Willis v Crosland [No 2]

[2021] VSCA 360

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2021 0024

ANNE WILLIS	Appellant
v
VANESSA LOUISE CROSLAND [No 2]	Respondent

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JUDGES:	SIFRIS, WALKER JJA and MACAULAY AJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	Determined on the papers
DATE OF JUDGMENT:	17 December 2021
MEDIUM NEUTRAL CITATION:	[2021] VSCA 360
JUDGMENT APPEALED FROM:	[2020] VCC 1964; [2021] VCC 39 (Judge Macnamara)

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COSTS – Costs of application for leave to appeal and appeal and notice of contention – Calderbank offer by successful appellant not accepted by respondent – Not unreasonable for respondent not to accept offer – Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority [No 2] (2005) 13 VR 435 applied.

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WRITTEN SUBMISSIONS:	Counsel	Solicitors
For the Appellant	Mr P Solomon QC with Mr J McComish	DST Legal
For the Respondent	Mr J Twigg QC with Mr W Newland	Ferdinand Zito & Associates

SIFRIS JA
WALKER JA
MACAULAY AJA:

1. On 23 November 2021, we published reasons for our decision to grant leave to appeal and allow the appeal.[1]  As a consequence, the appellant is entitled to repayment of the deposit paid to the respondent in the sum of $185,000.

   [1]Willis v Crosland [2021] VSCA 320 (‘principal judgment’). The relevant background to the appeal and the reasons for our decision are set out in the principal judgment. We will assume familiarity with the principal judgment and defined terms bear the same meaning.

1. We invited the parties to endeavour to agree on a form of order dealing with all remaining matters, including costs, in accordance with the principal judgment and notify the Court of any agreement.  To the extent that the parties were unable to agree, the parties were required to file submissions dealing with those matters.

1. The parties have failed to agree on the costs of the application for leave to appeal, the appeal and the notice of contention. There is no dispute about the costs of the trial or the appellant’s proposed order for interest. The respondent seeks an indemnity certificate under s 4 of the Appeal Costs Act 1998 with respect to the costs of the appeal.  Both parties filed written submissions.

Costs in the Court of Appeal

1. By reference to the principles stated in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority [No 2],[2] the appellant submitted that she is entitled to costs on an indemnity basis as the result of a Calderbank offer.

   [2](2005) 13 VR 435, 441 [23] (Warren CJ, Maxwell P and Harper AJA); [2005] VSCA 298.

1. By letter dated 11 March 2021, the appellant made an offer to the effect that the respondent refund the amount of $185,000 and pay $80,000 by way of costs of both the trial and the appeal.  The offer was open until 1 April 2021.  The appellant submitted as follows:

The relevant principles are as stated in Hazeldene’s Chicken Farm.  The critical question is ‘whether the rejection of the offer was unreasonable in the circumstances’.  The court ordinarily has regard to the following:

(a)the stage of the proceeding at which the offer was received — here, it was after the appellant’s written case was filed, thereby allowing the respondent comprehensively to understand the appellant’s case on appeal;

(b)the time allowed to the offeree to consider the offer — here, a full three-week period;

(c)the extent of the compromise offered — here, a significant compromise on interest and costs;

(d)the offeree’s prospects of success, assessed as at the date of the offer —here, the offeree vendor’s lack of prospects was clear even at the time, for the reasons set out in the appellant’s submissions and now vindicated by this Court;

(e)the clarity with which the terms of the offer were expressed — here, the offer was clear and explicit;

(f)whether the offer foreshadowed an application for an indemnity costs [sic] in the event of the offeree’s rejecting it — here, the offer did so expressly.

For each of those reasons, and in all the circumstances, it was unreasonable of the respondent to have rejected the appellant’s offer.  Indemnity costs should follow.[3]

[3]Citations omitted.

1. The respondent submitted that the offer did not contain a genuine compromise and was in effect an offer to capitulate.  Further, the respondent contended that while she was successful below she did not seek to support the judgment for the reasons given by the trial judge;  rather, when refusing the offer, she sought to uphold the judgment on the first two grounds set out in the notice of contention.  The respondent accepted that those grounds were not matters pleaded at trial but submitted that it was not unreasonable to rely on those grounds because this Court has previously allowed parties to rely on new grounds where a question of construction or law is raised.  In this regard it was submitted that in opening her case at trial, the respondent raised the issue of anticipatory breach, albeit expressed in terms of whether the appellant was ready, willing and able to comply with her obligations.  The respondent also argued that the third ground of contention, which was added by amendment, was argued at trial and determined by the judge and did not require the appellant to meet ‘shifting contentions’.

1. In our opinion, in all of the circumstances, it was not unreasonable for the respondent to reject the compromise offered.  Although the appellant’s offer was made at an appropriate stage, provided sufficient time for its acceptance, was expressed with clarity and foreshadowed indemnity costs, it did not represent a sufficient compromise.  There was no compromise in relation to the subject matter of the proceeding, namely the refund of the deposit.  Rather, the compromise was in relation to costs and interest.  In that regard, the offer called for a payment of $80,000.  The offer suggests that the sum of $80,000 was a significant reduction from the costs incurred by the appellant of $100,000 (in respect of the trial) and $70,000 to be incurred (in respect of the appeal).[4]  However, it is difficult to assess the extent of any compromise.  By that stage, the appeal costs referred to had not yet been fully incurred.  Presumably, the sum of $100,000 for the trial costs refers to indemnity costs.  But there is no breakdown of those costs from which the reasonableness of the offer can be assessed.  In fact, at trial, costs, including in part indemnity costs, were awarded in favour of the respondent.  Nevertheless, the offer effectively calls for a capitulation.

   [4]The is no breakdown of the costs and no indication of the scale on which such costs — expressed as a round figure — were calculated.

1. Having succeeded at trial, after the appellant had applied to re-open her case, and having been awarded (in part) indemnity costs, and having not yet filed her written case, it was not in our view unreasonable for the respondent to reject the offer.

1. The notice of contention was filed late and raised issues not dealt with below.  It was dismissed.  In our opinion that is an insufficient basis to award indemnity costs.

1. The costs of the application for leave to appeal, the appeal and the notice of contention will be awarded on the standard basis.

Costs of trial

1. The trial proceeded in November 2020.

1. On 20 May 2020, the appellant made a formal written offer of compromise under Order 26 of the County Court Civil Procedure Rules 2018 (‘the Rules’), which invited payment of $180,000 inclusive of costs.

1. The appellant submitted that as the result obtained by her is no less favourable to her than the terms of the offer, then in accordance with the Rules, she is entitled to her costs on an indemnity basis from 11:00 am on 22 May 2020.

1. The respondent accepted that the offer of compromise complied with r 26.08(2) of the Rules and the order proposed by the appellant.

Interest

1. By reason of s 50 of the County Court Act 1958, the power to award interest in that Court is to be found in Part 5 of the Supreme Court Act 1986. Part 5 includes s 58.

1. Section 58(1) of the Supreme Court Act provides:

If in a proceeding a debt or sum certain is recovered, the Court must on application, unless good cause is shown to the contrary, allow interest to the creditor on the debt or sum at a rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 or, in respect of any bill of exchange or promissory note, at 2% per annum more than that rate from the time when the debt or sum was payable (if payable by virtue of some written instrument and at a date or time certain) or, if payable otherwise, then from the time when demand of payment was made.

1. The appellant submitted that the proceeding was relevantly for recovery of a debt or sum certain (namely, recovery of the $185,000 paid towards the deposit). Accordingly, the appellant argued, by reason of s 58(1), interest under s 2 of the Penalty Interest Rates Act 1983 is payable from the date on which the debt or sum was payable, namely, 19 December 2019, the day after the notice of termination and demand for repayment was made.

1. At all relevant times, the interest rate under the Penalty Interest Rates Act has been 10 per cent.  Therefore, according to the appellant, the total amount owing for interest between 19 December 2019 and the date of these reasons and the orders made this day (namely, 17 December 2021) is $36,949.32.

1. The respondent made no submission on the appellant’s proposed order for interest.

1. As good cause to the contrary has not been shown, we will make the order sought by the appellant, with interest up to and including 17 December 2021.

Disposition

1. We will order that the respondent pay the appellant’s costs of the application for leave to appeal and the appeal and the notice of contention on a standard basis to be assessed in default of agreement.

1. The orders of his Honour Judge Macnamara made 5 March 2021 will be set aside and in their place we will order that:

(a)               there be judgment for the appellant in the sum of $221,949.32;  and

(b)              the respondent pay the appellant’s costs of the trial on a standard basis until 11:00 am on 22 May 2020 and thereafter on an indemnity basis to be assessed in default of agreement.

1. Finally, we will grant the respondent an indemnity certificate under s 4 of the Appeal Costs Act, with respect to the costs of the application for leave to appeal and the appeal.