Swaab v Stojanovski (No.2)

[2017] FCCA 1733

FEDERAL CIRCUIT COURT OF AUSTRALIA

SWAAB & ORS v STOJANOVSKI (No.2) [2017] FCCA 1733

Catchwords:
BANKRUPTCY – COSTS – Calderbank letter – principles relevant to whether costs should be taxed on an indemnity basis.

Legislation:  

Bankruptcy Act 1966

Swaab v Stojanovski [2017] FCCA 1509
Calderbank v Calderbank [1976] Fam 93
Cann v Commonwealth Bank of Australia (No.6) [2011] FMCA 912
Commonwealth of Australia v Gretton [2008] NSWCA 117
CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173
Taleb v GM Holden Ltd (2011) 286 ALR 309
Australian Medic-Care Company Ltd v Hamilton Pharmaceutical Pty Ltd (No.2) [2009] FCA 1494
 Seven Network Ltd v News Ltd (2007) 244 ALR 374
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225

First Applicant: FREDERICK SWAAB

Second Applicant: HARRY SIMON SNOW

Third Applicant: DAVID MATTHEW HALL

Fourth Applicant: TERENCE PAUL SPERBER

Fifth Applicant: MICHELLE ESTHER HARPUR

Sixth Applicant: MARY ELIZABETH DIGIGLIO

Seventh Applicant: ALISTAIR JAQUE

Respondent: ROBERT STOJANOVSKI

File Number: SYG 1489 of 2016

Judgment of: Judge Cameron

Hearing date: On the papers

Date of Last Submission: 17 July 2017

Delivered at: Sydney

Delivered on: 3 August 2017

REPRESENTATION

Solicitors for the Applicants: Mr M. Baddams of Swaab Attorneys

Counsel for the Respondent: Mr A.D Crossland

Solicitors for the Respondent: Foulsham and Geddes

ORDERS

1. The applicant creditors’ costs, including reserved costs, be taxed on a party and party basis and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966.

FEDERAL CIRCUIT COURT
OF AUSTRALIA

AT SYDNEY

SYG 1489 of 2016

FREDERICK SWAAB

First Applicant

HARRY SIMON SNOW

Second Applicant

DAVID MATTHEW HALL

Third Applicant

TERENCE PAUL SPERBER

Fourth Applicant

MICHELLE ESTHER HARPUR

Fifth Applicant

MARY ELIZABETH DIGIGLIO

Sixth Applicant

ALISTAIR JAQUE

Seventh Applicant

And

ROBERT STOJANOVSKI

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

1. The applicants filed and served on the respondent a creditors’ petition.  The respondent replied by seeking orders setting aside the petition or, in the alternative, adjournment of the hearing of the petition until certain proceedings reached a resolution in the Supreme Court of New South Wales.  The respondent was unsuccessful in those endeavours and on 30 June 2017 I ordered that his application for the adjournment of the creditors’ petition be dismissed and that a sequestration order be made against his estate:  Swaab v Stojanovski [2017] FCCA 1509 (“First Judgment”).

APPLICANTS’ CLAIM FOR COSTS

1. The applicants sought their costs and the parties have filed written submissions.  The parties agreed that the question of costs was to be decided without an oral hearing.

2. The respondent does not argue that costs should not follow the event or that he was not liable to pay the applicants’ costs of the proceeding.  However, the basis on which costs are to be taxed is a matter of contention.  The applicants have sought their costs on an indemnity basis from 6 February 2017 or, alternatively, from 7 March 2017 and the respondent submits that costs should be taxed on a party and party basis.

From 6 February 2017 – procedural delays

1. The applicants referred to:

   a)7 February 2017, when the creditors’ petition was listed for hearing.  On that day the respondent was granted leave to file a notice stating grounds of opposition, which was filed on 15 February 2017; and

   b)14 March 2017 when the matter was again listed for hearing.  On that occasion the respondent was granted leave to file and serve an amended notice stating grounds of opposition and the registrar referred the matter to me for hearing.

2. The applicants submitted that they had been ready to proceed on 7 February 2017 and 14 March 2017 but the respondent delayed the proceeding causing loss of time to the Court and to them.  Relying on those matters, they submitted that the respondent should pay their costs on an indemnity basis from 6 February 2017.

