Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [No 3]
[2009] WASC 352 (S)
•1 DECEMBER 2009
STRZELECKI HOLDINGS PTY LTD -v- CABLE SANDS PTY LTD [No 3] [2009] WASC 352 (S)
Pending Appeal
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2009] WASC 352 (S) | |
| Case No: | CIV:1591/2006 | ON THE PAPERS | |
| Coram: | MURRAY J | 1/12/09 | |
| 14/04/10 | |||
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Application for indemnity costs dismissed Plaintiff to pay defendant's costs to be taxed Defendant to pay plaintiff's costs of application for indemnity costs | ||
| B | |||
| PDF Version |
| Parties: | STRZELECKI HOLDINGS PTY LTD (ACN 051 222 253) CABLE SANDS PTY LTD (ACN 008 678 386) |
Catchwords: | Costs Application for indemnity costs Calderbank offer not accepted Unreasonableness |
Legislation: | Nil |
Case References: | Calderbank v Calderbank [1976] Fam 93 Coal Cliff Collieries v Sijehama Pty Ltd (1991) 24 NSWLR 1 Dobb v Hacket (1993) 10 WAR 532 Flotilla Nominees Pty Ltd v Western Australian Land Authority (2003) 28 WAR 95 Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [No 1] [2009] WASC 2 Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [No 2] [2009] WASC 150 Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [No 3] [2009] WASC 352 Whittaker v Paxad Pty Ltd [2009] WASC 47 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
DECISION : 14 APRIL 2010 FILE NO/S : CIV 1591 of 2006 BETWEEN : STRZELECKI HOLDINGS PTY LTD (ACN 051 222 253)
- Plaintiff
AND
CABLE SANDS PTY LTD (ACN 008 678 386)
Defendant
Catchwords:
Costs - Application for indemnity costs - Calderbank offer not accepted - Unreasonableness
Legislation:
Nil
(Page 2)
Result:
Application for indemnity costs dismissed
Plaintiff to pay defendant's costs to be taxed
Defendant to pay plaintiff's costs of application for indemnity costs
Category: B
Representation:
Counsel:
Plaintiff : No appearance
Defendant : No appearance
Solicitors:
Plaintiff : Lawton Gillon
Defendant : Corrs Chambers Westgarth
Case(s) referred to in judgment(s):
Calderbank v Calderbank [1976] Fam 93
Coal Cliff Collieries v Sijehama Pty Ltd (1991) 24 NSWLR 1
Dobb v Hacket (1993) 10 WAR 532
Flotilla Nominees Pty Ltd v Western Australian Land Authority (2003) 28 WAR 95
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115
Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [No 1] [2009] WASC 2
Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [No 2] [2009] WASC 150
Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [No 3] [2009] WASC 352
Whittaker v Paxad Pty Ltd [2009] WASC 47
(Page 3)
1 MURRAY J: This litigation commenced in 2006. Beech J originally had the management of the litigation through its interlocutory stages. His Honour gave two judgments, concerned with an application for further and better discovery, and a claim arising out of the order for discovery that certain documents were the subject of legal professional privilege: Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [No 1] [2009] WASC 2 and Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [No 2] [2009] WASC 150. The action went to trial before me on 26 - 29 October 2009. I gave judgment for the defendant and dismissed the plaintiff's claim: Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [No 3] [2009] WASC 352.
2 On 1 December 2009, I made some final orders. I dismissed the plaintiff's claim and ordered the plaintiff to pay the defendant's costs of the action, including reserved costs, up to 22 April 2008, to be taxed. The defendant made an application at that time for an order that the plaintiff pay its costs, from and including 22 April 2008, on an indemnity basis. I made orders for the exchange of submissions and affidavit evidence, and I ordered that the application should be determined on the papers so lodged.
3 The defendant's submissions not only seek to support its application for an award of indemnity costs, but add an alternative application, not envisaged in the orders made on 1 December 2009, for a special costs order that the plaintiff pay costs on a solicitor/client basis from 22 April 2008, or 75% of the costs actually incurred by the defendant after that date. I presume this is intended to be an application for a special costs order under s 215(2) of the Legal Practice Act 2003 (WA), which continues to have application in relation to this case, because the defendant did not first instruct its lawyers on or after 1 March 2009, the day upon which the Legal Profession Act 2008 (WA) was proclaimed to come into operation: Government Gazette, 27 February 2009, 511.
4 I presume therefore that this alternative application is intended to seek a special costs order upon the ground that the applicable legal costs determination will make inadequate provision for costs because of the unusual difficulty, complexity or importance of the action. However, the defendant does not elaborate upon this application in any way, and provides no material ins support of the application. So far as the defendant's application seeks a special costs orders rather than indemnity costs, the application is dismissed.
5 By the time the matter came to trial, there were essentially two heads of claim, neither of which succeeded. I will not discuss them in detail.
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- Reference to my judgment will provide the detailed information in relation to the resolution of those claims. It is sufficient, for present purposes, that I summarise what was involved.
