District Court New South Wales Medium Neutral Citation: Tred Consultants Pty Ltd v Kirana Training Pty Ltd (No.4) [2021] NSWDC 194 Hearing dates: On the papers Date of orders: 24 May 2021 Decision date: 24 May 2021 Jurisdiction: Civil Before: Abadee DCJ Decision: See paragraph 38 Catchwords: COSTS – application by successful defendant for indemnity costs – three Calderbank Offers made by defendant to plaintiff – liability for referee costs Legislation Cited: Civil Procedure Act 2005 (NSW), s 98 Uniform Civil Procedure Rules 2005 (NSW) rr 20.18, 20.26 Cases Cited: Commonwealth v Gretton [2008] NSWCA 117 Murphy v Nationwide News Pty Ltd (No.2) [2021] FCA 432 Ng v Chong [2005] NSWSC 385 Tinyow v Lee [2006] NSWCA 247 Tred Consultants Pty Ltd v Kirana Training Pty Ltd (No.3) [2021] NSWDC 161 Texts Cited: Hamilton & ors, New South Wales Civil Procedure Handbook (Thomson Reuters). Category: Costs Parties: Tred Consultants Pty Ltd (Plaintiff/Cross-Defendant) Kirana Training Pty Ltd (Defendant/Cross-Claimant) Representation: Counsel: Mr R McCrudden for the plaintiff/cross-defendant Dr S Baron Levi for the defendant/cross-claimant Solicitors: FutureLegal for the plaintiff/cross-defendant United ACL for the defendant/cross-claimant File Number(s): 2018/206266 Publication restriction: Nil. Judgment Background 1. On 7 May 2021, I delivered reasons for judgment in this proceeding [1] , and provided the parties with the opportunity to confer for the purpose of agreeing to dispositive orders, including orders for interest and costs. In particular, my orders envisaged the parties conferring to see if they could reach agreement as to those dispositive orders, but if the plaintiff did not agree with the short minutes supplied by the defendant within the 7 days the defendant was directed to supply them, the plaintiff should supply short submissions within a further 3 days ([144]-[145]) 2. The defendant supplied short minutes to the Court on 17 May 2021 and a short outline of written submissions on that date. The plaintiff did not supply submissions, within the period directed, but was granted an extension to do so expiring at 12pm on 24 May 2021. At the time these reasons are being delivered, that extended deadline has passed and no further submissions had been received from the plaintiff. 3. These reasons assume familiarity with my earlier reasons for judgment given on 7 May 2021. 4. The proceeding commenced on 4 July 2018. The plaintiff brought a money claim based upon the defendant's (admitted) refusal to pay the plaintiff's invoices of December 2016 and January 2017 issued pursuant to a written agreement entered into in October 2012 (which agreement was varied in the middle of 2013). 5. On 7 November 2018, the defendant filed its Defence. At the risk of some over-simplification, by that Defence, the defendant originally argued that its refusal to pay the two invoices was justified because of the plaintiff's alleged failure to abide by its own obligations relating to the quality of the services that were supplied. 6. On 5 July 2019, the defendant filed a Cross-Claim. As it had done in its earlier Defence, the cross-claimant reiterated (although in a more expansive way) that certain obligations under the agreement had not been performed by the plaintiff/cross-defendant but, in addition, and materially for present purposes, it also pleaded that it suffered loss and damage, for which it sought damages, arising from the cross-claimant receiving applications for 're-credits' from students for Commonwealth funding because of various reasons; which loss relevantly included making payments to the cross-defendant for students who had subsequently been re-issued credits. 7. As is apparent in those earlier reasons, a pivotal issue at the hearing was whether the amounts of the re-credits, as quantified by the referee, should be deducted from the amounts owing to the plaintiff for the unpaid invoices. I determined that question in favour of the defendant/cross-claimant. That was a legal determination which followed an extensive and detailed analysis of quantum upon the expressed assumption that the defendant was entitled to deduct the amount of the re-credits. 8. I had determined that after offsetting the debt on the cross-claim against the debt on the principal claim, the defendant/cross-claimant was entitled to the sum of $24,643.36 plus interest. 9. The defendant/cross-claimant has quantified the interest as being $2,098.20. There is no dispute about that. 10. I will make orders 1 and 2 in the defendant/cross-claimant's proposed short minutes of order, subject to varying order 2 so that there be a single amount for the monetary judgment, being $26,741.56. 11. The point of disagreement is costs. 12. The defendant/cross-claimant seeks its costs partially on an indemnity basis on the basis of the plaintiff's refusal to accept three Calderbank offers made by the defendant/cross-claimant, on 25 May 2020, 3 August 2020 and 10 September 2020. 13. In respect to each of those offers, the plaintiff/cross-defendant did not achieve a more favourable outcome than it would have if it accepted those offers. 14. In the version of short minutes supplied to the Court, the defendant/cross-claimant, as applicant for the special costs order, seeks an order that indemnity costs be payable in its favour from 25 May 2020, being the date of the first of the three Calderbank offers. The terms of the Calderbank offers 1. By its solicitor's letter to the plaintiff's solicitor dated 25 May 2020 (expressed to be 'without prejudice save as to costs' and 'without admission') the defendant/cross-defendant offered to pay the plaintiff the sum of $10,000, inclusive of interests and costs, in full settlement. The offer was expressed to accord with the principles in Calderbank v Calderbank [1976] Fam 93. The offer was open for acceptance until 5pm, 27 May 2020. The only explanation for why the offer should be accepted was that it was put on a 'commercial basis'. That is, no points were made about the intrinsic merits of the parties' respective claims. 