Plaintiff Seeking for Costs Order Opposed by the Defendant

Repose Nominees Pty Ltd v Phillip Capital Limited (No 2) [2021] VCC 1884 (1 December 2021)

Three Calderbank offers made to Repose which comprised an offer dated 17 December 2019 for $50,000 (inclusive of any claim for costs and interest); an offer dated 18 March 2020 for $250,000 (inclusive of any claim for costs and interest); and an offer dated 28 July 2020 for $250,000 (inclusive of any claim for costs and interest) were failed to be accepted.  PCL sought for Repose to pay its costs for part of the proceeding on an indemnity basis.  Repose submitted that the court should make the usual order for costs to be paid on a standard basis.

Facts:

PCL contended that Repose should pay its costs for part of the proceeding on an indemnity basis. PCL relied upon three Calderbank offers made to Repose which comprised an offer dated 17 December 2019 for $50,000 (inclusive of any claim for costs and interest); an offer dated 18 March 2020 for $250,000 (inclusive of any claim for costs and interest); and an offer dated 28 July 2020 for $250,000 (inclusive of any claim for costs and interest).  Repose failed to accept any of the offers and made no counter offers to PCL. 

Repose submitted that the court should make the usual order for costs to be paid on a standard basis.  Repose argued that PCL relied upon Repose’s failure both to call expert evidence and to sue 2Up.  Repose contended that neither of these matters was central to the question of whether PCL owed fiduciary or contractual duties to Repose.  Repose argued that the reasons given by PCL for the alleged problems with Repose’s case were neither persuasive nor relevant in the final outcome.

On 17 December 2019, an offer was made after the completion of pleadings and discovery.  The letter made various complaints about Repose’s failure to meet its discovery obligations, partly by being late and partly by producing only parts of a document or illegible copies.  Repose had failed to file any expert evidence by the due date.  Repose failed to respond to PCL’s request for confirmation of its position.  

PCL offered to pay Repose $50,000 (inclusive of any claim for costs and interest) within 28 days of Repose providing to PCL signed terms of settlement.  The offer was available for acceptance until noon on 24 December 2019.  On 18 March 2020, an offer was made referring to the earlier offer made in December the year before and repeated PCL’s view that Repose’s claim was bound to fail.  Part of the offer was in similar terms to the earlier offer: it referred to the problems with Repose’s discovery; it referred to the failure by Repose to serve any expert reports by the due date in the court’s orders even though a new trial date had been set; it repeated the reasons why PCL regarded the Repose claim as lacking merit.

Issue:

Whether or not the rejection of the offer was unreasonable in the circumstances

Applicable law:

BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Industriewerke GmbH (No 3) [2012] VSC 414 - Habersberger J set out the relevant legal principles in deciding whether a party is entitled to costs taxed on an indemnity basis due to the rejection of a Calderbank offer

Grynberg v Muller [2001] NSWSC 532 - held that submissions that it was inevitable that the proceedings would fail "focus the bright light of hindsight. Hindsight sings a siren song of which Judges must be cautious."

Hazeldene’s Chicken Farm v VWA (No 2) (2005)13 VR 351 - where the Court of Appeal held that "in our view, these competing considerations can be sufficiently accommodated by applying a test of (un)reasonableness.  The critical question is whether the rejection of the offer was unreasonable in the circumstances.  We see no justification for a more stringent test such as “manifestly” or “plainly” unreasonable.”

Analysis:

The fact that a less favourable result is achieved does not give rise to a presumption of a special costs order.  The competing policy objectives relevant to the exercise of the costs discretion are principally the desirability of promoting settlement and reducing litigation costs as against the undesirability of discouraging potential litigants from bringing their dispute to the courts.  In the 17 December 2019 offer, there were problems in Repose organising itself for trial and that, in the background, there were some difficulties between Repose and its then solicitors.  In addition, PCL was agitating the question of security for costs with Repose. 

When the matter came before Judge Ryan in late January 2020, the trial was vacated and adjourned to 5 August 2020.  In the 18 March 2020 offer, an important aspect of PCL’s case was that because the contract between Repose and 2Up was critical to determining the plaintiff’s interest in the 2Up shares, the conduct of PCL could not affect that contract.  To that extent, PCL’s conduct towards Repose and its breach of any assumed duties was not the cause of any loss which Repose claimed to have suffered.

As to the offer of 28 July 2020, Repose  had failed to do other preparatory work for the hearing which PCL was forced to undertake.   Repose put the same arguments in relation to this offer as it did in respect of the 18 March 2020 offer.

Conclusion:

The Court does not regard Repose’s rejection of the 17 December 2019 offer as unreasonable in the circumstances.  The Court considered that it was unreasonable for Repose to reject the 18 March 2020 offer as well as the 28 July 2020 offer.  The Court dismissed the plaintiff's claim.  The plaintiff is ordered to pay the defendant’s costs of and incidental to the proceeding, including reserved costs.  The costs are to be taxed on a standard basis up to 1 April 2020 and thereafter on an indemnity basis; the security for costs amounts of:

(a) $22,400.00 received 31 May 2019 (Receipt CCME458447); and

(b) $80,000.00 received 6 April 2020 (Receipt CCME478677);

which have been paid by the plaintiff to the Registrar of the Court are to be paid immediately to the defendant’s solicitors in part satisfaction of the plaintiff’s liability for costs.