Floyd v Nevgold Pty Ltd[2024] QDC 106

DISTRICT COURT OF QUEENSLAND

Summary

1. [1]
   The respondent defendant applies for costs in the wake of the plaintiff’s unsuccessful application for summary judgment the subject of the decision delivered ex tempore on 3 June 2024.

2. [2]
   The parties have provided detailed written outlines of argument, and consent to the matter being determined on the papers.

3. [3]
   The defendant relies upon its pleadings and Calderbank offers to argue that the plaintiff knew or ought to have known the argument the defendant relied upon to have the application dismissed. The plaintiff, in the circumstances of the case, argues that the costs of the application be the parties' costs in the cause or the costs be reserved.

4. [4]
   I have concluded that the costs of the application should be costs in the proceeding, which will be ultimately decided by the final determination of the proceeding when costs are likely to follow that event.

Costs

5. [5]
   The defendant relies upon its pleadings and Calderbank offers to argue that the plaintiff knew or ought to have known the argument the defendant relied upon to have the application dismissed. The plaintiff, in the circumstances of the finely balanced case, argues the costs of the application be the parties’ costs in the cause or the costs be reserved.

6. [6]
   Rule 299 of the Uniform Civil Procedure Rules 1999 (Qld) provides:

299 Costs

(1) If it appears to the court that a party who applied under this part for judgment was or ought reasonably to have been aware that an opposite party relied on a point that would entitle that party to have the application dismissed, the court may dismiss the application and order costs to be paid within a time specified by the court.

(2) Subrule (1) does not limit the court’s powers in relation to costs.

7. [7]
   Whilst, r 299 provides for a discretionary trigger for costs against an applicant in a summary judgment application, it otherwise does not limit the court’s powers about costs.  The general rule pursuant to r 681 is that costs of a proceeding are in the discretion of the court but follow the event unless the court orders otherwise.  This statutory conferral of jurisdiction to award costs gives this Court the widest possible power and discretion in the allocation of costs.  The discretion must be exercised judicially, that is to say, not arbitrarily, capriciously or to frustrate the legislative intent.^[1]  It follows that costs must necessarily be awarded on principle, not according to whim or private opinion.

8. [8]
   In State of Qld v Nixon & Ors [2002] QSC 296, Muir J, after referring to the usual rule in respect of costs, said the following about costs of unsuccessful summary judgment applications:

“[6] The position in relation to summary judgment applications though, as r 299(1) recognises, is somewhat different. Such an application may fail even though that applicant may have good prospects of ultimately succeeding in the action. The party seeking to resist the application may rely on evidence which may not be accepted on the final hearing and the applicant may be obliged to proceed on the basis that the respondent’s version of the facts be accepted for the purposes of the application.

[7] Because of considerations such as these, costs of summary judgment applications are something reserved or made the parties’ costs in the cause.  It is otherwise where it appears, for example, that the applicant for summary judgment ought reasonably to have appreciated that the application would fail or is applying primarily with a view to securing a forensic advantage.”

9. [9]
   This latter remark reflects r 299(2), which was the subject of consideration of Judge Richards in Guilfoyle v Newman & Newman.^[2]

“[3] In this case the plaintiff’s application for summary judgment was brought after the defendants had filed a defence …

[4] As I noted in my previous judgement it may well be that the plaintiff will succeed at trial and that the evidence may not be sufficient to establish that there was in fact a partnership. However, whilst the respondent does not appear to have a strong case, there was, depending on how the evidence unfolds, always a case to argue.

…

[6] It is accepted that the convention in relation to costs is that if the application is found to have been properly brought costs should be costs in the cause or reserved.  In this case however, the defendant defence disclosed an arguable defence.  In those circumstances the plaintiff should pay the defendant’s costs

10. [10]
    The plaintiff sought summary judgment for commission as a real estate agent on the sale of four properties owned by the defendant. The plaintiff claimed to have introduced the prospective purchaser, OneFin, who entered into a call option deed, and was the effective cause of sale to that entity’s nominee, RRAF3, by the deed. The pleaded facts relied upon by the plaintiff to form the foundation of the application for summary judgment were incontrovertible. The plaintiff contended for the strong inference that the plaintiff was the effective cause of sale clothed in the mechanism of the call option deed and the contemplated contract, albeit to an unrelated third‑party entity, RRAF3, as the ultimate buyer. 

