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Gobbert v Elders Rural Finance Services Ltd (No 2)[2017] QDC 234

Gobbert v Elders Rural Finance Services Ltd (No 2)[2017] QDC 234

DISTRICT COURT OF QUEENSLAND

CITATION:

Gobbert & Ors v Elders Rural Finance Services Ltd & Anor (No 2) [2017] QDC 234

PARTIES:

JASON STANLEY GOBBERT, ALEXANDER DEAN GOBBERT AND STANLEY MORTON GOBBERT trading as GOBBERT BROS

(Plaintiffs)

v

ELDERS RURAL SERVICES AUSTRALIA LIMITED ACN004045121 

(First Defendant)

and

RURAL BANK LIMITED ACN083938416

(Second Defendant)

FILE NO/S:

626 of 2016

DIVISION:

Civil

PROCEEDING:

Application for costs

ORIGINATING COURT:

District Court, Brisbane

DELIVERED ON:

15 September 2017

DELIVERED AT:

Brisbane

HEARING DATE:

On the papers

JUDGE:

Kefford DCJ

ORDER:

The plaintiffs are ordered to pay the costs of each of the first and second defendants to be assessed on the standard basis up to and including 20 February 2017, and on the indemnity basis thereafter.

CATCHWORDS:

PROCEDURE – COSTS – INDEMNITY COSTS – OFFER TO SETTLE – where the first and second defendants made an offer to settle prior to trial – where the plaintiffs did not accept the offer – where the plaintiffs’ claim was dismissed – where the defendants seek their costs on the indemnity basis, subject to their offer – whether the plaintiffs’ refusal of the defendants’ offer was unreasonable

LEGISLATION:

Uniform Civil Procedure Rules 1999 (Qld), r 361, r 681, r 703

CASES:

Bert & Ors v Red 5 Limited & Anor [2017] QSC 8, followed

Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435, considered

J & D Rigging Pty Ltd v Agripower Australia Ltd [2014] QCA 23, applied

Mizikovsky v Queensland Television Limited & Ors [2013] QCA 68; [2014] 1 Qd R 197, applied

COUNSEL:

D J Pyle with S Forder for the Plaintiffs

N Ferrett for the First Defendant

SOLICITORS:

Shine Lawyers for the Plaintiffs

Crawford Legal for the First Defendant

Dibbs Barker for the Second Defendant

Background

  1. [1]
    On 16 February 2017, the Plaintiffs filed a Claim and Statement of Claim in this matter. The Plaintiffs’ case was, in effect, that Jason Stanley Gobbert (on behalf of the Plaintiffs) relied on representations made by Paul Nelson (on behalf of the First Defendant and/or Second Defendant) to the effect that finance had been, or would be, approved prior to Mr Gobbert making the winning bid of $6.8 million at an auction to purchase a rural holding. The Plaintiffs claimed those representations were misleading or deceptive within the meaning of s 12DA of the Australian Securities and Investment Commission Act 2001 (Cth).
  1. [2]
    The trial with respect to this action was heard on 22 to 25 May 2017, with oral submissions on 17 August 2017.
  1. [3]
    On 30 August 2017 I dismissed the Plaintiffs claim and ordered that the parties file and serve written submissions as to costs by 6 September 2017. That has been done by all parties. The Plaintiffs also filed reply submissions.

Offer to settle

  1. [4]
    On or about 20 February 2017, the First Defendant and Second Defendant made a joint offer to the Plaintiffs under Part 5 of Chapter 9 of the Uniform Civil Procedure Rules 1999 (Qld) to settle the proceedings by jointly paying the Plaintiff the amount of $50000. The offer was expressed to be open until 6 March 2017.
  1. [5]
    On 27 February 2017, the Plaintiffs made an offer that the First Defendant and Second Defendant jointly or severally pay the Plaintiffs a total of $600000 and the Plaintiffs’ costs of and incidental to the proceeding on the standard basis to be assessed if not agreed.
  1. [6]
    The Plaintiffs did not accept the Defendants’ offer.

