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Holloway Nominees (Q) Pty Ltd v George (No 2)[2008] QSC 71

Holloway Nominees (Q) Pty Ltd v George (No 2)[2008] QSC 71

 

SUPREME COURT OF QUEENSLAND

  

PARTIES:

FILE NO/S:

Trial Division

PROCEEDING:

Trial

ORIGINATING COURT:

DELIVERED ON:

15 April 2008

DELIVERED AT:

Brisbane 

HEARING DATE:

4 and 9 April 2008

JUDGE:

Martin J

ORDER:

Judgment for the plaintiff against each defendant in the sum of $247,482.54, together with interest in the sum of $151,196.46 with costs to be assessed if not agreed.

CATCHWORDS:

PROCEDURE – COSTS – DEPARTING FROM THE GENERAL RULE – CALDERBANK LETTER – COSTS ON INDEMNITY BASIS – CONDUCT OF THE DEFENDANTS – Whether the plaintiff’s letter containing an offer which was mistaken could have been accepted – Efficacy of “all up” offers – Whether conduct of defendants at trial justified an indemnity costs order

Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397

Colgate-Palmolive Company v Cussons Pty Limited [1993] 46 FCR 225

Naomi Marble & Granite Pty Ltd v FAI General Insurance Company Limited (No 2) [1999] 1 Qd R 518

Di Carlo v Dubois [2002] QCA 225

COUNSEL:

C Francis for the plaintiff

P Lynch (Solicitor) for the defendants

[1] On 4 April 2008 judgment was given for the plaintiff against each defendant in the sum of $247,482.54 with interest (see [2008] QSC 63).

[2] The plaintiff now seeks indemnity costs on two bases:

(a) That the defendants failed to accept the plaintiff’s offer of compromise;

(b) The conduct of the defendants and the justice of the case require the award of costs on an indemnity basis.

The offer of compromise

[3] In a letter of 21 June 2007 from the plaintiff’s solicitor to the defendants’ solicitor the following appears:

“We refer to the mediation which was conducted before Martin Daubney SC on 20 June 2007.

As you are aware, an agreement in principle was reached which may be summarised as follows:-

On the basis that the Defendants solicitors sign a Request for Allocation of Trial Date by 1600 on 21 June 2006 setting the matter down for Trial for four days commencing 22 October 2007:

1.the Plaintiff will offer to settle the proceedings for the sum of $3,000.00 (inclusive of interest and costs) which is payable within 30 days of acceptance, such offer to remain open for acceptance until 1600 on 12 July 2007;

2.the offer will be the only offer of settlement that will be made and accordingly any counter offer will be construed as rejection of the once only offer of settlement;

3.the Plaintiff will not oppose the Defendants having leave to deliver an Amended Defence within 21 days of 20 June 2007 not withstanding the execution of the Request for Allocation of Trial Date; and

4.the Defendants will not oppose the Plaintiff delivering a reply to any Amended Defence it chooses to file and deliver.”

[4] There was no response from the defendants. It may be accepted that the offer to accept “$3,000.00 (inclusive of interest and costs)” was an error which would have been obvious to the defendants, given the amount sought in the claim.

[5] The plaintiff’s solicitors attempted to explain this error in an affidavit which contained references to what occurred at the mediation conference. That evidence was objected to and was not admitted.

[6] The plaintiff’s submission was that this was an informal offer in the form of a Calderbank letter. It was argued that the recipients of the letter “understood” that the amount which was really being sought was $300,000. There was no evidence to support this contention.

