Supreme Court New South Wales Medium Neutral Citation: McVicar v Hanson Construction Materials Pty Ltd (No.2) [2024] NSWSC 606 Hearing dates: On the papers Date of orders: 22 May 2024 Decision date: 22 May 2024 Jurisdiction: Common Law Before: Garling J Decision: Plaintiff to pay the defendant's costs on an indemnity basis from 21 September 2023. Catchwords: COSTS – Party/party – Indemnity basis – Whether costs should be awarded on an indemnity basis – Where a Calderbank offer was made by the defendant which was more favourable for the plaintiff than the final judgment of this Court. Legislation Cited: Civil Procedure Act 2005 Local Court Act 2007 Uniform Civil Procedure Rules 2005 Cases Cited: Australian Competition and Consumer Commission v Colgate Palmolive Pty Ltd (No.5) [2021] FCA 246 Hamod v State of NSW [2002] FCAFC 97 McVicar v Hanson Constructions Materials Pty Ltd [2024] NSWSC 175. Texts Cited: Not Applicable Category: Principal judgment Parties: Donna-Maree McVicar (P) Hanson Construction Materials Pty Ltd (D) Representation: Counsel: M Bennett (P) R Gall (D) Solicitors: Emerson Lewis (P) Patane Law (D) File Number(s): 2023/333509 Publication restriction: Not Applicable JUDGMENT 1. On 27 February 2024, for the reasons which I then gave, I ordered that the Summons commencing these proceedings be dismissed and that the plaintiff, ("Ms McVicar"), pay the defendant's ("Hanson") costs. My reasons are set out in McVicar v Hanson Constructions Materials Pty Ltd [2024] NSWSC 175. 2. Consequent upon the publication of the reasons, Hanson applied for an order that its costs be paid on an indemnity basis. 3. In that respect, Hanson relies on the affidavit of Mr Bruce Patane sworn 15 March 2024, and an Outline of Written Submissions. 4. In short, Hanson seeks an order that its costs be paid on an indemnity basis because, prior to the commencement of proceedings in this Court but after giving notice of its intention to appeal, it had on 14 September 2023, sent a Calderbank letter making an offer to Ms McVicar which was more favourable than the result of the final judgment in this Court. Alternatively, it seeks an order for indemnity costs on the basis that Ms McVicar commenced and maintained the proceedings in circumstances where she should have known that she had no real chance of success, was pursuing a hopeless case and/or persisted in prosecuting a case without regard to the forensic difficulties. 5. Ms McVicar was ordered to file and serve any affidavit material upon which she wished to rely in opposition to the orders sought, together with an outline of submissions. She did not do so and has not raised any matters in opposition to the orders sought. 6. As there are orders sought in the alternative, it is convenient to commence by referring to some parts of the judgment which are relevant to this application. Judgment 1. The proceedings in this Court were commenced by Summons on 20 October 2023. Ms McVicar sought leave to appeal against part of a decision of the Local Court of NSW, which had been delivered on 7 August 2023, by which she had been ordered to pay a sum for legal costs of debt recovery proceedings which had been commenced by Hanson against her in the Local Court. Because the only order which she sought to challenge was one for costs, s 40(2) of the Local Court Act 2007 required Ms McVicar to obtain a grant of leave to appeal. 2. In the Local Court, the substantive part of the proceedings, being a claim for about $22,000, was resolved by consent with the entry of judgment in favour of Hanson for the full sum which had been claimed, together with an order providing for the legal costs of the Local Court proceedings to be determined subsequently to the entry of judgment. 3. A contest took place in the Local Court with respect to whether Ms McVicar should pay Hanson's costs. After a hearing on that issue, the Local Court ordered that Ms McVicar pay Hanson the sum of $45,000 by way of legal costs. This was considerably less than the sum sought by Hanson, and less than the costs which it incurred. 4. In these proceedings, Ms McVicar contended that the Local Court erred "… by failing to give adequate or sufficient weight …" to various matters. Essentially, it was contended that no order for costs should have been made because there had been no determination on the merits of the substantive case, the costs which were sought and ordered were entirely out of proportion to the claim and out of proportion to the complexity of the proceedings, and that the order made did not adequately take account of the relevant Practice Note in the Local Court. 5. The Summons in this Court was filed out of time and, accordingly, an extension of time was necessary. 