New South Wales Supreme Court CITATION : Aghajanian v Stanley Thompson Valuers Pty Ltd [2000] NSWSC 215 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 4779/91 HEARING DATE(S) : 4 February and 3 March 2000 JUDGMENT DATE : 3 March 2000 Yourik Aghajanian (P1) Emmik Aghajanian (P2) Nshan Pty Limited (P3) PARTIES : Alice Aghajanian (P4) Ara Aghajanian (P5) Shakeh Arakelian (P6) Stanley Thompson Valuers Pty Limited (D) JUDGMENT OF : Hamilton J COUNSEL : S Donaldson (P1-6) S Kalfas (D) SOLICITORS : Tress Cocks & Maddox (P1-6) Phillips Fox (D) CATCHWORDS : PROCEDURE [574] - Costs - Departing from the general rule - Orders for costs on indemnity basis - Relevant considerations - Calderbank letter and other offers of compromise - Hopelessness of plaintiffs' case - Whether plaintiffs' conduct reasonable. Aghajanian v Stanley Thompson Valuers Pty Ltd [1999] NSWSC 1154 John S Hayes & Associates Pty Limited v Kimberley-Clark Australia Pty Limited (1994) 52 FCR 201 Mahlo v Westpac Banking Corporation Ltd [1999] NSWSC 358 CASES CITED : MGICA (1992) Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 Nobrega v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (No 2) [1999] NSWCA 133 Perre v Apand Pty Ltd (1999) 73 ALJR 1190 Wentworth v Rogers [1999] NSWCA 403 DECISION : Defendant's application for indemity costs refused. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J FRIDAY, 3 MARCH 2000 4779/91 YOURIK AGHAJANIAN & ORS v STANLEY THOMPSON VALUERS PTY LIMITED JUDGMENT HIS HONOUR: 1 This matter is before me this morning for the hearing of an application that the costs orders in favour of the defendant against the plaintiffs in these proceedings be orders on an indemnity basis. I delivered judgment in the proceedings on 17 December 1999: Aghajanian v Stanley Thompson Valuers Pty Ltd [1999] NSWSC 1154 ("my judgment"). The defendant was successful in the proceedings. The plaintiffs were entirely unsuccessful in the proceedings. The plaintiffs do not oppose the making of an order for costs against them of the proceedings on the ordinary basis. 2 Mr Kalfas, of counsel, however, applies on behalf of the defendant for indemnity costs of the whole proceedings. That application has been the sole subject matter debated before me this morning. Mr Kalfas argued that those costs should be awarded on either or a combination of the bases that the proceedings were hopeless and that a series of offers were made by the defendant to the plaintiffs during the course of the proceedings which it was unreasonable in the circumstances that the plaintiffs did not accept. The lengthy course of those offers, some put in the form of Calderbank letters and others made in the course of without prejudice negotiations, is set out in an affidavit of Peter Tredinnick, a member of the defendant's solicitors' firm. 3 It is true that in my judgment all issues actually determined were determined against the plaintiffs, and I indicated that on other vital issues I should have found against the plaintiffs, if that were necessary. The defendant's victory, therefore, was resounding. That does not mean that the decision on each of the issues contested was an obvious or easy one. Thus, the terms of my judgment indicate that the issue of the breach of a duty of care was an issue of some considerable difficulty and complexity factually. The question of whether a duty of care existed in the circumstances was, in addition, an issue of some considerable legal complexity. As to the issue of reliance, one matter was comparatively easy, as far as the decision was concerned, namely, the conclusion that none of the plaintiffs had seen the subject valuation before commitment to the transaction. That was clear on the evidence. However, there was considerable evidence (albeit, as it turned out, conflicting) as to whether the amount of the valuation had been conveyed to various of the plaintiffs at a more material time and, indeed, there was even conflict as to the amount said to have been told to them as the amount of the valuation. Thus reliance also involved issues of some difficulty both as to fact and as to law: see the recent decisions of Perre v Apand Pty Ltd (1999) 73 ALJR 1190; Mahlo v Westpac Banking Corporation Ltd [1999] NSWSC 358. Whilst the plaintiff in the end lost on every issue, it was a case where the sense in which the various questions would be determined was not apparent before their exploration in the lengthy hearing which took place: see per Hill J in John S Hayes & Associates Pty Limited v Kimberley-Clark Australia Pty Limited (1994) 52 FCR 201 at 207. 4 The correct criterion for deciding indemnity costs applications has been recently considered by the New South Wales Court of Appeal in Nobrega v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (No 2) [1999] NSWCA 133 and Wentworth v Rogers [1999] NSWCA 403; and see also the decision of Lindgren J in the Federal Court in MGICA (1992) Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236. These cases emphasise that the matter is essentially one for the exercise of a discretion at large by the Judge at first instance and also emphasise that one factor which should be taken into consideration is the protection of the integrity of the process of negotiation, which may lead to the settlement of litigation. It is important in relieving the Court of work, but of even greater importance in enabling parties to resolve disputes with early certainty and without the unnecessary expenditure of large sums of money at trial and in the appellate process. 5 I do not need to outline in detail the negotiation process which is dealt with in Mr Tredinnick's affidavit. One important fact that needs to be borne in mind is, as was indicated in my judgment, that this suit was originally part of a number of actions arising from the Aghajanians' unfortunate transaction. The other proceedings were proceedings against them by their financier, AGC, and proceedings for negligence by them against their solicitor's firm. Those proceedings were settled, but not, as the evidence shows, until May of 1997. Up to that time the possibility could not be eliminated that, if proceedings against this defendant were withdrawn, the solicitor defendants, at least, would attempt to throw blame on the valuers rather than themselves if a trial against them took place. The prospects of success of such an argument may now appear slight, and may even have been understood to be slight at the time. However, such arguments have a tendency to come to the fore if one of the defendants in multi defendant litigation is eliminated. This risk could only have been totally removed if it were quite plain that the other defendants would not resort to such an argument if their cases proceeded. There was no evidence that that was so in this case. That is something that must be taken into account in considering the reasonableness of the plaintiffs' response to offers made up to May of 1997. I have examined the course of offers made before and since that time and, in the end, I do not accept that the plaintiffs' course of conduct, in not accepting any of the offers that were open to it from time to time, was so unreasonable as to justify the making of an order against them for indemnity costs. 6 The conclusion is that the grounds put forward to justify an order for indemnity costs were not made out, looking at them either separately or in combination. The order of the Court as to the costs of the proceedings will, therefore, be that the plaintiffs pay the defendant's costs of the proceedings. As far as the argument this morning is concerned, the hearing was rendered necessary only by the defendant's desire to apply for indemnity costs. As it has lost that argument, an order should be made that the defendant pay the plaintiffs' costs of the application for indemnity costs of the proceedings. The orders of the Court will be as follows: 1 Judgment for the defendant. 2 Order that the defendant pay the plaintiffs' costs of the application for indemnity costs of the proceedings. 3 Order that the plaintiffs otherwise pay the defendant's costs of the proceedings. …oOo… Last Modified: 09/25/2000 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.