WSA Online Limited v Arms (No 2) - [2006] FCAFC 108

FEDERAL COURT OF AUSTRALIA
WSA Online Limited v Arms (No 2) [2006] FCAFC 108
COSTS – appeal – ‘Calderbank’ letters included interest and costs – no basis for costs to be assessed on an indemnity or solicitor/own client basis
COSTS – costs certificate –– one decision postdating argument – costs certificate granted
Federal Proceedings (Costs) Act 1981 (Cth) s 6
Trade Practices Act 1974 (Cth) s 52
Federal Court Rules O 23
Amadio Pty ltd v Henderson (1998) 81 FCR 149 referred to
Arktos Pty Ltd v Idyllic Nominees Pty Ltd (2004) ATPR 42-005 cited
Arms v Houghton [2006] FCAFC 46 referred to
Calderbank v Calderbank [1975] 3 All ER 333 cited
Doctor Martens Australia Pty Ltd v Figgins Holdings Pty (No.2) [2000] FCA 602 referred to
MGICA (1992) Pty Ltdv Kenny and Good Pty Ltd (No.2) (1996) 862 FCR 1 cited
Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97 referred to
Wong (as executor of the Estate of Wong (decd) v Citibank Ltd [2004] NSWCA 396 cited
WSA Online Limited (in administration) v Arms [2006] FCAFC 45 cited
WSA ONLINE LIMITED v SIMON ARMS
VID 843 of 2005
SIMON ARMS v JAMES HOUGHTON and JAMES STUDENT
VID 855 OF 2005
NICHOLSON, MANSFIELD and BENNETT JJ
5 JULY 2006
ADELAIDE (HEARD IN MELBOURNE)

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VID 843 OF 2005

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

WSA ONLINE LIMITED
ACN 081 121 495
Appellant

AND:

SIMON ARMS
Respondent

JUDGES:

NICHOLSON, MANSFIELD and BENNETT JJ

DATE OF ORDER:

5 JULY 2006

WHERE MADE:

ADELAIDE (HEARD IN MELBOURNE)

THE COURT ORDERS THAT:
1.        The appellant pay the respondent’s costs of the appeal on a party and party basis.
Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VID 855 OF 2005

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

SIMON ARMS
Appellant

AND:

JAMES HOUGHTON
First Respondent

JAMES STUDENT
Second Respondent

JUDGES:

NICHOLSON, MANSFIELD and BENNETT JJ

DATE OF ORDER:

5 JULY 2006

WHERE MADE:

ADELAIDE (HEARD IN MELBOURNE)

THE COURT ORDERS THAT:
(a)       The respondents pay the appellant’s costs of the appeal on a party and party basis.
(b)The issue of interest payable on the judgment, and of the costs of the proceeding at first instance, be referred to the primary judge for determination.
(c)On the respondents’ notice of motion dated 7 April 2006 the respondents be granted a costs certificate in respect of the appeal pursuant to s 6 of the Federal Proceedings (Costs) Act 1981 (Cth).

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VID 843 OF 2005

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

WSA ONLINE LIMITED
ACN 081 121 495
Appellant

AND:

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: [2006] FCAFC 108
Decision Date: 5 July 2006

CaseChat Overview and Summary

WSA Online Limited and its directors, Houghton and Student, were defendants in a proceeding brought by Arms. The dispute centred around the liability of WSA and its directors for damages and costs, and the terms under which these liabilities should be settled. The case was heard by the Federal Court of Australia. The primary issue before the court was whether the appellants should be ordered to pay the costs of the appeal on an indemnity basis or a solicitor/own client basis, given that Arms had made a Calderbank offer to settle the matter. A Calderbank offer is an informal proposal to settle a legal dispute, which, if rejected, can lead to an order for indemnity costs against the rejecting party. The court needed to determine whether the rejection of the offer was unreasonable and whether it should lead to an indemnity costs order.

The court found that the Calderbank offer was not clear and was conditional upon the agreement of all parties, including Houghton and Student. Additionally, the offer did not clearly propose a less favourable outcome for Arms compared to what he had achieved. The court also noted that the offer did not separate the costs of the hearing at first instance from the judgment amount and interest, which influenced their decision. Considering these factors, the court concluded that it was not appropriate to award the costs of the appeal on an indemnity basis or a solicitor/own client basis against WSA. Instead, the court ordered that each party bear their own costs for the appeal.