6 The action was primarily for breach of contract. The contract was said to be embodied in a memorandum of understanding entered into by the parties in respect of the process by which they would pursue negotiations with the aim of achieving a sale of the defendant's land to the plaintiff. The plaintiff's case was that the terms upon which that contract of sale would be made were substantially agreed and that the agreement in its final form was not achieved because the defendant sought to impose unreasonable special conditions upon the sale, to which the plaintiff would not agree.
7 Alternatively, the plaintiff pursued a head of claim in estoppel, which had been added during the progress of the action. On the basis that the court held that there was no contract of a kind for which the plaintiff contended, it asserted that the dealings between the parties were such that the defendant was estopped from denying the plaintiff the benefit of the agreement which the defendant's conduct persuaded the plaintiff it enjoyed. The plaintiff sought an order that the defendant execute the contract which the plaintiff asserted the defendant was bound to accept, alternatively, damages for breach of contract, alternatively, equitable compensation flowing from its claim of an estoppel.
8 The defence was that the memorandum of understanding did not constitute an enforceable agreement. It was a mere agreement to agree. If there was an enforceable contract, the defendant accepted that both parties were obliged to negotiate in good faith, but it denied it was, in any of the ways asserted by the plaintiff, in breach of its obligations in that regard. On the contrary, the defendant asserted, it was the plaintiff which caused the breakdown of the negotiations and the failure to complete a contract for the sale of the land. The defendant denied that it was estopped from adopting that position, and it asserted that no estoppel could arise as a matter of law.
9 Although the parties debated evidentiary matters in relation to the question whether a contract had been made, its proper interpretation, and in relation to the question of estoppel, in the end, as I concluded at [19] of the principal reasons, the case did not turn upon disputed matters of fact, but essentially upon the proper interpretation of the memorandum of understanding. As to that, in my opinion, the respective views of the parties were both fairly arguable. In the end, I concluded at [85], contrary
(Page 5)
- to the argument of the defendant, that the memorandum of understanding embodied the terms of an enforceable agreement which, at [88], I characterised as being an agreement to negotiate a contract for the sale of the land on terms partially agreed, and to be added to during the process of negotiation, in which the parties were bound to negotiate in good faith. That was not the way in which the plaintiff wished me to describe the agreement.
10 My findings about the nature of the agreement and my views as to the content of the duty to negotiate in good faith, lead to my conclusion that, contrary to their respective contentions, neither party was in breach of the obligation to deal with the other in good faith. In my view, all that happened, without fault by the defendant, was that the parties pursued the process of negotiation, but were unsuccessful in achieving a final agreement. The plaintiff's claim in estoppel, in my view, had much less merit and was also to be dismissed. But to run it had not involved the court or the parties in substantial additional work.
The application for indemnity costs
11 The defendant's application depends upon the plaintiff's failure to accept an offer to compromise the action made by a letter dated 22 April 2008, sent by the defendant's solicitors to the plaintiff's solicitors, 'without prejudice except as to costs'. The defendant proposed that, by consent, the plaintiff's claim should be dismissed with no order as to costs. The plaintiff's caveat over the defendant's land was to be withdrawn. The defendant would then pay the plaintiff the sum of $12,000, a sum which was obviously a sweetener, having nothing to do with the value of the land as held by the defendant, or the result which might be achieved if the plaintiff succeeded in its claim and was able to acquire the land for the purpose of development and resale. The offer was available for seven days, and was not open to negotiation.
12 The letter discussed, at some length, the matters of fact and law which, in the defendant's view, supported its contention set out in the letter that the plaintiff's claim, 'enjoys no reasonable prospect of success'. The letter observed that the only issue for determination was whether the parties acted in good faith in their negotiations. It referred to the decision of the NSW Court of Appeal in Coal Cliff Collieries v Sijehama Pty Ltd (1991) 24 NSWLR 1, a decision to which I later referred in giving my reasons for the dismissal of the plaintiff's claim.
13 Although it was open to do so, the defendant did not use the procedure provided by O 24A of the Rules of the Supreme Court1971
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- (WA). Had that procedure been used, under O 24A r 3, the offeror would be obliged to keep the offer open for not less than 28 days after it was made. Such an offer would ordinarily be taken to have been made without prejudice: O 24A r 6, and it is material to note that, by O 24A r 10(5):
Where an offer is made by a defendant and not accepted by the plaintiff, and the plaintiff obtains judgment on the claim to which the offer relates not more favourable to him than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled to an order against the defendant for his costs in respect of the claim up to and including the day the offer was made, taxed on a party and party basis, and the defendant shall be entitled to an order against the plaintiff for his costs in respect of the claim thereafter, taxed on a party and party basis.
15 I considered the more usual situation where an informal offer of compromise is made by a defendant outside the framework of O 24A, and the plaintiff recovers a judgment which is less favourable than the settlement offered by the defendant in Dobb v Hacket (1993) 10 WAR 532. That was a case like this, where the defendant had made a Calderbank offer, after the decision in Calderbank v Calderbank [1976] Fam 93. At 540, I referred to the approach of the court in these terms:
The court should preserve in the minds of litigants, the conscious consideration that their behaviour may place them at risk as to costs if they refuse reasonable offers of settlement. The court should be careful not to foster the proposition that obstinacy and unreasonableness will not be punished by orders as to costs. Such considerations foster the public interest in the desirability, not only from the point of view of the particular litigants in the case in question, but from the point of view of litigants generally, of the court so behaving as to encourage the achievement of reasonable and timely settlements.
