Enron Australia Finance Pty Limited (in Liquidation) v Integral Energy Australia [2002] NSWSC 819

New South Wales Supreme Court

CITATION : Enron Australia Finance Pty Limited (in Liquidation) v Integral Energy Australia [2002] NSWSC 819 FILE NUMBER(S) : SC 50042/02 HEARING DATE(S) : 5/9/02 JUDGMENT DATE : 5 September 2002

Enron Australia Finance Pty Limited (in Liquidation) (Plaintiff) PARTIES : Integral Energy Australia (Defendant)

JUDGMENT OF : Einstein J

Mr V Kerr (Plaintiff) COUNSEL : Mr D Knoll (Defendant)

SOLICITORS : Blake Dawson Waldron (Plaintiff) Corrs Chambers Westgarth (Defendant) CATCHWORDS : Practice and procedure - Costs - Calderbank letters - Offers of compromise - Failure to give 28 days in which to accept Calderbank offer may disentitle successful party from receiving indemnity costs for period post Calderbank letter. LEGISLATION CITED : Supreme Court Rules Arenson v Arenson [1977] AC 405 Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 CASES CITED : Murphy & Allen v Swinbank: Swinbank v Cleary [1999] NSWSC 1098 Oshlack v Richmond River Council (1998) 152 ALR 83 Re Buckton [1907] 2 Ch 406 DECISION : The defendant pay the plaintiff's costs of the separate question issues on a party/party basis.

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

Einstein J

Thursday 5 September 2002 ex tempore Revised 17 September 2002

50042/02 ENRON AUSTRALIA FINANCE (IN LIQUIDATION) PTY LIMITED v INTEGRAL ENERGY AUSTRALIA JUDGMENT - On application for costs

1 These proceedings were heard between 19 and 23 August 2002. A reserved judgment was delivered on 3 September 2002. 2 The matter is before the Court in terms of debate as to short minutes of order and submissions as to costs. The only matter which remains in dispute concerns the question of costs and the otherwise short minutes of order have been prepared and are agreed by the parties as properly reflecting the judgment. 3 The plaintiff seeks an order that the defendant pay its costs of the questions raised by the plaintiff's amended summons filed on 24 July 2002 as amended by the addition of paragraph 17A(c) and the demurrer question (raised by the defendant's opposition to leave being granted to the plaintiff to amend to plead the allegations in paragraphs 7A and 17A(a) and (b) of the proposed further amended summons) being the questions the subject of the Court's order for separate determination of 20 August 2002. Those costs are sought on a party/party basis up to and including 1 August 2002 and on an indemnity basis thereafter. 4 The claim to costs on a party/party basis up to and including 1 August 2002 is, as I understand it, simply put by reference to the usual principle as explained by McHugh J in the High Court of Australia in Oshlack v Richmond River Council (1998) 152 ALR 83 at paragraph 67, that subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The reasons are grounded in fairness and policy, the primary focus of an award of costs in that sense being to indemnify the successful party. McHugh J was there referring to the practice of the usual order for costs being an order for party/party costs. 5 The plaintiff's further claim to costs after 1 August 2002 on an indemnity basis is grounded upon the Calderbank letter sent on 1 August 2002 by the plaintiff's solicitors to the defendant's solicitors which has been read without objection. As Mr Kerr of junior counsel for the plaintiff who has argued the costs matter has made clear, a careful reading of paragraph 7(a) of the letter strongly suggests that following the construction given in the judgment, the plaintiff will have done far better at the end of the day then they there offered; in short the offer, I accept, seems to have been an offer which could not, in the light of the Court's construction, be said to have been unreasonable. 6 That having been said, Mr Knoll of junior counsel who has argued the costs issue on behalf of the defendant, has made the valid point that unless and until the bringing down of a final adjudication by, presumably, new reference market makers, one will not know the precise ultimate or bottom line figure. 7 Mr Knoll in turn submits firstly, that the proper course for the Court to take is to order that all of the costs of both parties on, I understood him, a party and party basis, be visited upon the plaintiff. The proposition in that regard relies upon the submission that this was effectively a test case and was a case run for, the benefit of a number of other counter-parties who, although not having been parties to these proceedings, in his submission will gain the benefit of the findings in the case. 8 Mr Knoll sought to cite some authorities in support of the proposition, for example that in a circumstance where the construction of a will is the relevant issue, a suit brought by the executor or trustee by way of the proper construction, although in form a case of adverse litigation, in substance may be regarded as an amicable proceeding for the determination of a question for the benefit of all concerned. In those circumstances one can certainly find authorities in support of the proposition that all parties costs are taxed as between solicitor and client and come out of the estate. One only such example which Mr Knoll referred the Court, to was the decision in Re Buckton [1907] 2 Ch 406. 9 During the course of address Mr Kerr took the Court to a passage in the judgment of Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 at p 451. In that passage Rolfe J expressed the view that: