Supreme Court New South Wales Medium Neutral Citation: Bathurst Real Estate Pty Ltd v Fairbrother (No 2) 408 [2022] NSWSC 408 Hearing dates: On the papers; written submissions 31 March, 6 April 2022 Date of orders: 7 April 2022 Decision date: 07 April 2022 Jurisdiction: Equity Before: Kunc J Decision: Plaintiff to pay defendants' costs on the ordinary basis Catchwords: COSTS — Party/Party— Bases of quantification — Indemnity basis — Calderbank "walk away" offer made shortly after commencement of proceedings — No issue of principle Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Bathurst Real Estate Pty Ltd v Fairbrother [2022] NSWSC 351 Cabport Pty Ltd v Marincheck (No 2) [2013] NSWCA 131 Calderbank v Calderbank [1975] 3 All ER 333 Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 Townsend v Townsend (No 2) [2001] NSWCA 145 Category: Costs Parties: Bathurst Real Estate Pty Ltd (Plaintiff) Sandy Michael Fairbrother (First Defendant) Jay Patrick Cleary (Second Defendant) Smile Real Estate Pty Limited (Third Defendant) Representation: Counsel: D Mahendra (Plaintiff) J Ireland QC; D McGirr (Solicitor) (First, Second and Third Defendants) Solicitors: FCB Workplace Law (Plaintiff) McGirr Lawyers (First, Second and Third Defendants) File Number(s): 2020/251168 Publication restriction: No Judgment Summary 1. The Court delivered its principal judgment in these proceedings on 29 March 2022 (Bathurst Real Estate Pty Ltd v Fairbrother [2022] NSWSC 351) (the Principal Judgment). These reasons assume familiarity, and should be read with, the Principal Judgment. Defined terms in the Principal Judgment have the same meaning in these reasons. 2. In the Principal Judgment, the Court determined that the proceedings should be dismissed. This judgment deals with the question of costs, which the parties agreed should be dealt with on the papers. The Court received written submissions from Mr J Ireland of Queen's Counsel with Mr D McGirr, Solicitor, for the defendants and from Mr D Mahendra of Counsel for BRE. 3. The defendants sought their costs of the proceedings on the indemnity basis by reference to an offer made in a Calderbank letter sent early in the history of the proceedings. For the reasons which follow, the Court has concluded that BRE did not act unreasonably in refusing to accept that offer. Those reasons may be summarised as being that the offer did not represent a genuine attempt at a compromise and was not open for acceptance for a reasonable time. Costs will, therefore, follow the event in the usual way, with BRE as the unsuccessful party paying the defendants' costs on the ordinary basis. The Calderbank letter 1. The relevant background facts may be conveniently taken from the Principal Judgment: "28 On 18 August 2020, Mr Whittaker observed that CFP had used the Hashtag in a post relating to a property CFP was marketing. 29 On 19 August 2020, BRE's solicitor wrote to the defendants' solicitor (emphasis in original): "As you are aware we act for Bathurst Real Estate Pty Ltd. On 17 April 2019 orders were made in the Supreme Court, proceedings 2019/108893, against your clients Jay Cleary and Sandy Fairbrother. In addition, on 17 April 2019 your clients provided Undertakings to the Supreme Court, which were clearly recorded in the Orders – a sealed copy is attached for your review. Importantly Court Note 2 states: "Notes the undertaking by the Defendants to the Court that they will remove and/or refrain from using the phrases "Bathurst Real Estate Agent" or "Bathurst Real Estate" in their email signatures and any or all marketing and promotional materials (whether online or otherwise)." As your clients ought to be aware, a breach of an Undertaking to the Court can constitute contempt of Court. It has recently come to our client's attention that both of your clients are consistently using the phrase "Bathurst Real Estate" in their online marketing & promotional materials. Our clients contend that this is a clear breach of the Undertaking. In order to avoid our client taking immediate action to enforce the Undertaking, we require your [sic] both of your clients to: 1. Immediately cease and desist using the phrase "Bathurst Real Estate" in any marketing and promotional materials (whether online or otherwise); and 2. Within 2 business days of this letter they should identify all marketing and promotional materials in which they have used the phrase "Bathurst Real Estate" and permanently destroy it or otherwise delete the phrase "Bathurst Real Estate"; and 3. Within 4 business days of this letter send our office written confirmation that both your clients have complied with (1) and (2) above, including evidencing the steps that they have taken to comply with (2). In the absence your both of clients' compliance we anticipate that our client's will immediately take steps to protect their interests…" 30 That letter was immediately drawn to Smile's attention because at 4.03 pm on 19 August 2020, Mr Michaelson's wife sent this email with the subject line "Urgent - Cleary Fairbrother Property" to Ms Victoriano, and including copies to Fairbrother and Cleary, Ms Symons and Mr Michaelson (emphasis added): "Hi Flor / Bel, Flor – Can you please go through all of Cleary Fairbrother's posts that you have uploaded – you will need to go back to the very beginning and change any text or even tags where you have used; 'Bathurst Real Estate' or 'Bathurst Real Estate Specialists' and then delete or change it to: 'Bathurst Property Specialists'. You may have forgotten but we are not permitted to use anywhere the wording 'Bathurst Real Estate' as another agency in the region used that wording. We have a court order to remove it immediately. Can you please get onto this urgently as it will take some time to check. Please don't miss any on Facebook and Insta. Bel – can you please check YouTube as well. Likewise on the CRM. This is critical. Flor perhaps set up a common template with the correct wording and tags so we don't post anything in future. Please confirm when updated. Thank you. Kind Regards, Suz" 31 The Court accepts Mr Michaelson's affidavit evidence, about which he was not challenged, that "On August 2020 and with a view to avoiding a conflict with BRE Smile removed any material that might arguably involve a breach of the undertaking to the Court" (emphasis added). 