Testel Australia Pty Ltd v Goulding (No 2) - [2023] SADC 57

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
TESTEL AUSTRALIA PTY LTD v GOULDING & ORS (No 2)
[2023] SADC 57
Judgment of her Honour Judge Thomas
15 May 2023
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - GENERAL RULE: COSTS FOLLOW EVENT - GENERAL PRINCIPLES AND EXERCISE OF DISCRETION
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - COSTS OF PROCEEDING IN WRONG COURT - BY REFERENCE TO AMOUNT OR VALUE CLAIMED OR RECOVERED
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS - INFORMAL OFFERS AND CALDERBANK LETTERS
The Applicant employer was successfully in establishing its claim that the First Respondent employee breached a number of his employment duties by actively engaging in competition with his employer through the Second Respondent company whilst its employee. However, the overall effect of his breaches on the Applicant was nominal and did not result in any substantive benefit or gain to the First Respondent, either directly or indirectly through the Second or Third Respondent companies. At trial, the Applicant’s claim against the Second Respondent was not pursued and its claim against the Third Respondent was dismissed.
Damages were assessed on a ‘head start’ basis and the Applicant elected for an account of profits against the First Respondent in the amount of $3,981 plus interest of $1,984.
Despite the general costs principle in Rule 194.5(11) of the Uniform Civil Rules 2020 that no costs of the claim are payable where a successful applicant is awarded less than $60,000, the Applicant submits it is just in the circumstances of this case for it to recover the whole or part of its costs of action on a number of bases. The First Respondent opposes such an order and seeks his and the Third Respondent’s costs of action from the date of refusal of the first of a series of three informal settlement offers.
Held:
1. Having regard to the circumstances of this case, it would not be just to allow the Applicant to have the whole or part of its costs of action. Nor do the informal offers made by the First Respondent warrant an award of costs in his favour, having regard to all the relevant factors. Accordingly, the Applicant and the First Respondent are to bear their own general costs of action.
2. The Third Respondent is to have its costs of action on a lump sum basis in the amount of $1,500 having regard to the quantum of costs incurred whilst the First and Third Respondents were represented by the same solicitors when legal costs were incurred, and the limited issues involving the Third Respondent.
District Court Act 1991 (SA) s 42(2); Uniform Civil Rules 2020 (SA) r 1.5, r 194.4, r 194.5(11), r 194.6, referred to.
A, DC v Prince Alfred College Inc (No 2) [2016] SASCFC 27; Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435; Holt v Bunney (No 2) [2020] SASCFC 120, applied.
Allen v Chadwick (No 2) [2014] SASCFC 130; Anwar v Mondello Farms Pty Ltd (No 2) [2015] SASCFC 136; Burton v Litton Business Systems Pty Ltd and Data Print (Aust) Pty Ltd (1977) 16 SASR 162; Calderbank v Calderbank [1975] 3 All ER 333; Grbavac v Hart [1997] 1 VR 154; Nominal Defendant v Dighton (No 2) [2012] SASCFC 97; Reid, Hewitt & Co v Joseph [1918] AC 717; Stewart v Atco Controls Pty Ltd (in liq) (No 2) (2014) 252 CLR 331, considered.

TESTEL AUSTRALIA PTY LTD v GOULDING & ORS (No 2)
[2023] SADC 57
Civil
Introduction

On 20 December 2022, I delivered judgment in favour of the Applicant, Testel Australia Pty Ltd (Testel), as against the First Respondent, Mr Goulding, and dismissed its claim against the Third Respondent company, ServiceCorp Pty Ltd (ServiceCorp). Whilst I found Mr Goulding committed numerous breaches of his implied duties of fidelity and good faith and fiduciary obligations owed to his employer Testel, his breaches were ineffectual overall in inflicting any significant damage on Testel and did not result in any substantial benefit or gain to him, either directly or indirectly through the Second Respondent Company, TestCorp Pty Ltd (TestCorp), or ServiceCorp.[1]
[1] Judgment [2022] SADC 156 [446]-[468].
Testel elected for an account of profits and on 22 December 2022, I ordered Mr Goulding pay Testel the sum of $3,981 (excluding GST) plus interest of $1,984 and entered judgment in those terms, dismissing the claim against ServiceCorp.