From 7 March 2017 – failure to accept Calderbank offer

1. On 8 March 2017, in an offer implicitly relying on the principle found in Calderbank v Calderbank [1976] Fam 93, the applicants offered to settle the matter on the following terms:

   a)the respondent pay the applicants $11,200 in full satisfaction of the debt the subject of the creditors’ petition;

   b)the respondent pay the applicants’ costs of the proceeding fixed at $3,800;

   c)the creditors’ petition be dismissed;

   d)the respondent agree to accept service of further documents by delivery of those documents to his current solicitors; and

   e)the respondent advise the applicants of his then-current email, residential and postal addresses and mobile telephone number.

2. That offer was rejected on 10 March 2017.

3. The applicants submitted that their taxed costs would exceed the $3,800 they had offered to accept.  They argued, in the alternative to the claim for indemnity costs from 6 February 2017, that they were entitled to costs on an indemnity basis from at least 7 March 2017 because the respondent’s rejection of their offer had been imprudent.

CONSIDERATION

From 6 February 2017 – procedural delays

1. I have had regard to the facts asserted in the applicants’ written submissions concerning the listing on 7 February 2017 and have read the transcript of the proceedings before the registrar on 14 March 2017. 

2. Nothing special or exceptional appears to have occurred at the February 2017 listing.  As for the March 2017 listing, although it appears that the respondent needed to amend the notice of grounds of opposition he had only recently filed and was in no real position to proceed on that day, those circumstances are far from unusual in litigation and, while they were sufficient to justify an order for the costs of that hearing had the registrar chosen to make one rather than reserving the question, in which connection I imply no criticism, they do not justify indemnity costs.  In reaching this conclusion I have had regard to Lucev FM’s discussion in Cann v Commonwealth Bank of Australia (No.6) [2011] FMCA 912 at [13]-[14] of circumstances which can justify making an order for indemnity costs, to which the applicants made reference in their written submissions.

From 7 March 2017 – failure to accept Calderbank offer

1. The principle applicable to the situation where a party does not accept an offer made in a Calderbank letter but fails to achieve an outcome better than that offer is settled.  It is that the offering party is not presumptively entitled to indemnity costs from the date of the offer or its expiry, as would be the case of a notice of offer of compromise served under the Court’s Rules, but must demonstrate that the rejection of the offer was unreasonable:  Commonwealth of Australia v Gretton [2008] NSWCA 117 at [1], [44] and [117]; CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173 at [75]; Taleb v GM Holden Ltd (2011) 286 ALR 309 at 318-319 [49]. Whether it was unreasonable of a party to not accept a Calderbank offer is to be determined prospectively, that is to say without the benefit of hindsight, by reference to the circumstances of the case at the time the offer was made or was rejected, those circumstances including whether the offer itself was reasonable: Australian Medic-Care Company Ltd v Hamilton Pharmaceutical Pty Ltd (No.2) [2009] FCA 1494 at [14]; Seven Network Ltd v News Ltd (2007) 244 ALR 374 at 389 [65]; Commonwealth vGretton at [1] and [78]; Taleb v GM Holden Ltd at 318-319 [49].

2. The applicants’ submissions did not contend that the respondent’s failure to accept their offer was unreasonable.  Their argument was that the respondent had been imprudent in not accepting the offer.  It is important to keep in mind that imprudence in not accepting an offer is no more than one sort of conduct which may justify ordering that costs be paid on an indemnity basis:  Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233. However, even if the respondent’s rejection of the offer was imprudent, the real issue is whether it was so imprudent as to also have been unreasonable in the circumstances as they were understood to be when the offer was rejected.

3. The applicants identified no particular matters or facts known to the respondent at the time the Calderbank letter was rejected which would require the respondent’s rejection of it to be regarded as imprudent, let alone unreasonable.  If the standard were that of an entirely risk-averse person then failure to accept the offer would be seen as imprudent but litigation is rarely, if ever, free of risk and the fact that a case may, at the end of the day, be lost is insufficient reason to characterise rejection of an offer as imprudent.  It should be noted in this connection that the respondent’s legal advisers seemed reasonably confident of his prospects in the related Supreme Court proceedings: First Judgment at [20], and acceptance of the offer required the respondent to provide personal information and commit to giving particular instructions to his solicitors.  The reasonableness or appropriateness of those particular demands and their rejection was not explored.

4. The onus of proving that the failure to accept the offer was unreasonable lay with the applicants but they have advanced no substantive argument which would support such a finding.  Consequently, the claim for costs on an indemnity basis from 7 March 2017 has not been made out.

CONCLUSION

1. The applicants have failed to demonstrate that any of the costs which the respondent must pay them should be taxed on an indemnity basis.

2. Consequently, the applicants will have their costs of the proceeding, including reserved costs, taxed on a party and party basis.

I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Judge Cameron

Associate: 

Date:  3 August 2017