GJA Kalra Pty Ltd v Amgade Pty Ltd and Anor (No 2)

1. [1]

   On 29 April 2022, I published reasons for judgment in this matter (GJA Kalra Pty Ltd v Amgade Pty Ltd and Anor [2022] NSWSC 509), which involved a dispute between the plaintiff lessee and defendant lessor of a property. The plaintiff/lessee’s claim primarily concerned whether the lessor was liable by reason of a promissory estoppel based on a representation concerning a wastewater system on the leased property.

2. [2]

   I dismissed the plaintiff’s claim, finding that no estoppel had been made out; the first defendant did not make any representation to the plaintiff at the relevant time. I also found that the plaintiff did not rely on any representation made to it by the defendants in executing the transfer documents, nor did it suffer any relevant detriment by reason of the defendants’ actions, and that the defendants did not act unconscionably in their dealings with the plaintiff.

3. [3]

   I ordered at [130] of my reasons that the plaintiff pay the defendants’ costs on the ordinary basis as agreed or assessed, unless a party sought a different costs order.

4. [4]

   The defendants have sought special costs orders on two bases: (1) the making of a Calderbank offer by the defendants, and (2) the abandonment at trial of the “damages” claim for the loss of the motel’s revenue.

5. [5]

   The plaintiff resists the application for special costs orders and submits that the costs of the proceeding should be paid on the ordinary basis (as proposed in the principal judgment at [130]) and that the defendants should pay the plaintiff’s costs of this costs application.

Calderbank offer

1. [6]

   Five days before the commencement of the hearing, on 6 April 2022 at 11.41pm, the defendants sent to the plaintiff an offer referencing the principles outlined in Calderbank v Calderbank (1975) 3 All ER 333. The letter offered resolution of the proceedings on the following terms:

2. [7]

   Just recently Ward P summarised the well-known principles in relation to costs in Abdi v Abdi (No 2) [2022] NSWSC 582 at [19]-[30]:

3. [8]

   Significantly, her Honour continued in relation to principles concerning Calderbank offers:

4. [9]

   Blandly the plaintiff submits that the offer is not a valid one, but does not provide reasons. I reject that submission as I consider that the offer in the present case was in the form of a valid offer. The offer stated: “[t]his offer is made in accordance with the principles set out in Calderbank v Calderbank [1975] 3 All ER 333”. Although it was not explicitly apparent in the terms of the offer that it would be relied on for the purposes of a special costs order, should it not be accepted and the defendants obtain a better outcome in the judgment, the letter does state that it is “without prejudice save as to costs.” I consider this sufficient to constitute a valid offer: Assaf v Skalkos [2000] NSWSC 935 at [110] (Carruthers AJ); Geoffrey Andrew Smith v Robert Gould [2014] VSCA 138 at [156] (Warren CJ, Osborn and Beach JJA).

5. [10]

   Moving to the requirement that the offer contained a genuine compromise, the defendants submitted that an offer to bear 50% of their own costs of the proceeding was a substantial compromise. The defendants say that the offer, had it been accepted, would have placed the plaintiff in a better position than it ultimately achieved in the litigation (which is clearly the case as it would not then have been exposed to the adverse costs order that has now been made).

6. [11]

   The plaintiff submits that the offer was not a genuine attempt to settle the proceeding, particularly considering that the offer was made:

   1. (1)

      when the proceedings had been on foot for almost three years, and

   2. (2)

      the day after the defendants served new evidence (out of time).

7. [12]

   The extent of that compromise was not readily ascertainable in financial terms from the offer. I discuss this further below.

8. [13]

   The defendants submit that the plaintiff unreasonably rejected the offer. Both parties have raised various factors said to be relevant in the exercise of the Court’s discretion.

9. [14]

   First, as to timing of the offer, the defendants submit that the offer was made close to the trial, at which time the plaintiff was fully aware of its position. In addition, the defendants note that the defendants’ solicitor had informed the plaintiff of the weaknesses of its case in a letter dated 15 February 2022, which was sent in the context of a proposal to mediate. The defendants say that, in these circumstances, the plaintiff could have quickly assessed the reasonableness of the offer balanced against its perception of its prospects of success. Further, the defendants suggest that there was nothing that would have stopped the plaintiff from seeking additional time to respond to the offer.

10. [15]

    The plaintiff submits that the time for consideration of the offer was too short, and that there is no requirement for an offeree to seek an extension of the time during which an offer remains open. In addition, there is no evidence that an extension would have been granted.

11. [16]

    Further in relation to timing, the plaintiff submits that it was not unreasonable for it not to accept the offer particularly because the defendants served new evidence the day before the offer was made. This evidence was served out of time and without leave, merely a few days before the hearing.

12. [17]

    Secondly, the plaintiff submits that the expressed basis for the offer was inconsistent with the findings in the principal judgment. It says that the weaknesses of the plaintiff’s case were not set out in the offer, and, in fact, the Court ultimately found against the plaintiff on a matter which did not feature prominently in the defendants’ opening or closing submissions.

13. [18]

    Thirdly, the plaintiff submits that the offer did not quantify the legal costs of the defendants (as is usual in such offers) and the plaintiff was unable to determine the value of the offer.

