Adcock Private Equity v Porges (No 2)

1. [1]

   HIS HONOUR: The plaintiff (APE) claimed damages from the defendants (Mr and Mrs Porges) for misleading or deceptive conduct. APE quantified its damages in the sum of $941,703.38. On 5 September 2018, I gave judgment. I concluded that as against Mr Porges [1] , APE was entitled to the amount claimed together with interest [2] .

2. [2]

   The parties agreed on the amount of interest. Accordingly, on 7 September 2018, judgment was entered for $1,111,594.23.

3. [3]

   I reserved the question of costs. APE seeks its costs against Mr Porges. Mr Porges accepts that costs should follow the event (UCPR r 42.1), so that APE should have its costs of the claim against him.

4. [4]

   APE seeks an order that its costs be assessed on the indemnity basis from 13 October 2017. It relies on what it says was an offer of compromise pursuant to UCPR r 20.26 dated 12 October 2017. APE says, further, that if that document is not valid as an offer of compromise, it should have effect (as the covering letter made clear) as a Calderbank [3] offer.

5. [5]

   There is also a dispute between the parties as to whether APE is entitled to the return of two bank guarantees, each in the sum of $75,000, provided to Mr and Mrs Porges as security for their costs.

The offer

1. [6]

   The offer was made under cover of a letter of 12 October 2017. The letter said, relevantly:

2. [7]

   The substantive part of the offer of compromise read as follows:

3. [8]

   I do not know if the offer was rejected, or was simply allowed to lapse without acceptance, but this does not seem to me to matter.

The parties’ submissions

1. [9]

   APE submitted that the offer was effective for the purposes of r 20.26. It submitted that the offer did not, in contravention of r 20.26(c), “include an amount for costs”, nor was it “expressed to be inclusive of costs”, simply because the covering letter pointed out what APE said were the normal consequences of acceptance (as to which, see r 42.13A).

2. [10]

   APE submitted that it had bettered the offer by reason of the judgment that was entered in its favour.

3. [11]

   To the extent that the offer should be considered in its alternative characterisation as a Calderbank offer, APE submitted that there was a valid element of compromise in the offer to forego interest. It quantified interest, to the date of making the offer, at an amount in excess of $123,000. The detailed calculation was not disputed.

4. [12]

   Mr Porges submitted that the offer was not valid for the purposes of r 20.26 because “[t]he plaintiff’s offer provides for judgment for the plaintiff in the sum of $941,703.38 ‘plus costs as agreed or assessed” (emphasis in original). That characterisation referred to APE’s submissions. However, it elided them: the submissions stated that if the offer were accepted, APE would have been entitled to its costs on the ordinary basis up until the time of acceptance.

5. [13]

   As to the offer’s alternative characterisation as a Calderbank offer, Mr Porges submits that:

   1. (1)

      it did not include any genuine element of compromise; and

   2. (2)

      in the circumstances prevailing at the time the offer was made, it was not unreasonable for Mr Porges to reject the offer.

Decision

1. [14]

   In my view, the offer of compromise was valid for the purposes of r 20.26. The offer is a document separate from the letter under cover of which it was sent. The letter itself makes that clear, even though it does not accurately state or summarise the terms of the offer.

2. [15]

   The letter was accurate to the extent that it stated that the overall consequence of acceptance would be that APE would have the sum offered in full satisfaction of its claim, together with costs. The rider follows, as APE correctly submitted, from r 42.13A. I set out that rule:

3. [16]

   Subrule (2) would have applied. That subrule is not subject to the rider that it applies unless the court orders otherwise. That rider is found from time to time elsewhere in the UCPR: see for example, r 42.14(2).

4. [17]

   It is incontestable, in terms of r 42.14, that APE has obtained judgment on its claim against Mr Porges no less favourable to it than the terms of its offer.

5. [18]

   It follows, in my view, that costs ought be assessed in the manner provided for in r 42.14(2). I set out that rule:

6. [19]

   If Mr Porges intended to submit that the circumstances upon which he relied, in considering the offer in its character as a Calderbank offer, were relevant to the discretion to order otherwise (in the event that his submissions as to its invalidity for the purposes of r 20.26 were not accepted), they failed spectacularly to make this clear.

Return of the guarantees

1. [20]

   The guarantees were provided as security for costs. The costs payable to Mrs Porges, by reason of the failure of APE’s claim against her (indeed, when the matter got to hearing, that claim is not pressed) have not been agreed or assessed.

2. [21]

   APE submits that there is no doubt about its ability to pay the costs. It refers to its entitlement to recover the judgment sum from Mr Porges. However, its submissions proceed on the implicit assumption that the appeal that Mr Porges has brought from the judgment against him will fail. It is inappropriate that I attempt any assessment of the strength of that assumption.

3. [22]

   The result is that one of the potential costs liabilities for which the guarantees were to stand as security has crystallised. However, the monetary consequence has not been determined. I see no reason why the guarantees should be returned unless and until whatever costs are payable by APE to Mrs Porges, either by agreement or by assessment, are in fact paid.

Orders

1. [23]

   I make the following orders:

   1. (1)

      order that the first defendant pay the plaintiff’s costs of its claim against him.

   2. (2)

      Order that those costs be assessed on the ordinary basis up until 12 October 2017 and on the indemnity basis thereafter.

   3. (3)

      Direct that the costs so payable include the costs of the application for indemnity costs.

   4. (4)

      Dismiss the plaintiff’s application for return of the bank guarantees provided as security for the defendants’ costs.