[2017] NSWSC 1469

Glenice Bailey v Warwick La Hood

See [13], [17], [20], [24], [27], [29], [30].

Catchwords

COSTS – whether failure by the plaintiff to accept offers contained in Calderbank letters should lead to an order for indemnity costs – whether an offer of compromise sent by the plaintiff to the defendants could be relied on - whether a specified gross sum order ought to be made, pursuant to s 101(4) of the Civil Procedure Act 2005 (NSW), in relation to the costs payable by the plaintiff to the defendants in circumstances where the defendants have incurred considerable costs successfully defending a hopeless case, the costs assessment process would be protracted and expensive and it is uncertain whether the plaintiff would be able to meet a costs order against her – what the specified gross sum order should be as against the plaintiff – whether interest should be awarded on costs.

Cases cited

Glenice Bailey v Warwick La Hood[2017] NSWSC 1354
Leichardt Municipal Council v Green[2004] NSWCA 341
Doyle v Hall Chadwick[2012] NSWCA 175
Hamod v State of New South Wales[2011] NSWCA 375
Leary v Leary [1987] 1 WLR 72
Auspine Ltd v Australian Newsprint Mills Ltd[1999] FCA 673

Legislation cited

Civil Procedure Act 2005 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)

Judgment

[1]
In this matter I handed down my reasons for judgment on 19 September 2017, Glenice Bailey v Warwick La Hood [2017] NSWSC 1354 ("the principal judgment"), and judgment was entered for the defendants, which I shall refer to as TLH, on the claim of the plaintiff, Ms Bailey. Regard should be had to the principal judgment and I will use the same terminology in these reasons. At the request of the parties the question of costs was stood over until today.
[2]
Ms Bailey's case in the principal proceedings was, in short, that Mr La Hood was negligent in advising her that a proposed claim against her former solicitors, Doherty Partners, for not bringing a claim against Moffatt Sullivan, another firm of solicitors, did not have high prospects of success because there was much material signed or written by her and her sister Annette, or recording instructions given by her and her sister, which was inconsistent with the claims she says Doherty Partners should have made on her behalf against Moffatt Sullivan.
[3]
I found that Mr La Hood's advice was not negligently given and that none of the other breaches alleged were made out (breaches of fiduciary duty and misleading and deceptive conduct were also alleged). I also held that Ms Bailey had not relied on the advice given, which advice also included a recommendation that she obtain a second opinion. Finally I set out some other problems with the proposed claim by Ms Bailey against Doherty Partners which, although not necessary for the conclusion adverse to Ms Bailey's claim, further demonstrated the weakness of her asserted claims against TLH.
[4]
The defendants seek an order that Ms Bailey pay their costs from December 2014 on an indemnity basis having regard to Ms Bailey's failure to accept an offer made in a Calderbank letter dated 17 November 2016.
[5]
They are also seeking that the plaintiff pay a specified gross sum for the defendant's costs of the proceedings and further that there be interest on that gross sum in accordance with the rate specified in s 101(4) of the Civil Procedure Act 2005 (NSW) (“the Civil Procedure Act”).
[6]
In support of their application they rely on the affidavits of Mr Timothy Randolph Price and Mr Dougal James Langusch, solicitors for TLH.
[7]
Ms Bailey also seeks a special costs order based on an offer of compromise sent on her behalf on 24 September 2014, which I shall refer to as the September offer.
[8]
I received oral submissions from Mr H Grace, counsel for the defendants, who appears on this application, and written and oral submissions from Ms Bailey, who, again, represents herself. Ms Bailey resists a costs order even on the ordinary basis. She does so for two reasons, other than the September offer with which I will deal separately,:
[9]
The defendants sent two Calderbank letters. The first, which I shall refer to as the November letter, offered to settle the proceedings with Ms Bailey paying $50,000 towards TLH’s costs and had an acceptance period of two weeks lapsing on 1 December 2016 and the second was sent on 15 August 2017 with a period of acceptance of one week lapsing on 22 August 2017, I shall refer to that letter as the August letter.
[10]
The November letter was sent over four months before the hearing was set to commence, although that hearing was later adjourned, and at the time Ms Bailey was represented by Mr Hill from Australegal. The November letter said in paragraph 4:
[11]
The August letter was sent 13 days before the matter commenced before me on 28 August 2017, at which time the plaintiff was self represented. The letter asserted that the defendants had incurred costs in the amount of $203,000 approximately and that the defendants were willing to settle the dispute by having judgment entered for the defendants, all previous costs orders made in the proceedings vacated and with no further orders for costs in the proceedings. The letter explained in some detail the weaknesses in the plaintiff's case: see pages 6 and 7 of Exhibit A.
[12]
The UCPR (by part 26) provides for the making of formal offers of compromise, as well as their consequences (by part 42), however, those rules do not preclude the use of what are known as Calderbank letters: see Leichardt Municipal Council v Green [2004] NSWCA 341 (“Leichardt”). To obtain an order for indemnity costs based on a Calderbank letter the offeror must establish that:
1. (1)
  The offer was a genuine offer with a real element of compromise; and
2. (2)
  The offeree's failure to accept the offer made was unreasonable having regard to what was then known to that party.
[13]
In my view the August letter was a genuine offer with a real element of compromise and Ms Bailey's failure to accept it was unreasonable because:
