The respondents seek such an order, relying on the appellants’ rejection of a Calderbank offer made on 8 July 1994. The offer and the consequences of its rejection as regards the costs at trial are discussed in the judgment of Carruthers AJ in Assaf v Skalkos [2000] NSWSC 935.

3 Carruthers AJ ordered the then defendants to pay the plaintiffs’ costs on a party and party basis until 16 August 1994 and thereafter on an indemnity basis. He held that they had unreasonably rejected the plaintiffs’ offer on 8 July 1994 to settle the proceedings. On 16 August 1994 the offer was quantified as an offer to accept in full settlement:

(a) $10,000;

(b) Indemnity costs of $25,389.52; and

(c) Publication of an apology, in terms which had by that date been agreed with the defendants.

4 Carruthers AJ considered the apology, costs and compensation sought to be reasonable: see esp at [82], [84], [85].

5 There was no response to the plaintiffs’ offer. The defendants dismissed their solicitors and effectively “walked away” from settlement negotiations (see at [79]).

6 The verdicts obtained by the plaintiffs in the trial which ensued were clearly more favourable than the settlement offers which they had made. Carruthers AJ said:

116 In my view, the deemed rejection by the defendants in the instant case of the plaintiffs’ offer could almost be described as a forensic disaster. It involved a considerable compromise on the part of the plaintiffs who were, in the circumstances, bound to pursue the legal proceedings. On the other hand, it was an olive branch tendered to the defendants which would have relieved them at minimal cost from significant costs and damages at the hands of the jury in what was a serious defamation.
117 It must be remembered that there was a very strong commercial element in these proceedings. The plaintiffs and the defendants were effectively competitors for an important part of both government and private commercial work. Thus, the plaintiffs were virtually compelled to seek to vindicate their reputations as a consequence of the defamatory publications.
118 In my view, the plaintiffs are entitled to an order for indemnity costs, I think, dating from 17 August 1994 when the defendants walked away from the settlement negotiations and may be deemed to have rejected the plaintiffs’ offer.
119 I take this view irrespective of whether one applied the less onerous test as identified by Rolfe J [in Multicon Engineering Pty Ltd v Federal Airports Corpotation (1996) 138 ALR 425 at 446, 451] or the more strict test of “plainly unreasonable” proposed by Sheppard J in Sanko [ Steamship Co Ltd v Sumitomo Australia Ltd ].

7 The appellants did not appeal against the costs orders made by Carruthers AJ. Nor have they suggested that his Honour was wrong in the conclusions which he reached at the trial, notwithstanding the respondents’ invocation of those reasons in support of its present application for indemnity costs in relation to the proceedings in the Court of Appeal.

8 We would respectfully agree with the order and reasons of Carruthers AJ and, for the reasons which follow, apply them in the present application.

9 The respondents invoke this Court’s discretion to award the costs of the appeal on an indemnity basis. They submit in effect that the appeal amounted to a continuation of the proceedings at trial. Since the defendants/appellants wholly failed on appeal in all matters of substance, the position is if anything a fortiori that as it stood when Carruthers AJ awarded indemnity costs. There were issues raised by the respondents in a notice of contention, as well as a foreshadowed notice of cross-appeal. However, the dismissal of the appeal meant that it was unnecessary for these essentially defensive matters to be pursued.

10 We agree with these submissions.

11 The respondents also submit that, in circumstances like the present, their offer should be viewed as having been made in respect of the claim, not just in respect of the trial. The claim in the present matter was not finally heard and determined until the dismissal of the appeal (leaving aside, of course, the outcome of any proceedings in the High Court).

12 We would also accept these submissions (see Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 at 409-10).

13 The parties are agreed that the orders sought by the respondents require the favourable exercise of the Court’s broad discretion with respect to costs. The making of a settlement offer in the form of a Calderbank letter is a relevant but not determinative factor.

14 In opposing the application, the appellants submit that the Court should be guided by Sheppard J who in Sanko Steamship Co Ltd v Sumitomo Australia Ltd (unreported, Fed Court No 22/96, 7/2/96) said (our emphasis):

In some cases the so called Calderbank approach may place a weapon in the hands of the parties to litigation which ought not to be allowed to be abused.
The ordinary rule is that costs when ordered in adversary litigation are to be recovered on the party and party basis. Any attempt to disturb that situation needs to be carefully considered. It should only be departed from where the conduct of the party against whom the order is sought is plainly unreasonable.

15 This passage was part of a wider extract from Sanko that was noted with approval by this Court in Nobrega v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (No 2) [1999] NSWCA 133. However, the decision in Nobrega did not turn upon the proposition embodied in the sentence we have emphasised. Rather, the Court in its discretion declined to order indemnity costs having regard to a range of matters in the particular case.

16 Nobrega affirms the existence of an ultimate judicial discretion in these matters (see at [20]). Mere failure to better a Calderbank offer is not conclusive in demonstrating unreasonableness or otherwise enlivening or precluding the exercise of the discretion to award indemnity costs. All circumstances in the case need to be considered and weighed up (see also SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37], CBA Investments Ltd v Northern Star Limited(No 2) [2000] NSWCA 146).

17 In the present case there was a very substantial improvement on the terms offered in the rejected Calderbank offer. The appellants’ conduct can be categorised as unreasonable in its own right, for the reasons given by Carruthers AJ.

18 The appellant submitted that the Court should decline to order payment of costs on an indemnity basis because the respondents have not provided to the Court a draft bill of costs (cf the practice referred to by Young J in Patronis v Oinoi & Kampi Pty Ltd unreported, NSWSC, 30 November 1993). There is no such practice in the Court of Appeal, nor do we see any reason why one should be introduced.

19 We therefore order that the appellants pay the respondents’ costs of the appeal on an indemnity basis.

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