11. [11]
    The defendant maintains that, since the service of the Amended Defence on 10 April 2024, the plaintiff should have been aware that the defendant would argue at the summary judgment that the ultimate sale was made to RRAF3, who was not introduced to the properties or the defendant by the plaintiff.  Consequently, further investigation at trial was necessary to determine whether the plaintiff was the effective cause of the sale of the properties to RRAF3.

12. [12]
    Paragraph 8, Amended Defence on 10 April 2024 provides the following explanation in denial that the plaintiff was the effective cause of sale:

“8.  The defendant denies the allegations in paragraph 12 of the statement of claim because:

a.   …

b.  Nevgold did not enter into any contract for sale of the Properties with OneFin;

c. RRAF3:

i. is a separate entity to OneFin that has different shareholders and directors to those of OneFin;

ii. obtained no interest in purchasing the Properties upon Nevgold entering into the Option Deed;

iii. acquired from OneFin, a right to be nominated as OneFin’s nominee to purchase the Properties;

iv. was not introduced to Nevgold by the plaintiff;

d. the plaintiff was not the effective cause of the sale of the Properties to RRAF3;

e. the plaintiff acquired no right to any commission under the Appointment as a result of Nevgold entering into contracts for sale of the Properties to RRAF3.”

13. [13]
    At the hearing, the defendant sought to distinguish between OneFin and RRAF3 to assert that OneFin did not enter into the contract of sale, nor did it complete the sale; but rather RRAF3, a different and separate entity, was the ultimate purchaser. It pointed to the efforts of HTL Properties as the effective cause of the ultimate sale despite RRAF3 being OneFin’s nominee. It seemed to me that it was not to the point that HTL Properties were the effective cause of the on-sale to the nominee of OneFin, but rather, in my view, HTL Properties were no more than an extension by way of the agency of OneFin in fulfilment of its obligations that continued under the call option deed. How it carried out those obligations and the effort and cost of such, in my view, added little to the factual matrix, and was potentially a distraction from the critical inquiry that is “was the plaintiff the effective cause of the sale to RRAF3?”

14. [14]
    It seemed to me that the plaintiff demonstrated a strong factual foundation to answer the effective cause of sale question “yes”; largely based on incontrovertible facts showing that the plaintiff was the effective cause of the sale to the nominee under the call option deed mechanism, there was nevertheless a factual void concerning the ultimate sale to the nominee. I concluded that the narrow factual issues regarding the ultimate sale warranted examination at trial with further evidence, if available, even though the legal issues would not be overly complex.

15. [15]
    But in that respect, even though the defendant’s pleading raised a point that entitled it to have the application dismissed, it was slim, if not shadowy. It did not as much exclude the plaintiff as an effective cause of sale as raise an inference that the plaintiff may not be the sole cause of the sale - that OneFin’s agent contributed to the sale to OneFin’s nominee under the deed. It seems to me that the plaintiff maintains good prospects of ultimately succeeding in the proceeding and that the defendant’s argument may not be accepted at the final hearing.

16. [16]
    In my view, that favours the exercise of the discretion to order that costs of the summary judgment application ought to be each party’s costs in the proceeding, to follow the event of the final determination.

‘Calderbank’ Offers

17. [17]
    The defendant also seeks its costs to be assessed on the indemnity basis in reliance upon two letters of offer made on 15 April 2024 and 2 May 2024, respectively, and the principles enunciated in Calderbank v Calderbank [1975] 3 All ER 333.  The case recognised that offers of compromise not directly authorised by the rules of the court, if reasonably made but unreasonably ignored, may properly influence the exercise of judicial discretion as to costs. 

