[2022] NSWSC 854

Sweeney v He (No 2)

Plaintiff to pay defendants’ costs on the indemnity basis pursuant to Calderbank offer

Catchwords

COSTS – Party/party – Bases of quantification – Calderbank offer – No issue of principle

Cases cited

Sweeney v He[2022] NSWSC 655

Judgment

Summary

[1]
The Court delivered its principal judgment in these proceedings on 24 May 2022 (Sweeney v He [2022] NSWSC 655) (the Principal Judgment). These reasons assume a familiarity, and should be read with, the Principal Judgment. Defined terms in the Principal Judgment have the same meaning in these reasons.
[2]
In the Principal Judgment, the Court determined that the proceedings should be dismissed. This judgment deals with the question of costs, which the parties agreed should be dealt with on the papers.
[3]
The Court received written submissions from Ms K Boettcher of Counsel which although titled “First Defendant’s Outline of Submissions in relation to Costs” sought orders for both defendants. No separate submissions were filed on behalf of the second defendant. Written submissions were filed on behalf of the plaintiff, Michael, prepared by Mr L Ang of Counsel.
[4]
The defendants sought their costs of the proceedings on the indemnity basis by reference to offers made in two Calderbank letters. For the reasons which follow, the Court has concluded that Michael acted unreasonably in refusing to accept the first of those offers. Michael will therefore be ordered to pay the defendants’ costs of the proceedings on the indemnity basis on and from the day after the first of the defendants’ Calderbank offers expired.

The Calderbank letters

[5]
The hearing of these proceedings commenced before me on Wednesday, 24 November 2021 as a three day fixture (which proved insufficient).
[6]
One week before the commencement of the hearing, on 17 November 2021, Legal Aid New South Wales sent this letter to Michael’s solicitors (the First Offer):
[7]
The First Offer was not accepted.
[8]
At 4.20pm on Wednesday, 24 November 2021 (immediately after the conclusion of the first day of hearing) Legal Aid New South Wales sent a further Calderbank offer to Michael’s solicitors (the Second Offer). The Second Offer was in identical terms to the First Offer, save that the amount which the defendants offered to pay was $30,000 and the offer was expressed to be open for acceptance until 9.30am on 25 November 2021, being the next day.
[9]
Michael did not accept the Second Offer.

The parties’ submissions

[10]
There was no dispute between the parties about the applicable principles, namely that the effect of a Calderbank offer is not automatic but may be relevant to the exercise of the Court’s discretion; it must reflect a genuine compromise; the successful offeror must achieve the same or a better outcome than if the offeree had accepted the offer; and the Court must be satisfied that it was unreasonable on the part of the offeree not to have accepted the offer.
[11]
It was submitted for the defendants:
1. (1)
  There could no doubt that the defendants had obtained a significantly better outcome than if either the First Offer or the Second Offer had been accepted. Their case had been vindicated, the proceedings are to be dismissed and they are otherwise entitled to their costs.
2. (2)
  In circumstances where the offers were generous, given that the defendants had maintained the view that Michael’s case was untenable, and given the outcome of the proceedings, the rejection of both offers was therefore unreasonable.
3. (3)
  Furthermore, the reasons supporting the offers set out in the letters had, in substance, been vindicated in the Principal Judgment. In paragraph [37] of the Principal Judgment, the Court had found Michael not to be a reliable witness, whereas the defendants have been found by the Court to be credible witnesses (Principal Judgment at [74] and [93]). Furthermore, the Court had noted (Principal Judgment at [132]) that there was no documentary evidence in support of the agreement alleged by Michael and the Court had unequivocally found (Principal Judgment [139]) for the conclusion advanced by the defendants that Kevin was always intended to obtain absolute ownership of the legal and beneficial interest in the Property.
[12]
The submissions for Michael sought to rehearse some aspects of the merits and suggested that the defendants’ offers lacked the necessary certainty to warrant a special costs order. Given these submissions were concisely expressed, it is convenient to reproduce them:

Consideration

[13]
The Court accepts the submissions made on behalf of the defendants.
[14]
In relation to the arguments advanced for Michael:
1. (1)
  It is of no assistance to Michael to attempt to rehearse the merits. The fact that there were certain pieces of evidence, which the Court took into account, that were “consistent” with Michael’s case does not affect the correctness of the proposition that at no time was there ever shown to be any contemporaneous documentary evidence which recorded or referred to the agreement for which Michael contended. That absence would have been apparent at the time of the two offers.
2. (2)
  Contrary to the submission made, both offers contained an expiry date and time. Furthermore, it was not necessary for them to specify an amount for costs given that it was proposed that each party should pay their own.
3. (3)
  The fact that Michael made an offer of compromise in March 2021 that he be paid $70,000 and that the defendants should pay his costs is irrelevant to the exercise of the Court’s discretion.
4. (4)
  While the Court has every sympathy for the position in which he now finds himself, Michael’s poor health and financial circumstances are, with respect, irrelevant to the legal analysis which the Court must undertake in exercising its discretion as to costs. Michael was legally represented and chose to bring Supreme Court proceedings in which he has completely failed.
[15]
It is sufficient for present purposes for the Court to have regard to the First Offer. I am not persuaded by any of the reasons advanced on behalf of Michael. The First Offer represented a genuine compromise and the defendants have achieved a significantly better outcome than if Michael had accepted the First Offer. Furthermore, for the reasons advanced by Ms Boettcher I am satisfied that it was unreasonable for Michael not to have accepted the First Offer.
[16]
In reaching that conclusion I have not overlooked two matters that might be thought to be relevant.
[17]
The first is the time for the which the First Offer was limited to be open for acceptance. In the week before a hearing, when the issues are well and truly exposed between legally represented parties and turn upon alleged dealings amongst themselves, an offer open for three clear business days is not open to criticism as being open for too short a period.
[18]
The second is that the final paragraph of the First Offer does not expressly refer to an application for indemnity costs. While it is generally desirable that an application for indemnity costs should be expressly foreshadowed, it is not an absolute prerequisite. In any event, given that the parties were legally represented, I am satisfied that a legal practitioner who received the First Offer would understand the last sentence to encompass an offer for costs on the indemnity basis. No evidence has been adduced for Michael that his lawyers did not understand the First Offer in that way.

Conclusion

[19]
For these reasons, the Court will exercise its discretion as to costs to make an order for indemnity costs to run from the next business day after the First Offer expired.
[20]
The orders of the Court are:
1. (1)
  Proceedings dismissed.
2. (2)
  The plaintiff is to pay the defendants’ costs of the proceedings: