New South Wales Court of Appeal CITATION : NOBREGA v. TRUSTEES OF THE ROMAN CATHOLIC CHURCH FOR THE ARCHDIOCESE OF SYDNEY (NO. 2) [1999] NSWCA 133 FILE NUMBER(S) : CA 40531/97 HEARING DATE(S) : 23 March 1999 and Written Submissions JUDGMENT DATE : 21 May 1999 PARTIES : TONY NOBREGA by his next friend LUDOVINA NOBREGA (Appellant) THE TRUSTEES OF THE ROMAN CATHOLIC CHURCH FOR THE ARCHDIOCESE OF SYDNEY (Respondent) JUDGMENT OF : Priestley JA at 1; Powell JA at 2; Sheppard AJA at 24 LOWER COURT JURISDICTION : District Court LOWER COURT FILE NUMBER(S) : DC7250/95 LOWER COURT JUDICIAL OFFICER : Patten DCJ COUNSEL : M.J. Joseph SC/I. Asuzi (Appellant) S.A. Woods (Respondent) SOLICITORS : White Barnes (Appellant) Shaw McDonald (Responent) CATCHWORDS : COSTS - Of appeal - Departing from general rule - Offers of compromise - Made otherwise than in accordance with Supreme Court Rules Evidence Act 1995 s.131(1) ACTS CITED : (2)(h): SCR Pt 52A r.22 Calderbank v. Calderbank [1976] Fam 93 Messiter v. Hutchinson (1987) 10 NSWLR 525 CASES CITED: Amev Finance Limited v. Artes Studios Thoroughbreds Pty. Limited (1988) 13 NSWLR 486 Bruinsma v. Menczer (1995) 40 NSWLR 716 Sanko Steamship Co. Limited v. Sumitomo Australia Limited FED No. 22/96 Fotheringham v. Fotheringham (No. 2) [1999] NSWCA 21 DECISION : Order made IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40531/97 DC 7250/95 PRIESTLEY JA POWELL JA SHEPPARD AJA 21 May 1999 NOBREGA v. TRUSTEES OF THE ROMAN CATHOLIC CHURCH FOR THE ARCHDIOCESE OF SYDNEY (NO. 2) JUDGMENT 1 PRIESTLEY JA: I agree with Powell JA. 2 POWELL JA: As the Judgment which was delivered by the Court on the hearing of the appeal (Nobrega v. Trustees of the Roman Catholic Church for the Archdiocese of Sydney (No. 1) [1999] NSWCA 75) records, after the Court had indicated that the appeal would be dismissed with costs, each of Mr. M.J. Joseph SC, who appeared with Mr. I. Asuzi for the Appellant, and Mr. S.A. Woods, who appeared for the Respondent, made application for a special order as to costs. The order which was sought by Mr. Joseph was an order that, although the Appellant pay the costs of the Respondent of the appeal up to and including 6 November 1998 - the date of a letter containing the offer of compromise to which I will shortly refer - the Respondent should pay the Appellant's costs of the appeal thereafter, or, alternatively, that there be no order as to the costs of either party thereafter. By contrast, the order which was sought by Mr. Woods was an order that the Appellant pay the Respondent's costs of the appeal, such costs, as from 23 October 1997 - the date of a letter containing an offer of compromise written by the Respondent's solicitors, to which letter I will shortly refer - to be assessed on an indemnity basis. 3 As the Judgment which the Court delivered on 23 March 1999 also records, the Court did not then dispose of the applications for costs which were then made, but reserved Judgment on those applications, having first given directions for the filing of Written Submissions by each of the Appellant and the Respondent. 4 The facts which gave rise to the two applications may be shortly stated. 5 Following the delivery by Patten DCJ on 25 July 1997 of his Judgment in which he dismissed the proceedings which had been brought by the Appellant, there was, on 19 August 1997, filed on behalf of the Appellant a Notice of Appeal without Appointment. 6 Thereafter, on 23 October 1997 - that is, within the time which was available to the Appellant to file a Notice of Appeal with Appointment - the Respondent's solicitors wrote to the Appellant's solicitors a letter which omitting formal parts was as follows: "WITHOUT PREJUDICE RE: NOBREGA ats AUSTRALIAN BOY SCOUT ASSOCIATION AND ANOR. We refer to your letter dated 25 August last and note the contents. Having reviewed the situation thoroughly with the solicitors acting for the Second Defendant (sic) I am authorised to inform you that both Defendants will agree to your client's Appeal being discontinued on the basis that each party pays its own costs. Agreement to this proposal will relieve your client of a substantial liability for the Defendants' costs of the proceedings at first instance and upon the Appeal. It seems to us that his Honour's judgment is virtually impregnable, being based entirely upon findings of fact. We look forward to your early response." 7 It might be noted, here, that, although the tender of that letter was, at the time, objected to by Mr. Joseph, in his Written Submissions, Mr. Joseph conceded that the letter was admissible. This concession, on the part of Mr. Joseph, was undoubtedly correct, for although, prior to the coming into force of the provisions of the Evidence Act 1995, such an objection would inevitably have been upheld (see Walker v. Wilsher (1889) LR 23 QBD 335; Calderbank v. Calderbank [1976] Fam 93; Amev Finance Limited v. Artes Studios Thoroughbreds Pty. Limited (1988) 13 NSAWLR 486; Williamson v. Mig Aero Pty. Limited McLelland J 15 March 1991 (unreported); Liquorland (Australia) Pty. Limited v. GYG Holding Pty. Limited Court of Appeal 27 March 1995 (unreported) ) that is no longer so. 8 Section 131 Evidence Act 1995 so far as is relevant, provides: "131(1) Evidence is not to be adduced of: (a) a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute, or (b) a document, whether delivered or not, that has been prepared in connection with an attempt to negotiate a settlement of a dispute. (2) Sub-s.(1) does not apply if: ……… (h) the communication or document is relevant to determining liability for costs ………" In the circumstances, the fact that the letter did not take the form first suggested by Cairns LJ in Calderbank v. Calderbank - which has since become dignified by the title "a Calderbank letter" (see, for example, Messiter v. Hutchinson (1987) 10 NSWLR 525, 527 ) - did not render the letter inadmissible on any argument as to costs (see, for example, Bruinsma v. Menczer (1995) 40 NSWLR 716 ). 9 However, to return to the narrative: the Appellant's Notice of Appeal with Appointment was filed on 18 November 1997. 10 It is clear that, thereafter, negotiations for a compromise of the appeal continued, for, on 24 March 1998, the Respondent's solicitors wrote again to the Appellant's solicitors, on this occasion as follows: "WITHOUT PREJUDICE RE: PUBLIC LIABILITY CLAIM NO. 1483171 DE LA SALLE COLLEGE ASHFIELD AND TONY NOBREGA We refer to your letter dated 1 December last and are instructed to resubmit the Defendants' settlement proposal that the Appeal be discontinued on the basis that each party pay his/its own costs of the appeal and the matter at first instance. Please let us have a response within the next fourteen days." 11 Nor was this the end of the matter for, on 21 August 1998 - which date, I would think, was at about the time when the appeal was first given a hearing date - the Respondent's solicitors wrote again to the Appellant's solicitors, on this occasion as follows: "RE: PUBLIC LIABILITY CLAIM NO. 1483171 DE LA SALLE COLLEGE ASHFIELD AND TONY NOBREGA We refer to your letter dated 20 April last, the contents of which have been discussed with the solicitors for the Boy Scouts Association, and our client. Your offer is rejected. Both Respondents remain willing to settle the matter on the basis that each party pays its and their own costs, and all claims are dismissed." 12 The appeal was first fixed for hearing on 3 November 1998, the appeal books being filed with the registry on 28 October 1998. 13 What happened thereafter is recorded in a letter of 3 November 1998 written by the Registrar to the solicitors for the Appellant and the Respondent, which letter was in the following terms: "This matter was listed for hearing on 3 November 1998. On 30 October 1998 the Registry was advised by the appellant's solicitors that the appeal would be 'discontinued'. Pursuant to that advice the hearing on 3 November 1998 was vacated by the Registry. On 2 November 1998 consent orders as between the appellant and the 1st respondent were lodged with the Registry. Those orders dismissing the appeal as between the appellant and the 1st respondent have been entered. Despite the advice of the appellant, it appears that the appeal remains on foot between the appellant and the 2nd respondent. The matter has been adjourned to the dormant appeals call-over on 27 November 1998 at 3.00 pm to ensure that the matter is either finalised, or if the matter cannot be resolved as between the appellant and the 2nd respondent, so that it can be relisted for hearing. If the appeal is discontinued against the 2nd respondent or consent orders are made disposing of the appeal as against the 2nd respondent the call-over will be vacated." 14 Thereafter, on 6 November 1998, the Appellant's solicitors forwarded to the Respondent's solicitors by facsimile a letter which was as follows: "WITHOUT PREJUDICE RE: NOBREGA v. DE LA SALLE COLLEGE ASHFIELD ……… We refer to your correspondence on 2 November 1998. We confirm that our client's instructions are to seek discontinuance of the proceedings on the basis that each party pay its own costs. We request confirmation as to what your client's position is and we will take our client's instructions accordingly. We confirm the matter is listed for call-over before the Registrar of the Court of Appeal on 27 November next. We would be pleased to have your earliest response on the issue." 