Given the amount of the award, I proposed in my judgment to make orders that the parties bear their own costs subject to any settlement offers that might inform the question of costs. When I was told there was a series of settlement offers, I gave the parties the opportunity to file written submissions and affidavit evidence on the question of costs.
Testel seeks its general costs of action against Mr Goulding. Mr Goulding seeks his costs on an indemnity basis after the lapse of an informal offer he made to settle. Each opposes any order in favour of the other. Testel relies on written submissions filed on 10 February 2023[2] and two affidavits Mr Goulding made[3] that were filed in opposition to Testel’s application for summary judgment that was dismissed on 10 July 2017.[4] Mr Goulding relies on written submissions filed on 2 March 2023[5] and a further affidavit he made on 25 January 2023[6] that outlines the details of the parties’ settlement communications and exhibits the written offers made by the parties between June 2017 and July 2018.
[2]    FDN 129.
[3]    Affidavits made on 27 June 2017 (FDN 8) comprising Exhibit A-B (Mr Goulding’s First Affidavit) and on 6 July 2017 (FDN 9) comprising Exhibit A-C (Mr Goulding’s Second Affidavit).
[4]    FDN 12.
[5]    FDN 132.
[6]    FDN 128 comprising Exhibit R1-A (Mr Goulding’s Third Affidavit).
I heard oral argument on 16 February and 14 March 2023.
I deal first with Testel’s and Mr Goulding’s competing claims for the costs of action and then turn separately to consider ServiceCorp’s claim for the costs of action.
Basis of Competing Costs Claims
Mr Goulding and ServiceCorp seek orders for their costs incurred after 4 July 2017, relying on three informal settlement offers that were not accepted by Testel. ServiceCorp’s starting position is as a successful respondent, relying on the general costs principle that costs follow the event. Mr Goulding’s starting point is as an unsuccessful respondent for a nominal judgment sum. Mr Goulding submits that each of his settlement offers involved a genuine and realistic compromise of the Respondents’ claims, the first including a term that judgment for liability be entered against him, and that the settlement amounts offered were more favourable to Testel than the ultimate outcome, given the Court proposed to make orders that the parties bear their own costs.
Testel opposes Mr Goulding’s application for costs. It does so on two alternate bases.
Despite the nominal amount awarded in its favour, Testel seeks to recover the whole (or part) of the costs of action as against Mr Goulding, relying on various matters advanced in support of its ultimate submission that in the circumstances of the case it would be just for it to recover such costs.
First, Testel submits that its conduct was not unreasonable. The principal events in issue in the proceeding, namely, the taking of information from Testel and the establishment of TestCorp and the conduct of its business, were not matters in which it was a direct and knowing participant.[7] Testel submits it reasonably relied on the evidence of Mr Goulding’s former business partner, Mr Stephen, for rejecting Mr Goulding’s implausible explanation as to why his handwriting was on the Post-it-Notes.
[7] Applicant’s written submissions on costs [8].
It is further submitted that Mr Goulding’s conduct was unreasonable because he conducted his case on the basis of two egregious lies: that he took none of the information on the Post-it-Notes from Testel’s computer and they were in his handwriting because he had re-written them from information Mr Stephen had given him.[8] Further, Mr Goulding’s late change of position as to his handwriting on the Post-it-Notes was said to be a pivotal factor in the outcome. Testel had conducted its case up until late in the trial on the basis that one very important aspect of the proceeding was not in dispute.[9] Reference was made to Mr Goulding’s First and Second Affidavits to show the untruthfulness of his evidence on his change of position.[10]
[8] Ibid [9].
[9] Ibid [10].
[10] Neither was tendered in the trial, although there was cross-examination on this topic.
Secondly, it is contended that the proceeding concerned a matter of significance, namely, where an employee improperly takes an employer’s information and misuses it, the costs rules ought not to put an employer with a successful claim of this kind to a disadvantage.[11]
[11] Ibid [11].
Thirdly, Mr Goulding engaged in misconduct from which he would benefit if there were no adverse costs order and was less than frank in the proceeding, which would have been shorter and less costly had he acknowledged his misconduct as an employee and provided a fulsome and timely explanation about what occurred at the outset.[12]
[12] Ibid [12].