[7] The nature and effect of a Calderbank letter[1] were most recently examined in the reasons of McColl and Basten JJA in Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [89]-[118] and [132]-[150] respectively. In doing so, their Honours gave particular attention to the efficacy of the offer which was headed “without prejudice except as to costs” and offered to accept the sum of $300,000 inclusive of costs in full settlement of the matter. With respect to such an offer, McColl JA observed:

“[100]There is a line of authority, commencing with Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97, to the effect that a Calderbank letter expressed to be inclusive of costs will not warrant departure from the usual basis upon which a successful party’s costs are calculated. Einstein J applied these authorities in Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (Formerly GIO Insurance Limited) and Ors [2006] NSWSC 583, saying:

“[40] It has been held that a Calderbank letter which is expressed to be ‘inclusive of costs’, is insufficiently precise to qualify as a Calderbank offer, for the reason that the offeree is placed in a position of not being able to determine the appropriate amount to attribute to the substantive claim and the costs incurred in advancing it: Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97 at 102; Hanave Pty Ltd v LFOT Pty Ltd (formerly Jagar Pty Ltd) [1998] 1429 FCA 11, BC9805993 (Smallacombe Pty Ltd v Lockyer Investments Co Pty Ltd was referred to by Young J in Rosser v Maritime Services Board of New South Wales (No 3) (unreported, Supreme Court of New South Wales, 25 November 1997, Young J, BC9706221).

[41] These authorities recognise the importance of isolating the costs component in such a way which is clear and capable of proper assessment independently of the principal claim, as part of a Calderbank letter.”

[102]Gillard J did not apply Smallacombe in M T Associates Pty Ltd v Aqua-Max Pty Ltd & Anor (No 3) [2000] VSC 163. His Honour (at [125] – [126]) was of the view that a Calderbank letter could be expressed to be on an all-inclusive basis. He observed that many cases were settled on an “all in” basis and “[t]here is little difficulty in making an assessment of the likely amount of the claim and costs”.

[8] Her Honour examined the authorities which were consistent with Smallacombe and those which diverged from that decision.  At [111]ff her Honour said:

111 The Smallacombe line of authority has been developed by experienced trial judges whose views, in my opinion, should be accorded great weight. The underlying premise of such cases rests in the proposition that an offeree cannot be said to have acted unreasonably in not accepting an offer expressed to be inclusive of costs, because of the offeree does not have an adequate opportunity to consider the offer and because of the difficulties posed when a court comes to consider the reasonableness of the offeree’s conduct in rejecting/not accepting it. In other words such an offer presents practical difficulties.

112 First, the recipient of such an offer would not know the likely party and party costs to date on taxation or assessment: see Smallacombe (at 102); Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602. Secondly, in considering the reasonableness of the offer at the time the question of its costs consequences arose, it would be necessary to indulge in a taxation, or assessment, of costs: Associated Confectionery (at 351). The Court should not be required to postpone the decision as to the basis upon which costs should be awarded while awaiting the outcome of that exercise. Nor should it be required either to speculate as to what the outcome of an assessment might be, nor arbitrate on a dispute between the parties on this topic.

113 In Smallacombe (at 102) Spender J opined that “all-in” offers “would not promote the finality of litigation, but fragment it”, a proposition implicitly recognised by Cole J (as his Honour then was) in W Jeffreys Holdings Pty Ltd v Appleyard and Associates (1990) 10 BCL 298 when he said “[g]reat difficulty is encountered if offers are framed in Calderbank letters on an inclusive of costs basis. It leads to ex post facto and unsubstantiated estimates of what costs may have been at a given date”.

114 In my view, the point was well made by Goldberg J in Dr Martens where his Honour said:

“[24] If the purpose of a Calderbank letter is to offer to bring litigation to an end it should be couched in such terms as enable the offeree to make a carefully considered comparison between the offer made and the ultimate relief it is seeking in all its aspects. An offer inclusive of costs confuses this issue as it puts the offeree in a position of not being able to determine the appropriate amount to attribute to the money sum it is seeking. Although an estimate can be made of what the offeree’s taxed party and party costs might be at the time of the offer, the offeree is not being offered the opportunity to have those costs assessed by taxation in default of agreement, in addition to being made an offer to settle its claim. As a matter of principle, if a party is to be put at risk of losing its costs, even if ultimately successful, by not accepting an offer made to settle or compromise the proceeding at a point of time prior to trial, that risk should only be imposed if the party is given the opportunity, at the time of the offer, to obtain its taxed costs to date in addition to the offer made, knowing that it has been able to make a careful comparative assessment of the value of the offer as against the ultimate relief sought to be obtained.”

