Stelmag Pty Limited v Long Paddock Pty Limited
[2005] ACTSC 100
STELMAG PTY LIMITED v LONG PADDOCK PTY LIMITED & ORS
[2005] ACTSC 100 (12 October 2005)
COSTS – whether costs should be awarded on an indemnity basis – whether reasonable negotiations – whether an unreasonable rejection of offer of compromise
Quirk v Bawden (1992) 112 ACTR 1
Dal Cortivo v Allen & Ors [2005] ACTSC 51 (5 July 2005)
Colgate-Palmolive Company and Another v Cussons Pty Ltd (1993) 46 FCR 225
Hart v McGlynn (unreported 13 July 1998)
No. SC 25 of 1997
Judge: Higgins CJ
Supreme Court of the ACT
Date: 12 October 2005
IN THE SUPREME COURT OF THE )
) No. SC 25 of 1997
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN:STELMAG PTY LIMITED
Plaintiff
AND:LONG PADDOCK PTY LIMITED
First Defendant
AND:ROBERT JOHN KING
Second Defendant
AND:SUSAN ROSALIE KING
Third Defendant
ORDER
Judge: Higgins CJ
Date: 12 October 2005
Place: Canberra
THE COURT ORDERS THAT:
The defendants pay the plaintiff’s costs of and incidental to these proceedings. Such costs are to be taxed on the usual party and party basis if not agreed.
This is a motion dated 3 August 2005 seeking a costs order to be made on behalf of the plaintiff, who enjoyed substantial success in the litigation. Mr Crowe SC, for the defendants, did not dispute that an order for costs should be made; he contended that costs ought not to be on any more favourable basis than usual, that is, on a party and party basis.
The plaintiff contends that costs should be awarded on an indemnity basis from 17 May 2004. Otherwise, it is agreed that the counter-claim of the third defendant ought to be dismissed and that the plaintiff’s claim against the third defendant also ought to be dismissed, in each case with no order as to costs.
I received an affidavit of Mr David Lander, solicitor for the plaintiff. It sets out correspondence that is relevant to offers of settlement between the plaintiff and the first and second defendants.
There was correspondence canvassing a settlement before 17 May 2004. For present purposes, the correspondence around 17 May 2004 is the most relevant.
It was sparked by Mr King, of and for the defendants, who offered to accept payments to the defendants of $25,000 plus costs. That offer was to expire at 9.30 am on Monday 17 May 2004. It was, as with all relevant correspondence, expressed to be “WITHOUT PREJUDICE SAVE AS TO COSTS”.
Mr Lander, for the plaintiff, responded with an offer to accept $100,000 plus costs payable to the plaintiff. It crossed, it seems, with the defendant’s offer above. It was expressed to expire at 10.00 am on Monday 17 May 2004.
By letter dated 13 May 2004, Mr King, for himself and for the first defendant, scornfully rejected that offer. He expressed “no interest at all” in any offer whereby the defendants were to pay “a single dollar” to the plaintiff.
Mr King made a counter-offer to accept $30,000 and costs, thereby reinforcing the rejection of the plaintiff’s offer. This was made by a separate letter also dated 13 May 2004.
A further letter elaborating that offer was despatched on the same day. The claim for costs was assessed, on a “compromise basis”, at $175,000.
That offer was to expire on Saturday 15 May 2004 at midday.
Following that example of somewhat unusual negotiation techniques, on 16 June 2004, the plaintiff’s solicitor raised its offer to $250,000 plus costs. It was to expire at 10.00 am on Monday 21 June 2004.
The plaintiff’s second offer drew a more constructive response than the previous one had. The defendants responded by offering to pay to the plaintiff $150,000 inclusive of costs. Whilst this offer represents a significant shift from the defendant’s previously truculent position, it was plainly less than the plaintiff’s previous lowest offer of $100,000 plus costs, even at 13 May 2004 when it was made. The defendant’s counter offer was to expire on 28 June 2004 at 4.00 pm.
The plaintiff put a further and, as it transpired, final offer on 22 July 2004, offering to accept $235,000 plus costs to be agreed at $226,000. It was to remain open “until 4.00 pm on Thursday 29 July 2004 or the delivery of judgment in the matter, whichever is the earlier”.
On 6 May 2005 judgment was entered for the plaintiff in the sum of $232,265.38, not inclusive of interest. That followed from my decision of 1 April 2005, where I found a verdict for the plaintiff against the first and second defendants in the sum of $223,838.51. That figure was subject to the accuracy of calculations made as to the final sum and as to the sum to be added for interest. The judgment sum was adjusted as indicated above; on 19 July 2005, I ordered that $295,000 be added to it representing pre-judgment interest.
I note that, even as at 29 July 2004, the offer made by the plaintiff was considerably less than would then have been found due.
The hearing of the matter commenced on 13 July 2004. It continued on 14th, 15th, 16th and 19th July 2004 when my decision was reserved.
The principle concerning costs sanctions was affirmed in Quirk v Bawden (1992) 112 ACTR 1. That was a case concerning the unreasonable rejection of a settlement offer that was significantly greater than the amount finally ordered by the Court.
However, as I noted in Dal Cortivo v Allen & Ors [2005] ACTSC 51 (5 July 2005), the mere fact that an offer is more favourable than the ultimate result does not, of itself, entail a departure from the usual order as to costs in favour of the successful litigant. Nor is it the case that the only response is to order indemnity costs. In the case of a plaintiff who unreasonably refuses a settlement offer, denying the plaintiff some or all costs otherwise payable may suffice as a response.
The guiding principle was succinctly enunciated by Sheppard J in Colgate-Palmolive Company and Another v Cussons Pty Ltd (1993) 46 FCR 225 at 234 –
It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principle and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
The purpose of making a costs order on a less favourable basis is to deter parties from unreasonably ignoring or rejecting reasonable offers of compromise. However, it is necessary to exercise restraint not only in departing from the usual rule, but also when determining whether to depart from it at all (see Hart v McGlynn (unreported 13 July 1998); Dal Cortivo v Allen & Ors [2005] ACTSC 51 (5 July 2005), [15]).
As this case illustrates, there is a further matter to be considered. The plaintiff did not make an offer that exceeded the sum awarded save that put on 22 July 2004. That offer was made after the evidence had been taken and the primary decision had been reserved. It was not unreasonable for the defendants to decline to accept that offer.
Immediately prior to the hearing, the plaintiff had raised its offer to $250,000 plus costs. This was also greater than the amount ultimately found due, albeit it did not address the interest question. It is not possible to conclude whether the amount offered as a quantification for costs did or did not exceed these offers.
It is apparent that, until 13 May 2004, the defendants had failed to undertake any reasonable negotiations with the plaintiff. However, instead of proposing a compromise offer, the plaintiff increased its demand.
In my opinion, while the course of negotiations did enliven the discretion to impose a costs sanction against the defendants, the unusual course of negotiation undertaken by the plaintiff leads me to conclude that no special order should be made. I also have regard to the impossibility of assessing the reasonableness of the term offered with respect to costs.
Therefore the defendants are to pay the plaintiff’s costs of and incidental to these proceedings. Such costs are to be taxed on the usual party and party basis if not agreed.
I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Chief Justice Higgins.
Associate:
Date: 12 October 2005
Counsel for the plaintiff: Mr D J C Mossop
Solicitor for the plaintiff: Lander & Co
Counsel for the defendants: Mr R L Crowe SC
Solicitor for the defendants: Bradley Allen Lawyers
Date of hearing: 12 August 2005
Date of judgment: 12 October 2005
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