Fourthly, Testel made a genuine offer to settle its claim at a substantial discount and this should override the prima face principle in Rule 194.5(11) of the Uniform Civil Rules 2020 (the Rules), even though Testel’s judgment did not exceed its offer.[13]
[13] Ibid [13].
Finally, if Testel were to bear its own costs of action, it would have to bear its own costs of steps taken in the action by reason of Mr Goulding’s failure to comply with his obligations. Reference was made to one example where Testel successfully sought orders to enforce Mr Goulding’s discovery obligation by the delivery up of electronic devices for analysis by Mr du Plessis.[14]
[14] Ibid [14].
In the alternative, if the Court were to refuse to make an order in Testel’s favour for the costs of action, then Testel submits that the application of the general costs principles in the circumstances of this case should result in there being no order as to costs in favour of Mr Goulding.
The Relevant Costs Principles
The principles governing the exercise of the Court’s discretion on costs are well established. The Court’s discretion as to costs is unfettered[15] and must be exercised judicially. Regard should be had to any and all relevant considerations, ignoring any irrelevant considerations, as is the general principle in exercising any discretion.[16] Each case will turn on its own peculiar circumstances.
[15] Holt v Bunney (No 2) [2020] SASCFC 120 at [9] per Kourakis CJ, Nicholson and Hughes JJ.
[16] Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435 at [25] citing House v R (1936) 55 CLR 499 at 505.
As against Mr Goulding, Testel is a ‘successful’ applicant and, ordinarily, subject to the presumptive costs rules and the overriding discretion of the Court as to costs both at common law and as reflected in the Rules, costs would follow the event.[17] The general principle enshrined in Rule 194.5(2) has been found to mean that the party who on the whole succeeds gets the general costs of action[18] unless there are special circumstances justifying another order.
[17] Rule 194.5(1) and (2).
[18] Reid, Hewitt & Co v Joseph [1918] AC 717.
In A, DC v Prince Alfred College Inc (No 2)[19] the Full Court of the Supreme Court observed that in more recent times, courts more readily modify the general rule, recognising that the interests of justice sometimes require a reduction in the costs that would otherwise have been awarded to a successful party when the party has failed on particular disputed questions of fact or law. Such modification is a response to cases where the issues raised unduly extend the time and expense of litigation, reflecting the great need for economy and efficiency in the conduct of litigation. The policy rationale of the just, quick and cheap resolution of the real issues in litigation is firmly entrenched in the costs principles, reflecting the express object of the Rules:[20]
The object of these Rules is to facilitate the just, efficient, timely, cost-effective and proportionate resolution or determination of the issues in the proceedings governed by these Rules.
[19] [2016] SASCFC 27 at [5] and [6] per Kourakis CJ, Gray and Peek JJ.
[20] Rule 1.5.
These same underlying policy considerations apply when the amount awarded in a monetary claim does not justify the time and expense of the litigation, where there has been misconduct or unreasonable conduct of a litigant that needlessly prolongs the litigation and wastes time and expense, or where settlement offers have been made and unreasonably refused.
In this case, the award against Mr Goulding was nominal and substantially less than the amount of $60,000 specified in Rule 194.5(11) that prima facie disentitles Testel as the applicant to its costs of action in a monetary claim where the Magistrates Court has jurisdiction unless the Court is of the opinion that it would be just in the circumstances to order otherwise.
It is uncontentious that Testel’s claim is a monetary claim and Rule 194.5(11) applies,[21] providing as follows.
In any other monetary claim in respect of which the Magistrates Court has jurisdiction, costs of the claim are not payable to a successful applicant if the amount awarded is less than $60,000 unless the Court is of the opinion that it is just in the circumstances of the case that the applicant should recover the whole or part of the costs of action.
[21] Applicant’s written submissions on costs [4].
