Ultra Thoroughbred Racing v Those Certain Underwriters (Ruling No 2) - [2011] VSC 636

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

No. 2008 of 05957

ULTRA THOROUGHBRED RACING PTY LTD (ACN 103 106 207) trading as BAREE STUD	Plaintiff
v
THOSE CERTAIN UNDERWRITERS AT LLOYD’S, LONDON, members of Syndicate 2001 for the 2005 underwriting year of account	Defendant
and
PAT LADHAMS	Second Defendant
and
ANGUS O McKINNON	Third Defendant

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JUDGE:	J FORREST J
WHERE HELD:	Melbourne
DATE OF HEARING:	7 December 2011
DATE OF RULING:	7 December 2011 (Reasons 9 December 2011)
CASE MAY BE CITED AS:	Ultra Thoroughbred Racing v Those Certain Underwriters & Ors (Ruling No 2)
MEDIUM NEUTRAL CITATION:	[2011] VSC 636

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COSTS – Offer of Compromise – Calderbank offer by one of two defendants inviting plaintiff to walk away – Defendants seeking indemnity costs or solicitor/client costs – Offer not clear and reasonable – No real and genuine element of compromise – Offer an offer to capitulate - Not unreasonable for plaintiff to refuse offer as reasonableness determined at the time of the offer – Application for solicitor/client costs refused.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A Sandbach	Francis Daniel Lawyers
For the Second Defendant	Mr G Burns	Ryan Carlisle Thomas Lawyers
For the Third Defendant	Mr S Shaw	Meridian Lawyers

HIS HONOUR:

Introduction

On 2 December, I dismissed Ultra’s claim against Dr McKinnon.

On 7 December 2011, I heard argument concerning the appropriate order for costs to be made in favour of Dr McKinnon.

Dr McKinnon sought to rely on the Calderbank offer made by his solicitors to Ultra’s solicitors on 17 August 2010 which read as follows:

I am instructed to offer to bear our own costs in settlement of the proceeding against my client.
In the event that my client achieves a result more favourable than the offer expressed in this letter at trial, then my client will produce this letter on the question of costs and seek its costs, both party/party and solicitor/client from the date of the letter, pursuant to the principles enunciated in Calderbank v Calderbank [1975] 3 ALL ER 333 and applied the decision of MT Assocs Pty Ltd v Aqua Max Pty Ltd (No 3) 2000 VSC 163.
The above offer is open for acceptance for seven (14) days from the date of this letter.

Dr McKinnon sought party/party costs up until 17 August 2010 and thereafter costs on a solicitor/client basis. I refused his application and my reasons now follow.

Submissions

In obtaining judgment, Dr McKinnon has done better than his offer to walk away and bear his own costs. Counsel for Dr McKinnon contends that rejection of the offer at that time was unreasonable in the circumstances and relied upon what was said by the Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2).[1]He argued that the pleadings set out exactly the position of his client in relation to Ultra’s claim. It should have been clear to Ultra and its solicitors, that the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2011] VSC 636
Decision Date: 7 December 2011 (Reasons 9 December 2011)

CaseChat Overview and Summary

Ultra Thoroughbred Racing pursued legal action against two defendants, seeking damages and other remedies. The defendants, in turn, applied for indemnity costs or, alternatively, solicitor/client costs, following a failed attempt by one defendant to settle the matter through a Calderbank offer. The court was tasked with determining the appropriateness of the costs sought by the defendants.

The central legal issue was whether the Calderbank offer was clear and reasonable, and whether the plaintiff's refusal to accept the offer was unreasonable. The court considered whether the offer contained a real and genuine element of compromise, as well as the reasonableness of the plaintiff's decision to reject the offer. The court found that the offer was not clear and reasonable, as it was an offer to capitulate, lacking any real and genuine element of compromise. As a result, the court held that it was not unreasonable for the plaintiff to refuse the offer, and the application for solicitor/client costs was denied.

The court's reasoning was grounded in the principles of cost assessment in Australian litigation, particularly the requirement for a Calderbank offer to be clear and reasonable. The court emphasised that the reasonableness of the plaintiff's decision to reject the offer must be assessed at the time the offer was made. Given that the offer did not contain a genuine element of compromise, the court found that the plaintiff's refusal was not unreasonable. Consequently, the defendants' application for indemnity or solicitor/client costs was dismissed.

The court's decision underscores the importance of a genuine and reasonable offer in Calderbank negotiations, and the need for careful assessment of the circumstances surrounding a plaintiff's decision to reject such an offer. The ruling serves as a reminder to parties involved in litigation that the reasonableness of their actions must be evaluated in the context of the offer presented to them.

Orders