In GEC Marconi Systems Pty Limited v BHP Information Technology Pty Limited [2003] FCA 688; (2003) 201 ALR 55 Finn J referred (at [34] – [36]) to the views expressed in the Smallacombe line of authority and in M T Associates Pty Ltd v Aqua-Max Pty Ltd (No 3), and said he was not prepared to say that the Smallacombe approach was clearly wrong, particularly in the light of the views expressed by Goldberg J in Dr Martens at [24].

115 I agree with Allsop J that Smallacombe does not lay down a “definitive rule” that an “all-in” Calderbank offer can never be considered on the question of indemnity costs. The Court cannot fetter the s 98 discretion by legal rules: Oshlack (at [35]). Smallacombe does, however, afford guidance as to the exercise of the s 98(1) discretion. It informs the question of the reasonableness of an offeree’s refusal to accept an “all-in” offer. In my view it has a sound practical basis. While I accept each case should be considered on its facts, Smallacombe provides sound reasons to discourage offerors from drafting Calderbank letters on an “all-in” basis.”

[9] I accept, with respect, that analysis of the authorities. Of course, an “all up” offer by a plaintiff is different in nature to such an offer being made by a defendant and does not have the same degree of uncertainty as the latter.

[10] The recipients of the offer by the plaintiff in this case were faced with this issue: was it an offer of $3000.00 or, if not, what.  This was complicated by the inclusion of interest and costs in the offer so that the defendants were not in a position in which they could make an informed decision about the nature of the offer. A failure to respond was not unreasonable and does not warrant an order for indemnity costs.

Conduct of the defendants

[11] The plaintiff also relies on the conduct of the defendants to justify the making of an order for indemnity costs.

[12] The misconduct of a party can be the basis upon which an order for indemnity costs can be made. The threshold which must be crossed in order for such an order to be made is not a low one. Rule 704 of the UCPR permits the court to order costs to be assessed on the indemnity basis but it does not give guidance as to when such an order might be made.

[13] There are a number of authorities in which the circumstances for making such an order have been discussed, two of them – Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 and Colgate-Palmolive Company v Cussons Pty Limited [1993] 46 FCR 225 – are regularly cited. They were the subject of consideration by Shepherdson J in Naomi Marble & Granite Pty Ltd v FAI General Insurance Company Limited (No 2) [1999] 1 Qd R 518 and by the Court of Appeal in Di Carlo v Dubois [2002] QCA 225. Drawing upon those authorities, it appears that before the conduct of a party will be sufficient to justify the making of an indemnity costs order, there needs to be some special or unusual feature to justify departure from the ordinary practice; such features might include the making of allegations of fraud when the maker of those allegations knew them to be false; misconduct causing loss of time to the Court and other parties; the commencement of continuation of proceedings for some ulterior motive, or the making of allegations which ought never to have been made.

[14] In Di Carlo v Dubois, White J referred to the decision of the New South Wales Court of Appeal in Rosniac v Government Insurance Office (1997) 41 NSWLR 608 where the Court observed, at 616:

“…the court requires some evidence of unreasonable conduct, albeit it that it needs not rise as high as vexation.  This is because party and party costs remain the norm, although it is common knowledge that they provide an inadequate indemnity. Any shift to a general or common rule that indemnity costs should be the order of the day is a matter for the legislature or the rule maker.”

[15] Justice White went on to say (with the agreement of Williams JA and Wilson J):

“[40] It is important that applications for the award of costs on the indemnity basis not be seen as too readily available when a particular party against whom the order is sought is seen to carry responsibility for the state of affairs calling for a costs order without some further facts analogous to those mentioned in Colgate and other considered decisions.”