Rule 194.5(11) is modelled on Rule 263(2)(g) of the District Court Civil Rules 2006 that operated as an exception to the general rule that costs follow the event subject to a contrary order of the Court. Both rules reflect the substance of s 42(2) of the District Court Act 1991 that provides:
(2)If—
(a)an action for the recovery of damages or any other monetary sum is brought in the Court; and
(b)the action might have been brought in the Magistrates Court; and
(c)the plaintiff recovers less than an amount fixed by the rules for the purposes of this paragraph,
no order for costs will be made in favour of the plaintiff unless the Court is of the opinion that it is just in the circumstances of the case that the plaintiff should recover the whole or part of the costs of action.
Section 42(2) of the District Court Act 1991 is in identical terms to s 40(2) of the Supreme Court Act 1935, save that the latter refers to the District Court, rather than the Magistrates Court.
Consistent with the express object of the Rules, the purpose of these specific provisions and costs rules is to encourage applicants to use the lowest court in which the proceeding could be entertained by penalising those who unjustifiably bring their claim in a higher court by not awarding costs where the amount awarded is sufficiently below the relevant jurisdictional limit. That the result may appear to be what has been described as a windfall for the unsuccessful respondent is their intended purpose.[22] In reality it is not a windfall because the unsuccessful respondent has been exposed to unnecessary additional cost by the applicant unjustifiably bringing its claim in a more expensive Court.
[22] Burton v Litton Business Systems Pty Ltd and Data Print (Aust) Pty Ltd (1977) 16 SASR 162 at 171.
Substantive weight should be given to this evident policy rationale in deciding whether to exercise the Court’s discretion to allow costs where the amount recovered by an applicant is less than the amount fixed by the Rules. This follows because there is an important public interest in ensuring that the time and costs incurred in litigation are reasonable and proportionate to the value and importance of the proceeding. This Rule is not solely for the respondent’s protection. There is a heavy burden imposed on public resources and a concomitant impact on other litigants when higher courts’ resources are used to determine claims of disproportionate value to the time and costs involved than is necessary or appropriate.
The Court has a general and unfettered discretion to depart from the prima facie effect of s 42(2) of the District Court Act 1991 and Rule 194.5(11) and may have regard to any factors it considers relevant,[23] including those expressly provided in Rule 194.6. Those factors include any misconduct or unreasonable conduct of a party in connection with the proceeding,[24] the making or not making of an offer by a party in connection with proceedings,[25] the non-acceptance by a party of an offer made to resolve the proceeding[26] and the value and importance of the relief sought or any relief obtained.[27] All factors must be weighed together.
[23] Rule 194.6(1).
[24] Rule 194.6(2)(a).
[25] Rule 194.6(2)(d).
[26] Rule 194.6(2)(e).
[27] Rule 194.6(2)(f).
In considering the effect of any informal or Calderbank offer on the question of costs, the issue for the Court is whether the party refusing an offer has acted unreasonably so as to warrant a higher basis of costs than otherwise.[28] It is well established that the fact that the unsuccessful offeror betters the award at trial does not necessarily mean that the successful party’s rejection of the offer was unreasonable in all the circumstances and justifies a higher costs award.[29] It is, of course, one factor informing the Court’s discretion on costs, bearing in mind that the focus here is on the conduct of both parties in the proceeding in assessing their competing claims for costs.
[28] Anwar v Mondello Farms Pty Ltd (No 2) [2015] SASCFC 136 at [5].
[29] Allen v Chadwick (No 2) [2014] SASCFC 130 at [36].
The matters ordinarily relevant in assessing the unreasonableness of the rejection of an informal offer have been identified as follows:[30]
·the reasonableness of the offer and its rejection
·the stage of the proceedings when the offer is made
·the time allowed to consider the offer
·the extent of the compromise in the offer
·the prospects of success at the time of the offer
·the clarity of the terms of the offer
·whether the offer foreshadowed that indemnity costs would be sought if the offeree rejected it
[30] As articulated in Hazeldene’s Chicken Farm op cit at [23] and [25] per Warren CJ, Maxwell P and Harper AJA; Nominal Defendant v Dighton (No 2) [2012] SASCFC 97 at [8] per Sulan, Anderson and David JJ.
The policy rationale for modifying the basis of an adverse costs order where there has been an unreasonable refusal of a settlement offer is because after such refusal, notionally the real cause of the litigation is the attitude adopted by the offeree who unreasonably refused it, thereby prolonging the litigation.[31] Unlike the policy rationale for Rule 194.5(11), the object is said not to be penal but to encourage the saving of private and public costs and to indemnify the party whose offer of compromise has been unreasonably rejected.[32]
[31] Grbavac v Hart [1997] 1 VR 154 at 164-5.
