Westpac Banking Corporation v Anderson (No 2)
[2017] VCC 1691
•16 November 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BANKING AND FINANCE LIST
Case No. CI-15-01507
| WESTPAC BANKING CORPORATION (ABN 33 007 457 141) | Plaintiff |
| Defendant by Counterclaim | |
| v | |
| LENA ANNIKA ANDERSON | Defendant Plaintiff by Counterclaim |
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JUDGE: | HER HONOUR JUDGE A RYAN | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 13 November 2017 | |
DATE OF RULING: | 16 November 2017 | |
CASE MAY BE CITED AS: | Westpac Banking Corporation v Anderson (No 2) | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 1691 | |
RULING
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Subject:COSTS
Catchwords: Calderbank offer – multiple offers made - short time for acceptance
Cases Cited:Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority(No 2) [2005] VSCA 298;
Berrigan Shire Council v Ballerini (No 2) [2006] VSCA 65;
Pearson v Williams [2005] VSCA 30;
Management 3 Group Pty Ltd (in liquidation) v Lenny’s Commercial Kitchens Pty Ltd (No 3) [2011] FCA 725;
Northwest Capital Management v Westate Capital Ltd [2012] WASC 121
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Hay | Gadens Lawyers |
| For the Defendant | No appearance |
HER HONOUR:
1 On 1 November 2017, I gave reasons for judgment in favour of the plaintiff (“the bank”) in respect of its debt claim and dismissed the counterclaim filed by the defendant (“Ms Anderson”). The parties were invited to file written submissions on the form of the final orders to be made, including the amount of the judgment debt, interest and costs. The matter was listed on 13 November 2107 to hear oral submissions regarding the final orders.
2 The bank filed written submissions on costs dated 8 November 2017, together with an affidavit of Annette Leigh Gaber, sworn 6 November 2017, a partner of Gadens Lawyers. Ms Gaber’s affidavit exhibits correspondence between the parties, including four letters sent by the bank to Ms Anderson making Calderbank offers of settlement.
3 Ms Anderson filed a short submission in respect of costs dated 1 November 2017 which stated as follows:
“The Defendant is appealing the orders of Judge AM Ryan dated 1 November 2107.
The Defendant is proceeding on the basis that these default proceedings against her were brought unlawfully and without proper basis as it was the Plaintiff who was in default.
As such all costs in the proceedings should be borne by the Plaintiff.”
4 Ms Anderson informed the court by email that she would not be attending the costs hearing on 13 November 2107. As foreshadowed, she did not appear.
The bank’s submissions
5 The bank seeks an order that Ms Anderson pay the bank’s costs:
(a)on a standard basis from 30 March 2015 (being the date of the commencement of the proceeding) to 9 February 2017; and
(b)on an indemnity basis from 10 February 2017 to the conclusion of the proceeding (being the date upon which its first Calderbank offer expired).
6 As the successful party, the bank seeks costs pursuant to the general rule that costs follow the event. I am satisfied the general rule should apply in this case as the bank proved its debt claim and successfully defended each of the various claims made in Ms Anderson’s counterclaim.
7 The issue that falls for determination is whether the bank is entitled to rely upon any of the four Calderbank offers made to Ms Anderson.
8 The first Calderbank offer was made by way of letter dated 30 January 2017. (Exhibit “ALG-1” to the affidavit of Ms Gaber). It proposed a settlement by way of signing a deed of settlement. The proposed settlement was subject to a number of conditions, the first of which was that Ms Anderson had to provide satisfactory evidence by 10 February 2107 that she was up to date in payment of owners’ corporation fees and land taxes.
9 Pursuant to the first offer, Ms Anderson was given the opportunity to elect to refinance the property, the subject of the proceeding, with another lender, but if that failed or if she elected not to pursue refinance as a settlement option, then the terms of the proposed deed would require her to surrender vacant possession of the property to the bank. If Ms Anderson wished to pursue the refinance option, then there were various conditions which were to apply, in particular, that the refinance must be with a non-Westpac Group lender. A process was then set in place as to how the property was to be valued. It was proposed that settlement of the refinance and payment to the Bank of an amount representing 80 per cent of the valuation was to occur within 14 days of the defendant obtaining unconditional finance approval.
10 In the event that Ms Anderson did not pursue the refinance option, she was required to surrender vacant possession to the bank within 14 days of execution of the settlement deed. Likewise, if the refinance did not proceed, then the bank would require the property to be surrendered. If the bank sold the property, it sought a term that it could retain the full amount of the sale proceeds realised, irrespective of the sale price achieved.
11 The first letter then set out the reasons why the bank considered the offer to be a favourable one given the level of debt then owed of $577,959.88 far exceeded the value of the property. The bank also set out the reasons why it considered Ms Anderson’s defence and counterclaim would fail.
