Supreme Court New South Wales Medium Neutral Citation: Mautray Pty Limited v Pillemer Pty Limited [2022] NSWSC 1315 Hearing dates: On the papers Date of orders: 28 September 2022 Decision date: 28 September 2022 Jurisdiction: Equity - Commercial List Before: Williams J Decision: See paragraph [23] Catchwords: COSTS – application for indemnity costs on the basis of unsuccessful party's failure to accept Calderbank offer – no question of principle Cases Cited: Calderbank v Calderbank [1975] 3 All ER 333 Miwa Pty Ltd v Siantan Properties Pte Ltd (No.2) [2011] NSWCA 344 Ziegler as trustee for the Doris Gayst Testamentary Trust v Cenric Group Pty Ltd [2020] NSWCA 85 Category: Costs Parties: Mautray Pty Limited (ACN 086 027 027) (Plaintiff) Pillemer Pty Ltd (ACN 120 539 488) (First Defendant) Pillemer Family Holdings Pty Ltd (ACN 130 257 680) as trustee for the Pillemer Family Trust (Second Defendant) Mr Russel Craig Pillemer (Third Defendant) Representation: Counsel: Mr I Jackman SC with Mr T Marskell (Plaintiff) Ms M E Hall (Defendants) Solicitors: Mills Oakley (Plaintiff) Deutsch Miller (Defendants) File Number(s): 2020/68897 Publication restriction: N/A Judgment 1. Judgment was delivered in these proceedings on 2 September 2022 dismissing the plaintiff's claims: Maurtray Pty Ltd v Pillemer Pty Ltd [2022] NSWSC 1181 (the principal judgment). 2. These reasons concern the costs of the proceedings. 3. The plaintiff accepts that there should be an order that it pay the defendants' costs of the proceedings. 4. The defendants contend that the plaintiff should be ordered to pay their costs on an indemnity basis from 14 September 2020, or alternatively from 5 July 2021, or alternatively from 13 September 2021. Those three dates coincide with offers made by the defendants to the plaintiff in accordance with Calderbank v Calderbank [1975] 3 All ER 333. 5. The plaintiff resists an order that it pay any part of the defendants' costs on an indemnity basis and submits that the costs order to be made against it should be for the defendants' costs on the ordinary basis as agreed or assessed. 6. Having considered all of the parties' written submissions in relation to costs, I have determined that the plaintiff should be ordered to pay the defendants' costs of the proceedings on the ordinary basis up to and including 14 September 2020 and on an indemnity basis from and including 15 September 2020, in such amount as may be agreed or assessed. 7. I will state my reasons as briefly as possible, assuming familiarity with the principal judgment and using the same terms as in the principal judgment. 8. The proceedings were commenced on 3 March 2020 and the final hearing commenced on 27 September 2021. The plaintiff claimed damages in an amount ranging between $8.697 million and $5.866 million for alleged breach of contract and alleged misleading or deceptive conduct. 9. On 14 September 2020, the defendants offered the plaintiff "an opportunity to extricate itself from" the proceedings which the defendants said "should never have been brought by [the plaintiff] in the first place". The terms of the offer were that the proceedings were to be dismissed with no order as to costs (with the intent that each party would bear its own costs). The offer was said to represent a genuine compromise on the basis that the defendants would bear their own costs, which were said to amount to $180,000 at that stage. The offer was open for acceptance for a period of 7 days. The plaintiff did not accept the offer. 10. On 5 July 2021, the defendants made a further offer to pay the plaintiff the sum of $150,000 in full and final settlement of all claims in the proceedings on the basis that the proceedings would be dismissed by consent with no order as to costs (with the intent that each party would bear its own costs). The offer was open for acceptance within 14 days. The plaintiff did not accept the offer. 11. On 13 September 2021 (two weeks before the commencement of the final hearing), the defendants made a further offer to pay the plaintiff the sum of $250,000 in full and final settlement of all claims in the proceedings on the basis that the proceedings would be dismissed by consent with no order as to costs (with the intent that each party would bear its own costs). The offer was open for acceptance within 7 days. The plaintiff did not accept the offer. 12. There is no presumption that the plaintiff, by reason of its failure to obtain a more favourable outcome than these offers, must necessarily pay the defendants' costs of the proceedings on an indemnity basis from the date of one of the offers. The question in relation to each offer is whether it was a genuine offer of compromise and, if so, whether it was unreasonable for the plaintiff not to accept the offer: Miwa Pty Ltd v Siantan Properties Pty Ltd (No. 2) [2011] NSWCA 344 (Miwa) at [6]; Ziegler as trustee for the Doris Gayst Testamentary Trust v Cenric Group Pty Ltd [2020] NSWCA 85 (Ziegler) at [68]-[69]. 13. The inquiry in relation to whether each offer constitutes a genuine offer of compromise is not directed to the subjective intentions of the defendants as the offerors. Rather, the inquiry is directed to whether the defendants offered in a real sense to give anything away: Miwa at [9]; Ziegler at [71]-[72]. 14. The reasonableness or otherwise of the plaintiff's conduct in not accepting the offers is to be assessed at the time of each offer, without the benefit of hindsight. The defendants, as the offerors, bear the burden of persuading the Court that the plaintiff's failure to accept the offer was unreasonable in the circumstances at that time. Relevant factors include the stage that the proceedings had reached at the time of the offer and the extent of the compromise offered: Miwa at [10]-[16]. 15. Mr A Turnbull was the director of the plaintiff who had assumed sole responsibility of the day-to-day management of the business of plaintiff, and the Loan was the only business of the plaintiff. [1] The following circumstances must have been known to the plaintiff (through its director, Mr A Turnbull) as at the date of the first offer, being 14 September 2020: 1. assuming that the plaintiff succeeded in proving the alleged breaches of contract and/or the alleged misleading or deceptive conduct, the plaintiff's claims for damages for alleged breaches of contract and alleged misleading or deceptive conduct would depend on the evidence of Mr A Turnbull about various alternative courses of action that he claimed he would have caused Maurtray to take rather than entering into the Settlement Deed, if the first and second defendants had not committed the alleged breaches of their disclosure obligations under the Loan Agreement and/or if the defendants had not engaged in the alleged misleading or deceptive conduct; [2] 2. each of those alternative courses of action was irreconcilably inconsistent with the course of action that Mr A Turnbull had in fact pursued on behalf of the plaintiff at a time when he knew that there had been a merger between Pengana and Hunter Hall, he knew the terms of that merger transaction and he had formed the view that, by entering into the Settlement Deed, he had caused the plaintiff to leave $10 million "on the table". The course of action actually pursued was documented in WhatsApp and text message communications between Mr A Turnbull and Mr Pillemer in the period from May 2017 to early 2018; [3] 3. the plaintiff's claims that it had would have taken one of the specified alternative courses of action (accepting a transfer of the Shares) was also inconsistent with the plain and ordinary meaning of Mr A Turnbull's statements in his communications with Mr Pillemer referred to above about why he had not accepted a transfer of the Shares; [4] 4. Mr A Turnbull had sworn an affidavit on 15 May 2020 in which he deposed that he had engaged in discussions with Mr Pillemer from 19 May 2017 until early 2018 "seeking to resolve my complaints". That evidence was false because those communications did not convey any complaint to Mr Pillemer and the falsity of that evidence would be bound to be revealed in due course (to the extent that it was not already apparent to the defendants) when the plaintiff was required to make disclosure of the relevant WhatsApp and text message communications; [5] and 5. in addition to revealing the falsity of Mr A Turnbull's evidence referred to above, the disclosure of the communications would also reveal the irreconcilable inconsistency between the plaintiff's conduct in the immediate aftermath of the Pengana and Hunter Hall merger on the one hand and the plaintiff's causation case in these proceedings on the other hand. To the extent that the plaintiff, as at 14 September 2020, had formulated the strategy that it later pursued in these proceedings of objecting to the communications being tendered in evidence relying on s 131 of the Evidence Act 1995 (NSW), the plaintiff must have known that this strategy was doomed to fail because communications exchanged in circumstances where no dispute has been mentioned between the parties (whether in the communications themselves or otherwise) are plainly not made in an attempt to negotiate a settlement of any such dispute. I note that the plaintiff abandoned its reliance on s 131 after I raised that problem with senior counsel for the plaintiff during the hearing. 1. The defendants did not have access to all of the WhatsApp and text message communications at the time they made the 14 September 2020 offer. Nevertheless, the defendants squarely put to the plaintiff in the letter of offer that the plaintiff's case was bound to fail due to the inconsistency between the case and the objective fact that neither the plaintiff nor Mr A Turnbull had raised any objection or complaint consistent with the plaintiff's allegations in these proceedings until one year after the Pengana and Hunter Hall merger had been publicly announced. The letter described the proceedings as having "all the hallmarks of rampant opportunism" on the part of the plaintiff "in reliance on a now artificially constructed but false foundation that conveniently and self-servingly ignores the Political Motive and, in that respect, seeks simply to revise the history". The letter further stated that the plaintiff had entered into the Settlement Deed "for the Political Motive at the time and did not, and would not, have acted differently irrespective of the conduct it now alleges against our clients." 2. The matters referred to at [15] above, that were known to the plaintiff as at 14 September 2020, overwhelmingly supported the defendants' assessment of the fundamental flaw in the causation element of the plaintiff's case set out in the letter of offer. Causation was critical to the plaintiff's claims in contract and for alleged misleading or deceptive conduct. If the plaintiff did not then know at that time that its case was bound to fail (even assuming at that time that the plaintiff might ultimately succeed in proving the alleged breaches of contract and misleading conduct), that can only be attributable to its own unreasonable failure to grapple with the objective realities referred to at [14] above. 3. Contrary to the plaintiff's submissions, it is not to the point that the defendants had not completed their documentary disclosure as at 14 September 2020 or that the pleadings were amended and further evidence was served by both parties after the 14 September 2020 offer. Those subsequent developments did not bear on the matters set out at [15] above that were known to the plaintiff at the time of the first offer. Nor could the plaintiffs have reasonably believed at that time that disclosure and further evidence might alter the matters set out at [14] above and cast the plaintiffs' causation case in a more favourable light. As at 14 September 2020, the plaintiff might have hoped that Mr A Turnbull would give evidence attempting to explain the language of his WhatsApp and text message communications with Mr Pillemer in a manner that might arguably reconcile that language with the plaintiff's claims in these proceedings. However, the prospect of such evidence had no rational bearing on the inconsistency between the plaintiff's conduct in pursuing the course of action that it did in the period after May 2017 when it was aware of the merger and its terms, and the very different courses of action that the plaintiff claimed in these proceedings it would have adopted if the prospect of such a merger had been disclosed to it before it entered into the Settlement Deed. Contrary to the plaintiff's submissions, any adverse assessment of Mr Pillemer's evidence or his credibility and any findings of non-disclosure that the Court might ultimately make in favour of the plaintiff would not bear on that issue. 4. Having regard to all of the matters set out above, I consider that the defendants' 14 September 2020 offer represented a genuine compromise. Although the offer invited the plaintiff to capitulate with respect to the outcome of its claims, the defendants offered to give away the entitlement that they would otherwise have to seek an order for their costs of the proceedings. Given that the defendants' costs actually incurred at that time were $180,000 and the plaintiff could not have unilaterally discontinued the proceedings without incurring liability for the defendants' costs, that was an offer by the defendants to give something away in a real sense. 5. In all the circumstances, I consider that the plaintiff's failure to accept the 14 September 2020 offer was unreasonable. The matters referred to at [14] above establish with a high degree of certainty the existence of the deficiencies in the plaintiff's case that were identified in the letter of offer, and that those deficiencies must have been known to the plaintiff. The period for which the offer was open was relatively short, but I infer that the plaintiff would have requested the defendants to keep the offer open for a longer period if the plaintiff had required further time to consider and assess the offer. No such request was made. 6. Contrary to the plaintiff's submissions, this conclusion does not involve applying hindsight. I have not had regard to all of the additional reasons why the plaintiff's claims ultimately failed that may or may not have been known to or ascertainable by the plaintiff as at 14 September 2020. In particular, I have not taken into account the inconsistencies that emerged within Mr A Turnbull's affidavit evidence once his 12 March 2021 affidavit was served and the unreliability of his recollection that emerged from those inconsistences, [6] or Mr A Turnbull's performance under cross-examination and the assessment of his credibility as a witness that was informed by that performance. 7. My conclusions at [19]-[20] above render it unnecessary to consider the defendants' offers made on 5 July 2021 and 3 September 2021. 8. For the foregoing reasons, the order of the Court in relation to costs is: 1. Order the plaintiff to pay the defendants' costs of the proceedings on the ordinary basis up to and including 14 September 2020 and on an indemnity basis from and including 15 September 2020, in such amount as may be agreed or assessed. ********** Endnotes 1. Principal judgment at [5] and [47]. 2. Principal judgment at [330]-[334]. 3. Principal judgment at [525]-[527] and [536]. 4. Principal judgment at [436]. 5. Principal judgment at [435]. 6. Principal judgment at [48]-[50], [63]-[67] and [349]-[350]. 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: 28 September 2022