[32] Hazeldene’s Chicken Farm op cit at [21].
Where the offeree submits that its rejection was not unreasonable, as Testel does in this case, it should at least point to a reason for not accepting the offer beyond the usual prospects of being successful in litigation.[33] Whether such refusal was unreasonable by comparison to the ultimate result is to be assessed objectively at the time the offer was made and not through the prism of hindsight.
Consideration
[33] Stewart v Atco Controls Pty Ltd (in liq) (No 2) (2014) 252 CLR 331 at [4] per Crennan, Kiefel, Bell, Gageler and Keane JJ.
Conclusion as between Testel and Mr Goulding

Having regard to all the circumstances of this case, I do not consider it would be just to allow Testel to have the whole or part of its costs of action. Nor do I consider that any of Mr Goulding’s informal offers warrant an award of costs in his favour, having regard to all relevant factors. Accordingly, I will order that Testel and Mr Goulding each bear their own general costs of action.
Factors Relied on by Testel
In my view, for the following reasons, none of the factors relied on by Testel (whether taken in isolation or together) justify Testel recovering the whole or part of its costs of action.
First, as is self-evident, the amount recovered by Testel is nominal and well below the jurisdictional minimum of this Court and both the maximum[34] and the minimum of the Magistrates Court’s general jurisdiction. This is not a case where the amount recovered was nonetheless substantial but less than the amount fixed by Rule 194.5(11). This is an important consideration.
[34] That is, $100,000; ss 3 and 8 of the Magistrates Court Act 1991.
Secondly, it should be accepted that the effect of depriving Testel of its general costs of action is that, unless otherwise ordered, the costs of directions hearings, interlocutory applications and any reserved costs orders are costs in the cause and become the general costs of action under the presumptive costs rules.[35] As stated, the penal effect of s 42(2) of the District Court Act 1991 and Rule 194.5(11) is deliberate, as is the corresponding benefit conferred on a respondent who has been exposed to the disproportionate cost and inconvenience of defending such a claim in a more expensive jurisdiction. This is all the more pertinent where the amount ultimately awarded is a small claim[36] within the jurisdiction of the Civil (Minor Claims) Division of the Magistrates Court. Accordingly, Testel’s submission that Mr Goulding would benefit from his misconduct carries little or no weight, absent other relevant factors justifying a costs order in Testel’s favour.
[35] Rule 194.4.
[36] That is, a monetary claim for $12,000 or less: s 3 of the Magistrates Court Act 1991.
There is, however, a more fundamental difficulty with Testel’s claim for the costs of action. None of the matters raised as to Mr Goulding’s misconduct as an employee have any bearing on the amount of the award in its favour. These matters concerned the question of liability, upon which Testel succeeded for a nominal amount. These matters do not justify Testel pressing a claim of nominal value in this Court for the sound policy reasons stated above.
It should be accepted that any real uncertainty in assessing the value of Testel’s claims may favour an order allowing Testel some costs of action. However, none of any persuasive force were identified. Some 12 months before the institution of proceedings, Testel had Mr Stephen’s assistance as the sole director and shareholder of TestCorp as to the events in which Testel was not a direct participant. On 29 July 2016, Mr Stephen and TestCorp entered into a deed of release with Testel, both promising to co-operate in providing all information and documents in their possession in consideration of releases.[37] By August 2017, just two months after institution of this proceeding, Testel had downloaded the electronic files in Mr Stephen’s Dropbox account for TestCorp with the assistance of Mr Stephen and Mr Hill and saved 12 GB of compressed data to a USB drive that Testel later discovered.[38] This exhibit was important documentary evidence that put in context Mr Goulding’s breaches and the sufficiency and reasonableness of the alleged causal connection between his breaches and the establishment and conduct of TestCorp’s business, and ultimately the nominal amount awarded to Testel.
[37] Exhibit R23.
[38] Judgment [241]-[244].