Issue for consideration

  1. [7]
    Each of the First and Second Defendants seek an order that the Plaintiffs pay their costs of the proceeding up until 20 February 2017 (or 6 March 2017) on the standard basis and thereafter on the indemnity basis.
  1. [8]
    There is no dispute between the parties that:
  1. (a)
    r 361 of the Uniform Civil Procedure Rules 1999 does not apply as the defendant was wholly successful;[1]  and
  1. (b)
    the Plaintiffs have not achieved an outcome that is more favourable than the offer by the First and Second Defendants; and
  1. (c)
    the First and Second Defendants are, as a minimum, entitled to their costs of the proceedings calculated on the standard basis.[2]
  1. [9]
    The issue is whether, as a result of their offer, the First and Second Defendants ought be awarded their costs on an indemnity basis from the date of their offer.[3]

Submissions

  1. [10]
    The First and Second Defendants submit that, from the date of their offer, costs should be assessed on the indemnity basis.
  1. [11]
    The First Defendant submits that:
  1. (a)
    the relevant date for an award of costs on an indemnity basis is 20 February 2017, being the date of the joint offer;
  1. (b)
    the fact of the offer, together with the absence of any countervailing factor, is sufficient to justify an order of the kind sought. In this respect, the First Defendant relied on the observations of White AJA in Sultana Investments Pty Ltd v Cellcom Pty Ltd (No 2) [2008] QCA 398; [2009] 2 Qd R 287, with whom the other members of the Court of Appeal agreed, endorsing the view taken by Chesterman J in Emmanuel Management Pty Ltd (in liq) & Ors v Foster’s Brewing Group Ltd & Ors [2003] QSC 299. White AJA observed at 290 [11]:

“His Honour rejected the adoption of any hard and fast rule, noting, correctly, with respect, that since the award of costs is discretionary there will be many circumstances to be weighed but the making of an offer “is a very relevant circumstance” and, if no countervailing circumstances are raised, “the order for indemnity costs is likely to be made”.”

  1. (c)
    in any event, there is a strong basis for concluding that rejection of the offer was unreasonable, as the prospects of success were always poor as, it submits, is evident from paragraphs 180 to 183 of my reasons for judgment.
  1. [12]
    The Second Defendant submits that:
  1. (a)
    the fact that the Plaintiffs have not achieved an outcome that is more favourable than the offer by the First and Second Defendants results in a prima facie presumption that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of making the offer;
  1. (b)
    the making of a counter offer during the currency of the First and Second Defendants’ offer is suggestive of an imprudent refusal of the offer to settle; and
  1. (c)
    the offer by the First and Second Defendants’ to pay $50000 and forego the costs they had incurred in defending the matter was a genuine offer of compromise.
  1. [13]
    The Plaintiffs submit that there are no special features in this case to warrant the making of an order that the Plaintiffs pay any indemnity costs. In particular they note:
  1. (a)
    the offer was not a Calderbank offer and, as such, the relevant consideration is whether there was an unreasonable refusal of the offer. The principle that, in the absence of countervailing circumstances an order for indemnity costs is likely does not apply;
  1. (b)
    the offer was made more than 12 months after the proceedings were commenced, after disclosure had been performed and the pleadings amended;
  1. (c)
    the time allowed for acceptance of the offer was 14 days, which is neither a long period nor a short period in the circumstances;
  1. (d)
    the offer was for $50000 all up (including interest and costs), which was only approximately 7% of the amount claimed by the Plaintiffs, not including interest and costs. The Plaintiffs submit that it is reasonable to infer that the Plaintiffs must have incurred a liability to pay considerable legal costs by the time of the offer, likely in excess of $50000. In those circumstances, even if the offer were genuine, the extent of compromise offered was minimal;
  1. (e)
    the Plaintiffs’ prospects of success, assessed at the time of the offer, were not so poor as to say it was unreasonable for the Plaintiffs to refuse the offer; and
  1. (f)
    the terms of the offer did not foreshadow an application for indemnity costs.

Consideration

  1. [14]
    As was observed by Applegarth J in Bert & Ors v Red 5 Limited & Anor [2017] QSC 8 at [22]:

“Where a wholly successful defendant has made an offer to settle under the rules and seeks an order for indemnity costs, r 361 of the UCPR does not apply, and it is appropriate to apply the general principles relating to Calderbank offers.”

