Silversea Cruises Australia Pty Ltd v Abellanoza (No 2)

1. [1]

   THE COURT: In proceedings in the Equity Division, the appellant, Silversea Cruises Australia Pty Ltd, sought to recover moneys stolen by Mary Ann Abellanoza for gambling, the proceeds of which were paid into various accounts in her name, in the joint names of herself and her husband, and of immediate relevance, into two accounts held solely in her husband’s name.

2. [2]

   By the time the proceedings were heard in September 2018, there was no resistance to the orders sought against Ms Abellanoza. The trial proceeded with respect to the claims against Mr Abellanoza. Silversea Cruises was wholly unsuccessful and appealed to this Court.

3. [3]

   By a judgment delivered on 20 December 2019, the Court allowed the appeal in part, with the result that the appellant obtained a judgment against Mr Abellanoza (the respondent) in an amount of $20,000. [1] The parties were invited, in the absence of agreement, to make submissions as to the appropriate costs orders within 7 days. Given the time of year, the period permitted was mercilessly short, but, much to their credit, counsel for the appellant responded with submissions dated 27 December and counsel for the respondent replied on 29 December 2019.

4. [4]

   Because of the limited basis upon which the appellant had succeeded, Bathurst CJ expressed a tentative view that the appellant should pay 75% of the costs of the respondent in this Court and in the Court below. [2] The respondent adopted the proposed orders.

5. [5]

   The appellant proposed different orders in the following terms:

6. [6]

   In support of these proposed orders, the appellant relied upon three matters, namely (i) the appellant’s success, in part, in this Court; (ii) an offer of compromise served on 6 March 2019 and (iii) a second offer of compromise dated 17 April 2019.

7. [7]

   In so far as the Court varied the order made in the Equity Division to allow for recovery of an amount of only $20,000, the appellant saw a need to address the application of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”), r 42.34. That provision denies a plaintiff the usual order for costs if it obtains a judgment in an amount of less than $500,000. To obtain costs in that circumstance it must satisfy the court that it was “warranted” in bringing proceedings in the Supreme Court, rather than the District Court. The justification proffered was that the proceedings against Mr Abellanoza were properly joined with the proceedings against his wife which were, in turn, properly brought in the Supreme Court as the appellant had sought and obtained freezing orders with respect to the assets of both the respondent and his wife. However, the issue may be put to one side; although the precise orders made with respect to Ms Abellanoza were not before this Court, it is clear that in the absence of opposition, the trial judge, Sackar J, was satisfied that Silversea was entitled to a judgment against her in an amount in excess of $3.5 million. Because r 42.34 is only engaged where the plaintiff has obtained a judgment “against the defendant or, if more than one defendant, against all the defendants, in an amount of less than $500,000” the constraint on recovery by a successful plaintiff was not engaged. It did not follow, however, that success on a limited basis justified a costs order against the respondent.

8. [8]

   So far as the appellant sought indemnity costs, its claims were premised on the two offers of compromise. Neither offer purported to be an offer in accordance with UCPR r 20.26, nor were the costs consequences flowing from the non-acceptance of such an offer relied upon. However, even as Calderbank offers, there were aspects of the drafting which were infelicitous, as the respondent noted. The first offer was headed “Without Prejudice” and, consistently with that title, concluded with the statement:

9. [9]

   While it is understandable that, given the haste with which the submissions must have been prepared, certain formalities were omitted, it is notable that there was no evidence to suggest that the judgment obtained in this Court in an amount of $20,000 exceeded the entitlement to costs of the trial in accordance with the judgment below. That was so despite the fact that the letter of offer justified its proposal largely on the basis that the appellant would succeed with respect to the amount of $20,000.

10. [10]

    The respondent did not put on evidence as to the costs of the trial, but stated in submissions that, “[a]t the time of making each Offer, the appellant was aware that the costs incurred by the respondent in defending the proceedings below, calculated on a solicitor-client basis, totalled at least $55,424, because the appellant had consented to the respondent accessing funds in his frozen bank accounts … to pay those costs”. The appellant was therefore aware, the submission proceeded, that, if accepted, the respondent would have foregone approximately $40,000 of costs, assessed on a party-party basis. It was not, the respondent submitted, unreasonable for him not to accept the first offer.

11. [11]

    Taking these matters together, there is no justification for imposing any element of costs on the respondent as a result of his non-acceptance of the first offer.

12. [12]

    The second offer was in slightly different terms, although it continued to rely on the likelihood of obtaining a judgment for $20,000, the quashing of the costs order made by Sackar J and, in addition, that the respondent would be ordered to pay the appellant’s costs of the appeal. The proposal was that the appeal proceedings be discontinued and each party bear its or his own costs of the trial and the appeal.

13. [13]

    Again the offer did not comply with r 20.26, not only in form, but also in substance in purporting to deal with the costs of the appeal. [3] This letter was headed “Without prejudice save as to costs” and concluded with the statement:

14. [14]

    The effect of this offer was that the appellant would abandon its appeal, again on the condition that the respondent abandoned its right to costs in the court below and any right it would have to costs of the appeal if it did not proceed. Although it indicated that the correspondence would be relied upon in support of a costs order, if the offer were not accepted, there was no express suggestion that it would be relied upon in support of an indemnity costs order. The respondent submitted that, for the same reasons it relied upon with respect to the first offer, its failure to accept the second offer was not unreasonable. That submission should be accepted; the second offer does not warrant an award of indemnity costs.

15. [15]

    The question remains as to whether the appellant should receive any costs in circumstances where it had a quite limited success on appeal or, in the alternative, whether it should meet a proportion of the respondent’s costs because it was largely unsuccessful on appeal.

16. [16]

    The case run by the appellant at trial was accurately summarised by the respondent as involving claims to three sums of money on a reducing basis namely, the amounts, in round terms,

17. [17]

    The earlier reasons of the Court (of 20 December 2019) sufficiently explain the manner in which the appellant pursued its case with respect to the separate amounts of $154,000 and $20,000. The circumstances attending the payment of $20,000 were discrete and limited in relation to the relevant considerations. [4] There was a severable claim on which the appellant was successful; the major part of the appeal, however, concerned the larger claim on which the appellant was unsuccessful.

18. [18]

    It might have been possible to contend that, taking into account that the respondent should be liable for the costs attributable to that part of the proceedings on which it was unsuccessful, as well as removing that part of the claim from the costs which the appellant should be required to pay, might have resulted in some variation of the 75% of the costs of the appeal proposed in the earlier judgment. However, the appellant limited its submissions in this regard to the proposition that there was no “clearly dominant or separable issue that arose in respect of the $20,000 claim”. Once that submission is rejected, as it should be, there was no submission that the 75% figure should be adjusted.

19. [19]

    Furthermore, the respondent accepted that he should receive only 75% of his costs of the trial, although there was a far greater amount at stake at the trial with respect to which the appellant was unsuccessful, a finding not challenged on appeal.

Conclusion

1. [20]

   In these circumstances, the appellant’s submissions on costs must be rejected and, in keeping with the respondent’s submissions, the tentative order proposed in the first judgment should be adopted. The respondent should have his costs of this application.

2. [21]

   Accordingly, the Court makes the following orders:

   1. (1)

      Set aside order (4) made in the Equity Division on 13 December 2018 (ordering the plaintiff to pay the second defendant’s costs of the proceedings, as agreed or assessed) and in lieu thereof, order that the plaintiff pay 75% of the second defendant’s costs of the proceedings.

   2. (2)

      Order that the appellant pay 75% of the respondent’s costs of the appeal.

   3. (3)

      Order that the appellant pay the respondent’s costs of the costs application.