Accordingly, Testel’s submissions that it was the victim of and not directly involved in MrGoulding’s misconduct as an employee carry no weight on the issue of costs. From the outset of the proceeding Testel knew its claim for equitable compensation was nominal, as Testel’s counsel properly acknowledged in final submissions.[39] Only five ‘Post-it Notes’ clients became clients of TestCorp and the impact of competition from TestCorp was negligible. Further, the significant difficulties in pursuing the only potentially substantive remedy in issue (that is, Testel’s claimed entitlement to an account of profits arising from Mr Goulding’s employment by TestCorp or the sale of his shares) should have been obvious to Testel and its legal advisors from the information it had from Mr Stephen, regardless of any other uncertainties or Mr Goulding’s change of position at trial on questions of liability.
[39] Judgment [454].
Moreover, Testel’s submissions overstate matters. Mr Goulding formally admitted a number of his breaches, his primary defence being that his breaches were ineffectual in inflicting loss on Testel or resulting in him realising any material profit.
Accordingly, it should not be accepted that any significant uncertainty attended Testel’s assessment of the key issues informing the value of any available equitable remedy for Mr Goulding’s alleged misconduct.
Contrary to Testel’s submissions, Mr Goulding’s late change of position as to his handwriting had no bearing on the value of the claim and was not pivotal to the amount of the award. It should be emphasised again that what mattered was the use made of the ‘Post-it Notes’ and the overall effect of any breaches of duty admitted by Mr Goulding or found.
If I had concluded that Mr Goulding had made all the ‘Post-it Notes’ in breach of duty, the result would have been substantially the same. Testel’s share of lost revenue would still have been nominal: $7,935 (excluding GST)[40] as compared to $1,226.23 (excluding GST).[41] This is because the client connections successfully misappropriated by Mr Goulding were immaterial and the overall effect of his breaches of duty was a modest ‘head start’ in setting up TestCorp. The evidence plainly showed that the establishment and limited success of TestCorp’s business did not depend on Mr Goulding’s breaches of duty, either entirely or in a material way.
[40] Judgment [13].
[41] Judgment [474].
In pressing its submissions as to Mr Goulding’s allegedly unreasonable conduct in the proceeding, Testel specifically referred to Mr Goulding’s failure to comply with his discovery obligations.[42] Having regard to Master Blumberg’s remarks, it is apparent that he was prepared to make some of the orders sought for delivery up of electronic devices not because he considered there was a failure to comply with discovery but because there was reason to doubt its sufficiency under the then relevant rule.[43] I do not regard this as a sufficiently important factor justifying an order that Testel recover the whole or part of its costs of action, bearing in mind the apparent vigour with which Testel pursued its case.
[42] Applicant’s written submissions on costs [14].
[43] Orders made on 8 October 2018.
Nor do I regard the fact that Testel made an informal offer to settle its claim at a substantial discount as a sufficiently important factor in its favour. Whilst it should be accepted that Testel’s offer was genuine, the offer materially exceeded the amount awarded. It therefore does not relevantly inform the Court’s discretion on costs in Testel’s favour in any material way. It should also be viewed in the full context of the series of informal offers made by Mr Goulding, such that any weight that might have been given to it is counterbalanced by Mr Goulding’s informal offers (that are considered further below).
In considering any misconduct of Mr Goulding, it should be emphasised that the approach of the Court should be to look at the overall effect of the impugned conduct. In this case, neither party had a monopoly on virtue. A close examination of the course and conduct of the proceeding as a whole shows there were delays and additional costs incurred as result of both parties’ conduct. A prime example on Testel’s part was the unnecessary delay and extra cost occasioned by the adjournment of the trial on Testel’s application to enable it to adduce documentary evidence from its computer records about the information recorded on the ‘Post-it Notes’, a matter that was ultimately not entirely necessary because the majority of the ‘Post-it Notes’ were not used by TestCorp to send quotes. Another was Testel’s insistence that all this information was in its computer and the documentary evidence overwhelming, when it was not.[44]
[44] Judgment [294]-[326].
