Wolfe v Permanent Custodians Limited (No 2)
[2013] VSC 38
•20 February 2013
| Do Not Send for Reporting | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2010 02423
| RICHARD WEBSTER MARK WOLFE | Plaintiff |
| v | |
| PERMANENT CUSTODIANS LIMITED (ACN 001 426 384) | Defendant |
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JUDGE: | ZAMMIT AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12 February 2013 | |
DATE OF JUDGMENT: | 20 February 2013 | |
CASE MAY BE CITED AS: | Wolfe v Permanent Custodians Limited (No 2) | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 38 | |
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COSTS – Application for costs – Indemnity costs – Whether unreasonable to reject Calderbank offer – Applicable principles –Abandonment of claim – Conduct of the plaintiff – Undue delay and expense – Maintenance of untenable claim – Notice of dispute.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr O. Scoullar-Greig | George Erlichster |
| For the Defendant | Mr S. Hay | Gadens Lawyers |
HER HONOUR:
On 11 October 2012 I delivered judgment dismissing the plaintiff’s proceeding against the defendant in relation to an agreement dated 1 December 2009.
The 1 December 2009 agreement related to the defendant staying the execution of a warrant of possession (“warrant”) after it obtained judgment against the plaintiff and his former de facto partner, Ms Gayle Nicole Breasley (Ms Breasley) for defaulting under a loan agreement they had entered into with the defendant.
The plaintiff and Ms Breasley entered loan agreements and mortgages with the defendant on 20 September 2000 and 31 March 2004. The mortgaged land, the subject of the loan agreement in these proceedings is located at 19 Main Street, Pascoe Vale, more particularly described in Certificate of Title Volume 7681 Folio 037 (“the property”). The loan agreement created a first registered mortgage (“the mortgage”) over the property of which Ms Breasley was the sole registered proprietor. The plaintiff was not a co‑mortgagor.
On 1 December 2009, only days before the defendant was to enforce the warrant and evict the plaintiff from the property, the plaintiff approached the defendant and negotiated an agreement to stay the imminent eviction.
The 1 December 2009 agreement contained an onerous term in relation to any future defaults by the plaintiff namely, if the plaintiff defaulted any payment which the parties had agreed to, the defendant would enforce its rights under the judgment and warrant without notice. The plaintiff defaulted and the defendant exercised its rights under the 1 December 2009 agreement.
The plaintiff claimed that the defendant’s exercise of its rights was contrary to law.
The plaintiff relied on a second further amended statement of claim, filed on the second day of trial. The document pleaded numerous causes of action.
I determined that none of the plaintiff’s claims were made out. I concluded that there could be no interference with the defendant’s right to enforce its judgment and warrant. Accordingly, the claims contained in the second further amended statement of claim were dismissed with costs.
As a result of the dismissal of the plaintiff’s claim the defendant seeks an order that the defendant’s costs be paid on an indemnity basis.
On 11 February 2012, submissions were made by parties on costs.
The defendant relies of the affidavit of Annette Leigh Gaber affirmed 8 February 2013. The plaintiff relies on his affidavit sworn 10 February 2013.
The defendant made three submissions as to costs. They were:
1.That the defendant had served a Calderbank offer dated 25 May 2010 and was entitled to costs:
(a)on a party/party basis for costs up to 8 June 2010; and
(b)on an indemnity basis from June 2010 to the conclusion of the hearing
2.Given the result of the trial, the undue delay and inconvenience caused by the plaintiff during the course of the proceedings and the defendant’s offer of 25 May 2010, the defendant is entitled to costs on an indemnity basis from the commencement of the proceeding
3.The defendant is entitled to costs:
(a)generally on a party/party basis; and
(b)on an indemnity basis for the costs of proving matters set out in paragraphs 18 and 19 of the defendant’s Notice to Admit Facts and Documents dated 16 May 2010.
The Calderbank offer
The evidence before the Court, which was uncontested, is that on 25 May 2010, the plaintiff’s solicitors sent a letter to the defendant’s solicitor by email. The letter contained an offer to settle this proceeding on terms.
The offer in the letter was made in the following terms:
In an effort to resolve the matter to avoid further time and costs associated with the litigation, our client has instructed us to make the following offer:
(1)…
(2)Your client bear his own legal costs;
(3)Your client pay to our client the sum of $38,561.08 (comprised of arrears of $8,760.81 on account 1057716/1, arrears of $344.45 on loan account 1057716/2 and unbilled legal costs of $29,455.82) by 4.00pm on Tuesday 8 June 2010. Such sum is to be paid by bank cheque payable to GEL Custodians which is to be delivered to our office by the deadline stipulated. Note, our unbilled legal costs are in fact $34,455.82 including counsel’s fees, but our client has agreed to bear $5,000 of its own costs in an effort to resolve the matter. Accordingly, we have quoted $29,455.82 for unbilled legal costs. In relation to the arrears of $8,760.81 owing on loan account 1057716/1, this is comprised of legal costs and agents’ fees. … In relation to the arrears of $344.45 on account 1057716/2, that amount is outstanding interest on the loan. …
(4)Within two business days of your client’s compliance with paragraph (3) above or within two days of our client’s completion of the Rectification Works (whichever is later), our client will return possession of the Property to your client on the conditions below:
(5)In exchange for our client handing over the keys to the property to your client to give effect to clause (4) above, your client must provide us with consent orders signed by your firm providing for the Supreme Court proceeding No S CI 2010/02423 to be dismissed with no order as to costs;
(6)Your client must pay on time all future monthly loan repayments on loan accounts 1057716/1 and 1057716/2. The next monthly instalment will be in the amount of $2,513.83 which is due on or before 6 June 2010. As there is currently no active direct debit in place your client will need to ensure he continues to make direct payments into the loan accounts until a direct debit is set up. …
(7)All payments made under clauses (3) and (6) above will be accepted by our client without prejudice to its rights to rely on the existing default notice dated 5 May 2008 and the Supreme Court judgment entered on 10 August 2009. Your client acknowledges that our client may rely upon that default notice and judgment for the purpose of continuing with any enforcement action under paragraph (8) below in the event of a default under paragraph (6);
(8)In the event that your client defaults under paragraph (6) above, our client may enforce its judgment. If our client decides to enforce its judgment under this paragraph, your client must voluntarily vacate the property within seven days of written notice being given by our client. If your client fails to vacate within the time allowed, our client may apply to the Court for a fresh warrant of possession and your client agrees not to defend that application if it is made;
(9)Notwithstanding the principle that liability under the loan agreement has merged in the judgment, the parties agree to continue to be bound by the terms and conditions of the Loan Agreement. However, for the avoidance of doubt, pursuant to paragraphs (7) and (8) above, our client would not need to issue a fresh default notice or commence fresh court proceedings in the event of a further default by your client in making loan repayments on time as required by paragraph (6) or any other default;
(10)Your client procures the written consent of Ms Breasley to these terms of settlement being entered into between our respective clients by 4.00pm on Tuesday 8 June 2010. You have previously said you do not believe Ms Breasley needs to be a party to any arrangement entered into between our clients. We disagree. While your client asserts that he has an interest in the property, we are told that the terms of settlement previously agreed between your client and Ms Breasley in the County Court proceeding are no longer on foot. Furthermore, we are told there is to be a trial in the County Court proceeding on 10 June 2010. For those reasons, our client is of the view that your client’s interest in the property is yet to be agreed or determined. As long as that continues to be the case, our client will not enter into any arrangement with your client without Ms Breasley’s consent. This is not negotiable.
The offer is open by acceptance until 4.00pm on Tuesday 8 June 2010.
Given the remarks by Warren CJ at the hearing on 20 May 2010 concerning the merger in judgment argument favouring our client, our client considers the above offer to be more than reasonable. …
The offer is made in accordance with the principles in Calderbank v Calderbank[1] as adopted in the unreported decision of Justice Byrne in the Supreme Court of Victoria on 28 April 1993 in Mutual Community Ltd v Lordon Holdings Pty Ltd and Ors and the decision of Justice Gillard in MTA Associates Pty Ltd v Aqua-Max Pty Ltd and Anor (No 3).[2]
In the event that this matter proceeds to a trial and the Court makes an order which is no less favourable to our client than the terms of the offer, we will produce this letter to the Court in support of an application for indemnity costs from the date the offer lapses …
[1][1975] ALL ER 333.
[2][2003] VSC 163.
The offer lapsed at 4.00pm on 8 June 2009. It was not accepted by the plaintiff. At no time has the plaintiff responded to the defendant’s offer dated 25 May 2010.
The plaintiff’s evidence is that on or about 26 August 2009 he entered into terms of settlement with his former partner, Ms Breasley, providing for the transfer of the property, the subject of this proceeding. This was to resolve the financial dealings between the plaintiff and Ms Breasley which were the subject of County Court de facto property proceedings.
The plaintiff states that following entry into terms of settlement the relationship between him and Ms Breasley became hostile due to “a messy custody dispute”.
The plaintiff tried to contact Ms Breasley to discuss the Calderbank offer dated 25 May 2010 made by the defendant and left messages on her voicemail explaining that he needed her to agree to allow him to reside in the property, however, she did not return his calls. The plaintiff’s evidence is that in relation to financing the 25 May 2010 offer he was unemployed at the time, there was a judgment against him, the property was not in his name and that he had previously made enquiries about obtaining finance to pay arrears.
The plaintiff considered it would be premature to make an offer in relation to the property until he had secured the transfer of the property from Ms Breasley to him. As such, the plaintiff did not consider it unreasonable to reject the defendant’s offer, particularly as he considered the terms were difficult to comply with given his financial situation and the uncertainty relating to the transfer of the property to him.
The Calderbank principles
The general principles that apply when a party rejects a Calderbank offer, enlivening the issue of whether indemnity costs should be ordered, are set out in Hazeldene’s Chicken Farm v Victorian WorkCover Authority (No 2).[3] Warren CJ, Maxwell P and Harper AJA stated in their joint judgment:
[23]In our view, these competing considerations can be sufficiently accommodated by applying the test of (un)reasonableness. The critical question is whether the rejection of the offer was unreasonable in the circumstances. We see no justification for a more stringent test such as “manifestly” or “plainly” unreasonable.
[24]Of course, deciding whether conduct is “reasonable” or “unreasonable” will always involve matters of judgment and impression. These are questions about which different judges might properly arrive at different conclusions. As Gleeson CJ said recently, “unreasonableness is a protean concept”. But a test of reasonableness is, we think, entirely appropriate to the exercise of a discretion such as this. (citations omitted)
[3][2005] VSCA 298.
The question here is whether the plaintiff’s rejection of the Calderbank offer was unreasonable in all of the circumstances. If the refusal was unreasonable, that is, of itself a proper ground for the award of indemnity costs or solicitor/client costs. As the Court of Appeal noted in Hazeldene’s case, what is unreasonable is a matter of impression and judgment. That usually requires consideration of matters such as the stage at which the offer was made, the extent of the compromise and the offeree’s prospects of success at the time. Under the heading “Factors relevant to assessing reasonableness”, the Court of Appeal in Hazeldene’s case said:
The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exclusive 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 indemnity costs in the event of the offeree rejecting it.[4]
[4]Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298;
at 441-442.
The defendant’s submissions are that the offer included terms that provided for the defendant to forebear its right to enforce the default judgment and warrant to continue in contractual relations with a borrower who had poor credit history and who, as at the date of the offer, had breached the terms of the contract governing the relationship between them. The defendant submits that the offer to bear $5,000 of its legal fees demonstrated a preparedness to compromise the claim. In exchange, the plaintiff would have been entitled to exclusive possession of the property.
The defendant submits that it was unreasonable for the plaintiff to reject the 25 May 2010 offer on the basis that:
(a)at the hearing of the plaintiff’s interlocutory application for an injunction on 20 May 2010, Her Honour Chief Justice Warren, foreshadowed that the merger in judgment principle was against the plaintiff. The defendant submits that despite this the plaintiff proceeded and ultimately failed in large because of the operation of that principle;
(b)the 25 May 2010 offer provided the plaintiff with an opportunity to salvage exclusive possession of the property without the need to continue with costly and uncertain litigation;
(c)the plaintiff’s solicitor swore an affidavit on 20 March 2012 which provided amongst other things, that it was not until 5 December 2012 that the issue of the plaintiff’s standing to seek possession was resolved. The defendant submits that the plaintiff could not at the time of the 25 May 2010 offer reasonably have considered that he would have achieved a result at trial more favourable than the defendant’s offer;
(d)given the plaintiff was not assured as to his standing to seek possession of the property, his prospects of obtaining an order for anything more than nominal damages at trial were poor;
(e)given that one of the remedies sought by the plaintiff was damages for loss caused by his eviction from the property, including ongoing rental expenses, the plaintiff’s rejection of the offer constituted an unreasonable failure to mitigate his alleged losses as the offer would have allowed the plaintiff to resume residing at the property.
(f)the plaintiff’s failure to respond to the offer suggests that the plaintiff did not turn his mind to the merits of the compromise offered. The defendant submits that such an imprudent lack of consideration of the defendant’s offer was, of itself, unreasonable.
The plaintiff’s submission in relation to the counter Calderbank offer
The plaintiff submits that it was not unreasonable for him to reject the offer on the basis that:
(a)the offer was made before the defendant had filed its defence and accordingly the plaintiff was not aware of what the defence was and could not properly assess the reasonableness of the offer;
(b)given the stage of the proceeding that the offer was made and without having the benefit of the defence, the plaintiff considered at the time that he had a reasonable prospect of success. The plaintiff was successful in obtaining an injunction restraining the defendant from selling the property prior to the issuing of proceedings;
(c)while the offer purported to allow the plaintiff possession of the property, it was subject to the plaintiff obtaining the consent of an unwilling non‑party to the proceeding, Ms Breasley, the registered owner and the plaintiff’s former partner. The defendant was aware that on 17 March 2010 Ms Breasley surrendered the property to the defendant by a signed notice of surrender which sought the sale of the property and in light of the fact that Ms Breasley wanted the property to be sold rather than transferred to the plaintiff, it was not unreasonable for the plaintiff to reject the offer;
(d)the offer was only open for two weeks which was insufficient time. At the time the offer was made the plaintiff was unemployed, had a judgment against him and was going to have difficulty obtaining finance to meet the terms of the offer.
Conclusion - Calderbank offer
The defendant’s offer was by letter dated 25 May 2010. It was made before the defendant filed its defence, before mediation and at a time where discovery had not been completed. The plaintiff subsequently amended its statement of claim and the matter was not ultimately ready for trial until 9 May 2012. The offer came at a very early stage of the proceeding, and gave the plaintiff very little time to respond. While I accept that the offer was a genuine attempt by the defendant to resolve the proceeding, it was made at a time when the plaintiff was endeavouring to reach some agreement with his former partner about the property and what rights, if any, he had in relation to possession of the property. It may be that with the benefit of hindsight the offer was reasonable. However, care must be taken with judgments in hindsight.
I do not think there is an injustice in declining to order indemnity costs on the Calderbank letter.
Conduct of the plaintiff
Legal principles
It is a well established principle that the ordinary rule is that in litigation where a court orders costs to be paid by one party to another party the usual order is for payment of such costs on a party/party basis.[5] However, the discretion of the Court to order costs on the basis of making such an order is always “absolute and unfettered” and made apart from the usual practice in the course of exercising the judicial discretion.[6] The exercise of the discretion to award costs over and above the ordinary is exceptional, being reserved for cases where the bringing of the application was highhanded;[7] if the application had no chance of success;[8] if the application was unnecessary;[9] if the application was not brought for a bona fides purpose but to achieve an ulterior purpose;[10] if the application was commenced with wilful disregard of known facts contrary to well‑established law;[11] if the justice of the case warrants solicitor and client or indemnity costs;[12] or if there are special or unusual features that warrant the exercise of the discretion to order solicitor and client or indemnity costs.[13]
[5]Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225, 230 and 232; Re Wilcox, Ex P. Venture Industries Pty Ltd and ors (1996) 141 ALR 727.
[6]Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, 400.
[7]AGC Limited v De Jager (1984) VR 483, 500.
[8]Colgate Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225, 231.
[9]Regatta Developments Pty Ltd v Westpac Banking Corporation, unreported judgment of the Federal Court, 5 March 1993.
[10]Ibid.
[11]Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, 400.
[12]Andrews v Barnes (1887) 39 Ch 133.
[13]Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, 400.
The defendant submits that the plaintiff’s conduct was such as to cause unnecessary delay and inefficiency of such a degree to warrant the Court’s exercise of its discretion to order indemnity costs. In particular, the defendant points to the fact that the proceedings were commenced by writ filed by the plaintiff on 5 May 2010 containing an endorsement of claim which was substantially in the form of a statement of claim. On 20 May 2010, an application by the plaintiff was made, Her Honour Chief Justice Warren, granted an injunction restraining the defendant from selling the property. At this time, her Honour expressly referred to the merger in judgment principle.
The plaintiff filed a statement of claim pursuant to the orders of Her Honour Chief Justice Warren on 9 July 2010. The defendant filed a defence on 9 August 2010.
On 2 June 2011, the plaintiff filed an amended statement of claim pursuant to orders made by this Court dated 31 May 2011 and at which time the Court also fixed the proceeding for trial on 28 March 2012. On 29 February 2012, the plaintiff filed a Notice of Trial, yet by summons filed 1 March 2012 the plaintiff sought leave to further amend his statement of claim. The plaintiff filed a further amended statement of claim pursuant to court orders dated 14 March 2012. The defendant submits that the plaintiff should have been aware as at 29 February 2012, when the Notice of Trial was filed, that he would not be ready for trial, yet he represented his readiness to both the Court and the defendant.
On 1 May 2012, plaintiff’s counsel foreshadowed that he would make an oral submission at the commencement of the trial to amend his statement of claim.
On 10 May 2012, the second day of trial, the plaintiff filed a second further amended statement of claim. It was at this time that the order for possession of the property was deleted from the plaintiff’s prayer for relief. The amendment required the defendant to further amend its defence during trial.
The plaintiff further submits that from the commencement of this proceeding the plaintiff’s standing to seek possession of the property was in question. The defendant submits that despite this the plaintiff insisted on maintaining this untenable claim for possession until the second day of trial. The defendant submits that as a result of the various amendments to the pleadings, the defendant was subject to undue delay and expense and accordingly, it is entitled to costs on an indemnity basis from the commencement of the proceeding.
I am not satisfied that the plaintiff’s decision to bring this claim was high-handed or that it was commenced in wilful disregard of known facts or contrary to well‑established law. The evidence does not give rise to a scenario where a litigant, properly advised, had no hope of success and therefore must be taken to have proceeded for some illicit motive or chosen to wilfully disregard the law. True it is that the plaintiff amended the statement of claim a number of times and as late as the second day of trial, however, the amendments reflect a genuine attempt to flesh out the plaintiff’s case in fact and at law. The delays which were occasioned by virtue of the amendments are not uncommon in this Court and it would be an improper use of judicial discretion to allow indemnity costs on the basis of numerous amendments to pleadings and applications for vacation of a trial date when a notice of readiness has been completed. This conduct of itself does not amount to something which could be considered high-handed or a wilful disregard of known facts or clearly established law.
The defendant submits that the plaintiff’s claim for possession of the property was untenable and this fact, along with the undue delay and expense, justifies the exercise of the discretion to award indemnity costs. Again, while it may be true that even at the commencement of this proceeding it was not certain that the plaintiff would ever have an entitlement to possession of the property, it must be understood in the background context, namely, a de facto property dispute. It is clear from the evidence before the Court that the plaintiff and his former partner, Ms Breasley, were engaged in settlement discussions which were not finalised until shortly before this trial commenced. I do not consider this amounts again to a wilful disregard of the known facts or a lack of bona fides by the plaintiff in bringing these proceedings. Accordingly, I do not consider it appropriate to award indemnity costs to the defendant from the commencement of the proceedings.
Notice of dispute
In summary, the defendant submits that on the basis of the plaintiff’s Notice to Dispute, the preparation and trial was unduly lengthened.
The hearing of the evidence in this trial took approximately one full day of hearing. The remaining days dealt primarily with legal submissions. The matters referred to in paragraphs 18 and 19 of the defendant’s Notice to Admit Facts only contributed to the duration of this hearing and preparation in a minor way. Further, given the way in which the evidence unfolded, it was not unreasonable for the plaintiff to dispute the matters set out in paragraphs 18 and 19 of the defendant’s Notice to Admit Facts. Accordingly, I do not consider this a basis to award indemnity costs approving the matters set out in paragraphs 18 and 19 of the defendant’s Notice to Admit Facts and documents dated 16 May 2010.
Orders
I propose to order that further to the orders made by the Court on 11 October 2012, the plaintiff shall pay the defendant’s costs of this proceeding, including any reserved costs.
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