2. On 23 June 2020, the plaintiff's solicitor sent an email to the defendant's solicitor in purported response to this offer, indicating his client's rejection of the offer. In point of fact, there was nothing to reject as the time for acceptance of the offer had already expired. 3. On 3 August 2020, the defendant's solicitor sent another Calderbank offer (again expressed to be 'without prejudice save as to costs') to the plaintiff. As with the earlier offer of 25 May 2020, the term of the offer was that the defendant/cross-claimant pay the plaintiff/cross-defendant the sum of $10,000 "all inclusive". No definition was given, however, to what was meant by 'inclusive'. 4. For this offer, however, specific 'commercial' reasons were supplied as an inducement for acceptance of the offer; namely, that the defendant's registration as a Registered Training Organisation had been cancelled and its solicitor indicated that he had been informed that there was a prospect that the company would be put into administration. Further, it was indicated that if the offer was not accepted, it was likely that the defendant would be unable to continue with the proceedings. As is obvious, the offer was rejected but the defendant was able to continue with the proceedings. Be that as it may, this offer was again expressed to accord with Calderbank principles. 5. On 10 September 2020, the defendant served its third Calderbank offer (again expressed to be 'without prejudice save as to costs'). The term of the offer was that the defendant/cross-claimant pay the plaintiff the sum of $35,000, inclusive of interest and costs. In her affidavit in support of the application for the special costs order, Ms Fabbri did not indicate how this letter was sent (eg by email or by post). At any rate, it was open for acceptance until 9:30am on 10 September 2020, being the date the offer was made. As with the earlier Calderbank offers, the explanation given for why the offer should be accepted was solely attributable to "commercial" reasons. I note that no further reference was made to the prospect, adverted to in the 3 August 2020 offer, about the prospect of the company being placed in administration or its capacity to continue its defence of the proceeding. 6. The hearing in this matter commenced on 29 October 2020. On that day, the matter was referred to a referee. Once the referee's report was prepared, the matter resumed for hearing before me (including a hearing of the motion to adopt the referee's report) before I delivered judgment on 7 May 2021. Consideration 1. It is trite that costs are awarded in the Court's discretion (Civil Procedure Act 2005 (NSW), s 98). That discretion is typically influenced by settlement offers and is presumptively so for 'rules offers' made under r 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) ('UCPR') where those rules are engaged, for example, by Division 3 of Part 42. 2. None of the three offers served were made under the rules but, instead, purported to engage the principles of Calderbank v Calderbank. 3. Whilst it well-established that rejection of a Calderbank offer may generate an entitlement to indemnity costs in favour of the offeror, it is also recognised that the making of an offer better than the result which the offeree obtains does not automatically translated into an indemnity costs order (Commonwealth v Gretton [2008] NSWCA 117 at [43]). 4. As indicated, the offeror obtained a better result in the outcome than that which was offered to the offeree. Further, all of the letters expressly warned the offeree that the defendant would rely upon Calderbank principles on the issue of costs. These are necessary, but not sufficient, conditions which would enliven the Court's exercising its discretion in favour of the offeror. 5. Whilst the discretionary considerations to evaluating Calderbank offers are at large, two well-established considerations identified in the authorities are the genuineness of the offer of settlement and whether it was unreasonable, in all of the circumstances, for the offeree to reject the offer (see the authorities collected in Hamilton & ors, New South Wales Civil Procedure Handbook (Thomson Reuters), [r 42.15.80]). The first Calderbank offer 1. As to the first of the Calderbank offers, being that of 25 May 2020, I do not accept that the Court's discretion would be engaged in favour of the applicant, for three inter-related reasons. First, the overall outcome was the result of a set-off between the parties' competing monetary claims. As is plainly evident from the circumstance that the factual aspect of the issue was referred, the factual question involved complexity; whatever the complexity of the legal entitlement. Put another way, it would have been very difficult for the plaintiff, as offeree to have formed a realistic estimate of the value of the defendant's claim. Indeed, one of the matters which concerned the Court on the date that the proceeding was made the subject of a reference, was the need for the defendant to obtain further information. It follows that the evidentiary case of the defendant was not complete at the date this offer was made. The factual