Finally, it should not be accepted that the importance of Testel’s claim outweighs the need for proportionality between the time and costs incurred in Testel pursuing its claim against Mr Goulding. In my view, there is no private or public benefit in litigants pursuing nominal claims in this jurisdiction, particularly where the proceeding has taken many years to bring to trial and consumed valuable Court resources in doing so. This case is a prime example, involving the filing of 93 documents, 23 interlocutory hearings and 10 days of trial between 6 June 2017 and 14 March 2023.
As stated, the evident purpose of Rule 194.5(11) is to protect the private and public interest in litigation being just, efficient and cost-effective such that the time and costs involved are proportionate to the outcome. This purpose is achieved by providing that the costs of a successful claim are not payable in this Court where the award is less than $60,000 unless the justice of the case otherwise demands. That is not this case in my view.
Factors Relied on by Mr Goulding
Mr Goulding put before the Court three informal settlement offers:
·an informal offer of settlement in the form of a letter dated 30 June 2017 from Mr Goulding’s then solicitors, DW Fox Tucker, to Testel’s solicitors, Townsends[45] (Mr Goulding’s First Offer)
·an informal offer of settlement in the form of a letter dated 9 April 2018 from Mr Goulding to Testel’s solicitors, Townsends[46] (Mr Goulding’s Second Offer)
·an informal offer of settlement in the form of a letter dated 11 July 2018 from Mr Goulding to Testel’s solicitors, Townsends[47] (Mr Goulding’s Third Offer)
Mr Goulding’s First Offer – 30 June 2017
[45] Exhibit JLG-1 to Mr Goulding’s Third Affidavit.
[46] Exhibit JLG-2 to Mr Goulding’s Third Affidavit.
[47] Exhibit JLG-7 to Mr Goulding’s Third Affidavit.
Mr Goulding’s First Offer was made at an early stage of the proceeding: before joinder of ServiceCorp,[48] defences and discovery but after a statement of claim had been filed and served and an interlocutory application for freezing orders pursued and made. Not insignificant costs had been incurred by Testel by the time Mr Goulding’s First Offer was made. Mr Goulding’s costs were in the order of $22,000.[49]
[48] 7 December 2017.
[49] Exhibit JLG-10 to Mr Goulding’s Third Affidavit.
This offer was expressed as “without prejudice save as to costs” and stated to be made in reliance on the principles in Calderbank v Calderbank,[50] with an express reservation that it would be relied on if not accepted on the question of costs on an indemnity basis. It should be accepted that Testel was on notice of the proposed use to be made of this offer on costs.
[50] [1975] 3 All ER 333.
The letter addressed various alleged “flaws” in Testel’s claim and offered to settle on the basis that Mr Goulding would consent to judgment on liability without specifying any amount and would pay Testel $32,400 in full and final settlement of all matters, each party bearing their own costs. A formal deed of settlement and release was proposed without indicating the proposed terms of such deed.
The offer was only open for acceptance until close of business on Tuesday, 4 July 2017, two business days later.
There are some factors indicating that objectively assessed it might have been unreasonable in all the circumstances for Testel not to accept this offer. One factor is the extent of the compromise made by Mr Goulding in the offer at the relevant time. In my view, it was genuinely made and represented a reasonable compromise of Testel’s claim in terms of the offer to consent to judgment and the monetary amount compared to the ultimate award, despite Testel’s submission it was put forward on the basis of false facts. The force of the offer is not undermined by the contentions put forward as to “flaws” in Testel’s claim given Mr Goulding’s offer to consent to judgment.
As to the prospects of success at the time of the offer, it should not be accepted that Mr Goulding’s prospects were poor and Testel’s were high, as Testel submits, when the all-important question of the quantum and value of the claim is considered, for the reasons previously stated. Instead, at its highest, it should be accepted there were some uncertainties as to the potential value of Testel’s claim given the early stage of the proceedings.
That said, I do not consider Testel’s failure to accept Mr Goulding’s First Offer was unreasonable and that the Court should act by making a costs order in Mr Goulding’s favour. The offer was not open for long enough (just two business days) for Testel to reasonably assess its position, despite the apparent simplicity of the offer. It was made at an early stage of the proceeding and, whilst Testel had Mr Stephen’s co-operation, it did not have the benefit of the electronic data downloaded from TestCorp’s DropBox until August 2017 or Mr Goulding’s defence or any discovery.
