Sayers v Sayers (No. 2)

This is the Court’s second judgment in these proceedings. The Court published its first judgment on 28 May 2018 after making orders on 30 April 2018: Sayers v Sayers [2018] NSWSC 519 (“the first judgment”). In that first judgment, the Court ordered that the plaintiffs’ Amended Summons be dismissed and on the defendant/cross-claimant’s Cross Summons the Court made orders that all the funds in Court be paid out to the defendant/cross-claimant. The Court also ordered that the plaintiffs/cross-defendants pay the defendant/cross-claimant’s costs of the proceedings but granted liberty to the parties to apply for special costs orders.

It is not necessary to restate the background to these proceedings, which is fully explained in the first judgment. This judgment should be read with the first judgment. Events, matters and persons are referred to in both judgments in the same way.

By motion dated 14 May 2018, the defendant/cross-claimant, Mrs Toni Sayers, now seeks that her costs of defending the Amended Summons and pursuing the Cross Claim be paid by the active plaintiffs/cross-defendants, Keith and Inesita Sayers, on an indemnity basis on, and from, 20 February 2018. Toni Sayers relies upon a Calderbank offer served by her solicitors on Keith and Inesita Sayers’ solicitors on 16 February 2018 (“the 16 February Calderbank offer”).

Keith and Inesita Sayers dispute that Toni Sayers has any entitlement to indemnity costs based upon the 16 February 2018 Calderbank offer. They contend that it was not unreasonable of them to decline to accept the 16 February 2018 Calderbank offer put on behalf of Mrs Toni Sayers.

On this application, Mr C.P. Locke of counsel continued to appear for Keith and Inesita Sayers, instructed by Oliveri Lawyers. And Mr D. Robertson of counsel continued to appear for Toni Sayers, instructed by Baker Deane & Nutt Lawyers.

The 16 February 2018 Calderbank offer made on behalf of Toni Sayers was in the following terms:

16 February 2018 was a Friday. On the following working day, Monday 19 February 2018, Oliveri Lawyers replied on behalf of Keith and Inesita Sayers in the following terms:

This rejection involved a counter-offer. The terms of the counter-offer show just how far apart the parties’ negotiating positions were at that stage.

At the time of this exchange of correspondence, the trial was listed for hearing about a month ahead, on Monday, 12 March 2018. Keith and Inesita Sayers did not do better in the outcome of the proceedings than their counter offer and did not have any costs order in their favour. So, they have not used their counter-offer to pursue a claim for indemnity costs.

Keith and Inesita Sayers contend on this application that it was not unreasonable for them not to accept the offer and that their failure to do so does not warrant departure from the ordinary rule as to costs.

The letter of 16 February 2018 sent on behalf of Toni Sayers was marked as being “Without Prejudice Except as to Costs”. It should be considered under the principles in Calderbank v Calderbank [1975] 3 All ER 333 and the cases following it.

The principles in relation to awards of indemnity costs based upon the non-acceptance of Calderbank letters are well established. They were fully stated by Ward J (as her Honour then was) in A v N [2012] NSWSC 549 at [14] – [19].

The issue raised here is whether it was unreasonable for Keith and Inesita Sayers to refuse the offer. The considerations relevant to the determination of whether a refusal of a Calderbank offer is unreasonable have been set out in Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344 at [12], based on Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No. 2) (2005) 13 VR 435; [2005] VSCA 298 (“Hazeldene's”) at [25]. The Victorian Court of Appeal (Warren CJ, Maxwell P and Harper AJA) in Hazeldene’s stated the following factors were relevant to determining whether the rejection of a Calderbank offer was unreasonable:

The parties first exchanged written submissions in early June 2018. Counsel for Toni Sayers, in his written submissions of 4 June 2018, summarised the contention that the judgment obtained by Toni Sayers was more favourable to her than the terms of the Calderbank letter in the following terms:

In their written submissions, Keith and Inesita Sayers attacked the 16 February 2018 Calderbank offer in its stipulation in paragraph 4 that “all costs orders in the proceedings be vacated, including the costs orders made by Darke J on 11 September 2015”. They submited that no order had previously been made in the proceedings for the vacation of existing costs orders. That being so, they say that costs orders previously made in their favour in the proceedings would always have been set-off against any costs orders that might be made in favour of Mrs Toni Sayers. They submit that when the abandonment of those costs orders (as required by the Calderbank offer) is taken into account, that Mrs Toni Sayers has not obtained a judgment which was more favourable to her than the offer. They submit that as the Court did not make an order in its first judgment that all costs orders in the proceedings be vacated, that the determination of whether Mrs Toni Sayers has bettered the 16 February 2018 offer must now bring to account the value of the existing costs orders made against her, which she required to be abandoned in her Calderbank offer.