6. The first matter considered in the judgment was whether it was appropriate to extend time to the plaintiff to commence the proceedings. I concluded that Ms McVicar had provided no explanation at all with respect her failure to commence proceedings at an earlier point in the time period between the delivery of judgment in the Local Court and the filing of the Summons in this Court seeking leave to appeal, and the need for an extension of time so to do. I concluded that the judgment in the Local Court was a relatively straight forward, single subject one, that Ms McVicar had solicitors acting for her who were present when the judgment was delivered and who filed the Summons in this Court. I noted that the preparation of the Summons, including the obtaining of instructions from Ms McVicar to commence the proceedings was not complex. I concluded that Ms McVicar had no adequate explanation which could justify her failure to commence proceedings within time. 7. I noted that the prejudice to Hanson was obvious whereas the prejudice to Ms McVicar was non-existent because I concluded that leave to appeal should not be granted and if it was, any appeal would be dismissed. Accordingly, an extension of time was refused. 8. I then addressed the issue of a grant of leave to appeal. 9. Counsel for Ms McVicar conceded, properly in my view, that the appeal did not involve any issue of legal principle or any question of general public importance. Counsel relied upon the proposition that there was a demonstrably clear injustice to Ms McVicar which was obvious and significantly more than was merely arguable. 10. I concluded that there was no room for any argument that there had been any injustice to the plaintiff of any kind, let alone one which would justify the relief sought in the Summons. I noted that the Local Court Magistrate was seized of evidence which, in many respects was largely unchallenged, and that he had made a decision to make a gross sum costs order which was "… well within the bounds of his discretion …" and that the award for costs which was made in the Local Court was significantly less than the sum claimed and was "… obviously significantly less than the sum to which [the defendant] may have been entitled". I also concluded that the Local Court Magistrate had correctly applied the "proportionality principle". 11. On that basis I concluded that there was no injustice to the plaintiff which was arguable "… much less (as the authorities required) one that is reasonably clear". Evidence on this Application 1. The evidence of Mr Patane on this application, which I accept, was that by email sent on 14 September 2023, a letter ("the Calderbank letter") was sent by the defendant in the following terms: "We refer to the above matter and the attached Notice of Intention to Appeal dated 4 September 2023. To save costs and efforts for all involved, on a without prejudice basis and without any admissions or concessions, our client, Hanson Construction Materials Pty Ltd, makes the following offer to your client, Donna Maree McVicar, in respect of Supreme Court of NSW, Court of Appeal - Case 2023/00281199 ('Appeal'): 1. your client consent to orders that: (a) the Appeal is dismissed; and (b) each party pay their own costs of and incidental to the Appeal. 2. This offer may only be accepted by signing and returning the attached draft consent orders by midday 21 September 2023 (upon receipt of which we will counter-sign same and file it with the Court). 3. Time is of the essence. 4. Unless withdrawn earlier, this offer is open for acceptance up to and including midday 21 September 2023 … This offer is made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333. In the event that your client fails to accept the offer, at hearing of the Appeal, our client will rely on this offer and seek costs on an indemnity basis in accordance with the principles enunciated in Calderbank v Calderbank." 1. It is necessary to note that a Notice of Intention to Appeal had first been filed inappropriately by Ms McVicar in the Court of Appeal. She was not entitled to appeal to the Court of Appeal. Any proceedings challenging the Local Court judgment had to be commenced by Summons in the Common Law Division, which is what occurred on 20 October 2023. Submissions 1. In its submissions, Hanson seeks alternative orders. Only two are relevant. The first order is that indemnity costs be payable from 14 September 2023 which is the date of the Calderbank letter; the second alternative is that indemnity costs should be payable from the date the plaintiff filed her Summons, being 20 October 2023. 2. The submissions draw attention to the legal principles. It cannot be doubted that this Court has the power to order that costs are to be paid on an indemnity basis: s 98 Civil Procedure Act 2005; r 42.5 Uniform Civil Procedure Rules 2005. 3. The submissions note that as a matter of principle, indemnity costs are not punitive, but rather are ordered to compensate a successful party fully for costs incurred when the Court takes the view that it is unreasonable for the other party to have subjected the successful party to the expenditure of costs: see Hamod v State of NSW [2002] FCAFC 97 at [20]. 4. The submissions note that if a Calderbank offer is a genuine offer of compromise and that it was unreasonable for an offeree not to accept it, then provided the result of the proceedings is more favourable, indemnity costs may be awarded. 5. The submissions noted that a "walk away offer" (such as that set out in the Calderbank letter) can amount to a genuine offer of compromise. 6. The submissions also draw attention to the fact that where a Court finds that it was unreasonable for the successful party to be subjected to the expenditure of costs where an applicant, properly advised, should have known that they had no chance of success, or where the moving party persists in what would be seen as a hopeless case for a case clearly foredoomed to fail, then indemnity costs could be awarded: see Australian Competition and Consumer Commission v Colgate Palmolive Pty Ltd (No.5) [2021] FCA 246 at [8]-[12]. 7. Hanson submits that at the time the Calderbank letter was sent, although the offer could be described as a "walk away" offer, it was a genuine compromise because Hanson was giving up any entitlement to costs and was proposing that each party bear their own costs. It was submitted that it was unreasonable for Ms McVicar not to accept that offer in circumstances where: 1. costs in dispute between the parties had been substantial in the Local Court, and it was reasonable to form the view that a considerable amount of costs would be expended on the appeal if it was pursued; 2. at the time that offer was made, an appeal from the Local Court had not been properly brought and therefore any appeal, if properly commenced, would be out of time, and an extension of time would be necessary; and 3. it should have been apparent to Ms McVicar, properly advised, that the appeal had no chance of success or was hopeless. 1. The submissions noted that in addition to the unreasonable conduct of Ms McVicar in failing to accept the Calderbank offer, any reasonably objective review of the proceedings, which would have been available by 14 September 2023, must have demonstrated that the appeal did not involve any issue of legal principle, nor did it involve any question of general public importance. It must have been clear that to succeed Ms McVicar had to show that there was a manifest injustice which was demonstrably clear. 2. It was submitted that this must have been so, particularly in circumstances where no additional evidence was sought to be relied upon in this Court over and above that which was before the Magistrate. 3. Further, it is submitted that the need for an explanation to obtain an extension of time is clearly required in circumstances such as those which existed in these proceedings. The absence of any such explanation was obvious. At no time did Ms McVicar ever make an attempt to provide an explanation. It was submitted that she must have known she had no explanation for the delay. Discernment 1. I accept the submissions of Hanson that the Calderbank offer of 14 September 2023 was a genuine compromise. True it is that the offer was a "walk away" offer. However, it could be reasonably expected that the lodging of a Summons seeking leave to appeal to this Court would have involved the incurring of significant costs by both parties in circumstances where the Summons was seeking relief against an order made by the Local Court dealing only with legal costs. At no time did Ms McVicar, in this Court, dispute that she was obliged to pay Hanson's costs. Rather, these proceedings sought only to argue about the amount of costs which she was obliged to pay. 2. As well, as the reasons in the principal judgment articulate, any such Summons and any basis for contentions of that kind in it was, simply put, hopeless. It was not demonstrably arguable that there had been any miscarriage of justice in the Local Court. 3. I also note that in coming to this conclusion, the plaintiff has not filed any submissions in opposition to the order sought. 4. In my view, the conduct of Ms McVicar in refusing to accept by 21 September 2023, the terms of the offer contained in the letter of 14 September 2023, which clearly refer to the principles of law contained in Calderbank, was unreasonable. The time allowed was, in all of the circumstances, a reasonable time. As well, her claims did not articulate any basis for a conclusion that any demonstrated miscarriage of justice had occurred. 5. I conclude that I should vary Order 2 made on 27 February 2024, so as to add the words "… on an indemnity basis from 21 September 2023". Orders 1. Accordingly, Order 2 of the Court's orders of 27 February 2024 will read: "2. Plaintiff to pay the defendant's costs on an indemnity basis from 21 September 2023." ********** 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: 22 May 2024