estimate of the referee was made only subsequent to the offer being made. 2. Secondly, there was no explanation within the body of the letter enclosing the offer which would have enabled the offeree to divine how the settlement sum offered ($10,000, inclusive of interest and costs) was reached, or why, it should be accepted given the merits of the parties' cases; as they appeared at that point. The offer was only expressed as being put on a 'commercial' basis. But by the time the offer was made, in May 2020, the proceeding had already been on foot for close to two years and it would be surprising if the costs already incurred by the plaintiff, to that point, would not have already vastly exceeded the component for costs factored into the offered sum. Indeed, the amount offered probably valued the plaintiff's claim as almost being next to nothing. Whilst the offer may have been 'commercial' from the defendant's perspective, it is difficult to conceive that a reasonable bystander might think it commercial from the plaintiff's perspective; and, as indicated, there was no attempt made to suggest that the factual or legal merit of the parties' respective claims was such that it was desirable for both to compromise. There is serious doubt whether, in those circumstances, it was a genuine offer being made; but rather, instead, an attempt to trigger a potential entitlement to indemnity costs down the line. 3. Thirdly, given the (factual) complexity, the time for acceptance, being (at most) only two days, was not a reasonable amount of time to consider the offer; and it cannot be said that it was unreasonable to accept it even if it was a genuine offer [2] . The second and third Calderbank offers 1. The terms of the defendant's short minutes of order do not actually indicate that the defendant's position is that indemnity costs should be payable from some other date, such as the dates of the second or third Calderbank offers. However, the applicant's submissions indicate that reliance is placed upon the rejection of the second and third Calderbank offers as well, to support a partial order for indemnity costs. 2. Even if they had, there are problems for the defendant with those offers as well. 3. As to the 3 August 2020 offer, there was an ambiguity in what was being offered. It was not clear what the word 'inclusive' meant, in conjunction with the settlement sum offered. Secondly, similar to the first offer, the only suggested basis for the acceptance of the offer was, at that point, the defendant's prospective financial incapacity to pay any judgment in the plaintiff's favour. But that was only a vague reference to a prospect unsupported by objective documentation to indicate the defendant's then financial position. As subsequent events have shown, the defendant was in fact able to carry on its defence and prosecuted its cross-claim; vindicating the reasonableness of the plaintiff's decision to reject the offer. 4. As to the 10 September 2020 offer, although the amount offered to the plaintiff was higher than the first and second Calderbank offers, the time offered for acceptance, 9:30am on the same date as the offer, was manifestly inadequate to enable fair consideration of the offer. 5. I am not persuaded to exercise the Court's discretion in favour of the defendant/cross-claimant to make a partial order for indemnity costs on the ground of rejection of any of the Calderbank offers. Referee's costs 1. On 10 November 2020, by consent of the parties, I ordered, amongst other things, that the referee's fees: ".. shall be paid equally by the parties and treated by each as a disbursement for the purpose of any final orders as to costs". 1. That order was made pursuant to r 20.18(1)(b) of the UCPR. However orders made under r 20.18(1) do not affect the powers of the Court as to costs (r 20.18(2)). The power of the Court to make orders is in s 98 of the Civil Procedure Act 2005 (NSW), which power relevantly extends to determining "by whom, (and) to whom" costs are to be paid. 2. It is appropriate that the plaintiff/cross-defendant's liability to pay costs extends to including the costs of the referee [3] . 3. The Court understands that the referee complained about not being paid for his fees. That was contrary to the order made on 10 November 2020 (which had never been sought to be varied). The fee should have been split between the parties with the successful party obtaining practical reimbursement for its share from the losing party. With this order, there should no longer be any excuse for delay in payment of the referee's fees. They should be paid forthwith. I propose to have a copy of these reasons supplied to the referee. Orders 1. The Court orders: 1. The Amended Statement of Claim filed on 26 September 2018 is dismissed. 2. Judgment for the cross-claimant for the sum of $26,741.56 on the cross-claim. 3. The plaintiff is to pay the defendant's costs of the proceedings (the Statement of Claim and the cross-claim) as agreed or assessed. 4. For the avoidance of doubt, the fees payable to the referee form part of order 3 as to costs. ********** Endnotes 1. Tred Consultants Pty Ltd v Kirana Training Pty Ltd (No.3) [2021] NSWDC 161. 2. Ng v Chong [2005] NSWSC 385 at [14]-[15]; also Tinyow v Lee [2006] NSWCA 247 at [11]-[12] 3. For a recent illustration of an unsuccessful party's liability for remunerating a referee as part of the costs outcome of a proceeding, see Murphy v Nationwide News Pty Ltd (No.2) [2021] FCA 432 per Lee J at [23]-[24] Amendments 24 May 2021 - Fixed typo 24 May 2021 - Fixed typo. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 May 2021