The principles as to indemnity costs
16 This case then adds another dimension, that because the success of the defendant would entitle it, in any event, to its costs on a party and party basis, it seeks an order which would punish the plaintiff for its refusal to accept the offer of compromise, by an award of costs of an indemnity basis. The application is for costs to be awarded on that basis
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- after the date upon which the offer is made. But if such an award was to be made, it would have to be from the date upon which the offer ceased to be open.
17 In Flotilla Nominees Pty Ltd v Western Australian Land Authority (2003) 28 WAR 95, at 101 [25], Pullin J succinctly summarised the position adopted by the courts in relation to indemnity costs orders. His Honour said that they:
will be appropriate in cases where there has been improper or unreasonable conduct on the part of a party or his legal advisers. An order for indemnity costs is a mark of disapproval on the part of the Court about the improper or unreasonable conduct of litigation, even though there should not be much difference in the costs recovered under such an order compared with recovery under a properly formulated special costs order.
18 A case where the principles were discussed, when a Calderbank offer had been made by a plaintiff and rejected by the defendant, but the plaintiff succeeded at trial to a greater extent than his offer of compromise, is Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115. In that case, Buss JA, Wheeler JA agreeing, set out the applicable principles, at [16] - [32]. For present purposes, it is sufficient that, without, I hope, doing violence to his Honour's reasons, I attempt to summarise those principles.
19 A Calderbank offer will not justify an award of indemnity costs unless its rejection was unreasonable, having regard to all the relevant facts and circumstances, including the stage of the proceedings at which the offer was made, the time allowed for its consideration, the extent of the compromise offered, and the offeree's prospects of success. It is for the applicant for indemnity costs to persuade the court that such an order should be made. The question is whether the refusal of the offer was unreasonable, not 'manifestly', 'plainly' or 'so' unreasonable as to cause the court to come to the view that an ordinary award of costs would not do justice between the parties.
20 In Whittaker v Paxad Pty Ltd [2009] WASC 47, Blaxell J dealt with a similar question, and usefully referred to the exceptional nature of an award of indemnity costs. He said that when such an application was based upon the suggested unreasonable refusal of a Calderbank offer of compromise, the determination of the court was not to be made with the benefit of the hindsight gained as a result of the outcome of the trial, but upon the basis of the circumstances as they were presented to the offeree at the time when the offer was made.
(Page 8)
Unreasonableness
21 As at 29 April 2008, the date upon which the offer to compromise the action expired, the action had been on foot for some time, and the pleadings were substantially in order, although amendments were later made, on a number of occasions, to the statement of claim and the defence. Further and better particulars were sought, and the process of amending the pleadings did not conclude until September 2009. The question of discovery was, as has been seen, also a matter of controversy between the parties at that time.
22 I do not, of course, enter into an evaluation of the utility of those processes, but I think it is fair to say that, although there had been an unsuccessful mediation in February 2008, and the plaintiff had earlier sought, in mid 2007, to have the matter listed for trial, the plaintiff may not, at that time, have been fully aware of the available evidentiary material and the facts which might be found in relation to the central issues raised in the litigation.
23 Given a finding by the court that there was an enforceable contract to negotiate, and that the case would turn upon a conclusion about whether, in all the circumstances, the defendant might be found to have been in breach of its contractual duty to negotiate in good faith, I am not persuaded that it was not open to the plaintiff to suppose that it might achieve a favourable result in the litigation. Whether that might be so, depended upon an objective evaluation of what was reasonably able to be maintained by the defendant as being its entitlement to look after what it perceived to be its own interests in relation to the terms of the proposed contract of sale.
24 Against that background, the offer proposed to the plaintiff, that it should give up this litigation for the benefit of the receipt of the sum of $12,000 and that each party should bear its own costs. Seven days only was allowed for consideration. The time was short, but apparently sufficient to enable the plaintiff to reject it out of hand, as I assume was the plaintiff's attitude. As the offer was said to be non-negotiable, there would seem to have been little point in the plaintiff making a formal response to the letter of 22 April 2008. The wisdom of hindsight might suggest that the plaintiff was taking an unduly optimistic view of its prospects of success, at least according to the conclusions to which I came after the trial, but that is not to the point.
25 I am not persuaded by the defendant that the plaintiff behaved unreasonably in not accepting the offer, and in my opinion, the court
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- should make the following orders additional to the first two orders made on 1 December 2009:
3. The plaintiff do pay the defendant's costs of the action (including all reserved costs) from 22 April 2008, to be taxed if not agreed.
4. The defendant's application for indemnity costs is dismissed.
5. The defendant do pay the plaintiff's costs of that application, to be taxed if not agreed.
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