1. (1)
  TLH offered Ms Bailey not only the opportunity to walk away from the proceedings without having to pay their cost but offered to give up costs orders previously made in their favour, including costs thrown away by reason of the vacation of the hearing date in March. Offers of this kind have been recognised as capable of being treated as genuine offers of compromise for the purposes of a Calderbank letter: see Leichardt at [30], [37] – [39] and Doyle v Hall Chadwick [2012] NSWCA 175 at [71].
2. (2)
  The August letter pointed out in sufficient detail for Ms Bailey, at that time an unrepresented litigant, to appreciate that her case was untenable. The most acute problems with Ms Bailey's case were not based on some esoteric point of law that she would have trouble understanding, or upon which views might differ, but rather were due to the conflicting verifications, and instructions previously given by her and her sister. Ms Bailey knew that she and her sister had advanced inconsistent evidence and instructions in earlier proceedings, not only because she ought objectively to have known it, but because:
3. (3)
  Although the time allowed for acceptance was relatively short (one week) it was reasonable having regard to the impending hearing and the other matters to which I have referred.
[14]
I now turn to the November letter. By that letter TLH offered to walk away from the case with Ms Bailey paying half of the costs to which TLH had incurred to date. The letter did point out more succinctly the difficulties in Ms Bailey’s case and sufficient for her legal advisors to provide advice. It was made at a time that all the evidence to be relied on by the parties had been served.
[15]
As the cases in this area demonstrate the strength or weakness of the offeree’s case is very relevant in determining whether an offer of very limited scope can nevertheless be a genuine one that it was unreasonable for the offeree to refuse. I regard the offer made in the November letter as of very limited value to Ms Bailey and of the type that would normally be difficult to characterise as one unreasonably rejected. However, I regard the following matters as significant:
1. (1)
  I have already referred to the fact that Ms Bailey’s case against TLH was hopeless;
2. (2)
  The matters I have referred to in [13(2)], and the fact that, although at this stage unrepresented, Ms Bailey was a qualified accountant.
3. (3)
  Ms Bailey may have convinced herself that she had very good prospects of success against Doherty Partners, but she had objectively no proper basis for that view. Those objective problems and her unwillingness to accept them continue to the present time, as is demonstrated by the last sentence of her written submissions: “I still believe I had high prospects of winning the case if Australegal had been able to maintain representation” (see: MFI 1);
4. (4)
  The time for acceptance was reasonable.
[16]
Although I think these are powerful considerations in support of TLH’s case for indemnity costs, I regard the benefit to Ms Bailey proposed by the settlement, that is a reduction of $30,000 in the party/party costs which she was required to pay, as too small to justify the imposition of costs on an indemnity basis. The defendants were giving away at the time only two costs orders of the sort made when an amendment is made (see the table in Mr Price’s affidavit at paragraph 17) and they were requiring Ms Bailey to pay 62% of the party/party costs, it being accepted by Mr Grace this morning that $80,000 would represent the party/party costs of the total of $110,000 costs incurred by TLH by that stage of the proceedings.
[17]
I therefore conclude that Ms Bailey’s failure to accept the offer contained in the August 2017 letter leads to the conclusion that she should pay TLH’s costs on the ordinary basis up to 22 August 2017 and from thereon on the indemnity basis.
[18]
I should note that Ms Bailey’s response to the defendants’ application for special costs orders contained numerous allegations unfounded in fact (see: MFI 1). These allegations include accusations by Ms Bailey that the defendants trespassed on her and her sister’s property, that Mr Emmett and Mr Grace had made various admissions and allegations and conducted themselves unreasonably and that Ms Bailey had incurred various costs involved in seeking legal representation for the proceedings. Leaving aside the point about the costs of her own legal representation, none of these matters are supported by any evidence and the fact that she has had to pay a great deal of money for her own costs is not relevant to the determination of what costs orders should be made against her in favour of TLH.
[19]
Turning now to the September offer, it contained the following:
[20]
The September offer cannot be relied on because:
[21]
Section 98(4)(c) of the Civil Procedure Act gives the Court power to make an order that, before costs are referred for assessment, the party to whom costs are to be paid is entitled to “a specified gross sum instead of assessed costs”. The subject period of the application sought by the defendants is from 17 October 2013 to 28 June 2017 and the total fees and disbursements claimed in their application for a gross sum order is $293,000 approximately, but with some items removed because they do not properly fall within the characterisation of costs payable by the plaintiff, and with a further $8,000 relating to the costs of making this application.
[22]
The legal principles relevant to the exercise of the Court’s discretion in respect of gross sum orders was set out by Beazley JA, as her Honour then was, in Hamod v State of New South Wales [2011] NSWCA 375 (“Hamod”) see: [813] - [820]. In those paragraphs her Honour indicated that consideration should be had to the following factors:
1. (1)
  Whether the “assessment of costs would be protracted and expensive.”
2. (2)
  “If it appeared that a party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment.”
3. (3)
