FEDERAL COURT OF AUSTRALIA Rodgers v Schmierer [2003] FCA 606 PRACTICE & PROCEDURE - costs – two Calderbank offers made at early stage of proceedings rejected by unsuccessful litigant – rejection of offers not unreasonable as at the stage of the proceedings when offers made – order for costs of proceedings made on party and party basis – no order as to costs of discrete proceedings involving lengthy submissions on costs made after the conclusion of the principal proceedings. Alpine Hardwood (Australia) Pty Ltd v Hardy's Pty Ltd (No 2) (2002) 190 ALR 121 applied Black v Tomislav Lipovac BHNR Lipovac [1998] FCA 699 applied PETER DAVID RODGERS as Trustee of the Bankrupt Estate of Frederick Cecil Reader and Dianne Jean Reader v TREVOR JOHN SCHMIERER and ADRIAN STEWART DUNCAN N 7312 OF 2001 CONTI J 18 JUNE 2003 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 7312 OF 2001 BETWEEN: PETER DAVID RODGERS as Trustee of the Bankrupt Estate of Frederick Cecil Reader and Dianne Jean Reader APPLICANT AND: TREVOR JOHN SCHMIERER and ADRIAN STEWART DUNCAN RESPONDENTS JUDGE: CONTI J DATE OF ORDER: 18 JUNE 2003 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The applicant pay the respondents' costs of the proceedings on a party and party basis. 2. There be excluded from the scope of the above costs order all professional work and expenses in relation to the respondents' application for costs orders undertaken after the delivery of reasons for judgment on 30 April 2003. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 7312 OF 2001 BETWEEN: PETER DAVID RODGERS as Trustee of the Bankrupt Estate of Frederick Cecil Reader and Dianne Jean Reader APPLICANT AND: TREVOR JOHN SCHMIERER and ADRIAN STEWART DUNCAN RESPONDENTS JUDGE: CONTI J DATE: 18 JUNE 2003 PLACE: SYDNEY REASONS FOR JUDGMENT ON COSTS 1 On 30 April 2003 I ordered that the application of the applicant the subject of these proceedings be dismissed, and that the costs of the proceedings be reserved for further consideration. In the result, both parties have prepared comprehensive written submissions as to costs, and have subsequently addressed the Court orally upon those written submissions. 2 In the first instance, the respondents as successful parties to the main proceedings seek indemnity costs from the applicant in reliance upon two 'Calderbank' offers, the first having been made on behalf of the respondents by letter to the applicant dated 24 September 2001 to the effect that the respondents pay to the applicant the sum of $10,000.00 in full satisfaction of the applicant's claims, and the second being made by letter dated 31 October 2001 to the effect that the parties bear their own respective costs of the proceedings, and that subject thereto the proceedings be dismissed. Both offers were rejected by the applicant. 3 Alternatively, the respondents contend that the applicant should pay the respondents costs on a party and party basis. 4 The applicant contends in the first instance that there should be no order as to costs, or alternatively that his exposure to a costs order should be limited in scope to the usual party and party costs basis. Thus the "fall-back" or secondary submission by the respective parties is identical. 5 In the course of lengthy written submissions, counsel for the applicant stated that the applicant's objective in bringing the proceedings was to recover as much as possible for the benefit of the unsecured creditors of Mr and Mrs Reader, and further that it is entirely irrelevant that the applicant voluntarily accepted appointment as insolvent trustee of their respective bankrupt estates. Criticisms have been advanced by Counsel for the applicant, of the respondents' conduct of the administration of Vokal, in particular in '…continu[ing] to trade the business of a company in administration'. I am obviously unable to make any assessment of those criticisms, to which doubtless the respondents would wish to respond. It is readily apparent from the submissions which have been made that the parties are mutually resentful of each other's purported insolvent administrations of the affairs of Vokal and Mr and Mrs Reader. 6 A more compelling case advanced by counsel for the applicant was that the conduct of the applicant in rejecting the Calderbank offers was not unreasonable in the circumstances of the litigation at the time the same were made. Both offers were made by the respondents, so the applicant contended, '…before the applicant's case was pleaded by statement of claim, so that the applicants did not have the benefit of particularisation of the respondents' pleaded defence', and moreover both offers were made before the respondents filed any evidence which the applicant could appraise. Counsel for the applicant thereafter referred to counter offers subsequently made by the applicant in the light of ensuing communications between the parties. I think that there is substance in that submission. 7 Reliance was placed by the applicant upon what was said recently by Weinberg J in Alpine Hardwood (Australia) Pty Ltd v Hardy's Pty Ltd (No 2) (2002) 190 ALR 121 concerning the award or otherwise of indemnity costs, and in particular the view expressed by his Honour to the effect that the policy of promoting the compromise of disputes does not necessarily require that a litigant be at risk of paying indemnity costs, because the litigant has rejected an offer of compromise. Amongst the authorities cited by Weinberg J in support of that contention was that of a Full Federal Court in Black v Tomislav Lipovac BHNR Maria Lipovac [1998] FCA 699 (Miles Heerey and Madgwick JJ), where reference was made to an earlier line of authority in this Court supportive of the proposition that the mere refusal of a Calderbank offer does not of itself warrant an order for indemnity costs, and further that the offeror needs to show that the conduct of the offeree was unreasonable (see [217-218] in particular). 8 Having given the matter much thought, I am inclined to the view that the order which I should make as to the costs of the proceedings should be confined to the normal or usual order for costs following the outcome of contested litigation, and that an order for indemnity costs should not be made. I do not think that the respondents have shown that the conduct of the applicant in rejecting the Calderbank offers, at the time they were made, was unreasonable. Apart from the procedural matters of history in the proceedings to which the applicant has referred me, I bear in mind also that the issues of law arising in the light of the circumstances of the case were complex and by no means readily susceptible to resolution. 9 I propose to order that the applicant pay the respondents' costs of the proceedings on the usual party and party basis, and not on an indemnity basis, a course which I think reflects the justice of the situation. I am troubled however as to whether that order should extend to the cost dispute proceedings per se, which have followed upon delivery of my reasons for judgment of 30 April 2003, and which have involved extensive oral and written submissions, and which have reflected the intensity of the bitterness of the relationship between the applicant and respondents. 10 As I have already mentioned, the submissions of both parties upon the costs issues were undertaken comprehensively, both orally and in writing. Much of what was submitted was irrelevant to the task which confronted me in resolving those issues. Bearing in mind that the respondents have failed in their primary submission that an order for indemnity costs should be made, but that the applicant has failed in his primary submission that each party should bear his or their costs of the proceedings, I propose to exclude from the operation of the costs order which I have foreshadowed, all professional work undertaken by the respondents in relation to the resolution of the costs issues subsequently to delivery of my reasons for judgment of 30 April 2003. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti. Associate: Dated: 18 June 2003 Counsel for the Applicant: R Harper Solicitor for the Applicant: Gray & Perkins Counsel for the Respondent: P Newton Solicitor for the Respondent: Kemp Strang Date of Hearing: 8 May 2003 Date of Judgment: 18 June 2003