32 On 27 August 2020, Mr Whittaker was informed by his solicitor of the Facebook post included as one of the Publications. The next day Mr Whittaker located the Instagram Publications by searching the Hashtag on Instagram. 33 In what, with the benefit of hindsight, appears to be a strange omission, no response was ever sent on behalf of any of the defendants to the letter of demand set out in [29] above. It may be that this entire litigation could have been avoided if the remedial steps that had been taken by Smile had been promptly reported to BRE's solicitors. 34 These proceedings were commenced by summons and statement of charge filed on 28 August 2020. The summons and statement of charge were amended to join Smile as a defendant in June 2021." 1. Less than three weeks after the commencement of the proceedings, Fairbrother's and Cleary's solicitors (Smile not yet being a party) sent a letter to BRE's solicitor making an offer to settle the proceedings (the Offer). The letter was marked "Without Prejudice Save as to Costs", expressly relied on the principles in Calderbank v Calderbank [1975] 3 All ER 333, and foreshadowed that it would be tendered in support of an application for indemnity costs from the date of the letter if BRE did not obtain an order more favourable than the terms of the Offer. The letter included: " … We are instructed that in accordance with the Orders made on 17 April 2019 (the Order) our clients have refrained from using the phrases "Bathurst Real Estate" in their email signatures and any or all marketing and promotional materials (whether online or otherwise). Your clients application is misconceived for the following reasons:- 1. In order for you to establish that our clients are in contempt of the Order dated 17 April 2019 your client must prove, beyond reasonable doubt, that our client firstly, breached the order, and secondly, took deliberate steps to breach the Order. On our reading of your client's evidence these elements can simply not be proved by your client to the standard necessary. 2. Our clients did not use the phrase "Bathurst Real Estate" to promote or market themselves. 3. Our clients have never provided any instructions or directions to any person or entity to promote or market themselves using the phrase "Bathurst Real Estate". 4. Even if it is proved that a person entering a search term bathurstrealestate is deemed to be promoting or marketing themselves using the phrase "Bathurst Real Estate", which we do not believe it will, then our clients state that they were unaware of that having occurred and therefore did not take conscious steps to breach the Order. On that basis we were instructed to put an offer to your client as follows:­ 1. These proceedings be dismissed; 2. Each party bear their own costs to date. This offer remains open for a period of seven (7) days from the date of this letter..." 1. BRE did not accept the Offer. The defendants' submissions 1. The defendants' submissions were pithily expressed: "6. Both the Summons and the Amended Summons included a claim for "damages" which was always misconceived and rightly not pursued at the hearing. That was an unreasonable claim which was persisted in until the opening when it was unequivocally dropped without explanation as to why it had been included at all. 7. The Defendants were at all times jointly represented by the same firm of solicitors, McGirr Lawyers. 8. The letter of 16 September 2020 proposed that the proceedings be dismissed with no order as to costs. It was expressly sent "Without Prejudice save as to costs" and drew attention to the principle in Calderbank v Calderbank and foreshadowed the current application for indemnity costs in the events that have occurred. 9. The offer contained in the letter was not accepted by the Plaintiff. It was a reasonable offer made promptly after the commencement of the proceedings involving a true compromise if accepted in that the Defendants were offering to forego any application for payment of their legal costs which were not insignificant at the date the offer was made. A "walk away offer" is recognised as a true compromise: Leichardt Municipal Council v Green [2004] NSWCA 341 [LMC] and Cabport Pty Ltd v Marinchek (No 2) [2013] NSWCA 131 [Cabport]. 10. The offer was made in light of a consideration of the Plaintiff's affidavit evidence served with the Summons. It drew attention to the inadequacy of the evidence and the standard of proof required to establish a contempt of Court. 11. The period of 14 days was a reasonable period to allow for acceptance of the offer. [I note this submission appears to be in error – the Offer was open for 7 days.] 12. The Defendants' offer required no further negotiation and was susceptible of direct and immediate acceptance. 13. The failure by the Plaintiff to accept the offer was unreasonable in all the circumstances." BRE's submissions 1. BRE made five points. 2. First, it submitted that the Offer was made at a very early stage in the proceedings. No defence had been filed, no evidence had been served by the defendants and no subpoenas had been issued. The defendants would hardly have incurred any significant costs at all at the time the Offer was made, so that an offer for each party to pay their own costs was not a compromise. 3. In support of this proposition, BRE relied on the decision of Giles JA in Townsend v Townsend (No 2) [2001] NSWCA 145 (Townsend), in which his Honour declined to order indemnity costs: "4. In the letter of 30 May 2000 the respondent offered to "agree to the discontinuance or dismissal of the appeal upon the basis that each party is to pay their own legal expenses of the appeal". The offer was open for acceptance for 28 days from 30 May 2000. The respondent reserved the right to use the letter on the question of costs, and gave notice that he would claim costs on an indemnity basis. 5. As at 30 May 2000 the respondent's costs of the appeal must have been minimal, and he would not have anticipated any significant costs within the next 28 days. There was no evidence suggesting otherwise. The offer had no real element of compromise, but invited capitulation by the appellant." 1. BRE submitted that the present case was on all fours with the authority just cited. This was because, at the date of the Offer, BRE would hardly have incurred any costs, such that there was no element of compromise but rather an invitation to capitulate. 2. Second, BRE submitted that it was not unreasonable for it to have rejected the Offer when it was only open for seven days, in contradistinction to the requirement under the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) for an offer of compromise under those rules to be open for no less than 28 days. 3. BRE relied on these dicta of McColl JA in Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 (Elite): "117 For the foregoing reasons it was open to the appellant to argue that its conduct in not accepting the 11 August offer was not unreasonable. I would add that even if the offer had not been inclusive of costs, my prima facie view would have been that it did not, in the circumstances in which it was made, attract an indemnity costs order. It was open for acceptance for only one week at a time when there was no imminent trial. Further, the respondent's solicitors forwarded under cover of the same letter a quantity of economic loss material which it would have been necessary for the appellant's solicitors to assess. At the time the letter was sent Offers of Compromise were required to be open for a minimum of 28 days (Pt 19A r 3(3), District Court Rules 1973), a period no doubt believed to provide a reasonable time for consideration. Prima facie, I see no reason why litigants who choose not to avail themselves of the rules as to Offers of Compromise should be in a better position than those who do, if they radically foreshorten the period in which an offer is open for consideration." 1. Third, BRE submitted that the Offer was not made by Smile (which was not then a party to the proceedings) and accordingly Smile could not obtain the benefit of the Offer. 2. Fourth, BRE had at all times acted reasonably and had not conducted the litigation in a way that would justify a special costs order. This submission referred to the Court's findings in the Principal Judgment, in particular on the primary question of whether the Undertaking prohibited the use of the Hashtag with the Publications. The Court had found that the constructional choice advanced by BRE was clearly or reasonably arguable (see [69] of the Principal Judgment). 3. Fifth, BRE drew attention to the fact that Fairbrother's and Cleary's solicitors never responded to BRE's solicitor's letter of 19 August 2020 (see [4] above). Consideration 1. There is no dispute about the applicable principles, namely that the effect of a Calderbank offer is not automatic but may be relevant to the exercise of the Court's discretion; it must reflect a genuine compromise; the successful offeror must achieve the same or a better outcome than if the offeree had accepted the Offer; and the Court must be satisfied that it was unreasonable on the part of the offeree not to have accepted the Offer. 2. The Court accepts the first, second and fifth submissions made on behalf of BRE with the result that the Court finds that BRE did not act unreasonably by not accepting the Offer. I will say a little more about each of BRE's submissions in the order in which they were made. 3. As to the first submission, it may be accepted that a "walk away" offer can be a true compromise for the purposes of a Calderbank offer in some cases. It is nevertheless instructive to consider the two cases cited for the defendants. 4. The offer in LMC was a "walk away" offer. It was made five weeks before the trial. While recorded with less precision, the offer of compromise in Cabport "was made prior to the hearing before Olsson DCJ" (at [8]). I should record for completeness that it is not apparent that the offer in that case was a "walk away" offer, although nothing turns on that for present purposes. 5. The timing of the offers in those two cases is to be contrasted with the present case, where the Offer was made less than three weeks after the proceedings had been commenced. While every case must turn on its own facts, the Court accepts that Giles JA's reasoning in Townsend is equally applicable to these proceedings with the same result. 