Elan Boulevard Pty Ltd v Fnyn Investments Pty Ltd & Ors (No.2) [2016] QSC 157

SUPREME COURT OF QUEENSLAND CITATION: Elan Boulevard Pty Ltd v Fnyn Investments Pty Ltd & Ors (No.2) [2016] QSC 157 PARTIES: ELAN BOULEVARD PTY LTD ACN 127 758 132 (plaintiff) v FNYN INVESTMENTS PTY LTD ACN 101 848 515 AS TRUSTEE FOR THE FARHAT ESSACK FAMILY TRUST (first defendant) FARHAT ESSACK (second defendant) NADIA ESSACK (third defendant) FILE NO/S: SC No 1539 of 2012 DIVISION: Trial Division PROCEEDING: Civil Trial – Further Orders ORIGINATING COURT: Supreme Court of Queensland at Brisbane DELIVERED ON: 21 July 2016 DELIVERED AT: Brisbane HEARING DATE: Heard on the papers JUDGE: Boddice J ORDERS: 1. There be judgment for the plaintiff on its claim. 2. The defendants’ counterclaim is dismissed. 3. The defendants pay to the plaintiff the sum of $1,172,614.26. 4. The defendants pay the plaintiff’s costs of the proceeding (including any reserved costs), to be assessed on a standard basis up to and including 26 April 2016 and thereafter on an indemnity basis from 27 April 2016. CATCHWORDS: PROCEDURE – COSTS – DEPARTING FROM THE GENERAL RULE – ORDER FOR COSTS ON INDEMNITY BASIS – OFFER TO SETTLE – where the plaintiff was successful at trial – where, prior to the trial, the plaintiff made a Calderbank offer to settle the proceedings – where the defendants did not accept the offer – where the plaintiff’s offer was no more favourable than the judgment it obtained after trial –where the plaintiff seeks its costs on the indemnity basis -- 1 of 4 -- 2 – whether the plaintiff’s costs should be assessed on a standard or indemnity basis Calderbank v Calderbank [1975] 3 WLR 586, cited Comgroup Supplies Pty Ltd v Products for Industry Pty Ltd [2016] QCA 130, cited Stewart v Atco Controls Pty Ltd (in liq) (No.2) (2014) 252 CLR 331; [2014] HCA 31, cited COUNSEL: No appearance by the plaintiff, the plaintiff’s submissions were heard on the papers No appearance for the defendants SOLICITORS: No appearance for the plaintiff. No appearance for the defendants [1] On 9 June 2016, I delivered judgment in this matter dismissing the defendants’ counterclaim. The defendants’ had already conceded the plaintiff’s claim. The parties were to confer as to the form of the orders and costs. If they could not reach an agreement, they were to provide to my Associate any submissions within seven days. [2] On 16 June 2016, the plaintiff’s solicitors sent to my Associate written submissions and an affidavit. Those submissions stated the parties had not been able to agree on interest or costs. No submissions or material were received from the defendants. [3] On 14 July 2016, my Associate emailed the defendants’ solicitors to enquire whether they intended to make any submissions. The defendants’ solicitors replied by return email that they did not hold instructions to make further submissions in relation to the proceeding. [4] The plaintiff’s written submissions set out in detail the calculation of damages and interest. Subject to a minor error,1 I am satisfied those calculations are correct and in accordance with my reasons, including my determination as to the construction of clause 15.6.2 Accordingly, I will make an order that the defendants pay to the plaintiff the sum of money calculated by the plaintiff in their written submissions. [5] The remaining question is one of costs. There is no reason to depart from the ordinary rule, namely that costs follow the event. As such, the defendants should pay the plaintiff’s costs of the proceeding. The sole issue is whether those costs should be paid on a standard or indemnity basis. Plaintiff’s submissions on costs [6] The plaintiff submits costs should be paid on an indemnity basis as the plaintiff, pursuant to the principles Calderbank v Calderbank3 (“offer”), made an offer to the defendants to settle the proceeding, and the plaintiff obtained at trial a result no less favourable than the terms of its offer. 1 In paragraph 7 of the plaintiff’s written submissions, the total should be $1,172,614.26, not $1,172,814.26. 2 Elan Boulevard Pty Ltd v Fnyn Investments Pty Ltd & Ors [2016] QSC 123 at [88]. 