18. [18]
    Many of the relevant principles have been summarised in a recent decision of the Court of Appeal of Western Australia in Ford Motor Company of Australia Limited v Lo Presti.^[3]  The following principles can be distilled from Lo Presti:

1. a Calderbank offer will not justify an award of indemnity costs unless its rejection was unreasonable;^[4]
2. the party who makes a Calderbank offer that is rejected bears the onus of satisfying the Court that it should make an award of indemnity costs in his or her favour;^[5]
3. all the relevant facts and circumstances must be considered in determining whether a party’s rejection of a Calderbank offer was unreasonable;^[6]
4. whilst it is neither possible nor desirable to enumerate exhaustively all the circumstances which must be taken into account in a particular case in deciding whether the rejection of a Calderbank offer was unreasonable or imprudent, ordinarily regard should be had at least to the following:
   1. the stage of the proceeding which the offer was received;
   2. the time allowed to the offeree to consider the offer;
   3. the extent of the compromise offered;
   4. the offeree’s prospects of success, assessed at the date of the offer;
   5. the clarity with which the terms of the offer were expressed; and
   6. whether the offer foreshadowed an application for … indemnity costs in the event of the offeree’s rejecting it;^[7]
5. In determining whether the conduct of the respondent was “unreasonable,” recent authority from Australian intermediate courts of appeal indicate that the concept of “unreasonableness” does not require qualification by terms such as “manifestly,” “plainly,” or “so,” which would imply a more stringent test.^[8]

Prerequisites

19. [19]
    To qualify as a Calderbank offer, it must state in effect that if not accepted and the offeror obtains an order which is equal to the offer or more favourable, the offeror will apply its costs on an indemnity basis from the date of rejection or expiry of our client’s offer.

20. [20]
    It is unnecessary for the letters to expressly state that they were Calderbank offers. Here, each letter of offer containing the words “without prejudice save as to costs” will suffice and thereby warrant consideration as Calderbank offers. 

21. [21]
    Further, it is clear that the outcome of the summary judgment application is equal to the offer or more favourable than the offer made on 15 April 2024 to the effect of dismissal of the application and there be no order as to costs.

22. [22]
    The second offer made on 2 May 2024 is different. First, it seeks the plaintiff’s consent to orders for leave to withdraw admissions in the amended defence, which is a discretionary matter. Secondly and separately, the defendant offers to resolve the summary judgment application on the basis the plaintiff “consents to withdrawal of his summary judgment application, and both parties bear their own costs of the application to date”.  It is the whole of the letter that is framed as “without prejudice save as to costs”, and in circumstances where the withdrawal of admissions also forms part of the letter, that could not be said to be more favourable than the summary judgment outcome.

Unreasonable Rejection

23. [23]
    Further, the rejection of a Calderbank Offer does not create an automatic entitlement to costs on an indemnity basis.  Such an order could only be made if the rejection of that offer was unreasonable.^[9] 

24. [24]
    In Racing & Wagering Western Australia v Software AG (Aust) Pty Ltd,^[10] McKerracher J in considering the principles applicable to the exercise of the discretion to award indemnity costs in circumstances where a Calderbank offer had been made, referred to the approach taken in Alpine Hardwoods (Aust) Pty Ltd v Hardy’s Pty Ltd (No.2)^[11] in following the Full Federal Court in Black v Lipovac^[12] that, insofar as an applicant relies upon a rejection of the offer of compromise, the applicant must demonstrate that the conduct of the respondent was imprudent or unreasonable.