[16] It is correct, as counsel for the plaintiff pointed out, that Mr George, the guiding mind of the corporate defendants, was the subject of some detrimental findings so far as credit is concerned. A substantial part of the defendants’ case was taken up with questions relating to whether or not a joint venture agreement had been entered into and, if so, what was the effect of that agreement. Although I found that no agreement had been formed, the conduct of the defendants in advancing and prosecuting that part of their case was not so unusual as to justify the order sought.

[17] While the conduct of the defendants approached the necessary threshold to justify the making of an indemnity costs order, I do not think that, in all the circumstances of this case, they crossed it.

[18] There will, therefore, be judgment for the plaintiff against each defendant in the sum of $247,482.54, together with interest in the sum of $151,196.46 with costs to be assessed if not agreed.

Footnotes

[1] The term “Calderbank letter” is something of a misnomer. In Calderbank v Calderbank [1976] Fam. 93, a letter written “without prejudice” containing an offer to settle was not allowed to be relied upon. The costs order was decided in the light of an offer which was contained in an affidavit used in the trial. It was Cutts v Head [1984] Ch. D. 290 which extended the principle in Calderbank v Calderbank to “without prejudice” letters.

Close

Editorial Notes

  • Published Case Name:

    Holloway Nominees (Q) P/L v George & Ors (No 2)

  • Shortened Case Name:

    Holloway Nominees (Q) Pty Ltd v George (No 2)

  • MNC:

    [2008] QSC 71

  • Court:

    QSC

  • Judge(s):

    Martin J

  • Date:

    15 Apr 2008

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2008] QSC 7115 Apr 2008Order for costs on standard basis; failing to respond to offer of compromise and conduct of defendants otherwise does not warrant order for indemnity costs: Martin J
Primary Judgment[2009] QSC 6325 Mar 2009The defendants are liable for a debt to the plaintiff and for damages for misleading or deceptive conduct under s. 82 Trade Practices Act 1974 (Cth); judgment for plaintiff in sum of $247,782.54: Martin J
Appeal Determined (QCA)[2008] QCA 28116 Sep 2008Appeal dismissed; Mackenzie AJA, Cullinane and Douglas JJ
Special Leave Refused (HCA)[2009] HCASL 6012 Mar 2009-

Appeal Status

Appeal Determined - Special Leave Refused (HCA)

Cases Cited

Case NameFull CitationFrequency
Balderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2006] NSWSC 583
1 citation
Calderbank v Calderbank (1976) Fam 93
1 citation
Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 F.C.R 225
2 citations
Cutts v Head [1984] Ch. D. 290
1 citation
Di Carlo v Dubois [2002] QCA 225
2 citations
Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd [2000] FCA 602
1 citation
Elite Protective Personnel Pty Ltd v Salmon (2007) NSWCA 322
2 citations
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397
2 citations
GEC Marconi Systems Pty Limited v BHP Information Technology Pty Limited [2003] FCA 688
1 citation
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55
1 citation
Hanave Pty Ltd v LFOT Pty Ltd (formerly Jagar Pty Ltd) [1998] 1429 FCA 11
1 citation
Holloway Nominees (Q) Pty Ltd v George [2008] QSC 63
1 citation
MT Associates Pty Ltd v Aqua-Max Pty Ltd [2000] VSC 163
1 citation
Naomi Marble and Granite Pty Ltd v FAI General Insurance Co Ltd (No 2) [1999] 1 Qd R 518
2 citations
Rosniac v Government Insurance Office (1997) 41 NSW LR 608
1 citation
Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97
2 citations
W Jeffreys Holdings Pty Ltd v Appleyard and Associates (1990) 10 BCL 298
1 citation

Cases Citing

Case NameFull CitationFrequency
Bell v State of Queensland & Anor [2015] QCAT 3691 citation
Bell v State of Queensland & Anor [2014] QCAT 4951 citation
Hail Creek Coal Holdings Pty Ltd v O'Loughlin (No 2) [2024] QLC 62 citations
Potts v T & M Buckley Pty Ltd [2011] QCAT 4692 citations
1

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