12 The letter noted that if the court made an order which was no less favourable to the bank than the offer, the bank would produce the letter in support of an application for indemnity costs from the date the offer lapsed.
13 The first offer was open for 11 days, expiring on 10 February 2017. It was rejected by Ms Anderson’s solicitors then acting, TressCox, in a letter dated 10 February 2017, which was sent by email on 13 February 2017. (That letter forms part of Exhibit “ALG-1” to the affidavit of Ms Gaber.)
14 The bank contends that Ms Anderson acted unreasonably in not accepting the first offer because it provided her with an opportunity to, in its words, to “salvage the property”. The amount that she would have had to pay in settlement would have been far less than the amounts she is now liable to pay the bank as a result of it being successful at trial and she would have avoided bankruptcy.
15 The second offer by way of a Calderbank letter was made on 16 February 2017 (Exhibit “ALG-2”). It was in similar terms to the first offer, save that the principal proposal was the bank would permit Ms Anderson to refinance the property providing she paid the bank $300,000 and the money came from a non-Westpac Group lender. Alternatively, if that did not occur, or the sum was not paid, Ms Anderson would surrender vacant possession of the property, and in the event that the bank sold the property, it was entitled to retain $350,000 from the proceeds and any surplus funds would be payable to Ms Anderson. This offer was open for 24 hours only and was not accepted. The offer was made shortly before the trial had been due to commence on 22 February 2017. The second offer carried the same warning as before about the seeking of an order for indemnity costs.
16 The bank says Ms Anderson acted unreasonably in not accepting the second offer. As the judgment has been less favourable than the offer made, it says it is entitled, on the basis of the second offer, to indemnity costs from 17 February 2017. Ms Anderson replied by way of email dated 17 February 2017 (part of Exhibit “ALG-2”). By this stage, she was no longer legally represented. Ms Anderson advised she would be proceeding with the trial on 22 February 2017 as litigant in person. She referred to an earlier offer made by her former lawyers dated 10 February 2017 and stated that no other offers would be made or considered that did not improve on that offer.
17 The third offer was made by way of a Calderbank letter dated 24 April 2017 (Exhibit “ALG-3”). This was substantially the same as the second offer, save the figures had reduced to a refinance of $200,000 in settlement of the matter, or in the event the bank sold the property, it could retain $250,000 from the proceeds realised. It carried the same warning about an indemnity costs order. The third offer was open for 14 days, expiring on 8 May 2017. Ms Anderson did not accept this offer. She replied by email on 24 April 2017, stating she declined to respond further (part of Exhibit “ALG-3”). Ms Anderson wrote a letter to Gadens Lawyers on 30 April 2107 (Exhibit “ALG-4”) setting out details of her claim for damages and costs and outlining why she considered her claim was a strong one. She said relevantly: “The claim is not negotiable and no further Calderbank offers will be considered or responded to.”
18 The fourth and final offer made on behalf of the bank by way of a Calderbank letter was dated 1 September 2017 transmitted at 9.55am (“Exhibit “ALG- 5”). Significantly, the bank offered to pay Ms Anderson the sum of $170,000, which was said to represent $145,000 in compensation for her and $25,000 for her trial preparation costs. The bank also offered to provide a discharge of mortgage for the mortgage registered over her property and to clear her entire liability under her two loan accounts with the bank. The offer was open to be accepted until 4.00pm on 1 September being the same day as the day the offer was made. Again, the letter carried a warning about seeking an order for indemnity costs if the court made an order which was no less favourable to the bank than the offer.
19 Ms Anderson promptly replied within an hour in a letter dated 1 September 2107 (part of Exhibit “ALG-5”). She rejected the offer on the basis of the unacceptable limitations that would be placed on her by clauses 5 and 7 of the fourth Calderbank letter. Clause 5 of the fourth Calderbank letter provided that Ms Anderson was not to disparage Westpac. Clause 7 was a standard clause to the effect that the deed could be treated as a bar to any action or proceeding now or in the future commenced by or on behalf of any party arising out of the County Court proceeding or out of the Court of Appeal proceeding.
20 In an email dated 1 September 2017 (part of Exhibit “ALG-5”) sent some 10 minutes after her letter of the same date, Ms Anderson said further:
“I clarify that I do not intend to waive my rights to freedom of expression for less than $3 m. I don’t wish you to waste further time advancing offers.”