  “A relative responsibility of the parties for the costs incurred” and “the degree of any disproportion between the issue litigated and the costs claimed; the complexity of proceedings in relation to their costs.”
4. (4)
  “Whether it would avoid the expense, delay and aggravation likely to be involved in contested costs assessment.”
5. (5)
  “The power may also be exercised where a party’s conduct has unnecessarily contributed to the costs of the proceedings especially where the costs incurred have been disproportionate to the result of the proceedings.”
[23]
I note that Ms Bailey did not put any submissions against a lump sum costs order or any interest sought other than:
1. (1)
  Saying that she had incurred more costs than the defendants which, again, is an irrelevancy.
2. (2)
  Relying on the September offer.
3. (3)
  Asserting that the reasonableness of costs could only be determined by “peer review” (see: MFI 1).
[24]
In my view the following matters support such an order:
1. (1)
  TLH, or their insurers, have incurred a considerable amount of costs due to what I regard as a hopeless case brought by Ms Bailey, the further costs in relation to costs should be kept to a minimum.
2. (2)
  The case against TLH is another chapter in what has become a saga of litigation involving Ms Bailey and her family and there is reason to think that any costs assessment process would be protracted and expensive. Mr Price has estimated the likely costs of an assessor as $35,000, which, if TLH is successful in obtaining 90% of what it seeks, will be payable by Ms Bailey.
3. (3)
  There is some evidence from which it can be inferred that Ms Bailey may not be able to meet the full extent of any costs order made against her. She did not pay all of the costs in advance sought by her lawyers (see: Exhibit 2) and her income is limited (see: Exhibit 3). Ms Bailey told me from the bar table that she has a minimum one-third interest in two properties in Ballina and one in Cremorne, but the value of her equity in those properties is entirely unclear, as is her general financial position. She has not provided the Court with any affidavit relating to her financial position.
4. (4)
  Mr Price’s affidavit is very detailed and Ms Bailey has led no evidence to suggest that the amounts sought are not reasonable. Indeed the fees that she says she has paid and the additional amounts she says were sought from her by Sweeney Tiggemann are far more than the fees paid by TLH to its lawyers: see Exhibit 2.
[25]
In assessing what the gross sum awarded should be, Beazley JA in that same excerpt in Hamod indicated, with reference to various authorities, that:
1. (1)
  “The courts have typically applied a discount in assessing costs on a gross sum basis.”
2. (2)
  “In the exercise of its discretion the court is not required to undertake a detailed examination of the kind that would be appropriate to taxation or formal costs assessment.”
3. (3)
  “The costs ordered should be based on an informed assessment of the actual costs having regard to the information before the court (for example, by relying on costs estimates or bills).”
4. (4)
  “The approach taken to estimate the costs to be ordered must be logical, fair and reasonable.”
[26]
Mr Price, in his supporting affidavit, has provided considerable detail relating to the costs and has set out the range of their expected recovery of costs (see: paragraphs 28 to 29 of his affidavit). In paragraph 29.2 he sets out the expected gross sum recovery based on the alternatives of the indemnity costs argument succeeding on the November letter and the August letter. On the basis of indemnity costs following from Ms Bailey’s failure to accept the August letter, he assesses the range as commencing at $252,000, leaving aside the costs of the present application. I accept Mr Price’s evidence and I think that both, of itself, and with some additional support from the figures that Ms Bailey has provided evidence in relation to her own costs, his assessment and figures are realistic and a reasonable estimate of what the defendants would be likely to obtain on an assessment.
[27]
Given that the discount is usually applied to a costs order in this context (see: Hamod at [820] and also Leary v Leary [1987] 1 WLR 72 at 76 per Purchas LJ; Auspine Ltd v Australian Newsprint Mills Ltd [1999] FCA 673 at 164–165), I shall take the lowest figure of the range at $252,624.92, apply a discount of 10%, by reducing it by $25,000, leading to a figure of $227,624.92 to which I will add $7,200 being the figure of $8,000 for today’s application, for which details are provided in Mr Price’s affidavit, but applying again a 10% discount to that. The total figure, therefore, of costs which should be awarded on a lump sum basis is the amount of $234,824.92.
[28]
TLH seek an order that Ms Bailey pay interest on the costs paid to date. Mr Price has calculated the interest at approximately $15,000 and provided evidence of payment of the costs and details of that calculation (see: paragraph 32). As I have noted, s 101(4) of the Civil Procedure Act permits the Court to make such an order and no relevant submission was made as to why it should not be made.
[29]
Accordingly, there should be interest allowed of $15,000 to be added to the figure of $234,824.92.
[30]
Ms Bailey did indicate that she would wish to have additional time to endeavour to meet a lump sum order for costs and she sought a three month period. The defendants indicated their willingness to grant her that time, provided that the order is not framed in such a way as to interfere with their right to place a caveat on the title of the properties on which Ms Bailey has an interest. Accordingly, the total amount payable by Ms Bailey to the defendants is $249,824.92. I make an order that Ms Bailey pay that amount as the costs to the defendants. That money is to be paid to the defendants’ solicitors, but I stay the operation of that order for a period of three months from today, that is until 28 December 2017.