(footnotes omitted)

  1. [15]
    In J & D Rigging Pty Ltd v Agripower Australia Ltd [2014] QCA 23, the Court of Appeal outlined the following relevant principles with respect to Calderbank offers:

[5]The failure to accept a Calderbank offer is a matter to which a court should have regard when considering whether to order indemnity costs.[4] The refusal of an offer to compromise does not warrant the exercise of the discretion to award indemnity costs. The critical question is whether the rejection of the offer was unreasonable in the circumstances.[5] The party seeking costs on an indemnity basis must show that the party acted “unreasonably or imprudently” in not accepting the Calderbank offer.[6]

[6]In Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2)[7], the Victorian Court of Appeal stated that a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard to at least the following matters:

“(a)the stage of the proceeding at which the offer was received;

  1. (b)
    the time allowed to the offeree to consider the offer;
  1. (c)
    the extent of the compromise offered;
  1. (d)
    the offeree’s prospects of success, assessed as at the date of the offer;
  1. (e)
    the clarity with which the terms of the offer were expressed;
  1. (f)
    whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.”
  1. [16]
    However, when determining whether indemnity costs ought be awarded, care must be taken to ensure that an offer that is not expressed to be a Calderbank offer should not be treated as such an offer. In Mizikovsky v Queensland Television Limited & Ors [2013] QCA 68; [2014] 1 Qd R 197, Fraser JA observed at 213 – 214 [52] – [55]:

[52] Sultana Investments Pty Ltd v Cellcom Pty Ltd (No 2) concerned a Calderbank offer. White AJA (with whose reasons McMurdo P and Holmes JA agreed) observed in that respect that in the case of a Calderbank offer the Courts are “inclined to the award of indemnity costs as an incentive to parties to consider seriously offers to settle which are reasonably made”. The respondents and the appellant agreed in their submissions that the respondents’ offer in this case was not expressed to be a Calderbank offer and that it should not be treated as such an offer. Emanuel Management Pty Ltd (in liq v Foster’s Brewing Group Ltd, which was approved in Sultana Investments Pty Ltd v Cellcom Pty Ltd (No 2), also concerned a Calderbank offer. It is distinguishable on the further ground that Chesterman J found that the plaintiffs prosecuted their case when they should have appreciated that it had no worthwhile prospects of success, and that finding informed his Honour’s further finding that it was unreasonable for the plaintiffs not to accept the first defendant’s Calderbank offer.

[53]Another ground of distinction is that Chesterman J considered that r 361(3) did not apply in that case only because the plaintiffs did not obtain any judgment; his Honour thought that a defendant who was completely successful and had made an offer to settle which was better than the result for the plaintiff should not be in a worse position than a partly unsuccessful defendant who made such an offer. That reasoning is not applicable in this case because the respondents’ offer was made before the first day of the trial. The rules leave scope for costs orders adapted to the particular circumstances of the case and r 361 did not apply in this case because the appellant did not obtain any judgment, but the closest analogy here is r 361(2) (which refers to costs on the standard basis) rather than r 361(3) (which refers to costs on the indemnity basis). The trial judge described that contrast between rr 361(2) and 361(3) as “anomalous”, but the contrast was apparently deliberate.

[54]In Velvet Glove Holdings Pty Ltd v Mount Isa Mines Ltd, the relevant principle was stated as being that “… a party who unreasonably refuses to accept a Calderbank offer, on terms more favourable than the court’s subsequent order, may be ordered to pay indemnity costs”. The principle should not be more generous in the case of a defendant who makes an offer which, as the respondents accepted was the case here, is not a Calderbank offer. That offer afforded the respondents a significant protection against the adverse costs order which would probably be made if the appellant obtained even a relatively small judgment in his favour. In such a case, the appellant’s failure to accept the offer would displace the usual presumption of costs following the event of the litigation, provided that the judgment in favour of the appellant was not more favourable to him than the respondents’ offer. As the litigation fell out, it was the respondents who were entitled to the benefit of that usual approach to costs, but it does not follow that the appellant’s mere failure to accept the offer afforded a ground for the costs awarded in favour of the respondents to be assessed on an indemnity basis.