14. [19]

    On balance I do not consider that the plaintiff unreasonably rejected the offer for the following reasons.

15. [20]

    The offer was made on 6 April 2022, approximately five days before trial. However, the defendants served 106 pages of new evidence on the plaintiff on 5 April 2022 at 5:04pm. The new evidence was relevant to findings in the case, including the date of the meeting at which the representation was made, and the finding that the representation was not made to the plaintiff. Therefore, the service of late evidence tells against the plaintiff’s rejection of the offer being unreasonable (Vale v Eggins (No 2) [2007] NSWCA 12 at [22] per Beazley JA), particularly in light of the time the offer remained open. While neither party raised the strength of their respective cases as a relevant consideration, I consider that the service of new evidence impacted on the plaintiff’s ability to assess the relative strengths of its case in the limited period provided by the offer.

16. [21]

    As to the time allowed to consider the offer, it remained open until 4:00pm on 7 April 2022 (effectively 13 hours after the offer was made). In MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FCR 236 at 240, Lindgren J described a Calderbank offer left open for 1 day as “an extreme case”. In Ghunaim v Bart (No 2) [2006] NSWCA 82 at [28], McColl JA (with whom Giles and Ipp JJA agreed) described the period of 3 hours afforded to an offeree to accept a Calderbank offer on the first day of trial as a “period so brief it might be regarded as derisory” and held that “[a] party should not be rewarded by an indemnity costs order in such circumstances”. While alone the short time available for acceptance may not lead to a conclusion in the plaintiff’s favour, I do consider it a strong factor pointing against a finding of unreasonableness.

17. [22]

    As I noted above, the extent of the compromise as to the defendants’ costs was not readily ascertainable in financial terms from the offer. In Commonwealth v Gretton [2008] NSWCA 117 at [98]-[100], Beazley JA, with whom Mason P agreed, noted that in considering a reasonableness of the offer at the time the offer is made, an assessment would need to be made of the costs in question. The quantum of costs that had been incurred by the defendants at the relevant time was not indicated in the 6 April offer or the 15 February correspondence. While it might seem likely that 50% of the defendants’ solicitor/client costs would not exceed the costs to which the defendants might be entitled on a party/party basis, this is not assessable on the face of the offer and therefore also tells against the plaintiff unreasonably rejecting the offer: Ying v Song [2011] NSWSC 618 at [90] (Ward J).

18. [23]

    A final consideration supporting the conclusion that the plaintiff did not unreasonably reject the offer is that the offer did not explicitly foreshadow the costs consequences of rejection of the offer: see Danidale Pty Ltd v Abigroup Contractors Pty Ltd (No 2) [2007] VSC 552 at [17] (Habersberger J); Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 CR 435; [2005] VSCA 298 at [25] (Warren CJ, Maxwell P and Harper AJA).

19. [24]

    For the above reasons, I do not consider the defendants are entitled to a special costs order based on the offer.

Costs of the abandoned “damages” claim

1. [25]

   The defendants also submit that the Court should make a special costs order in relation to the wasted costs of the “damages” claim for loss of the motel’s revenue, because this claim was abandoned by the plaintiff at the trial. These costs include the costs of expert evidence, including the conclaves between the expert witnesses for the plaintiff and the defendants.

2. [26]

   The defendants submit that this claim was severable from the balance of the plaintiff’s case, although they accept that it was only relevant if the plaintiff succeeded on its liability case.

3. [27]

   In response, the plaintiff submits that there is no principled basis for the Court to exercise its power to award indemnity costs. The plaintiff notes that the issues bound up in the plaintiff’s expert report were not hopeless and that the parties’ experts reasonably differed on their approach to the task at hand.

4. [28]

   The plaintiff further submits that it should not be criticised for abandoning the claim at trial, thereby narrowing the issues for determination. It is said that “[t]here is a perversity inherent in the notion that the plaintiff should have maintained the damages claim at trial so as to avoid an indemnity costs order”.

5. [29]

   Finally, the plaintiff submits that the sequence of events involving the service of and response to the expert reports was a rational and reasonable approach to the issue by the plaintiff, who abandoned the claim after assessing the defendants’ objections.

6. [30]

   Generally, the abandonment of an aspect of a party’s case does not of itself raise the prospect of an indemnity costs order in respect of that particular claim.

7. [31]

   There is no demonstrated impropriety on the part of the plaintiff which, in my view, would justify the Court making an order for indemnity costs. Further, I do not accept that this was a case where, properly advised, the plaintiff ought to have known when they commenced the proceeding that there was no prospect of success in relation to the damages claim. The plaintiff should not be punished for its decision to limit the issues at trial.

8. [32]

   Therefore, I do not consider that an indemnity costs order should be made in relation to the abandoned damages claim in circumstances where the defendants nevertheless have the benefit of an ordinary costs order covering that aspect of the case.

Orders

1. [33]

   The Court orders that:

   1. (1)

      The order made as to the costs in the principal judgment stands.

   2. (2)

      The defendants are to pay the plaintiff’s costs of the application for a special costs order on the ordinary basis as agreed or assessed.