Further, the court referred the issue of interest on the judgment and the costs of the trial to be determined by the primary judge. Finally, the court granted a costs certificate in respect of the appeal to the respondents, pursuant to section 6 of the Federal Proceedings (Costs) Act 1981 (Cth).

Orders

Orders of the court

1. The appellant pay the respondent’s costs of the appeal on a party and party basis.

(a) The respondents pay the appellant’s costs of the appeal on a party and party basis.

(b) The issue of interest payable on the judgment, and of the costs of the proceeding at first instance, be referred to the primary judge for determination.

(c) On the respondents’ notice of motion dated 7 April 2006 the respondents be granted a costs certificate in respect of the appeal pursuant to s 6 of the Federal Proceedings (Costs) Act 1981 (Cth).

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Mr Arms submits that the interest payable by Messrs Houghton and Student on the judgment now entered against them should be referred for determination by the primary judge before whom already is the issue of the interest payable by WSA on the judgment against it. He suggests the interest will exceed some $66,000, but that is a matter for the primary judge. CONSIDERATION A Calderbank offer is a less formal means of proposing resolution of a proceeding or proceedings than the procedure under O 23 of the Federal Court Rules. The regime under O 23, where it applies, gives rise to a presumptive entitlement to indemnity costs: See e.g. per Lindgren J in MGICA (1992)Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 at 240. A Calderbank offer does not carry the same presumptive entitlement to indemnity costs, but the public policy of encouraging settlement of litigation should nevertheless lead the Court to make an order for indemnity costs where a Calderbank offer has been made in terms which are clear and where it is appropriate to do so. Issues as to the terms of the Calderbank offer, including the persons to whom it was made, whether it included interest and costs, and the period allowed for its acceptance, will be relevant to that question. There may be other matters relevant in particular cases. In this matter, Mr Arms contends that in all the circumstances, WSA and Messrs Houghton and Student unreasonably rejected his offers of settlement. We are not persuaded that the costs of the WSA appeal should be awarded against WSA on an indemnity basis or on a solicitor/own client basis. In essence we accept its submissions for that conclusion. Only the letter of 9 February 2006 concerned its position. However, the offer in that letter was not capable of being accepted by WSA itself, independently of Messrs Houghton and Student. It required their agreement. That is not a matter which conclusively operates against the costs order sought. See e.g. Amadio Pty Ltd v Henderson (1998) 81 FCR 149. In the present circumstances, where the offer required each of the offerees to assess its or his individual circumstances and prospects of success on the forthcoming hearing of the two appeals, it is a significant matter. Secondly, the offer in that letter is not shown clearly to propose a result which is less favourable to Mr Arms as against WSA than he has now achieved. It may prove to be the case. Mr Arms has maintained the judgment in his favour against WSA, and has an order for the costs of the appeal. However, the issues of interest on the judgment and the costs of the trial are still to be addressed by the primary judge. We do not know what matters may influence his Honour in dealing with those issues, so it is not possible to determine whether that offer (even if it could have been accepted by WSA alone) would have led to a less favourable outcome for Mr Arms than he will ultimately achieve against WSA. Finally, we are influenced by the fact that the offer did not break up the amounts proposed for costs of the hearing at first instance, and of the appeal, separately from the amount of the judgment plus interest: see the remarks of Spender J in Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97 at 102; and of Goldberg J in Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 at [24]. Again, that is not a decisive consideration, but weighs in the balance in this matter where issues of interest and costs of the hearing at first instance are to be resolved by the primary judge.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 843 OF 2005

BETWEEN:	WSA ONLINE LIMITED ACN 081 121 495 Appellant
AND:	SIMON ARMS Respondent

JUDGES:	NICHOLSON, MANSFIELD and BENNETT JJ
DATE OF ORDER:	5 JULY 2006
WHERE MADE:	ADELAIDE (HEARD IN MELBOURNE)

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 855 OF 2005