6. In reaching that conclusion, the Court has not overlooked the assertion in the defendants' submissions (see [7] above) that the then defendants' legal costs were "not insignificant at the date the offer was made". However, that does not avail them for two reasons. First, the Offer could have, but did not disclose the then defendants' costs at the time of the Offer to demonstrate what they were giving up if the Offer was accepted. Second, no evidence was filed with the present application to prove what those costs were when the Offer was made. 7. Turning to BRE's second submission, I accept that, so early in the proceedings and with no relevant Court event imminent, leaving the Offer open for only 7 days was not an adequate period of time. No reason has been advanced by the defendants as to why such a short time had to be specified when the litigation had barely begun. For the same reasons, I would have reached the same conclusion if the Offer had been open for 14 days (as appears to be the suggestion in the defendants' submissions, which I can only assume is an error). 8. Nevertheless, while I accept the force of McColl JA's comparison in Elite with the requirement for an offer of compromise under the rules to be open for at least 28 days (if made more than two months before the hearing – see UCPR Pt 20 r 20.26(5)(a)), in my respectful opinion it would be an error to interpret her Honour's observation as an inflexible rule. I do not suggest that her Honour intended it as such. There will be many situations where a Calderbank offer open for less than 28 days can be effective, depending upon the point in the litigation in which it is made. It should also be recalled that an offer of compromise made in the two months before a hearing is only required to be open for so long "as is reasonable in the circumstances" (UCPR Pt 20 r 20.26(5)(b)). 9. The point made by McColl JA is not expressly dealt with in the judgment of Beazley JA (as her Honour then was) in Elite. I would respectfully adopt what fell from Basten JA in the same case: "149 In the present case, the fact that the offer was said to be open for only seven days may well be a factor suggesting that a failure to accept the offer was not unreasonable. However, it is but one circumstances [sic] to be considered and should not by itself lead to any prima facie conclusion. The absence of any request for an extension of time would be relevant in assessing reasonableness, as would the fact that the offer was made in response to an offer by the defendants which itself required acceptance within seven days." 1. Having cited his Honour's observations, I should add that in the present case I do not regard it as unreasonable that BRE did not ask for an extension of time to consider the Offer. This is because it was made so early in the litigation and BRE was entitled to await the defendants' evidence and take advantage of interlocutory processes to seek to obtain evidence that would have been only in the knowledge or possession of Fairbrother and Cleary that could have assisted BRE in proving its case. 2. As for the fifth reason, being Fairbrother's and Cleary's failure to respond to BRE's solicitor's letter of 19 August 2020, I adhere to what I said at [33] in the Principal Judgment: "It may be that this entire situation could have been avoided if the remedial steps that had been taken by Smile had been promptly reported to BRE's solicitors." Given the adversarial nature of litigation, silence breeds suspicion and gives rise, rightly or wrongly, to the thought "what is the other party hiding?". For an aggrieved litigant, an opponent's failure to respond to correspondence will rarely, if ever, be interpreted as innocence or oversight. 3. While Fairbrother's and Cleary's failure to respond to BRE's solicitor letter is not dispositive of the question, their silence fortifies the Court in its conclusion that BRE, having received no response, did not act unreasonably in refusing to accept an offer that was peremptory in tone, open for a very short period and made so quickly after the proceedings were commenced. Having now been seized of the evidence of what occurred, I remain of the view that a prompt apology and explanation by the defendants to BRE (or its solicitors) could have avoided this litigation completely. 4. As to BRE's fourth submission, the Court expresses no concluded view. Subject only to the requirements of being exercised judicially and for a proper purpose, the Court's costs discretion is a wide one. There may well be cases where a successful defendant who is not a party to proceedings at the time when other defendants made an effective Calderbank offer may nevertheless be able to take advantage of that offer. This might be the case, for example, if the later joined defendant could demonstrate that early settlement with the other defendants would have meant that the later joined defendant would never have been vexed with the litigation. 5. As to BRE's fifth submission, the fact that a party may have conducted litigation reasonably will, in most cases, be irrelevant to the exercise of the Court's discretion in relation to a Calderbank letter. Many unsuccessful litigants conduct litigation reasonably and have arguable points to make, but nevertheless will be found to have unreasonably refused to accept a Calderbank offer. 6. Finally, I note that Mr Ireland QC's submissions for the defendants referred to a claim for damages that was not pursued by BRE. However, no application was made for a specific indemnity costs order in relation to costs (if any) that had been incurred by the defendants solely referable to meeting the abandoned damages claim. Conclusion 1. The orders of the Court are: 1. Proceedings dismissed. 2. Plaintiff to pay the defendants' costs. 3. Direct the exhibits be returned to the parties to be held in accordance with Practice Note SC Gen 18, para 28. ********** Amendments 08 April 2022 - Catchwords and Legislation omitted from original on cover page 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: 08 April 2022