3 [1975] 3 WLR 586. -- 2 of 4 -- 3 [7] On 22 April 2016, the plaintiff made an offer to the defendants to settle the proceeding on the basis the plaintiff retain the deposits (with interest), the defendants pay to the plaintiff $200,000 and each party bear their own costs. The offer was left open for four days. The plaintiff does not specify in its submissions or affidavit material whether the offer was accepted, rejected or simply allowed to lapse. Plainly, it was not accepted. [8] The plaintiff submits the non-acceptance of that offer was patently unreasonable and the onus is on the defendants to demonstrate why their non-acceptance of the plaintiff’s offer was reasonable. The only possible reason the defendants did not accept the offer was they thought they would be successful at trial on the counterclaim. [9] The plaintiff submits any attempt to rely on it being reasonable to proceed to trial because of uncertainty surrounding Mr Omar’s evidence should be rejected for two reasons. First, Mr Omar was a close friend of the second defendant and Mr Osman and assisted the defendants in the trial. That evidence was central to the defendants’ case, which pleaded that the relevant representations were made to Mr Omar, in the absence of the defendants and Mr Osman. [10] Second, the unreliability of Mr Omar was not the sole reason the counterclaim was unsuccessful. To be successful on the counterclaim, the defendants had to prove they relied on the representations. That depended on the second defendant’s evidence. There were findings the second defendant was unreliable and lacked credit. Applicable principles [11] The mere non-acceptance of a Calderbank offer is not determinative of whether costs should be awarded on an indemnity basis. It is a factor. Another relevant factor is whether the rejection of that offer was reasonable. Ultimately, the Court must be satisfied it is appropriate to exercise its discretion to award indemnity costs. [12] The applicable principles where a Calderbank offer has been made are set out in Stewart v Atco Controls Pty Ltd (in liq) (No.2):4 “This Court has a general discretion as to costs. The non-acceptance of a Calderbank offer is a factor, in some cases a strong factor, to be taken into account on an application for indemnity costs. The respondent submits that its rejection of the offer was not unreasonable. If that be the test, it would appear to require at the least that the respondent point to a reason for not accepting the offer beyond the usual prospects of being successful in litigation.” Discussion [13] A complication in the present case is that due to the defendants’ failure to provide submissions on the issue of costs, there is no explanation as to why that offer was not accepted and as to why it was reasonable not to accept that offer. 4 (2014) 252 CLR 331 at 334 [4]. See also: Comgroup Supplies Pty Ltd v Products for Industry Pty Ltd [2016] QCA 130 at [2]. -- 3 of 4 -- 4 [14] In the circumstances, it is appropriate to consider whether the defendants’ non-acceptance of the offer was reasonable, and whether there are other factors relevant to the issue of whether costs ought to be on an indemnity basis. [15] One relevant factor is the difference between the amounts of the offer and the judgment sum. The plaintiff has obtained a judgment five times more favourable than the offer. That being so, I am satisfied the plaintiff made a genuine offer to compromise. The non- acceptance of a genuine offer to compromise is arguably unreasonable. [16] An unusual factor in this case is the defendant had conceded the plaintiff’s entitlement to judgment in its claim and success in the defendants’ counterclaim (and therefore its liability) depended upon what evidence was accepted at trial. However, without further submissions from the defendants, the only conclusion is that the offer to settle was not accepted because the defendants believed they would succeed on the counterclaim. They did not succeed on that counterclaim. Without more, it was unreasonable for the defendants not to accept what was a considerably more advantageous offer of compromise.5 [17] In the circumstances, the appropriate order for costs is that costs be awarded on the standard basis up until 26 April 2016 but on an indemnity basis thereafter. Orders [18] I order: 1. There be judgment for the plaintiff on its claim. 2. The defendants’ counterclaim is dismissed. 3. The defendants pay to the plaintiff the sum of $1,172,614.26. 4. The defendants pay the plaintiff’s costs of the proceeding (including any reserved costs), to be assessed on a standard basis up to and including 26 April 2016 and thereafter on an indemnity basis from 27 April 2016. 5 Comgroup Supplies Pty Ltd v Products for Industry Pty Ltd [2016] QCA 130 at [7]. -- 4 of 4 --