Importantly, the offer was made on the basis each party would bear their own costs. Bearing in mind the quantum of Mr Goulding’s costs at the time this offer was made, it was reasonable in my view for Testel to take the view that this offer did not represent a genuine compromise of the real value of its claim and the costs incurred at that time.
Accordingly, Testel’s failure to accept Mr Goulding’s First Offer does not justify an award of costs in Mr Goulding’s favour.
Mr Goulding’s Second Offer – 9 April 2018
This offer was open for 14 days, lapsed without Testel accepting it and offered a settlement sum of $45,100 inclusive of costs. Similar denials of liability were made. No offer to consent to judgment was made, unlike the previous offer.
Bearing in mind again the stage of the proceeding and the fact that further substantial costs had been incurred by Testel, I do not consider Testel’s refusal of this offer was unreasonable given it was expressed as inclusive of costs and the impasse between the parties in settling had become costs (as is evident from the correspondence subsequently passing between Mr Goulding and Testel’s solicitors in June and July 2018). In any event, the force of Mr Goulding’s Second Offer was overtaken by Mr Goulding’s Third Offer.
Mr Goulding’s Third Offer – 11 July 2018
This offer was made on behalf of Mr Goulding and ServiceCorp, expressed as being open until withdrawn. By reference to the terms of the informal offer made by Testel[51] referred to above, Mr Goulding indicated the terms were acceptable save as to the unquantified amount for costs, and counter-offered a settlement amount of $30,000 plus $15,000 on account of costs. Mr Goulding withdrew this offer on 31 July 2018.
[51] Exhibit JLG-5 to Mr Goulding’s Third Affidavit.
It is an important consideration that Mr Goulding’s Second and Third Offers were made when both Testel and Mr Goulding had incurred substantial costs. By the time these offers were made, Mr Goulding had incurred and paid costs and disbursements of $55,490 out of a total of $64,014.75[52] and not all would be recoverable since he had changed solicitors once and the parties had attended a settlement conference.[53] Plainly, any unreasonable refusal of Mr Goulding’s informal offers can only inform the question of costs incurred a reasonable time after these informal offers were made. The costs subsequently incurred were in the order of $8,500 given Mr Goulding was self-represented between 2 November 2017[54] and 11 December 2018[55] and from 17 March 2021,[56] seeking occasional legal advice out of court from time to time.
[52] Mr Goulding’s Third Affidavit [35].
[53] Ibid [35.1] and [35.2] and page 30 of Exhibit JLG-10.
[54] FDN 17.
[55] FDN 43.
[56] FDN 59 and FDN 60.
As regards most of this amount,[57] Mr Goulding has not put before the Court the retainer of his third firm of solicitors, Westside Lawyers, or invoices or other evidence of these costs. As such the Court cannot have any confidence in the reasonableness of the costs incurred. In any event, the quantum would not justify the further expense and delay of a taxation.
[57] $6,473.69 as evidence in a ‘Statement of Account’ at page 83 of Exhibit JLG-10 to Mr Goulding’s Third Affidavit.
In all the circumstances, I do not consider Testel’s failure to accept Mr Goulding’s Third Offer was unreasonable and should inform the Court’s discretion on costs in allowing Mr Goulding to recover any costs incurred after it was withdrawn.
ServiceCorp
As stated, Testel’s claim against the Third Respondent was dismissed. As a matter of general principle, ServiceCorp as a successful respondent would be entitled to an order as against Testel for its costs of the proceeding on the standard costs basis. In my view, there are no compelling reasons to depart from the general principle, despite Mr Goulding’s Third Offer being made on its behalf.
Moreover, the interests of the efficient, cost-effective and proportionate determination of the issue of ServiceCorp’s costs of action require strong regard to be given to the fact that such costs would be nominal if taxed. When represented, Mr Goulding and ServiceCorp shared the same solicitors, only a modest quantum of costs was incurred after ServiceCorp was joined in the proceeding[58] and the issues and evidence adduced at trial concerning only ServiceCorp were limited.
[58] Approximately $14,000 was incurred from 7 December 2017.
Accordingly, I will order that ServiceCorp have its costs of action on a lump sum basis in the amount of $1,500.