[55]The circumstances identified by the trial judge provided an insufficient basis for departing from the usual basis of assessment of a successful party’s costs. In the kind of defamation litigation described by the trial judge – which is presumably not atypical of serious defamation litigation – it would be reasonable for a plaintiff to accept any one of a very broad range of offers. To adopt that as a sufficient ground for ordering indemnity costs where the plaintiff has not acted unreasonably in any respect would unduly erode the basic principle that indemnity costs orders are the exception rather than the norm.

(emphasis added, footnotes omitted)

  1. [17]
    In this case, the offer was not a Calderbank offer. I accept the submission of the Plaintiff that, in such a case, the relevant consideration is whether there was an unreasonable refusal of an offer.
  1. [18]
    In determining whether the Plaintiffs were unreasonable in refusing the offer, I am cognisant that care must be taken to avoid hindsight bias.[8]  The offeree’s prospects of success should be assessed at the date of the offer, conscious that the outcome of litigation is uncertain.
  1. [19]
    With respect to the Plaintiffs’ prospects of success, the Plaintiffs submit:
  1. (a)
    their case rested on implied representations made by Mr Nelson and, until witnesses for the Plaintiffs and Mr Nelson gave evidence, it would be difficult to say which witnesses would be accepted by the court;
  1. (b)
    the court was required to make findings as to credit and the court’s assessment in this regard could not have been known at the time the offer was made;
  1. (c)
    in large part, the court’s resolution of the matter turned on whether the court accepted Mr Gobbert’s evidence that, at the relevant times, he believed that finance had been, or would be, approved – a matter that could not have been known at the time the offer was made; and
  1. (d)
    in terms of the test of whether a reasonable person in Mr Gobbert’s position would have been misled, the centrality of the “stretch” statement only arose during Mr Gobbert’s testimony and, in any event, it was not so unarguable that the failure to accept a minimal offer should result in indemnity costs.
  1. [20]
    In this case, I have had regard to the fact that:
  1. (a)
    the offer was made more than 12 months after the proceedings were commenced, after disclosure had been performed and the pleadings amended;
  1. (b)
    the offer was for $50000 all up (including interest and costs), which was likely insufficient to cover the costs that would have been incurred by that stage. However, had the Plaintiffs accepted the offer, they would have also avoided the risk of an adverse costs order in the event their claim was dismissed;
  1. (c)
    the time allowed for acceptance of the offer was 14 days, which I accept is neither a long period nor a short period in the circumstances. I also note that a counter offer was made after seven days; and
  1. (d)
    the terms of the offer did not foreshadow an application for indemnity costs.
  1. [21]
    Despite these matters, I regard the Plaintiffs refusal of the offer as unreasonable. If the Plaintiffs had subjected their case to critical scrutiny at the time they received the offer, they would have realised that their case faced a significant obstacle, namely:
  1. (a)
    the Plaintiffs assertion that, immediately before the winning bid, in response to Mr Gobbert’s question “what do you think?”, MrNelson said “it will be a bit of a stretch” was central to their claim;
  1. (b)
    the colloquial meaning of the phrase “a bit of a stretch” is:[9]

“… 23. be a bit of a stretch, a. to require a maximum physical or mental effort. b. to be difficult to believe: his claim was a bit of a stretch. 24. stretch a point, to go beyond the usual limits.”

  1. (c)
    the words “it will be a bit of a stretch” are not, of themselves, reasonably capable of sustaining a meaning other than that it will be a challenge to get finance;
  1. (d)
    there was a significant risk that the court would not be satisfied that a reasonable person would attribute the meaning to the phrase contended by the Plaintiffs, given that meaning is at complete odds with its ordinary meaning; and
  1. (e)
    even if the court accepted all of the evidence of the Plaintiffs’ witnesses, those findings could not overcome an adverse finding with respect to what a reasonable person would understand the “stretch” statement to mean.[10]

Order

  1. [22]
    The Plaintiffs are ordered to pay the costs of each of the First and Second Defendants to be assessed on the standard basis up to and including 20 February 2017, and on the indemnity basis thereafter.