The logic of this contention is correct. But when these arguments were first presented to the Court in written submissions in June 2018, the parties’ competing contentions about the value of Darke J’s September 2015 costs orders (in relation to the Conveyancing Act 1919, s 66G application) were speculative. The estimates on each side were estimates, not informed at that stage by hard evidence. Keith and Inesita Sayers contended in their submissions that the value of those costs orders was in excess of $100,000 on a party/party basis. On the other hand, Toni Sayers sought to estimate the value of those costs orders as being between $45,000 and $65,000.

Darke J’s September 2015 costs orders were the substance of the claimed set-off. But some other minor costs orders had been made in Keith and Inesita Sayers’ favour, and which were in place at the time of the Calderbank letter. On 8 May 2017, the Registrar had ordered Toni Sayers to pay the plaintiffs’ costs of a directions hearing on 24 April 2017. And on 16 August 2017, the Registrar had ordered that Toni Sayers pay the plaintiffs’ costs thrown away by reason of the filing of a Further Amended Defence. But compared to the quantum of the September 2015 costs orders, these orders were de minimis and can be ignored for present purposes. The balance of these reasons will therefore only refer to Darke J’s September 2015 costs orders in relation to the s 66G application.

The state of these submissions created an impasse for the Court. Whilst Keith and Inesita Sayers were saying that the costs orders to which they were entitled under the orders of Darke J were “in excess of $100,000”, it was difficult for the Court to give a realistic assessment of value of the costs orders required to be abandoned upon acceptance of the Calderbank offer. So it became equally challenging to evaluate the arguments on either side of this case.

To deal with this deficiency, on 18 June 2018 the Court made further directions for the parties to give greater definition to their differences. On that date the Court made the following orders:

These directions led to the parties filing supplementary evidence and written submissions. This supplementary material threw further light on the possible upper limit of Keith and Inesita Sayers’ contentions about the value of Darke J’s September 2015 costs orders in their favour.

In their supplementary evidence and submissions, Keith and Inesita Sayers produced the memoranda of fees and disbursements that were available to be submitted for costs assessment pursuant to the costs orders Darke J made in September 2015. The solicitor/client costs and disbursements incurred by Keith and Inesita Sayers on this account totalled $54,121.40, inclusive of GST. This amount was significantly less than the broadly estimated value of such costs that had been proffered in Keith and Inesita Sayers’ previous submissions. Indeed, the figure is actually right in the middle of the range which had been estimated on behalf of Mrs Toni Sayers, namely the range of $45,000 to $65,000.

Thus, as a result of the Court’s directions and the provision of further evidence, there was by early July a realistic basis upon which the Court could conduct a comparison of the plaintiffs’ 16 February 2018 Calderbank offer with the outcome of the proceedings. The Court will shortly proceed to undertake that analysis. But before doing so, it is necessary to address an additional argument deployed on behalf of Keith and Inesita Sayers in their supplementary submissions.

Keith and Inesita Sayers returned to the terms of the 16 February 2018 Calderbank letter and emphasised that paragraph 4 included a stipulation not only that costs orders previously made in the proceedings be vacated, but that the outcome that should occur was “such that there be no order as to costs of the proceedings”. They submitted that the “costs of the proceedings” referred to in the Calderbank letter should include not only Darke J’s s 66G costs orders, but also all the other costs they had incurred in proceedings prior to the Calderbank offer.

Keith and Inesita Sayers then advanced the memoranda of fees submitted to them for their conduct of the proceedings up to the date of the Calderbank letter (apart from the s 66G costs orders). These totalled $91,195.50. They say that, on a conservative basis, on costs assessment they would have recovered 75 per cent of these solicitor/client costs. Therefore, they submit that the party/party value of the “costs of the proceedings” referred to in the Calderbank letter would be not less than $108,987. Their figure of $108,987 is calculated as $145,316.90 [being $54,121.40 + $91,195.50] multiplied by 75 per cent.

Keith and Inesita Sayers submit that in the event the Calderbank letter had been accepted, Toni Sayers would have received $102,127.15, being 50 per cent of the net proceeds of sale paid into Court and that such amount is less than the $108,987 value of the party/party costs which Keith and Inesita Sayers were required to forego by accepting the offer in the Calderbank letter.

This argument is not persuasive. It contains two errors of logic. The first error is that it interprets the words in the Calderbank letter “such that there be no order as to costs in the proceedings” as requiring them to bring to account their own ordinary costs of the proceedings up to the date of the Calderbank letter, whether or not those costs were the subject of an existing specific costs order. That contention misunderstands the terms of the Calderbank offer. All that the Calderbank offer requires as a term of its acceptance is the vacation of existing costs orders between the parties. The cost of that to Keith and Inesita Sayers is that they should give up a benefit of $54,121.40. Paragraph 4 of the Calderbank offer cannot be interpreted as requiring anything else.

The second error is that the argument does not actually compare the outcome of the proceedings with the Calderbank offer, as is required on Calderbank principles. Rather, the argument complains that the Calderbank letter required the offerees, Keith and Inesita Sayers, to give up total costs of $108,987 that were greater than the amount in Court of $102,127.15. That comparison does not correspond with any legal test which the Court is required to apply to assess whether plaintiffs had a more favourable outcome than the Calderbank offer. This submission of Keith and Inesita Sayers, in my view, is beside the real legal point at issue.

In supplementary and related argument Keith and Inesita Sayers contended that the costs incurred by the trustees for sale should also be included in the costs for which they should be credited upon the terms of paragraph 4 of the offer of 16 February 2018 offer of compromise, but this argument dails for the same reason.

The balance of Keith and Inesita Sayers’ supplementary submissions are not persuasive. It was, in my view, unreasonable for Keith and Inesita Sayers to reject the Calderbank offer. Had they accepted the Calderbank offer, they would have received half of the net proceeds of the sale of the Dyraaba property, being the sum of $102,127.15. But they would have been required to give up the Darke J costs orders in their favour, the solicitor/client costs of which were $54,121. Upon assessment the recoverable party/party costs could not have been more than that figure.

But one can assume the figure of $54,121 as the working value of the Darke J September 2015 costs orders. Making that assumption, had the plaintiffs accepted the Calderbank offer, the net result to them would have been the recovery of an amount of at least $48,006.15 (being $102,127.15 minus $54,121). Upon assessment of the Darke J’s costs orders this figure could only have become higher.

But by their rejection of the Calderbank offer, Keith and Inesita Sayers have recovered nothing from the proceedings under the first judgment and have now been ordered to pay the defendant/cross-claimant’s costs. Keith and Inesita Sayers are clearly worse off under the terms of the judgment than they would have been had they accepted the Calderbank offer. In these circumstances, rejection of the Calderbank offer was unreasonable.

The 16 February 2018 Calderbank letter otherwise satisfies Calderbank requirements. It was made at a reasonable time prior to trial. The Calderbank offer was left open for seven days. But it was rejected only three days after it was made. The Calderbank offer represented a genuine compromise: by it, Toni Sayers offered to give up her claim for indemnification against Keith and Inesita Sayers, which claim the Court valued at $200,413.67. The offer also foreshadowed that its rejection might result in an application for indemnity costs. Finally, Keith and Inesita Sayers were in a reasonable position a month before trial to assess the merits of their own case against that propounded by Toni Sayers. Keith and Inesita Sayers contend that the evidence was strongly contested. But the Calderbank letter required them to take a realistic view of their own case.

Ordinarily, the Court would order the assessment of indemnity costs from the date of expiry of a Calderbank letter. This would be at the expiry of the seven day period after the letter, namely on 23 February 2018. But the plaintiffs’ rejection of the offer on 20 February 2018 is the appropriate assessment date here: that is the date by which through their reply they prove that they had judged they had sufficient information to decline the offer. In my view, because they elected within the seven days to reject the offer, that is the date from which indemnity costs should be assessed.

Accordingly, the Court makes the following orders: