Fielding v Dushas[2013] QCA 85

SUPREME COURT OF QUEENSLAND

[1] THE COURT: On 22 March 2013, this Court delivered its reasons for judgment in these matters.  In Appeal No 5098 of 2012, leave to appeal was granted, the appeal allowed, the order of the primary judge dismissing the appellant liquidator's claim set aside and instead it was declared that 22 payments totalling $59,758 made by Lyngray Developments Pty Ltd to the respondent, Ms Dushas, were voidable under s 588FE(6A) Corporations Act 2001 (Cth).  The Court also ordered that Ms Dushas pay to the company $44,818.50, together with interest at 10 per cent from 15 August 2008.  In Appeal No 9608 of 2012, Ms Dushas' application for an extension of time to appeal from the primary judge's costs order was refused as the liquidator was successful in the principal appeal.  In both matters, the parties were given leave to make submissions as to the appropriate costs orders on appeal and at first instance.

[2] The liquidator contends that, as it was successful in the principal appeal, it should have its costs of the primary proceeding until 26 March 2012 on the standard basis and thereafter the costs of all primary proceedings and of both applications and the appeal on an indemnity basis.  His claim for indemnity costs turns on his two offers to settle. 

[3] On 23 March 2012, the liquidator's solicitors wrote to Ms Dushas' solicitors offering to settle the proceeding before trial on the basis that she pay $75,000 "all up", that is, inclusive of interest and costs.  The liquidator estimated that the company's standard costs were then $30,000. 

[4] On 27 September 2012, after Appeal No 5098 of 2012 had been commenced and after Ms Dushas had attempted to commence an application for leave to appeal from the primary judge's costs order,[1] the liquidator's solicitors again wrote to Ms Dushas' solicitors offering to settle the appeal, this time for $63,298.46.  This figure comprised a repayment amount of $44,818.50 together with interest at 10 per cent from 15 August 2008 ($18,479.96).  The liquidator estimated that the company's costs were then $45,000 for the primary proceeding and $9,000 for the appeal, and that the ultimate costs of the appeal would be assessed at about $15,000.

[5] Both letters were marked "Without Prejudice Save as to Costs" and included the following:

"… our client intends to bring this correspondence to the attention of the Court and at the appropriate time to support his submission that your client ought to pay our client's costs of the appeal on an indemnity basis in accordance with the principles set out in Calderbank v Calderbank…"

[6] In Calderbank,[2] the English Court of Appeal held that it was relevant when exercising the costs discretion to take into account that one party had made a compromise offer greater than the subsequent court award and the other party ought to have accepted the offer.

[7] Ms Dushas emphasises that the liquidator's appeal was only partially successful and contends that it was run on a different basis to his case below.  She submits that, despite the liquidator's Calderbank-type offer of 27 September 2012 which was the same as this Court's subsequent order, the liquidator should not have indemnity costs.  Many of the liquidator's arguments were not accepted on appeal.  In exercising the costs discretion, this Court should take into account the following matters.  Ms Dushas was not a party to a voidable transaction and the impugned dealings were between her mother, Ms Gray, and the company.  Ms Dushas gave value for the payments she received and there was no criticism of her conduct.  The parties should bear their own costs of all primary proceedings.  In respect of Appeal No 5098 of 2012, she should pay only one-half of the liquidator's costs to be assessed on a standard basis.  There should be no order as to the costs of the application to extend time to appeal in Appeal No 9608 of 2012. 

[8] The Court is unpersuaded the liquidator's case at trial was so different to his case on appeal as to deprive him of his entitlement to costs of the primary proceeding and of the applications on appeal.  Even that part of his case which failed on appeal and at first instance was well arguable, as Daubney J's partially dissenting reasons demonstrate.  The fact that the liquidator attempted to recover a larger sum than that in his offers to settle and the amount ultimately awarded does not preclude him from a favourable costs order, both in the primary proceeding and on appeal. 

[9] It is common ground that the liquidator's offers to settle effectively matched or exceeded the orders which have now been made in the primary proceeding and on appeal.  It is not contended that the letter of 23 March 2012 contained an offer under ch 9 pt 5 of the Uniform Civil Procedure Rules (UCPR) which deals with offers to settle and circumstances where indemnity costs orders are ordinarily made.  It is also common ground that ch 9 pt 5 UCPR does not apply to appeals.  But an offer to settle an appeal can have effect as a Calderbank-type offer and may result in an award of indemnity costs: Tector v FAI General Insurance Co Ltd[3] and Valleyfield Pty Ltd v Primac Ltd & Anor.[4]  This is because, where a Calderbank-type offer is made, courts are inclined to award indemnity costs as an incentive to parties to accept reasonable offers to settle: Sultana Investments Pty Ltd v Cellcom Pty Ltd (No 2).[5]

[10] Ms Dushas' failure to accept the liquidator's offer is a powerful factor in favour of an indemnity costs order, both on appeal and at first instance.[6]  But a party's failure to accept a Calderbank­-type offer to settle which is ultimately the same as or more favourable than the amount awarded does not inevitably result in indemnity costs.  The appropriate costs order remains a matter of discretion for the court after weighing all relevant considerations.  A critical issue is whether the offeree ought to have accepted the offer and not continued with the proceeding.

[11] It is true that Ms Dushas rejected the liquidator's offer, required him to prove his case at trial and on appeal, and she has not been ordered to pay an amount less than that offer.  It follows that the liquidator has a solid basis for seeking indemnity costs.

[12] But the present litigation, both at first instance and on appeal, was novel.  The liquidator was seeking to recover the company's payments to a third party (Ms Dushas) where there was no evidence the company was then insolvent.  Nor was there evidence that the impugned payments did not reflect market value; were made to defeat creditors; or that Ms Dushas knew that they were unlawful.  In those circumstances, it was not entirely unreasonable, despite the liquidator's sensible offers to settle, for her to continue to defend both the primary proceeding and the applications on appeal.  In the end, the Court remains unpersuaded that she should pay the liquidator's costs on an indemnity basis of either the primary proceeding or the appeal.  The liquidator should have its costs only on the standard basis.

[13] The Court proposes the following order as to costs in Appeal No 5098 of 2012:

Sasha Elizabeth Dushas pay to Andrew Fielding as liquidator of Lyngray Developments Pty Ltd (In Liquidation) ACN084052371 the costs of the application, the appeal and the primary proceeding on the standard basis.

[14] As the liquidator was successful in overturning the primary judge's order refusing his application, the discretion as to costs of that proceeding had to be re-exercised.  As a result, Ms Dushas' application to extend time in Appeal No 9608 of 2012 was refused.  The liquidator should have his costs of that application in the primary proceeding and on appeal on the standard basis.

[15] The Court proposes the following order as to costs in Appeal No 9608 of 2012:

Sasha Elizabeth Dushas pay to Andrew Fielding as liquidator of Lyngray Developments Pty Ltd (In Liquidation) ACN084052371 the costs of the primary proceeding and of the application for an extension of time to appeal on the standard basis.