Footnotes

[1]Plaintiffs’ Submissions on Costs p 2 [8] – [10]; First Defendant’s Submissions on Costs pp 1 – 2 [4] – [5]; Submissions on behalf of the Second Defendant p 2 [3.1] – [3.2]. See Carlyon v Town and Country Pubs No. 2 Pty Ltd T/A Queens Hotel Gladstone (No. 2) [2015] QSC 25, [10] – [11] and Surfstone Pty Ltd & Anor v Morgan Consulting Engineers Pty Ltd [2015] QSC 322, [11].

[2]Plaintiffs’ Submissions on Costs p 2 [5] and [12]; First Defendant’s Submissions on Costs p 2 [5]. See Uniform Civil Procedure Rules 1999, r 681.

[3]The Plaintiffs also appear to accept that, if indemnity costs are awarded, it is appropriate to award them from the date of the offer. See Plaintiffs’ Submissions on Costs p 2 [6].

[4]Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 at 441 [20]; [2005] VSCA 298 at [20].

[5]At 441 [23].

[6]McBride v ASK Funding Ltd [2013] QCA 130 at [65].

[7][2005] 13 VR 435 at 442 [25], an authority frequently cited with approval in this and other Australian courts.

[8]Bert & Ors v Red 5 Limited & Anor [2017] QSC 8, [25].

[9]Macquarie Dictionary (6th Ed) – See Gobbert & Ors v Elders Rural Services Australia Limited & Anor [2017] QDC 219, [180].

[10]This is an important distinguishing feature as compared to Mizikovsky v Queensland Television Limited & Ors [2013] QCA 68; [2014] 1 Qd R 197.

Close

Editorial Notes

  • Published Case Name:

    Gobbert v Elders Rural Finance Services Ltd (No 2)

  • Shortened Case Name:

    Gobbert v Elders Rural Finance Services Ltd (No 2)

  • MNC:

    [2017] QDC 234

  • Court:

    QDC

  • Judge(s):

    Kefford DCJ

  • Date:

    15 Sep 2017

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Bert v Red 5 Ltd [2017] QSC 8
3 citations
Jump To
Cite 1 - [2017] QSC 8
Cite 2 - [2017] QSC 8
Cite 3 - [2017] QSC 8
Carlyon v Town & Country Pubs No 2 Pty Ltd (No 2) [2015] QSC 25
1 citation
Jump To
Cite 1 - [2015] QSC 25
Emanuel Management Pty Ltd (in liquidation) v Foster's Brewing Group Ltd [2003] QSC 299
1 citation
Jump To
Cite 1 - [2003] QSC 299
Gobbert v Elders Rural Services Australia Limited [2017] QDC 219
1 citation
Jump To
Cite 1 - [2017] QDC 219
Hazeldene's Chicken Farm Pty Ltd v Victorian Work Cover Authority (2005) 13 VR 435
4 citations
Jump To
Cite 1 - (2005) 13 VR 435
Cite 2 - (2005) 13 VR 435
Cite 3 - (2005) 13 VR 435
Cite 4 - (2005) 13 VR 435
Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298
2 citations
Jump To
Cite 1 - [2005] VSCA 298
Cite 2 - [2005] VSCA 298
J & D Rigging Pty Ltd v Agripower Australia Limited [2014] QCA 23
2 citations
Jump To
Cite 1 - [2014] QCA 23
Cite 2 - [2014] QCA 23
McBride v ASK Funding Ltd [2013] QCA 130
1 citation
Jump To
Cite 1 - [2013] QCA 130
Mizikovsky v Queensland Television Ltd[2014] 1 Qd R 197; [2013] QCA 68
6 citations
Jump To
Cite 1 - [2013] QCA 68
Cite 2 - [2013] QCA 68
Cite 3 - [2013] QCA 68
Cite 4 - [2014] 1 Qd R 197
Cite 5 - [2014] 1 Qd R 197
Cite 6 - [2014] 1 Qd R 197
Sultana Investments Pty Ltd v Cellcom Pty Ltd (No. 2)[2009] 2 Qd R 287; [2008] QCA 398
2 citations
Jump To
Cite 1 - [2008] QCA 398
Cite 2 - [2009] 2 Qd R 287
Surfstone Pty Ltd v Morgan Consulting Engineers Pty Ltd [2015] QSC 322
1 citation
Jump To
Cite 1 - [2015] QSC 322

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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