Nicolaou v The Federation of Ethnic Communities’ Councils of Australia (No 2)

1. [1]

   HER HONOUR: This is a decision in relation to indemnity costs.

2. [2]

   On 8 October 2015, I delivered judgment in this matter: see Nicolaou v The Federation of Ethnic Communities’ Councils of Australia [2015] NSWSC 1440. On 27 May 2015, the Local Court Magistrate had dismissed the plaintiff’s claim. I dismissed the appeal from the Magistrate’s decision and affirmed the orders of the Magistrate.

3. [3]

   The plaintiff in this Court is Dr Loucas Nicolaou (“Dr Nicolaou”), who was the plaintiff in the Local Court proceedings. The defendant in this Court is the Federation of Ethnic Communities’ Councils of Australia (“FECCA”), who was the defendant in the Local Court proceedings.

4. [4]

   Both parties have now complied with the timetable and they have furnished their written submissions in relation to costs.

5. [5]

   FECCA seeks indemnity costs in relation to these appeal proceedings on the basis of an offer of compromise dated 30 July 2015. It seeks a costs order that Dr Nicolaou pay FECCA’s costs on the usual basis up to 29 July 2015 and an order that Dr Nicolaou pay FECCA’s costs on an indemnity basis from and including 30 July 2015.

6. [6]

   Dr Nicolaou seeks an order that FECCA’s costs be paid on an ordinary basis.

The Calderbank offer

1. [7]

   On 30 July 2015, FECCA’s solicitors forwarded a letter to Dr Nicolaou’s solicitors. It relevantly reads:

2. [8]

   The letter states that this offer is made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586. No response was forthcoming from Dr Nicolaou.

3. [9]

   FECCA submitted that as it has been entirely successful in the proceedings on appeal and has obtained a result more favourable than the offer, it seeks its costs on an indemnity basis.

The law

1. [10]

   The starting point is s 98 of the Civil Procedure Act 2005 (NSW).

2. [11]

   It relevantly reads:

3. [12]

   Rules 42.1 and 42.15A of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) are also relevant. They read:

Indemnity Costs

1. [13]

   The general rule is that costs are payable on a party/party basis. A court should only depart from the general rule and award indemnity costs where the conduct of the party against whom the order is sought is plainly unreasonable: see Sydney City Council v Geftlick [2006] NSWCA 280 at [90] per Tobias JA, Mason P and Hodgson JA agreeing. Indemnity costs orders should be reserved for the most unreasonable action by unsuccessful plaintiff: see Leichhardt Municipal Council v Green [2004] NSWCA 341 per Santow JA (at [57]).

2. [14]

   In Cat Media Pty Ltd v Allianz Australian Insurance Ltd [2006] NSWSC 790, Bergin J confirmed the relevant principles in relation to Calderbank offers by reference to Leichhardt Municipal Council stating that the costs consequences attendant under the general law upon an offer of compromise made in a Calderbank letter are in the court's discretion, to be exercised having regard to all of the relevant circumstances of the case. Firstly, there is not a prima facie presumption in favour of an award for indemnity costs if the Calderbank offer is not accepted and is not bettered; secondly, a Calderbank offer that has no real element of compromise in it, which is designed merely to trigger costs sanctions, will not be treated as a genuine offer of compromise; thirdly, there is no rule that an optimistic offer is not a genuine offer. Whether or not it was reasonable to reject an offer is a question that may figure in the discretionary balance, but it is not a question which affects the genuineness of the offer; and fourthly, an applicant for an order for indemnity costs consequent upon an unaccepted Calderbank offer must show that the rejection of the offer was unreasonable.

3. [15]

   The question for the court is whether the offer was a genuine offer of compromise; and whether it was unreasonable for Dr Nicolaou not to accept the offer: see Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8].

Dr Nicolaou’s submissions

1. [16]

   Dr Nicolaou submitted that although the offer was put, it does not represent a genuine offer of compromise as to the discount applied, and in the circumstances it was not unreasonable for the offer not to be accepted as the appeal was one that had prospects of success.

FECCA’S submissions

1. [17]

   FECCA assessed the costs it would recover pursuant to the costs order in the Local Court proceedings to be $51,282.16. FECCA says that this offer firstly represented a discount of approximately 20% of those costs; and secondly, it proposed the discontinuation of the appeal proceedings in this Court, with no order as to costs. According to FECCA, an acceptance of the offer would have removed the need for a hearing of both Dr Nicolaou’s summons seeking leave to appeal, and his appeal, and this would have meant that no further court time would have been required and no costs would have been incurred.

2. [18]

   FECCA further submitted that Dr Nicolaou’s argument that the offer of compromise was not genuine is difficult to reconcile in light of the fact that it represented both a 20% discount on the recoverable costs of the Local Court proceedings (amounting to about $10,000) and was effectively a walk away offer in respect of the costs of the appeal, saving both parties and the Court time and money. In terms of legal costs, FECCA says that there was real comprise of what it would have recovered if it was successful, and for that reason the offer was genuine.

3. [19]

   Finally, FECCA submitted that for Mr Nicolaou to say that it was unreasonable for him to accept the offer of comprise, appears to rest solely on the strength of Dr Nicolaou’s case. FECCA says that the conclusion of this Court was that to accept Dr Nicolaou’s position on appeal was “one of contortion and not borne out by the objective and circumstances” (J [48]). While at least the appeal was arguable (J [14]) the strength of Dr Nicolaou’s case was at best weak and accepting the offer of compromise would have avoided the risk of his failure. Therefore, FECCA says that it was reasonable for Dr Nicolaou to accept the offer of comprise and in light of the result, unreasonable not to accept it.

Conclusion

1. [20]

   I agree that at [48] in my earlier judgment, I stated that to accept Dr Nicolaou’s approach to establish that an agreement was formed, is one of contortion and not borne out by the objective facts and circumstances.

2. [21]

   Although only leave to appeal was listed for hearing before me, with the consent of the parties, I determined both the application for leave to appeal and the appeal itself at the one hearing. That meant court time and the parties’ legal costs were saved by obviating the need for a further hearing at a later date. I granted leave to appeal on the basis that Dr Nicolaou’s case was arguable but dismissed the appeal after all the issues had been ventilated.

3. [22]

   FECCA offered a 20% discount on its legal costs up to 29 July 2015 on the basis that the appeal be discontinued with no order as to costs and the parties enter into a formal deed of settlement and release incorporating these terms and including mutual clauses as to confidentiality and non-disparagement and mutual releases.

4. [23]

   It was clear from the reading of the transcript and his affidavit in the Local Court that Dr Nicolaou felt personally aggrieved by the actions of FECCA. He had an arguable case, but ultimately failed on a full hearing of the appeal. He would have felt that an injustice had occurred had he not been permitted to ventilate the issue on appeal. In additional to a slight discount in FECCA’s costs, FECCA required Dr Nicolaou to sign a formal deed that incorporated, inter alia, mutual clauses as to confidentiality and non-disparagement. It was not reasonable for Dr Nicolaou to agree to this additional term. In these circumstances, it is my view he did not act unreasonably in not accepting FECCA’s offer of compromise dated 30 July 2015. In the exercise of my discretion, I order that the plaintiff is to pay the defendant’s costs on an ordinary basis as agreed or assessed.