25. [25]
    Mere rejection is not automatically unreasonable, even if the reasoning process to reject an offer was wrong.^[13]  As McDougall J explained in Rickard Constructions v Rickard Hails Moretti:^[14]

“[30] If, as decisions such as Jones v Bradley (No 2) [2003] NSWCA 258; establish, the failure to accept a Calderbank offer does not create a presumption as to indemnity costs when the offeror receives a more favourable outcome than that offered, then the corollary is that it is necessary to show that there exist sufficient circumstances to displace the general rule as to costs (where the offeror was a defendant and the offeree a plaintiff). In many cases — maybe most — that will be done by demonstrating that rejection of the offer was unreasonable in some way. In this context, I think, “unreasonable” may mean either that the rejection was not supported by any process of reasoning whatsoever or that the reasons for rejection that were advanced, or that may be inferred, were legally or factually (or both) inadequate.  Further, where an offer on its face is reasonable, then I think that it is open to infer (absent some demonstration to the contrary) that the rejection was unreasonable.  Thus, I think, where it is shown that a reasonable offer was made and rejected, and where the offeror does better than the offer, there is at least a persuasive burden on the offeree to show that its rejection of the offer was not unreasonable.

[31] Where the question to be considered is whether an offer was reasonable, or whether its rejection was unreasonable, the analysis and answer require attention to the objective rather than subjective circumstances.  It is for the party asserting reasonableness to show, by reference to the relevant circumstances objectively considered, that the offer was reasonable.  Equally, if there is a persuasive burden cast on an offeree to show that its rejection was not unreasonable, that must be shown by an objective analysis of the relevant circumstances.

[32] An offeree may not be compelled to disclose its advice, where to do so would infringe legal professional privilege. However, whilst its failure to show what its advice was in respect of an offer may not lead to an inference being drawn against it (and in some cases at least it may be possible to infer that the advice given was consistent with the course taken), nonetheless a failure to disclose advice means that one circumstance that is possibly relevant to the characterisation of the rejection as reasonable or unreasonable is not available.”

26. [26]
    I respectfully agree with that reasoning, which is apt here. There is no exhaustive or strict rule about what the court will consider reasonable, as I turn to consider the circumstances in this case.

27. [27]
    The offer was communicated relatively early. The first offer was made on 16 April 2024 being one month before the hearing set for 16 May 2024, and the second offer, made on 2 May 2024, being two weeks before the hearing.  

28. [28]
    By then, the pleadings had closed. They are clear and certain in their terms and involve a compromise. Each espouses the merit of the amended defence that the plaintiff did not introduce the ultimate buyer, but another party facilitated the introduction. I have already remarked about the pleading above.  There is no reason to doubt that the defendant was apparently willing and able to carry out the terms of the offer, or that it was not capable of acceptance.  

29. [29]
    The offers were made on 15 April 2024 and 2 May 2024. The former expired on 18 April 2024 (three days after it was made), while the latter expired at 5:00 p.m. on 3 May 2024 (the day after it was made). 

30. [30]
    In Digga Australia Pty Ltd v Norm Engineering Pty Ltd (No.2),^[15] the Full Federal Court stated that the preparedness or otherwise of the unsuccessful party to contemplate a careful consideration of its legal position and to engage in sensible discussions is a relevant consideration.^[16]  By the time the offers were made and thereafter open for acceptance, it seems to me the offeree would not have reasonably understood the case's strengths and weakness legally and factually to assuredly assess prospects of success as at the date of the offer.  The affidavits opposing the application were filed later on 10 May 2024, but were served on 7 May 2024.  In any event, that material did not as much exclude the plaintiff as an effective cause of sale as raise an inference that the plaintiff may not be the sole cause of the sale - that OneFin’s agent contributed to the sale to OneFin’s nominee under the deed.  There remained a factual void.

31. [31]
    Consequently, I think the time allowed for the plaintiff to consider each offer was too short and unreasonable.

Interests of Justice

32. [32]
    In my view, the interests of justice favours the exercise of the discretion to order that costs of the summary judgment application ought to be each party’s costs in the proceeding, to follow the event of the final determination

Orders

33. [33]
    For these reasons, I make the following orders:

1. The defendant’s application for costs is refused;

2. The costs of the Summary Judgment application will be each party’s cost in the proceeding.

3. The trial will be listed for 2 to 3 days in Cairns before Judge Porter KC in the week commencing 18 November 2024.

4. The proceeding will be listed before Judge Porter KC for directions for the hearing on 23 July 2024 at 9:00am.

Judge Dean P Morzone KC