Applicable principles relating to Calderbank offers
21 The principles applicable in respect to the consideration of Calderbank offers are well established. They were summarised conveniently by Nettle JA in Berrigan Shire Council v Ballerini (No 2).[1] His Honour said:
[1][2006] VSCA 65 at [33]
“[33] The rejection of a Calderbank offer not later bettered by judgment does not lead automatically to an indemnity costs order in favour of the offeror. The question in each case is whether the offer was a reasonable offer of compromise, and whether the rejection of the offer was unreasonable, and the answer to that question turns in each case on all the circumstances of the case. The making of an offer and its rejection are but two albeit important circumstances to which the court will have regard in the exercise of its costs discretion. As the court explained in Hazeldene’s Chicken Farm:
‘The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations.25 It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
a) the stage of the proceeding at which the offer was received;
b) the time allowed to the offeree to consider the offer;
c) the extent of the compromise offered;
d) the offeree’s prospects of success, assessed as at the date of the offer;
e) the clarity with which the terms of the offer were expressed;
f) whether the offer foreshadowed an application for an indemnity costs [order] in the event of the offeree’s rejecting it.’”
Conclusion
22 I am of the view that Ms Anderson did not act unreasonably in rejecting the first, second and third Calderbank offers. The principal reason for this is that these offers were predicated in part on obtaining the approval of an unrelated party, namely, a non-Westpac Group lender, in respect of the proposal to refinance, which was a matter outside Ms Anderson’s control. If she was unable to obtain refinance or it fell through, then she stood to lose her property albeit for sums less than her current indebtedness. To some extent, the offers could also be seen as an invitation to negotiate in a sense that alternatives were proposed, namely, the refinance or the option to surrender the property for a specified amount. It has been held that it is not unreasonable to refuse offers which are in effect offers to negotiate.[2] The offers were premised on the basis Ms Anderson would not succeed on her counterclaim and the bank would be entirely successful on its claim. There were issues to be determined at trial as to whether the bank had a legitimate right to debit Ms Anderson’s account. This involved assessing whether the disputed payment was valid or not and considering the powers of the bank under its security documentation to debit customers’ accounts without notice. It also fell to be considered whether any of the actions of the bank amounted to unconscionable conduct giving rise to a claim for damages on the counter claim. It was by no means certain the bank would have succeeded on all issues. In my opinion, it was not unreasonable for Ms Anderson to have rejected the first three offers made by the bank having regard to all these matters.
[2]Dal Pont Law of Costs at paragraph 1366 and Pearson v Williams [2002] VSC 30 per Ashley J at [15] to [16]
23 But the position is quite different in respect of the fourth and final offer. This offer was made on the Friday prior to the trial commencing on Monday, 4 September 2017. Whilst ordinarily a short time to consider an offer will be a significant factor in weighing in the favour of the reasonableness of a decision to reject the offer, this is not always the case. Courts have recognised that a period as short as a day or even a period issued in hours may be sufficient to consider some offers.[3] It is clear from Ms Anderson’s prompt response that she was not troubled by the timing of the offer and was able to reject it within an hour of it being made.
[3]Management 3 Group Pty Ltd (in liquidation) v Lenny’s Commercial Kitchens Pty Ltd (No 3) [2011] FCA 725 at [52]; and Northwest Capital Management v Weststate Capital Ltd [2012] WASC 121 at [43]
24 Under the fourth Calderbank offer, the bank offered to clear all the debt owed by Ms Anderson in its entirety, being the amount of the two loans, interest and enforcement costs incurred by the bank and give her a discharge of mortgage. In addition, the bank offered to pay Ms Anderson compensation in respect of her counterclaim in the sum of $170,000. This offer was a very generous one and provided her with a substantial windfall. The effect of the offer was that the bank was abandoning all of its claims against her and offering to pay her money on her counterclaim, which was based on the alleged unconscionable conduct of the bank in making the disputed payment. Ms Anderson’s purported reliance on clauses 5 and 7 of the terms of the offer as a basis for rejecting the offer was misplaced and did not provide a sound basis for refusal. In my view, it was clearly unreasonable for Ms Anderson not to have accepted the fourth offer in the circumstances and it is regrettable she did not do so.
25 Accordingly, I consider the bank is entitled to indemnity costs from 1 September 2017.
26 At the hearing on 13 November 2017, counsel for the bank informed the court that his client was not seeking an order for interest on the judgment debt.
27 I will therefore order as follows:
(a) There be judgment for the plaintiff against the defendant in the sum of $309,622.14;
(b) The defendant’s counterclaim is dismissed;
(c) The defendant pay the plaintiff’s costs of the proceeding and the counterclaim (including any reserved costs):
(i) on the standard basis in respect of costs incurred from the commencement of the proceeding up to and including 1 September 2017; and
(ii) on an indemnity basis in respect of costs incurred on and from 2 September 2017.
Certificate
I certify that these 9 pages are a true copy of the Reasons for Ruling of Her Honour Judge A Ryan delivered on 16 November 2017.
Dated: 16 November 2107
Elisabeth Buchan
Associate to Her Honour Judge A Ryan
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