15 Although there was no formal evidence that this was so, it is tolerably plain that the offer contained in that letter, if not formally rejected, was, at least, not accepted, for the appeal was thereafter listed for hearing on 23 March 1999. 16 Although Mr. Joseph had earlier sought the making of a special order for costs in favour of the Appellant, that application was not persevered with in the Written Submissions which were later filed on behalf of the Appellant which Written Submissions were directed toward persuading the Court that the special order for costs sought on behalf of the Respondent ought not be made. 17 Put shortly, those Written Submissions were as follows: 1. the letters which had been tendered on behalf of the Respondent did not constitute "a Calderbank offer" so as to found the application for indemnity costs since none of those letters was such as to lead the Appellant's solicitors to understand - what was said to be a fundamental feature of "a Calderbank letter" (see, for example, Messiter v. Hutchinson supra at 526 ; Williamson v. Mig Aero Pty. Limited supra - that the intention of the letter was to provide the evidentiary foundation for a later application to the Court for the making of an indemnity costs order; 2. even if the letters were, or one of them was, to be regarded as constituting "a Calderbank offer", such offers were to be distinguished from an offer made pursuant to the provisions of SCR Pt. 22 r.5, for the effect of the rejection of such an offer - as the rules (SCR Pt. 55 r.17(4), (5)) make clear - is to cast on the offeree the onus of persuading the Court that a special order for costs should not be made. By contrast, the making of "a Calderbank offer" does not impose upon the person to whom that offer is addressed any such onus - such an offer provides no more than a prima facie position. In this respect reference was made to the decisions, in the Federal Court of Australia, of Hill J in Summerhayes & Associates Pty. Limited v. Kimberley Clarke Australia Pty. Limited (1994) 52 FCR 201 ; of Sheppard AJA when a judge of the Federal Court of Australia in Sanko Steamship Company Limited v. Sumitomo Australia Limited Fed. No. 22/96 and of Lindgren J in MGICA (1992) Limited v. Kenny & Good Pty. Limited (1996) 140 ALR 707 ). 18 The decision, apparently taken on behalf of the Appellant, not to prosecute the claim for a special order for costs in his favour which had earlier been made on his behalf was, in my view, a correct one for the basis upon which that application had originally been made - namely, that the Respondent had acted unreasonably in rejecting, or, at least, not accepting, the offer contained in the letter of 6 November 1998 could not be sustained - after all, the Respondent, together with the Scout Association, had made a similar offer on a number of occasions prior to the appeal being set down for hearing on the first occasion and prior to the delivery of the appeal books and, no doubt, the Respondent had incurred significant costs in the months which had intervened. More to the point, however, is the fact that the Respondent did succeed on the appeal and, as appeared to be conceded by Mr. Joseph during the course of discussion on 23 March 1999, was entitled to have made in its favour an order for at least part of its costs. 19 By contrast, the Appellant as it seems to me is on far sounder ground when submitting that the order for indemnity costs sought by the Respondent ought as a matter of discretion not be made. 20 Even if the offer which had been contained in one or more of the letters written by the Respondent's solicitors had been made the subject of a formal order for compromise delivered pursuant to the provisions of SCR Pt. 22 the Court would have retained a discretion not to order the Appellant to pay the Respondent's costs of the appeal's success on an indemnity basis (Fotheringham v. Fotheringham (No. 2) [1999] NSWCA 21) and, even if one or other of the letters written by the Respondent's solicitors be regarded as "a Calderbank letter", the position clearly is that the court retains a discretion not to make an order for the payment of costs assessed on an indemnity basis, that discretion to be exercised in the light of all the circumstances of the case. Thus, as Oliver LJ (as he then was) said in Cutts v. Head [1984] 1 Ch 290, 312: "I would add only one word of caution. The qualification imposed on the without prejudice nature of the Calderbank letter is, as I have held, sufficient to enable it to be taken into account on the question of costs; but it should not be thought that this involves the consequence that such a letter can now be used as a substitute for payment into court, where a payment into court is appropriate. In the case of the simple money claim, a defendant who wishes to avail himself of the protection afforded by an offer must, in the ordinary way, back his offer with cash by making a payment in and, speaking for myself, I should not, as at present advised, be disposed in such a case to treat a Calderbank offer as carrying the same consequences as payment in." a similar observation being made by Fox LJ in the same case supra at paras. 16-19 . 21 In Sanko Steamship Co. Limited v. Sumitomo Australia Limited supra Sheppard J, having earlier referred to the decision in the Federal Court of Australia of Olney J in WCW Pty. Limited v. Charthill Limited 7 July 1992 (unreported) and Hill J in John S. Hayes & Associates Pty. Limited v. Kimberley-Clarke Australia (1994) 52 FCR 201 to the effect that there was no authority supporting the proposition that the mere writing of "a Calderbank letter" would justify an order for costs in favour of a successful party being taxed on a solicitor and client or an indemnity basis, an observation with which his Honour agreed, later wrote (inter alia): "In all those circumstances it seemed to me to be difficult for the defendant to maintain that this case was an appropriate one for an order for payment of costs on an indemnity basis. At the relevant time its offer was to accept more than it would have been entitled to recover if the action had been determined by a judgment entered then. Apart from this matter though, it seems to me that one needs to be careful about making orders based on perceived unreasonable conduct in refusing to accept offers. It is in the public interest, as well as in the interest of the parties to litigation, for negotiations to settle cases to take place and for settlements to be achieved if they possibly can be. It has been said that the fact that the law does not provide a full indemnity for costs may be an important spur to settlement; see the judgments of Devlin LJ in Berry v. British Transport Commission (1962) 1 QB 306 at 323 and Handley JA in Cachia v. Hanes (1991) 23 NSWLR 304 at 318 referred to in the Judgment in Cussons at 227-8. In some cases the so called Calderbank approach may place a weapon in the hands of parties to litigation which ought not to be allowed to be abused. The ordinary rule is that costs when ordered in adversary litigation are to be recovered on the party and party basis. Any attempt to disturb that situation needs to be carefully considered. It should only be departed from where the conduct of the party against whom the order is sought is plainly unreasonable. This was a difficult case involving a myriad of issues both of fact and of law … My own reasons for judgment reflect the difficult contractual and other issues which had to be considered. In the Judgment I have also alluded to the difficulties that arose because of the need to sift and weigh evidence from a multiplicity of witnesses who gave evidence through interpreters. The case was certainly not clear cut and was hard fought. In those circumstances it seems to me very difficult to reach the conclusion that either party was acting at all unreasonably. It was for those reasons that I considered that the appropriate order for costs was the usual order which would involve the payment by the plaintiffs of the defendant's costs on the party and party basis." 22 Although, in the end, the Court dismissed the appeal, it could not be said that the Appellant clearly acted unreasonably in seeking to prosecute the appeal - as the reasons delivered by Sheppard AJA at the time demonstrate, the case which the Appellant sought to advance on the appeal could not be said to be lacking in substance. 23 In all the circumstances, I would propose that the Appellant merely be ordered to pay the Respondent's costs of the appeal, such costs to include the costs of the additional Written Submissions as to costs which have been provided on behalf of the Respondent. 24 SHEPPARD AJA: In this matter I have had the advantage of reading the judgment to be delivered by Powell JA. I am in agreement with his Honour's reasons and conclusions, and with the orders which he proposes. ******* 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.